Business Environment of Wal-Mart - Case Study Example

Table of Contents Introduction………………………………………………………………. 3 2. Business Environment of Wal-Mart………………………………………3 3. Theory of Innovation……………………………………………………….4 4. The Role of Innovation in Business Development…………………………5 4.1 Technological Innovation………………………………………….5 4.2 Product Innovation……………………………………………..…6 4.3 Service Innovation…………………………………………….…..7 4.4 Process Innovation………………………………………………..8 5. Conclusion and Recommendations……………………………………….9 6. References…………………………………………………………………10 1.0 Introduction: Wal-Mart stores are an American retailing corporation and it has branches all over the world. The company manages a large chain of departmental stores, and it also provides warehouse services (Lee, 2008). Currently, the company has a presence in approximately 27 countries, and it has managed to open more than 11,000 stores (Lee, 2008). This paper provides an analysis an analysis on the business environment of Wal-Mart in regard to innovation. Innovation is an important business issue. In explaining innovation and its role in business development, this paper will identify different aspects of innovation such as product, technological, process and service innovations. This is in relation to how they affect Wal-Mart. The conclusion of this paper is a summary of the major points contained in it. The recommendation section identifies the various areas where Wal-Mart has to improve, for purposes of maximizing its profits. This paper takes a stand that innovation is the major contributor to the successes of Wal-Mart. 2.0. Business Environment of Wal-Mart: As a multinational company, Wal-Mart has stores in various parts of the world. Because of capitalism and liberalization of most economies, Wal-Mart faces stiff competition from companies such as Sainsbury in the United Kingdom, Sears in the United States, etc (Lee, 2008). In fact, the competition for the UK market is very stiff, that Sainsbury managed to out-compete Asda, which is a subsidiary company of Wal-Mart, as the top competitor in the region (Massengill, 2013). Sainsbury managed to use the cost leadership strategy adopted by Asda in the UK market, therefore becoming a market leader. Another major rival of Wal-Mart is Amazon. This is on e-commerce. Amazon, through a series of innovative measures is a market leader in the provision of online retailing services (Lee, 2008). Wal-Mart is competing with Amazon for a share on online consumers, and hence it has developed a number of innovative solutions for purposes of efficiently competing with Amazon for a share of this market. 3.0. The Theory of Innovation: Innovation refers to a set of new ideas, processes, or devices. It can further be explained as an application of good solutions that have the capability of meeting new requirements, and satisfy the existing needs of a given market or employees of an organization. It is possible to mistake innovation with invention. Invention is the development and manufacture of a new product, while innovation involves the improvement of the product under consideration (Nicholls & Murdock, 2011). It also involves the use of a better idea that has the capability of making the company to be productive. In the field of management and economics, innovation is a process, and it involves the bringing together of different ideas, in a manner that it would transform the society (Lee, 2008). There is also a tendency of mistaking innovation from improvement. This is because innovation involves a process of carrying out an activity in a different method. Improvement on the other hand involves undertaking the same activity in an efficient and effective method (Govindarajan & Trimble, 2012). Take for example in the sales department of a retailing organization. When the company is able to sale more units as in a given year, when compared to a previous years, this can be referred to as improvement. Innovation occurs when the management of the company is able to develop some sales strategies which have the capability of improving the sales of the organization. Examples would include developing a unique advertising strategy or advertisements, when compared to that of its competitors. An example is Singapore airlines (Govindarajan & Trimble, 2012). The airline company has developed its advertisement based on the concept of Singapore girls, who are its cabin crews. 4.0. The Role of Innovation in Business Development: 4.1. Technological Innovation. The use of technology by Wal-Mart has contributed greatly to its growth and development (Lewis, 2004, p. 94). Ever since the company was formed, Wal-Mart has used the tools of Information-Technology for supplies and customers management, and for administrative purposes. The technological innovation by Wal-Mart began with the development of the computerized accounting system. These systems enable the company to efficiently record its transactions, leading to the development of accurate accounting records that could be used for decision making processes. These records have been essential in guiding the management of the company, into the best methods or policies that they should adopt (Roberts & Berg, 2012). Another example of technological innovation at Wal-Mart is the development of the computerized point of sale system. This system has the capability of identifying the number of units sold, and storage of items, as well as analyzing the operations of the company (Lee, 2008). The point of sale system was able to help the company to avoid the overstocking of goods, through an efficient collection and decimation of information. Furthermore, it helped the company to identify the most profitable products to sale. The point of sale system also helped the company to collect the relevant information regarding the tastes of customers, and their needs (Roberts & Berg, 2012). This type of information is useful; mainly because it helps companies develop solutions that can make it carter for the needs of these consumers. It is through the satisfaction of the needs of consumers that a company can maximize its profits, and achieve a competitive advantage over its rivals. In 2004, Wal-Mart was the first retailing company to introduce the use of radio frequency identification (RFID). These were tags placed in its inventory, for purposes of easy identification and management (White & Bruton, 2011). This technology is important to the company because it helps them in tracking the movement of its inventories, across its supply chain. The use of RFID has become an important trend setter in the retailing industry. Almost all major retailing companies are using RFID for purposes of tracking their inventories (White & Bruton, 2011, p. 8). This is all because of the successful use and adoption of this technological innovation. 4.2. Product Innovation For purposes of promoting the emergence of new products at the company shelves, Wal-Mart constantly involves its consumers to provide recommendations on what they need (Lichtenstein, 2011). The research and development unit of Wal-Mart is constantly looking for new products that the company should sale. For instance, Wal-Mart has adopted a program referred to as, Get on the Shelf (Morgan, 2014). This is a program that invites suppliers, whether they are large or small scale supplies to submit product ideas that they would like Wal-Mart to sale. While carrying out the submission, these suppliers have to also present videos that can be used for purposes of explaining more about the product, and its capabilities in satisfying the needs of consumers (Fitzgerald & Wynn, 2004). These videos are then placed into the internet, where consumers are invited to vote for the best product that they want. This strategy by Wal-Mart is aimed at increasing the number of products it offers at its stores (Saul, 2011). The company believes that there are a number of products that are not sold in its stores; hence this strategy is used in the identification of these products. This innovative idea was developed by Wal-Mart after Ora-Brush, in a viral video campaign tried to get its products sold at the stores of Wal-Mart. The company believes that when it sales many products through its stores, then it will be able to maximize on its sales, hence achieve a high sense of profitability (Charan, 2008). This is because many shoppers would purchase all of their products at its stores. Wal-Mart also partners with retailing organizations for purposes of improving their products. An example is the partnership between Wal-Mart and Procter and Gamble for purposes of increasing sales of flu and cough products (Charan, 2008, p. 141). Initially, when people needed such kind of products, they went to nearby shops. However, Wal-Mart managed to increase its spending by developing a marketing campaign, centering on the preparedness of consumers in buying these products. The company had to collaborate with P&G to make this a success (Charan, 2008, p. 141). 4.3. Service Innovation; One of the services offered by Wal-Mart is e-commerce. However, the major competitor of the company in this sector is Amazon. For instance in 2011, the profits emanating from the organizations online company sales were 4.9 billion dollars (Lichtenstein, 2011). This cannot be compared to the profits made by Amazon, which was 48 billion dollars. Wal-Mart gives a projection that its online sales would increase by 9 billion dollars in the coming years. This is in comparison to the 100 billion dollars annual sales made by Amazon. Most products sold by Amazon through this method were electronics, books, toys, music, etc. These are some of the major products sold by Wal-Mart. This is an indication that customers are increasing using the internet for purposes of making purchases. The emergence of internet enabled tablets has made this to be possible. These tablets make it easier for the consumers to shop online, and purchase products. In a bid to efficiently offer online shopping services, the company introduced the Shopycat app. This is a gift recommendation application that is able to scan the profiles of its consumers through the social media (Kelley, 2010). It thereafter identifies what these people like, based on their comments, likes and status updates. This innovation will thereafter identify a convenient gift from the stores of Wal-Mart that the consumer can purchase and issue it out to his or her friends (Lee, 2008). This is an amazing innovation that has transformed the online service of Wal-Mart. This is happens because of the ability of many people to use this service for purposes of identifying the various likes of their friends, and buying them gifts, based on their likes. 4.4. Process Innovation Wal-Mart is better known for its success and efficiency in supply chain management. The company manages to achieve this objective by creating a strong relationship with manufacturers, hence improving the delivery of its products. Wal-Mart managed to improve the delivery of its products through eliminating wholesalers in its supply chain system (Soderquist, 2005). The elimination of wholesalers allowed Wal-Mart to add value to its products, without increasing their prices. This in turn led to low prices of their products. This process innovation was possible because of the use of cross-docking and vendor managed inventory (Westerman, 2001). The Vendor managed system allowed the company to bypass wholesalers, because it gave manufacturers the responsibility of supplying the products of the company. This is because the company gave them information regarding the quality of products it needs, and the quantity. Cross docking on the other hand refers to the process where the company directly supplies its products to consumers. Conclusion and Recommendations: In conclusion, Wal-Mart is a market leader, in regard to the provision of retailing services at physical stores. This has made the company to be the largest in the world, in terms of revenues generated from its stores. However, in regard to e-commerce, Wal-Mart lags behind to Amazon. This is an issue of concern, mainly because there is a trend that most people would be using the internet for purposes of buying their retailing products. Based on this fact, the company should now focus on developing innovative solutions that could help it out-compete Amazon. One of the best approaches in regard to this situation is the use of open innovation. This means that the company should take advantage of internal, and external innovative ideas, for purposes of developing a strategy aimed at competing efficiently with Amazon. The company should analyze the business strategies of Amazon, and other competitors, and develop a strategy aimed at out competing these organizations. Through open innovation, the company may borrow some of the innovative ideas from its competitors and implement them in their company. Samsung is one of the prominent companies that is known to be using this type of strategy. It proved to be successful when the company was entering the smart phone market. Bibliography: Top of Form CHARAN, L. (2008). The Game Changer How Every Leader Can Drive Everyday Innovation. London, Profile Books.. Top of Form FITZGERALD, B., & WYNN, E. (2004). IT innovation for adaptability and competitiveness: IFIP TC8/WG8.6 seventh working conference on IT innovation for adaptability and competitiveness May 30-June 2, 2004 Leixlip, Ireland. Boston, Kluwer academic publishing. Bottom of Form Bottom of Form Top of Form GOVINDARAJAN, V., & TRIMBLE, C. (2012). Reverse innovation: create far from home, win everywhere. http://www.books24x7.com/marc.asp?bookid=47507. Bottom of Form Top of Form KELLEY, B. (2010). Stoking your innovation bonfire. Hoboken, N.J., Wiley. Top of Form LEE, S. (2008). Sam Walton: business genius of Wal-Mart. Berkeley Heights, NJ, Enslow Publishers. Bottom of Form Top of Form LEWIS, W. W. (2004). The Power of Productivity Wealth, Poverty, and the Threat to Global Stability. Chicago, University of Chicago Press. http://public.eblib.com/choice/publicfullrecord.aspx?p=530442. Top of Form LICHTENSTEIN, N. (2011). Wal-Mart the face Of twenty-first-century capitalism. New York, Top of Form MASSENGILL, R. P. (2013). Wal-Mart wars: moral populism in the twenty-first century. New York [u.a.], New York Univ. Press. Top of Form MORGAN, J. (2014). The future of work attract new talent, build better leaders, and create a competitive organization. Hoboken, N.J., Wiley. 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