Wall-Mart and Information System - Essay Example

?Wall-Mart and Information System Introduction Wal-Mart is the largest retail store in the world. It deals with assorted consumer goods – it essentially stocks any product that can be imagined by a homemaker, ranging from foods to electronics. Wal-Mart has become very popular with its customer particularly due to its aggressive internet marketing and low cost on its goods. Wal-Mart is amongst the fortune 500 companies and its financial strength is very evident considering that it leads other fortune 500 giants like GE and Microsoft in terms of revenue generation. Unexpectedly, Wal-Mart is the only largest fortune 500 company that directly engages the common man. This paper will explain why Wal-Mart has lived to become one of the most successful retail companies in the world, and particularly tie its competitive advantage strategies with relevant theoretical models. Wal-Mart stores are, therefore, designed in such a manner that the managers of the organization are the ones who allocate duties as well as monitor the activities of employees within the organization. The managers also identify any changes that need to be implemented to the stores in order to ensure that all the production processes within the stores are in line with the goals of the entire organization (The Wall Street Journal, 2012). This paper will show how Wal-Mart has used information systems to achieve different categories of its strategic goals. New products, services, & business models Wal-Mart has been able to utilize information systems to improve its products, deliver and sell its product and services to create wealth. Ideally, the key characteristic of Wal-Mart’s business model is its low cost strategy, which is enabled by its efficiency and high level of productivity as a result of use of innovative information systems. Therefore, the company has managed to attain cost leadership by reducing its cost of operation to the lowest level possible (Porter, 2008). The fact that Wal-Mart’s products cost relatively low makes it very successful when introducing new products and services, because after all many customer will want to purchase in its stores to maximize the value for their money. The management of Wal-Mart tirelessly continues to utilize information technology to improve the company’s business model in such a manner that meets the customers’ requirements, and suits the organizational goals. The kind of information systems deployed by Wal-Mart is a mixed type, whereby both “bricks and motor” and “clicks and bricks” methods are used to market its products. Ideally, Wal-Mart does not advertise in the media like many of its competitors do, however, its products and services are very popular with customers. Customer and supplier intimacy Advancements in information technology have played a vital role in terms of revolutionizing the manner in which businesses communicate with their customers. As such, advancements in information technology have made it easy for Wal-Mart to communicate with its customers and suppliers in an efficient and faster manner. It has also helped Wal-Mart to drastically reduce the costs of its production, hence selling goods at low prices and making customers to return many times. As part of its growth strategy, therefore, Wal-Mart has invested in a communication infrastructure, which has enabled it to improve the way it interacts with its customers and suppliers. Wal-Mart has managed to reduce its costs significantly, passing on the benefit to its customers, which creates a highly competitive pricing strategy. In order to develop and take advantage of this strategy, Wal-Mart has focused on developing an advanced and highly structured supply chain management strategy, using information technology (University of San Francisco, 2012). The aim of this strategy is to ensure that whatever Wal-Mart do is in the interest of its customers. In addition, the company uses Web 2.0 and social networking tools to enable it effectively interact with its customers and suppliers. Improved decision-making Wal-Mart has a satellite communication system in the United States, which links all its stores to the headquarters, making decision-making between the company and the customers as well as suppliers very effective. This has made the process of managing the organization easier, besides attracting and maintaining customers and suppliers. Wal-Mart also makes use of decision-support system, which provides information on merchandise movements and merchandise volume, as well as customer buying trends, in its 2945 stores in six countries. This timely available and comprehensive data ensures that stores have the right items when the customers need them, making the organization very successful. Wal-Mart is also provided with Software by NeoVista, which delivers its data mining. This decision support system is tailored to go with the requirements of Wal-Mart’s database settings, hence enhancing decision-making. This tool ensures that the company is able to maximize the inventory management. Furthermore, data mining is used by Wal-Mart to deliver what its customers want, at the right time, at the right store and the right place. The NeoVista Decision Series makes it possible for the company to scrutinize individual items for individual stores to establish the nature of seasonal sales, which aids in decision-making. In addition, this detailed analysis helps Wal-Mart in making better and informed business decisions while at the same time helping the company to capitalize on its data Warehouse. Operational excellence Wal-Mart also uses RetailLink and EDI applications over the internet, thereby making it possible for the company to exchange data with its suppliers, from all over the world. This tool digitally links its suppliers to all its stores. Immediately a customer purchases an item from its stores, the supplier is able to check on it and decide when to supply the company with replacement items. This way, Wal-Mart is able to achieve high efficiency and productivity in its business operations. Following the rapid grwoth of Wal-Mart, it set up its own satellite in 1983 to asist in the management montitor the activities in each and every store and take approapriate action where need arose. By allowing the stores to manage their own inventroy, Wal-Mart ensures that redundant stock is minimized as much as possible. To make sure that the items that customers need most are available while still minimizing the inventory, Wal-Mart utilizes its rich IT infrustructure for this purpose. Information Technology has played a very important role in enabling Wal-Mart to be successful in its operations. Technology has helped the company to improve the relationship it has with its customers and employees. The customers can easily access various services that the company offers through the internet. As a result, it is possible for customers to find more information about the products before making an actual purchase. In addition, the company has a very responsive support team that usually addresses any queries that the customers make, using the information system. Competitive advantage Wal-Mart is growing to become one of the biggest corporations in the world courtesy of its unique information systems strategies that gives it a competitive advantage. The company has the latest information systems to ensure that its operation gives it an edge over its competitors. Wal-Mart use information systems with the aim of putting the interest of its customers first, and also uses the same technology to procure its products at the lowest price possible in order to reduce cost on behalf of the customers, which gives it an edge over its competitors. One of the most important areas that the company utilizes information systems to achieve competitive advantage is its supply chain, which is concerned with forecasting, demand planning as well as inventory management. Wal-Mart use information systems to forecast its inventory in order to maintain the optimum inventory level that meets the demand of its customers. This is very important as it allows the company to meet the customers’ needs when the inventory carrying cost is at its lowest. What’s more, the company uses software systems to manage its supply chain, hence creating a mutual workflow amongst all the entities in order to take full advantage of efficiencies and put up a lean supply chain, which ideally tries to eliminate intermediaries and achieve competitive advantage. Initially, Wal-Mart started its operations with the aim of providing customers “with the goods they wanted when and where they wanted them” (University of San Francisco, 2012). Thereafter, the company found it essential to focus on developing cost structures such that they could be able to reduce operation cost and hence offer their customers goods at very low prices. To achieve this objective, Wal-Mart had to manage its inventory in such as manner that restocking of the inventory was strategically managed using a logistics method called cross docking, which is aided by information systems. This is whereby products are sourced from the suppliers and stored in Wal-Mart’s stockrooms, and then dispatched to the stores making sure that the inventory does not sit in the storerooms for very long. Rather than holding goods for valuable time in the storerooms, goods are passed from one loading dock to another in two days or less. This strategy enables Wal-Mart to achieve the economies of scale because goods are purchased in bulks and at the same time circumventing the ordinary handling and inventory costs, which yields competitive advantages. Wal-Mart has always recapitalized on information systems to attain some level of efficiency, hence reducing its costs, and passing on the benefit to their customers hence creating a highly competitive pricing. In order to develop and take advantage of this strategy, Wal-Mart focused on developing an advanced and highly structured supply chain management strategy. References Porter, M.E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1), 57-71. The Wall Street Journal.(2012). Global Leaders Urged to Support New Action Plan to Wipe Out Illiteracy by 2020. Retrieved from http://online.wsj.com/article/PR-CO-20120404-905434.html University of San Francisco. (2012). Wal-Mart’s Keys to Successful Supply Chain Management. Retrieved from: http://www.usanfranonline.com/wal-mart-successful-supply-chain-management/. Read More