Organization Theories and Designs - Wal-Mart - Case Study Example

Firstname Lastname Instructor’s Name Course Number 11 June 2018 Part A- Organization Theories and Designs Wal-Mart is the second largest company in the world, specializing in the control and management of mass merchandising stores. Wal-Mart basically operates through three primary segments, which include Wal-Mart Stores, Sam’s Club and International Segments. The Wal-Mart stores segment further comprises of supercenters, discount stores and neighborhood markets in the United States including its online shopping segment (Research and Markets, Online). Wal-Mart retails a wide variety of merchandise starting from grocery, apparel, books, home appliances and electronics to books, movies, gifts, jewelry and cosmetics etc. Wal-Mart, internally operates through a number of departments including Aviation and Travel, Business Sustainability, CMI Benefits, Corporate Affairs, Finance, Global Security, Information Systems (ISD), Marketing, Merchandising, Human Resources, Real Estate and Store Planning, Replenishment, Store Operations and Walmart.com. These departments take care of one operation each extensively (Wal-Mart, Online). The global retail industry has come a long way from its humble beginning to reach worldwide sales of about $ 7 x 105 Crores. 30% percent of the worldwide demand is accounted for by the top twenty retailers. The retail sector in general continues to show an upward growth trend. The retail turnover in Europe is roughly about Euros 2,00,000 Crores and retail stores make up about 20% of the GDP in the USA and is the third largest employer segment. China has drawn many global retailers and about 7% of the population in China is employed by the retail segment. The global retail market is diverse covering a wide number of segments. Global retailers showcase diverse financial and operational subtleties. The primary business of retail companies is to function as the final sales point to consumers for wholesalers and manufacturers. There are certain characteristics that are specific to the retail industry as such. Firstly the buyer of retail goods is either an individual or a small trader. Secondly the goods bought in retail are basically physical goods although some retailers sell certain types of services. Lastly the frequency of purchase of retail goods can vary depending upon need. It can range from everyday grocery purchase, to annual purchase of large consumer goods such as electronics to white goods. Additionally the retain sector has considerable diversity in risks, with tight logistics and high standards of execution being the key factors. Retail is largely capital intensive with an organic growth model. The markets of the retail industry are generally local or regional in nature although some retailers extend their operations internationally (Moody’s Investors Service). The below diagram is a representation of the organizational chart of Wal-Mart. It shows functional relationships and the hierarchy of the organization. Wal-Mart was built into a three product divisional structure, with the three divisions being Wal-Mart Stores, Sam’s Club and International Stores. This divisional structure method is advantageous to Wal-Mart, as each division focuses on specific objectives such as products, services or customers. Each of the three divisions has a President and CEO under who subordinates work. The President and CEO of Sam’s Club have an Operations EVP, a merchandising and replenishment EVP and an EVP GM for Home Services reporting to him. The President of Wal-Mart Stores, which is the largest division, has a large number of people reporting to him. These people range from EVP Operations, EVP Food Consumables, EVP Apparel and Home furnishing, EVP People’s division, Chief of Staff etc. The Vice President of Internal Stores has the EVP President of the Americas International reporting to him. Wal-Mart has roughly about fourteen departments handling various operations of the company, each concentrating and specializing in the tasks pertaining to that department. Wal-Mart has a flat organizational structure, with cross-hierarchical and cross-functional teams. Additionally it also has a comprehensive information network with communication moving both up and down. Wal-Mart has much standardization in its organization structure. There are a considerable amount of rules involved and there are certain standard operating procedures. Since Wal-Mart’s belief is to deliver the best customer service, they make use of standardization because using a structured operating procedure and electronic transfer of information and instruction will do away with errors and cut down on severance. The organizational structure of Wal-Mart also has a significant amount of specialization involved. As stated above it has three major divisions. Employees of these divisions are specifically trained to deliver one kind of service. This kind of specialization in one task brings about efficiency and resultant customer satisfaction. Wal-Mart has an organic structure, which is highly flexible and adaptive. Organic structures are generally characterized by individuals working together as a team, as opposed to working alone. Additionally there is lesser emphasis on taking orders from superiors. Instead employees communicate across different levels of the organization to obtain information and advise as well as feedback. The organic structure has no standardized jobs and regulations and the organization is flexible and changeable to suit current needs. Despite having division of labour the jobs are not standardized. Employees are trained efficiently are equipped to handle diverse jobs (Management Consulting Courses, Online). The information network of Wal-Mart is highly advanced with upward as well as downward communication. There is a high level of employee participation in decision-making as opposed to the bureaucratic decision-making seen in a mechanistic structure. A high level of Decentralization can also be seen in the organizational structure of Wal-Mart as the authority to control tasks are delegated, with most communication being lateral. This is a wide contrast to the mechanistic structure, wherein decision-making is kept as high and as vertical as possible (Martha, R, 2007). Sam Walton started Wal-Mart 1962, as the first discount store in Rogers, Arkansas. In five years, there were 24 Wal-Mart stores all over Arkansas hitting a sales figure of about $12.6 million. In the next two decades Wal-Mart opened it’s first distribution center, the Wal-Mart home office in Bentonville, operation in more that ten states, and started selling it’s shares as a publicly held company and was approved and listed in the New York stock exchange. In 1983 Wal-Mart was listed as the number one retailer among other general retailers for the eighth year in a row by Forbes magazine. The first Sam’s Club outlet was also opened in the same year. With the opening of a retail unit in Mexico City in 1991, Wal-Mart stepped into the international market. Wal-Mart had stores across 50 states, and retail units in Argentina, Brazil and a join venture in China by 1995. Just before the year 2000 Wal-Mart became the largest private employer in the world. According to the latest reports from Forbes magazine in year 2008 Wal-Mart is the world’s largest public corporation by revenue. Today there are over 7,800 Wal-Mart stores and Sam’s Club outlets in 16 markets across the world. Wal-Mart employs over 2 million associates and serve roughly about 100 million consumers. Wal-Mart’s annual growth rate was a little over 10 percent from end 2008 to end 2008. Wal-Mart’s objectives are to increase shareholder values by increasing profits. It aims to achieve this by increasing incoming revenues and by decreasing costs. Its primary marketing objective is to retain competitive advantage by offering quality products at the lowest price and increase its research expenditure on analyzing potential customers and future products by 25 percent. Wal-Mart’s long-term objectives include targeting the upscale market and going abroad for growth. In an effort to target upscale customers and attain its’ goals, it opened a new store on Texas with an expanded section of high end electronic goods. As far as stores abroad are concerned it is planning to extend its arm further into China and also into India for the first time. Wal-Mart is one of the global leaders of information technology innovation. Being one of the world’s largest retailers, with an enormous employee base and wide array of stores across countries, is it hardly surprising that technology plays such an important role in the operations of the organization. With the leasing of an IBM 370/135 computer system, in 1975 to maintain control over inventory for all goods in the warehouse and distribution centers and to generate income statements for each store, they continued technological innovation and now stand as a global leader. Their latest step to keep up with the latest technological advances has been the opening of Walmart.com. This is an online version of their store enabling customers to do their shopping online in an easy and quick manner. Wal-Mart has a separate Technology Division, which specializes in innovating cutting edge technology for all of its operations. They have a strong information systems set up with the world’s largest non-governmental database. About 90 percent of Wal-Mart’s business solutions are written in-house in the technological division. The division has developers working on the entire life cycle of a product. Wal-Mart ISD develops constructs and performs on every platform in operations today. The basic organizational culture of Wal-Mart is one where the company helps the consumers save money to enable a better lifestyle. Their basic mission statement is to ‘save people money so they can live better’. Wal-Mart, being well aware that price is most important to consumers; it offers the highest quality services at the lowest prices. The company is also known for its unique corporate culture. Apart from their mission they have three basic beliefs and values. Firstly they believe in respect for individuals, be it for consumers, employees or suppliers. Their second belief is service to customers. Since customers are the most important part of the business, they believe in extensive service for customers. They strive to deliver the best customer service by training their employees to politely handle them. Thirdly they believe in striving for excellence. Although Wal-Mart is proud of its achievements, it will always continue to strive for excellence. Part B - Business Sustainability – Case Study Summary The case study details how an industrial design company built a Sustainability Management System (SMS) standard, designed and executed an SMS throughout its business and went ahead to become the first company to get a third party SMS certification. The study also explains current developments and challenges and investigates how SMS has led to the implementation of the United Nations Global Compact. Founded in 1972, Designworks/USA offers a wide range of design and engineering services. The company has gained expertise in designing automobiles as well as a variety of consumer goods. With the designing of seats for the BMW 8-series it began working closely with the BMW group in 1985. Eventually the BMW group bought over Designworks and it became a wholly owned subsidiary of the group in 1995. BMW group, which has always displayed a commitment to improving the environmental profile of their products implemented environmental management systems, which allowed the company to recognize and handle environmental risks and impacts. When the idea of developing a Sustainability management system came up, the group approached Designworks. The entire process began with the developing of an SMS framework, which would make sure that economic, environmental and social concerns were unified within the organization’s decision-making process. The SMS standard was built on the framework of the ISO 14001 to enable certification of both standards. The standards combined two important concepts of sustainability. The first one was the triple bottom line concept, which involved the incorporation of economic, social and environmental impacts in decision making. The second concept ensured that the SMS standard brought about development that met the needs of the present without compromising the capacity of the future generations to meet their own needs. Following this was the development of a Sustainability Policy, which included the constant improvement of social, environmental, economic and ethical performance. The policy also urged Designworks to unify a corporate social responsibility into their product development. Additionally it required Designworks to encourage it’s stakeholders to follow similar practices. After the development of the policy each department was asked to create a comprehensive list of environmental, social and economic aspects. The environmental aspects included on-site issues such as solid wastes, emissions, effluents, and resource use. Other environmental aspects were associated with the products designed, which included manufacture, use and end-of-life disposition. The social aspects detailed in the case study includes on-site issues such as employee retention and turnover, optimal working conditions, gender and racial equity, workload and sufficient staffing, building evacuation and first responder training, indoor air quality, and general environment, health and safety (EH&S) awareness. The economic aspects were listed under four main themes, namely, increasing sales to customers interested in sustainability management and increasing revenue, reducing business risks, improving the productivity of employees and cutting down on operating costs. Aspect prioritization was done based on seven dimensions including, probability of occurrence, intensity, duration, legal and regulatory requirements, stakeholder concerns, leadership potential and level of control. An SMS Action Plan, which listed the prioritized aspects and described the objective for each aspect followed the listing of the various aspects. To achieve these objectives targets were set and individuals were assigned to oversee the achieving of targets. The objective and targets were revised according to the progress made. The SMS standard further required an audit to be conducted annually to ensure that the decision-making and operations adhered to the SMS, as well as ISO 14001 standards. An internal audit team was formed to conduct the audit and submit reports for each of the several departments. The audit was to examine the policy, aspects, objectives and targets. This was followed by Designworks having a third party organization certify that its management system conformed to SMS and ISO 14001 standards. The case study then goes on to highlight the implications of SMS implementation. It discusses the implication of applying SMS to building operations and personnel management, client engagements, suppliers and contractors, stakeholders and lastly applying SMS across the BMW group. The case study also deals with the ongoing SMS developments. It details the integration of SMS into its design process and performance evaluation and compensation scheme of the organization. It also deals with making SMS more accessible to its employees. In an effort to integrate SMS into the design process a tool to screen potential clients interested in sustainability has already been developed. It has also built an employee appraisal system that evaluates SMS performance and commitment. To enable easier accessibility some employees have translated SMS procedures and elements into simpler, easily understandable language. While significant progress has been made in implementing SMS, there are still some challenges faced by Designworks. The response time taken because of follow up research, after a question asked by the client regarding SMS is a big challenge. Another challenge is the unwillingness of clients to pay for researching ways of improving sustainability. As far as future developments are concerned, incorporating social aspects into the design process is on the agenda. The study finally deals with the United Nations and SMS. The UN Global Compact was proposed encourage the world business leaders to take up more responsibility in improving the social and environmental aspects of the global economy. The Global Impact was based on nine major principles in the fields of human rights, labor, and the environment taken from the Universal Declaration of Human Rights, the International Labour Organization’s Fundamental Principles on Rights at Work, and the Rio Principles on Environment and Development. The BMW group is one of the primary international corporations formally committed to the UN to implement these nine principles. The case study concludes with the analyzing of SMS with respect to human rights and labour principles and environmental principles. There are two interesting and stimulating aspects in the case study. The first one is that SMS Framework has been based on the ISO – 14001, an internationally recognized standard. This ensured that the SMS framework was inherently strong without any major loopholes or drawbacks. This is all the more intriguing because it is a clear case of reusability, which is one of the core principles of environmental standards in ISO-14001. Another interesting aspect was the focus on local design schools. The SMS economic aspect analysis of the case study outlines a plan to involve the local talent studying at surrounding design schools by enabling the Designworks staff to act as a faculty and spread the word on green careers to the students. An indirect outcome apart from enhanced recruitments is the improved awareness on green issues. Applying the SMS framework across all units of BMW may prove to be an issue largely because of the cultural environment and also the nature of its subsidiaries like Rolls Royce, which is a manufacturer of elite cars. Focus on sustainability may not be a top priority for a company that focuses on higher margins as the basis of business continuity. One area that was not addressed adequately is the direct value add to the clients by way of SMS. Most clients would be unwilling to pay Designworks to research on sustainability when it derives no direct benefit from the same. This aspect is not adequately addressed in the SMS design framework. The assumption that has been made is that the integration of social issues into the design process has remained distinctive because the awareness of the SMS process relies largely on individual designers. The writer says that enthusiasm and insight of SMS can be attributed only to individual designers. This is an assumption as enthusiasm and insight of SMS is not limited to individual designers alone. References Associated Press (2006). Wal-Mart Turns Attention to Upscale Shoppers. MSNBC Website. Retrieved 24 April 2009. http://www.msnbc.msn.com/id/11957536/ Cogmap. Wal-Mart Stores Inc. Retrieved 24 April 2009. http://www.cogmap.com/chart/wal-mart-stores,-inc. Gogoi, P (2007). Wal-Mart Goes Abroad for Growth. Business Week. MSNBC Website. Retrieved 24 April 2009. http://www.msnbc.msn.com/id/17262613/ Lennon, J (2008). The Organizational Structure of Starbucks, Unilever an Wal-Mart. Associated Content. Retrieved 24 April 2009. http://www.associatedcontent.com/article/782963/the_organizational_structure_of_starbucks.html?cat=3 Martha, R (2007). Wal-Mart Case. LaGuardia Community College. Retrieved 24 April 2009. http://www.eportfolio.lagcc.cuny.edu/scholars/doc_fa07/Ruth.Martha/WALMARTCASE.HTM Millsap, D F (2009). Wal-Mart Strategic Marketing Plan. Retrieved 24 April 2009. http://www.danielmillsap.com/research/wal-mart-hypothetical-strategic-marketing-plan.html Moody’s Investors Service (2006). Global Retail Industry. Moody’s Website. 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