Wal-Mart Analysis: Threats and Challenge - Case Study Example

Wal-Mart Case Study What threats and challenges is Wal-Mart currently facing? Wal-Mart Stores Inc. is an American multinational that runs a chain of discount department stores and warehouse stores. It is a powerful retail brand which is operating in 15 countries worldwide and is catering to millions of customers who shop in their stores around the world (Walmart Corporate, 2011). Wal-Mart is envisioned to help people save their money so that they can live a better life. It has a reputation for convenience and wide range of products all in one store (marketingteacher.com, 2011). It is however, facing some threats and challenges like any other organization. Since it is number one, it means that it is the target of both local and global competition. Also being a global retailer, it is exposed to political problems in the countries it operates in. Intense price competition is also one of the major threats it is facing which has resulted in price deflation in some ranges (marketingteacher.com, 2011). Wal-Mart is world’s largest retailer and despite of its edge in IT, control of its empire could leave it weak in some areas due to its huge stretch of control. Since it has a large product diversity ranging from food to clothing to stationary, it may not have the flexibility of some of its more focused challengers. Although the company is global, it still has its presence in relatively few countries across the world (marketingteacher.com, 2011). 2. What priorities did Wal-Mart CEO Lee Scott set in his Wal-Mart: Twenty-First Century Leadership address (24 Oct 2005)?  One of the priorities set by Lee Scott in his Wal-Mart: Twenty-First Century Leadership address was to continue serving the underserved which was Sam Walton’s dream. This was the hardest method in retailing which other businesses feared to go. Wal-Mart also focused on showering people with gratitude and helps them in need as in the case of hurricane Katrina and make America and hence, the world a better place to live. This was one of the basic priorities set by Lee Scott in his address (Lee Scott, 2005). EDLP (Every Day Low Pricing) is more than just a catchphrase. It is a commitment to customers which promises customers the lowest available prices without waiting for discount promotions. Lee Scott set this commitment as one of his priorities and promised to abide by it. He also addressed his opportunities one by one, starting with the environment. He highlighted that by being one of the largest companies in the world, environment is their responsibility and environmental problems are their own problems. They can supply natural products such as fish, food and water only if the environment is safe and protected. This can be possible only if there is zero wastage and they are supplied by 100% renewable energy (Lee Scott, 2005). Another goal is the reduction of waste and this is one of their most visible opportunities. This can be achieved if the materials in the packaging are made up of recyclable materials. This can save them a lot of money and in turn help the environment (Lee Scott, 2005). Lee Scott’s another goal is built around the products Wal-Mart sells wherein customers should not make compromises when they buy products at Wal-Mart stores. Similarly, healthcare and wages structure, community involvement or diversity are other areas which were emphasized by Lee Scott in his Twenty-First Century Leadership address (Lee Scott, 2005). 3. Wal-Mart’s Board discussed proposals to meet (some of) these challenges at a board retreat in 2005. To counter the challenges, the team proposed Wal-Mart to implement the nine limited-risk initiatives and five bold steps. The first initiative is to change the eligibility criteria for health insurance so that Wal-Mart becomes more competitive in the part-time labor market. The second initiative is to decrease cross-subsidization of spouses which would allow more dollars to be put towards Associates and their children. The third initiative is to provide information related to healthcare and health insurance which would help Associates to make more efficient decisions regarding healthcare services (Chambers, 2006). The fourth initiative is to lower the life insurance coverage level paid by the company. The fifth initiative is to reduce the no of labor hours per store and increase the percentage of part-time Associates in stores in order to save costs. The next initiative is to introduce the care management programs in order to improve the quality of care and save some costs. Another initiative is to develop high performance networks in order to provide effective and efficient healthcare to the Associates. The next initiative includes offering other benefits to Associates in order to maintain effective relationships with them. Finally the last initiative is to put clinics in stores as an alternate for emergency room visits (Chambers, 2006). The five bold steps proposed are allowing Associates to build Health Saving Accounts, changing around the retirement program, creating other benefits to attract a more effective workforce, making strategic investments in Wal-Mart’s healthcare services and effectively communicate the benefit offerings (Chambers, 2006). According to Wal-Mart Health cost strategy NYT 26Oct2005, M. Susan Chambers, Wal-Marts executive vice president for benefits, proposed in the memorandum that physical activity should be incorporated in all jobs and hence, it will be easier to attract a younger workforce. She also proposed that health saving accounts should also be promoted (The New York Times, 2005). 4. Was additional damage done to Wal-Mart by the leaking to the public of the Board Benefits Strategy document?  Healthcare is one of the most crucial issues that Wal-Mart is facing regarding its reputation. A survey shows that people’s perception of healthcare and wages at Wal-Mart depict the overall reputation of Wal-Mart. The critics especially the labor unions have selected healthcare as their central point of attack. Even the central and state governments are very concerned about healthcare costs and some consider Wal-Mart a culprit (Chambers, 2006). Wal-Mart’s healthcare is susceptible to criticism because they have not efficiently disclosed their healthcare benefits to the general public. Critics believe that Wal-Mart should provide offerings according to a large company standard not a retailer standard, more like a GM or a Microsoft than a Target or a Sears (Chambers, 2006). 5. Comment on two recent Wal-Mart initiatives from the standpoints of: a) Strategy and b) PR One of the initiatives taken was the change of eligibility criteria for health insurance. This was done so that full-time and part-time Associates and their children could qualify after a specific number of hours. This would make Wal-Mart even more competitive in the part-time labor market (Chambers, 2006). The other initiative that was taken was providing information to Associates related to healthcare and health insurance. Many Associates were making inefficient decisions about healthcare services by making too much use of emergency rooms. Hence this initiative was taken to better educate and help the Associates make more efficient decisions regarding healthcare services (Chambers, 2006). 6. Discuss Wal-Mart’s strategic social challenges from the standpoint of Bonini, Sheila M. J.; Mendonca, Lenny T.; Oppenheim, Jeremy M. When social issues become strategic. McKinsey Quarterly. 2006 no. 2.  Social and political issues can completely transform a company’s overall strategic picture and can hamper its image and reputation. The challenge however, is to find a way to consolidate an awareness of sociopolitical issues into a company’s strategic decision-making processes. Companies should not see these sociopolitical elements as risks or threats but take them as opportunities and avail them (Bonini, Mendonca, & Oppenheim, 2006). Companies not only have a bond with the direct stakeholders but also with the society. Parts of this bond are some rules and regulations which if violated will lead to some legal consequences. A company’s growth and success gives rise to the expectations among the stakeholders about the social role of the company (Bonini, Mendonca, & Oppenheim, 2006). Environmental sustainability initiatives serve all Wal-Mart stakeholders from customers to shareholders. By focusing on areas such as energy, waste and product, Wal-Mart is rationalizing these priorities into evaluations and fulfilling the commitment of EDLP (every day low price) and EDLC (every day low carbon) (Payton, 2010). 7. Were all of the issues Wal-Mart now faces in 2009 already evident in the 2003 case study? Have the issues improved? Most of the issues that Wal-Mart faces now were quite evident in the 2003 case study. Although the challenges have increased as the company has evolved over the years and has grown bigger and expanded across the world. The corporate social responsibility has also increased with the increasing success of Wal-Mart. The expectations from the society are more now (Ghemawat, Bradley, & Mark, 2004). References Bonini, S. M., Mendonca, L. T., & Oppenheim, J. M. (2006). When social issues become strategic. McKinsey Quarterly , 20-32. Chambers, S. (2006). Supplemental Benefits Documentation: Board of Directors Retreat. Reviewing and Revising Walmarts Benefits Strategy . Walmart Stores Inc. Ghemawat, P., Bradley, S., & Mark, K. (2004, January 30). Wal-Mart Stores in 2003. Harvard Business School . Lee Scott. (2005, October 24). WalMart Twenty First Century Leadership. WalMart Twenty First Century Leadership . marketingteacher.com. (2011). Wal-Mart SWOT. Retrieved Feburary 14, 2011, from marketingteacher.com: http://www.marketingteacher.com/swot/walmart-swot.html Payton, P. (2010). Wal-Mart Experimental Stores: Environments of scale. European Retail Digest , 8-12. The New York Times. (2005, October 26). WalMart Health cost strategy. WalMart Health cost strategy . Walmart Corporate. (2011). Walmart Corporate. Retrieved febuary 14, 2011, from Walmartstores.com: http://walmartstores.com/AboutUs/8123.aspx Read More