Wal-Mart Terre Haute Indiana - Case Study Example

Wal-mart Terre Haute Indiana Wal-Mart Terre Haute Indiana Wal-Mart Terre Haute Indiana has different department stores as listed below. Korl’s department stores in Warl-Mart The department opens operates a 24-hour schedule. It is stored with everything that consumer needs at personal level and at home. This includes apparel for women, children and men, home products such as electronics, luggage and more others. Under Korl, there is Stein Mart Company, which is a public company at the Meadows shopping center that sells fashion goods for men, women, and children. The company provides different services, which include store planning services and customer support services. Stein Mart also runs boutiques that sell pants, swing jackets, jerseys, and tunics. Men’s products include shoes, belts, slacks, and ties. T.J maxx is also part of the Korl department stores at the Walmart outlet provides the most needed trends and designs in particular time seasons in different brands. The store renews its stock every season with different designs of the same product and unique designs of a new product. T.J maxx has several other stores nationwide. Wal-mart adopted the activity-based accounting has been increasing over the years in Ireland and the world over. The most dominant users of the accounting techniques are manufacturing firms, which account for more than 50% of the Irish that have adopted ABC (Chapman, Hopwood, & Shields, 2007). However, the adoption rate is still low though gradually rising. Evidence that supports the widespread use of Activity-based costing research findings for the last decade after the beginning of the new millennium finds a rising trend. A survey in seven countries found that the trend was almost similar. The countries are Japan, Germany, Italy, the United Kingdom, the United States, Canada, and France. Canada and France have the same adoption indices in most of the surveys. The United States has about 54% percent adoption rate, which has doubled in about a decade due to the economical strains that came with the financial crisis. Similar results are evident for Italy, Germany, Japan, and the United Kingdom. Firstly, in Ireland, the proportion of Irish firms that have not considered using accounting based costing is still high. According to a survey conducted by Perce (2004), Pierce and Brown (2004), the adoption rate of ABC was still low at 27.9 % (Cokins & NetLibrary, 2001). The responding companies included about 51.6% of manufacturing firms. Subsidiaries Warl-mart accounts for about 49.2% of the respondents in the survey. Wal-mart decided not to adopt ABC due to the prevalence of out-come based rather process based dependencies between ABC and strategy orientation across the organizations investigated. There is a clear relationship between the strategy and perception of implementation of ABC. ABC has increased in adoption over the years it is widely applied as accounting principle in Ireland and other countries in the world. Different countries that have Wal-mart subsidiaries have different rates of adoption of ABC depending on the contextual factors that influence their accounting standards. However, Wal-mart maintains the American standard. Some of the contextual reasons that influence the adoption of ABC are Increase in sector competition in Retail for Wal-mart The increasing rate of competition in the economy propels Wal-mart to adopt ABC systems. The most accurate cost accounting system can enable firms to have a competitive edge in the industry in terms of profitability (Drury, 2006). ABC uses both the unit based and non-unit based activity drivers to assign costs to cost objects in the production process. This increases the accuracy of cost assignments and the general quality and relevance of cost information. The cost information is useful in a variety of managerial objectives such as financial reporting. It also provides more comprehensive product costing definitions for better planning, control and decision-making. The need to reduce Environmental uncertainty at Wal-mart There are two kinds of uncertainties influencing the adoption of ABC. First, the internal uncertainty originating from the technical systems in the firm can inhibit the adoption and implementation process. It stems from the varying levels of interdependence of different subsystems (p 100). Second is the external uncertainty that arises from the unpredictable external environmental contingencies. ABC eases the process of co-ordination along the material flows of information and items hence overcoming uncertainties arising from internal interdependencies. It helps manage the differences arising from external differences. Organizational structure of Wal-Mart Wal-mart as both a Non-manufacturing manufacturing and manufacturing firm is more likely to adopt and implement ABC. This is due to the differences in the cost structures. Non-manufacturing firms do not have direct material costs and possibly no direct labor costs. This implies that fixed overhead cost generally make up a larger proportion of total costs. However, in most industrial sector the reason for adoption and implementing ABC are rarely given the firms. The need to increase the size of Wal-mart Although this factor may not statistically significant, it indirectly increases the number of overhead costs. An increase in overhead costs influences the rate at which organizations adopt activity based costing. This is due to the accuracy with which is able to assign costs on various items in the accounting cycle of the organization. Considering that, most firms want to expand to reach other markets; they have to expand their size of investments in the sector that is likely to come with more overhead costs. Prospector’s strategies of Wal-mart Terre Haute Indiana Wal-mart Terre Haute Indiana has four main characteristic strategies. This is measured according to the way the rate at which the firms change their products and markets. Firms can be prospectors, defenders, reactors or analyzers (Tan, 2003). Wal-Mart has adopted the prospectors’ organizational strategy that has made them dynamic in exploiting market opportunities. This aspect makes them seek more information on a wide range of markets and products. This makes them adopt Activity Based costing because it is the most suitable to this strategy. Increased multinational expansion and application of ABC by Wal-mart Firms, which are members of a multinational chain, are more likely to attain high performance than those that are not. This is because they can attract managers that are more competent, share the knowledge across facilities, negotiate shared purchase agreements with suppliers, obtain, quantity discounts, and negotiate more favorable labor contracts (p 253). For the firms to do this they will need more sophisticated ABC systems, which provide qualitative cost data. With the growth in multinational business, ABC systems are now more applicable than in the past. Client/customer relationship at Wal-Mart The professional guidelines at of Wal-Mart insist on an emotional distance they should maintain with clients and customers. The relationship should only be a therapeutic relationship. However, every law has an exception in the real sense of life. In some instances, patients come in different versions that emotionally affect employees positively or negatively. In the course of duty, employees come across patients with spectacular traits Market penetration strategies at Wal-mart This the growth strategy the focus on the selling existing products into the existing market. This has been perfected through departmental stores that specialize in fashion clothing. The strategies simply to increase the market share of the business in the provision of goods and services. For example, Wal-Mart increased its market share in the 21st century by opening more retail outlets in several countries south of the Sahara. Reasons why aWal-Mart adopted the market penetration strategy i) To maintain or increase the market share of current products ii) To secure dominance of growth markets iii) To restructure heat market by driving out competitors. This is through very aggressive promotional campaigns with the support of an attractive pricing strategy iv) Increase usage by existing strategy e.g. through the introduction of loyalty schemes Gains i) Increase the number of customers fro the business ii) Increases sales hence increasing the profitability of the organization Limitations i) There must be a balance between the market share and profitability. Expanding the market requires heavy spending on advertisement costs. This requires managers to strike this balance, to ensure that the strategy is successful. Market development strategy at Wal-mart This is where a small firm seeks to sell its existing products into new markets. Reasons i) To expand the market share of products ii) To explore new markets geographically Gains i) In case the new markets are friendly the firm can reap from economies of scale of mass production ii) There will be new opportunities to discovers market niches in new market segments Limitation i) The firm should already in profitable operation to finance market development of the product ii) Not all markets will be friendly to the introduction of the new product. Some gains are subject to the long run References Chapman, C. S., Hopwood, A. G., & Shields, M. D. (2007). Handbook of management accounting research: [Volume 2]. Amsterdam: Elsevier. . Activity-based cost management: An executives guide. New York: Wiley. Drury, C. (2006). Cost and management accounting: An introduction. London [u.a.: Thomson. Tan, F. B. (2003). Advanced topics in global information management: Vol. 2. Hershey, Pa: Idea Group. Read More