Wal-Mart - Value Chain Analysis, Ethical and Environmental Issues - Assignment Example

Executive Summary Wal-Mart has been facing issues of operation management since 2009 and raises question whether the same operational management strategy will ensure similar growth rate and ensure that the different environmental and ethical issues are looked at. Wal-Mart has been successful over the last few years due to proper operational management strategy which was adopted by the organization. The value chain analysis highlights the manner in which Wal-Mart has been able to perform as a cost leader due to adoption of strategies like cost effectiveness in corporate culture, management style and operations. To ensure efficiency in operational management Wal-Mart has streamlined their supply chain and has been able to deal with the different customer needs. This has also raised questions concerning the environment and other ethical issues which needs to be addressed as during the process of gaining operational efficiency Wal-Mart has compromised on environmental and ethical needs. The future strategy for Wal-Mart needs to be developed keeping in mind the manner in which the different ethical and environmental standards will be achieved and at the same time ensuring that operational gains are achieved through the process. Table of Contents Introduction 3 Value Chain Analysis 3 Ethical & Environmental Issues 8 Diagnosis 10 Conclusion 12 References 13 Introduction Wal-Mart has been successful over the last four decades and has become the world’s largest retailer due to the manner in which the different operational activities are carried out. The retail player has been growing both in US and other international market as integrating their supply chain and achieving operational efficiency has provided them an opportunity to tap a bigger market. Over the last few years Wal-Mart is facing issues regarding their growth and future development. This report looks to examine the different operational activities which were carried out by Wal-Mart and the manner in which it helped them to gain operational efficiency. This is followed by identification of the different ethical and environmental issues which have been raised and the steps which needs to be taken to improve those. This will thereby help to reflect on the mechanism which Wal-Mart needs to adopt and the changes which have to be made in the working environment so that better efficiency is achieved. Value Chain Analysis Wal-Mart strategy is to be cost leader where they offer people products at lowest cost possible and the mission statement of the organization reflects the same. The strategy of developing their operations and gaining efficiency in the supply chain is one where Wal-Mart has worked on a continuous basis and has been successful. Below is the value chain analysis for Wal-Mart which will help to analyze the manner in which different activities related to the operational aspect is carried out. This is a point of differentiation which has helped them to ensure that they are capable of gaining operational efficiency and ensuring that better results can be achieved (Chen, 2006). Support Activities: This are some of the operational activities which Wal-Mart looks to carry out apart from the primary activities which has helped them to gain operational efficiency and ensures better use of resources. General Administration: Wal-Mart uses unique practices to carry out their general activities. The communication process takes place directly between the individual stores and the headquarters in Bentonville. People directly visit the local stores to gather information about customer demand, competitors strategy and other aspect which will help to ensure that the different activities are carried out in the best possible manner. The process has helped to develop a positive relationship between the head office and local stores and has also ensured that operational efficiency is achieved (Chen, 2006). The process of carrying out operations in this method has helped to ensure that they are able to understand the customer demand and makes quickly, deal with the strategies that competitors have taken and ensure an advantage over others. The process has helped to add value and bring about a complete change in the manner different operational activities are carried out. Human Resource Management: Wal-Mart has managed the human resource issues associated with operational activities in a proper manner. The interaction between the different associate partners of Wal-Mart along with Wal-Mart is done based on respect, communication and clear incentives. Apart from the salaries employees are provided with other incentives like health care plans, retirement schemes, profit incentives, and stock purchase plans. The organization provides greater autonomy to its employees and ensures a level playing field where every employee is provided an opportunity to be rewarded like promotions and so on (Chen, 2006). The process has helped to add value to the process of carrying out activities and provides an opportunity through which the different activities are carried out in the most effective manner and has helped them to work towards their mission Technology Integration: This is one of the factor which has helped them to gain operational efficiency as using the process of technological integration has provided an opportunity through which the supply chain has developed. Ensuring regular technology up gradation has provided an opportunity where the customers are able to get the correct product at the correct time and at the right price (Chen, 2006). The process has also led towards environmental harm as continuous removal of changes has resulted in landfills and has increased the level of pollution and requires strategies to be able to control it. Procurement: The purchasing decision is made centrally by Wal-Mart and then the goods are dispatched to each store. This provides an opportunity to have a better bargain and ensures that the prices charged by the suppliers are low. This has an impact on the goods which are procured as at times it results in procuring the materials from suppliers who either exploit the employees or indulge into unethical means. This is an aspect which has impacted Wal-Mart and has resulted in raising ethical issues regarding the different purchases that have been made. This will thereby require that Wal-Mart develops policies through which maximum efficiency is gained and overall operational effectiveness is achieved in the services and products offered. Primary Activities: These are the major activities which are carried by Wal-Mart and help to identify the manner in which operational efficiency and gains are achieved. The detailed are as Inbound and outbound logistics: Wal-Mart has developed their logistics system using the latest technology and has adopted the hub and spoke model. This model has provided the opportunity to ensure that each store has the required inventory to supply products to its customers and at the same time ensure that the transportation cost is kept low. Wal-Mart doesn’t rely on third party outside logistics and have taken even control of the logistics for the products which are procured from different countries. Wal-Mart has thereby looked towards cheaper, faster and reliable logistics network through the use of cross docking system which has ensured that the retail player is able to garner required flexibility and ensure better role in carrying out the different operations. This has resulted in increased environmental harm as the process has resulted in increased transportation which has intensified the level of pollution. Operations: Wal-Mart relies of multiplying the experience for the customers through the operational services that they carry out. The store has both in house as well as renowned brand so that they are able to attract and retail customers from all section of the society. Wal-Mart looks to continuously expand its store by adding more and more products and has different brands like Apple, Samsung and so on. A feature of Wal-Mart operational services is the manner in which decentralization of activities takes place within the store. Store managers are provided with the flexibility to take decisions regarding product location, range and pricing (McCoy, 2006). This has provided the opportunity through which Wal-Mart is able to understand the purchasing habits of the consumer and design and develop services so that better customer satisfaction can be ensured. The process of operations has helped to understand competitors and provides an opportunity through which the different operational activities are carried out so that the business is able to make substantial gains (Wayne and Wheeler, 2006). Marketing & Sales: Wal-Mart attracts customer due to the low pricing strategy. Wal-Mart relies mostly on word to mouth form of advertising so that they are able to attract people from all section of the society. This strategy aligns with their mission statement as the extra cost which would have been used in marketing is spent in the direction of ensuring that the prices of the products are kept low and customers are provided with products at lower cost. Wal-Mart in its annual report provides evidence that the products which are procured re from ethical sources and the products which have been procured from different suppliers are procured after keeping in mind the different environmental norms which have been followed by the retailer (McCoy, 2006). This is done with the purpose of ensuring that a proper brand image is projected about the organization but there are still different ethical and environmental issues which surround Wal-Mart and needs to look at reducing those so that better standards can be developed and the different needs of the customers can be satisfied. Service: Wal-Mart looks to multiply the shopping experience of customers and have a habit of greeting customers when they enter the stores. The store also ensures that customers within 10 meter are greeted and looked to provide direction to the customer so that they can be directed towards the place where the products are kept and looks at satisfying the customer. The value chain analysis thereby helps to bring forward the different issues and challenges which Wal-Mart faces and the manner in which they have developed their operational management aspect so that better services can be provided. The overall relevance of the manner in which different services have improved has grown and provides an opportunity through which the different aspects and facets can be considered so that better services can be provided. A complete detail of the manner in which Wal-Mart is able to add value is (Fishman, 2007) Competency Valuable Rare Inimitable Non-Substitutable Conclusion Integrated technology of supply chain Yes No No Yes Competitive parity Ability to generate large sales volume Yes Yes No Yes Temp. comp. adv Superior logistics system Yes Yes No Yes Temp. comp. adv Operation decentralization Yes Yes Yes No Temp. comp. adv Strong culture Yes Yes Yes Yes Sustainable comp. adv Human resources (management team and employee autonomy) Yes Yes Yes No Temp. comp. adv Management routines and practices Yes Yes Yes Yes Sustainable comp. adv The above table shows the manner in which Wal-Mart has added value but needs to look towards the different ethical and environmental issues which surround their operational activities and need to develop strategies which will help them to reduce those. Ethical & Environmental Issues Wal-Mart while looking to carry out its operations has to deal with different ethical and environmental issues which have been identified while looking to carry out its operations. This has been identified as under Wal-Mart doesn’t look to compensate its employees appropriately as they are either under paid or are not paid on time. This is in addition to the fact that employees are not paid for the overtime which they have carried out and has thereby resulted in a situation where the ethical consideration are not being looked at and has thereby impacted their decision making process (Archie, Carroll, and Ann, 2006) Wal-Mart has over 80 lawsuits pending against them which show that Wal-Mart hasn’t been able to adhere to the different environmental and ethical requirements. The different cases which have been raised against Wal-Mart is due to non compliance of legal working hours and not being able to adhere to the hour requirements (Archie, Carroll, and Ann, 2006) Wal-Mart while looking to carry out their operations have to face issue related to the manner in which discrimination between women and men arises as Wal-Mart under pays women and don’t promote them to higher position within the working environment. This has resulted in suppressing the women and not looking towards having proper ways through which correct pay is made to all (Archie, Carroll, and Ann, 2006). Wal-Mart has entered into contracts with suppliers from China and other places who produce goods which don’t adhere to the environmental requirements and are produced either at the cost of the environment or the employees. This has resulted in creating a platform where for their own gains the organization hasn’t been able to identify the path which will fetch them maximum returns and ensure better growth. Wal-Mart communicate that they look to preserve the environment but have hardly taken ways through which process can be developed through which global warming and rise in carbons can be controlled. Wal-Mart doesn’t have a process or policy in place which will be aimed towards bringing a change in the working pattern and concentrates on reducing emission. This has thereby increased the level of pollution and haven’t taken appropriate steps to reduce carbon emission (Archie, Carroll, and Ann, 2006) Wal-Mart is thereby surrounded by different ethical and environmental issues which needs to be addressed and looked at so that the retailer is able to concentrate on the important matters and ensure long term growth of the business Diagnosis Wal-Mart faces several ethical and environmental issues related to the manner in which they carry out their operational activities. The retailer has looked to add value to customers through the process of low cost leader but in between the process hasn’t developed the required ethical and environmental standards. Some of the different aspects which highlights the manner in which in which different requirements hasn’t been achieved are an area of consideration and require specialized efforts to deal with it. One of the serious problems is that Wal-Mart doesn’t look to compensate its employees appropriately as they are either under paid or are not paid on time (Friscia, O’Marah, Hofman, and Souza, 2009). This impacts the manner in which value creation takes place within the organization and will require implementation of strategies which will ensure that employees are compensated fairly and are provided remuneration based on their contribution towards the organization. Developing a code of conduct which prescribes the ethical standards and policies which has to be followed will determine the manner in which Wal-Mart will be able to identify the manner and mechanism which will help to add value. The overall improvement in the functioning and working in different directions will create the required scope through which better results will be achieved. Another important issue which Wal-Mart needs to address is that Wal-Mart has entered into contracts with suppliers from China and other places who produce goods which don’t adhere to the environmental requirements and are produced either at the cost of the environment or the employees. This has resulted in creating a platform where for their own gains the organization hasn’t been able to identify the path which will fetch them maximum returns and ensure better growth. This aspect needs to be addressed quickly as the process instead of adding value to the brand is acting against it (Friscia, O’Marah, Hofman, and Souza, 2009). Wal-Mart needs to develop standards based on which suppliers will be selected. The process of using technology and ensuring that technology is properly integrated with the different business needs will help to address the different needs and will provide a platform through which better results will be achieved. Wal-Mart on this front has to develop a database of suppliers who supply proper products which are fit for consumption and look towards adhering to the different ethical requirements. Wal-Mart needs to find out the correct supplier and have to address the issue through which better needs of customer can be satisfied. This will help to add value and create a process where the different needs of the customers are better addressed and will help to develop the momentum through which additional value will be generated for the business. Wal-Mart faces another issue associated with global warming as they look to preserve the environment but have hardly taken ways through which process can be developed through which global warming and rise in carbons can be controlled. Wal-Mart doesn’t have a process or policy in place which will be aimed towards bringing a change in the working pattern and concentrates on reducing emission. This has thereby increased the level of pollution and hasn’t taken appropriate steps to reduce carbon emission (Friscia, O’Marah, Hofman, and Souza, 2009). This has impacted their brand name and has created doubt and suspicion which needs to be looked at. Developing policies which will look towards reduction of carbon and improving the entire process through which different activities are carried out will help to improve the gains and will provide the required dimensions through which overall effectiveness will be improved (Stanley, 2006). Wal-Mart by having better and stringent policies in place will be able to develop the process through which operational activities are carried out. The process will help to ensure that global warming will be addressed and the business will be able to develop a platform through which overall effectiveness will be achieved. The process will thereby ensure that better results are achieved and the business is able to gain efficiency. Conclusion Wal-Mart needs to look towards working on the different aspects and facets of operational management so that they are able to improve the process through which activities are carried out. The entire process needs to bring a change in the process of carrying out activities and looking towards developing ways which will ensure better results. Wal-Mart has to look at addressing the different ethical and environmental issues and need to develop ways which will help them to provide better services and products to the customers. Addressing the different issues and developing a framework through which basic support functions are developed and the business is in a position through which better results can be achieved will help to bring around a complete turnaround and will improve their operational activities. This will also ensure that Wal-Mart will be able to change the process of carrying out different activities and will be able to gain from the entire process of working and will be able to add value towards customers. References Archie B. Carroll, and Ann K. Buchholtz, 2006. Wal-Mart: The Main Street Merchant of Doom,” Business & Society: Ethics and Stakeholder Management, 7th ed. South-Western Cengage Learning Chen, J. 2006. Wal-Mart: Case Study. Retrieved on March 20, 2014 from http://people.ucsc.edu/~rbaden/Case%20Study%20Example.pdf Friscia, T., K. O’Marah, D. Hofman, and J. Souza, 2009. “The AMR Research Supply Chain Top 25 for 2009,” AMR Research http://www.amrresearch.com/Content/View.aspx?compURI=tcm:7-43469 Fishman, C. 2007. “The Wal-Mart You Don’t Know,” Fast Company McCoy, M. 2006. “Wal-Mart’s Data Center Remains Mystery,” Joplin Globe Wayne M. and Wheeler, D. 2006. ‘‘Making the case for the added-value chain,’’ Strategy & Leadership, 34 (4) Stanley C. Abraham, 2006. 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