Security Management of Wal-Mart - Case Study Example

Security Management of Wal-Mart Table of Contents Introduction………………………………………………………………………………………..3 Wal-Mart IT Services: Aligned to the Needs of the Business and Needs of the Customers…….3 Level of Strategic Alignment Based on Luftman Levels………………………………………….6 Measures Can Be Planned in Order to Improve the Strategic Business-IT Alignment…………...8 Conclusion………………………………………………………………………………………...9 References……………………………………………………………………………………..…11 Introduction Wal-Mart is one of the largest retailers and public corporations in the world in terms of sales and revenue. This 40-year old company was founded by Sam Walton in 1962 which dominated the local market of the United States, and began to trade stocks on the New York Stock Exchange. Along with the company’s growth in revenue is the growth of its expenses in information technology (IT). According to Wal-Mart IT executives, the company is adopting expensive technologies; that is why its investment in IT is considered to be their single largest capital expenses with approximately $500 million dollars over one five year period (Beard, 1996, p.78). The company demonstrated its preparedness to invest heavily on these technologies because it strongly believes that IT is a powerful tool in achieving efficiency goals and in creating economic value for stakeholders. In order for Wal-Mart to know how these technologies will support the business in obtaining implicit and explicit objectives, it must develop IT governance strategies (Schwalbe, 2009, p.136). To provide competitive advantage, these strategies must be integrated and aligned with the company’s strategic and operational plans, this is to make the process more comprehensive (Papp, 2004, p.27). The main focus of this paper is to identify the IT services of Wal-Mart and whether these services are aligned to the needs of the business and the customers. In the process of assessing strategic alignment, this paper will be using the conceptual levels of strategic alignment maturity model developed by Dr. Luftman and some measures in order to improve the strategic business-IT alignment of Wal-Mart. Wal-Mart IT Services: Aligned to the Needs of the Business and Needs of the Customers Linda Dillman, the Chief Information Officer (CIO) of Wal-Mart noted that, “We do not want to be known by our technology, but we do want to be known by what our technology has done for the business” (cited in Luftman, 2004, p.275). She also added that the business is performing favourably in terms of improved revenue and market share, cost and time reduction, customer satisfaction, and many more because of business-IT alignment maturity through metrics performance. “Wal-Mart was one of the first companies to introduce computers to track store sales and inventory and was the first to develop a computerized network to share this information with suppliers” (Fottler & Malvey, 2007, p.267). However, because IT changes daily and becomes outmoded, the company needs to continuously seek for upgraded technologies (Eisenberg et al., 2004, p.265). The information technology/system of Wal-Mart is classified as strategic and focused on how to meet customers’ needs wherein it relies on most current information to sustain the minimum cutting of cost in retail. In order for Wal-Mart to lower their costs, maximize return on capital, and streamline their operations, the company is using the operational excellence strategy. For several decades, IT is considered to be an essential part not just of Wal-Mart but to some large suppliers in the world particularly in dealing with customers. Recently, Wal-Mart is using the standard transaction formats and protocols called the Electronic Data Interchange (EDI) capabilities in order to standardized operations in the sharing of information regarding competitors (Schmidt & Vance, 2004, p.908). Furthermore, Wal-Mart also invested on a strategic information system called Inventory Control System in order to decrease its inventory carrying costs and negotiate lower prices apart from its competitors. Another system that helps in inventory and distribution of the company’s products is the Point-of-Sale System. This is a computerized system that managed prices, sales receipt, and item-by-item sales information for the customers and the company to become a low-cost producer in sales and inventory. In terms of telecommunications, Wal-Mart adopted the Retail Link system in order for their vendors to accurately forecast demand about the needed quantity of a certain product to be delivered in the right store at the right time. This system is a two-way communication that will provide vendors with historical information of products and communicate the orders directly to the production department of Wal-Mart. Today, more and more suppliers are using the system because the data are reliable and they are given the chance to do business with large companies just by linking electronically to their computers (Dunne & Lusch, 2008, p.143). The central computer system of the company is interconnected between the stores and suppliers, this is to have an automatic reordering inventory and close coordination to all of its business partners in a lesser inventory costs. All of the crates and pallets delivered to Wal-Mart stores are placed in an inventory area and these are tagged with a Radio-frequency Identification (RFID) chips so that checking inventory, sales, etc. would be easy to trace. All the data that entered in RFID must be consistent because these are the historical sales information found in Retail Link to be used by the trading partners. Also, to have an accurate inventory tracking, Wal-Mart adapted the bar code scanner; however, to have this technology consistent with the adoption of any IT, the company developed a coding system called Universal Product Code (UPC) system. Despite of some unnecessary problems brought by this technology, Wal-Mart still prefer to use this as an alternative in reordering and sales analysis. With better coordination placed on these technologies, today’s major retailers are generally requiring most of their business partners to use the system for it provides competitive advantage. Level of Strategic Alignment Based on Luftman Levels Investing in IT is said to increase the performance of the business if only IT investments are aligned with all the business functions (Luftman, 2004). Despite of the billions of dollars being invested into IT still the results are not at all favourable to the company, and this has been attributed to the lack of strategic alignment (Akpan, 2007, p.71). A more fundamental explanation of the IT-productivity paradox is explained by Luftman and Bullen (2004), when they said that “business investment in IT has not been sufficiently aligned with the strategic business goals” because IT executives did not recognize the value of IT investment. In order to create value for the investment and business-IT alignment, Wal-Mart must develop IT governance strategies. These strategies must be assessed based on the five conceptual levels of Luftman maturity assessment model for business-IT alignment from the weakest (1) to the strongest (5) level together with all the external partners and customers (Luftman & Bullen, 2004, p.71). Level 1 - Initial/Ad Hoc Process This level of strategic alignment is considered to be the lowest and the weakest level because the maturity criteria are ad hoc, minimum, and not found in the process. In terms of communication, understanding IT by the business is low as well as knowledge sharing and learning/effectiveness are also not found. In terms of value measurements, the metrics (IT, business & balanced) used by the process are not related and unlinked. On the other hand, benchmarking, formal assessments, and continuous improvement are not generally practiced. In addition, the planning as well as the budgetary control is still ad-hoc because the business perceived IT as a cost and not a value. Therefore, business and IT for this level are not aligned and underleveraged. Level 2 - Committed Process IT in this level is viewed by the business as their assets; however, alignment is difficult to achieve because most of the maturity criteria are limited and dependent on functional organization. Understanding IT by the business is limited and some of their metrics are technical and unlinked. Benchmarking as well as improvement is already practiced by this level but they are informal and low. Level 3 - Established Focused Process This process is focused on the business objectives to generate long-term competitive advantage by giving importance on the some of its maturity criteria such as governance, processes, and communications. IT on this level is characterized by the senior and mid-management and their value measurements are emerging and formally linked. In terms of governance, the strategic planning is not limited on functional but on some inter-organizational planning. Therefore, IT in this level is viewed as an asset and a business process enabler in planning and investment management. Level 4 - Improved/Managed Process Based on Luftman level and attributes of Wal-Mart IT, its business-IT alignment belongs to this process as it continued the enhancements to gain competitive advantage and leverage IT assets. This level also managed to capitalize the five maturity criteria: communication, competency/value measurements, governance, partnership, technology and human resource (Hoque, 2002, p.125). First, because understanding business by IT and IT by business is encouraged down through the organization. Relationship building at the same time activity monitoring is also facilitated by their IT executives when they spare time with their staff talking about IT projects. For Wal-Mart, communication is a form of motivation; in fact, they “implemented the largest satellite communication system in the U.S. It linked all of the operating units with its headquartered office by two-way voice and data and one-way video communication” (Fottler & Malvey, 2007, p.267). Second, competency in Wal-Mart particularly in metrics (IT, business & balanced) is linked and characterized by effectiveness and customer-based. The adoption of several systems like RFID and retail link is among the evidences that the company is meeting their customer’s needs. Formal assessments and continuous improvement are formally and frequently performed by the CIO of Wal-Mart in terms of conducting team-building meetings and team-based leadership with the senior management and IT-staff. According to Dan Phillips (n.d.), Wal-Mart -VP of operations, “the fun part about working with Wal-Mart [Information System Division] is we’re treated as business enablers, not computer nerds” (cited in Hellriegel & Slocum, 2007, p.238). Third, strategic planning is managed across the company and perceived IT not just an asset but a driver/enabler. Lastly, Wal-Mart is focused across the functional organization making it ready for any changes and innovation. Over all, the attributes of level 4 is applicable to Wal-Mart for the application is successful and the accountability is clear. Level 5 - Optimized Process The maturity criteria in this level are pervasive, strong and structured, and most attributes are extended to all external partners. All of the value measurements are routinely performed and their governance is integrated across and outside the organization. Organization that fall on this level is very attached to relationship because they always made their partners get involved with all their activities. Measures Can Be Planned in Order to Improve the Strategic Business-IT Alignment An ongoing alignment practice is considered to be successful if operation plans and strategic objectives are accomplished which may result to an increased in revenue, market share and profits, and reduced costs. As noted, “Achieving alignment is evolutionary and dynamic. It requires strong support from senior management, good working relationships, strong leadership, appropriate prioritization, trust, and effective communications, as well as through understanding of the business environment” (Luftman et al., 1999, p.2). Now, in order for Wal-Mart to reach the optimized level of maturity by securing all attributes, the company “should have a leveraged commitment to continuous improvement, utilizing business-focused metrics to reach new levels of both efficiency and effectiveness” (Fisher, 2004, p.4). Wal-Mart must have an advanced IT understanding that involved the tracking of sales and inventories across its different stores location, and evaluation of the current spending of resources on IT whether the company is overspending or underspending (Baschab & Piot, 2007, p.45). The starting point in order to improve the strategic business-IT alignment of Wal-Mart is to have appropriate benchmark that is routinely performed. This measure is complicated and needs careful analysis that is why before the process begins it is essential to select first the secondary processes or guidelines. The company must gather peer group information not just from the internal but also to the external sources, and do checkpoints of life cycle in all of their IT projects to ensure that these provide value for the business. Through benchmarking and checkpoints, the business will have the chance to measure its success and areas that need to correct, and to readily justify in case it is overspending or underspending on technology (Akpan, 2007, p.74). Other thing to consider in order for the business-IT alignment of Wal-Mart to reach the optimized level is to extend all of its activities to external partners and valued the partnership. The business could conduct workshops or IT/business management meetings wherein there is the sharing of ideas and collective experiences among stakeholders. It is the preliminary action that the business could take in order to change the culture that hindered the achievement of business objectives. During this activity, the company at the same time could introduce the balance scorecards in order to monitor and compare whether the outcomes meet the layout of operational planning. Wal-Mart could also establish a customer-focused relationship model “to facilitate interfaces, decisions, and resolution of issues, collaborative plan development and better communication, and build trust between IT and the business” (Selig, 2008, p.78). Conclusion Overall, business-IT alignment is important to businesses and there is no doubt why they continue to link IT and business. This is basically the reason that even though Wal-Mart spent millions of dollars of IT investment the results are still mixed between the best and pessimistic worst. Although the company introduced several IT services still the attributes did not reach the optimized level. As noted, technology alone would be useless if the business has no IT governance strategies that would create value for the investment and business-IT alignment. The optimized level is not impossible for Wal-Mart because it has the resources and committed people as their assets. Recommended measures are benchmarking, checkpoints, workshops, balanced scorecards, and valued partnership. References Akpan, E.O., 2007. Strategic alignment: the business imperative for leading organizations. USA: Tate Publishing, LLC. Baschab, J. & Piot, J., 2007. The executive’s guide to information technology. 2nd ed. Hoboken, New Jersey: John Wiley & Sons, Inc. Beard, J.W., 1996. Impresssion management and information technology. Westport, CT: Greenwood. Dunne, P.M. & Lusch, R.F., 2008. Retailing. 6th ed. USA: Thomson Higher Education. Eisenberg, M. Lowe, C.A. & Spitzer, K.L., 2004. Information literacy: essential skills for the information age. Santa Barbara, CA: Libraries Unlimited. Fisher, D.M., 2004. 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Luftman, J.N. & Bullen, C.V., 2004. Managing the information technology resource: leadership in the information age. USA: Prentice Hall. Luftman, J.N. Papp, R. & Brier, T., 1999. Enablers and inhibitors of business-IT alignment. Communications of the Association for Information Systems, [Online] 1 (11) March, pp.1-33. Available at:http://www.belkcollege.uncc.edu/jpfoley/Readings/artic11.pdf [Accessed 1 February, 2011]. Papp, R., 2004. Assessing strategic alignment in real-time. Journal of Informatics Education Research. [Online] pp.11-28. Available at: http://www.sig-ed.org/jier/v6n1/JIERv6n1_article2.pdf [Accessed 1 February 2011]. Schmidt, M. & Vance, D., 2004. IT does matter (at least when it is properly managed). AMCIS 2004 Proceedings (124). [Online] 31 Dec., pp. 903-912. Available at: http://aisel.aisnet.org/cgi/viewcontent.cgi?article=1702&context=amcis2004 [Accessed 1 February 2011]. Schwalbe, K., 2009. Information technology project management. Boston, MA: Course Technology. Selig, G.J., 2008. Implementing IT governance: a practical guide to global practices in IT management. USA: Van Haren Publishing. Read More