The Organizations Response to Change - Assignment Example

The evolution history

Since its commencement in 1962 as a small rural based chain of discount store, Walmart has rapidly ended up developing into one of the world’s biggest retailer as well as private employer (Copeland & Labuski, 2013). Sam Walton in Rogers, Arkansas started the first Walmart store because of the inspiration from the success of his dime store. Walmart foundation formed a basis around extremely low prices with great services with a view to enable clients save on their money while shopping, which was not an intention by other players. Therefore, its competitors thought it would never last because it operated on small margins but the retailer saw the opportunity that came with economy of scale. However, Walmart went public by 1970 with large profits margins financing a steady expansion because it managed to secure a big market share from masses that preferred both its services and products. The rapid growth owed its effect not only to the low prices but also to the great shopping experience that kept the customers coming back. As the company grew, Sam’s aspirations also grew with it whereby he thought of even bringing an experience whereby clients would be able to buy almost everything they need from one roof (Copeland & Labuski, 2013). Therefore, he expanded the store to include Sam’s Club as well as Wal-Mart Supercenter. Moreover, the company grew a branch into Mexico where it managed to attract large pool of clientele who in the area preferred its service and products to the others. Presently, Walmart is a retail dealer in bricks-and-mortar stores in a variety of formats worldwide besides an online retail store, which saves many much time of commuting to the physical stores and get what they wish to have (Nitschke, 2011). Hence, the clientele not only within the confines of its initial geographical establishment places but also other places where they do not even have the stores though with a simple phone app can adequately buy what one he or she wishes. However, attaining a large pool of clientele has not only been due to low prices but also the retailer’s proficiency in devising appropriate segments that include Walmart international, Walmart U.S. and Sam’s Club. In addition, its online segment constitutes an average monthly visit of 60 million people wishing to purchase varied products as well as services. Therefore, Walmart has been on a continuous growth owing to its evolutionary history (Copeland & Labuski, 2013). It started as a small enterprise and has since grown into one of the world’s largest retail stores to the extent of thriving in regions whose cultures and market dynamics differ significantly with those of US.

Vertical integration and outsourcing

Adopting an efficient operation structure is extremely essential in enhancing any given entity’s competitive business profile. Vertical integration as well as outsourcing are viable approaches to help in the advancing of a business’s competitive edge whereby in the latter serves as a way of evading costly implications (Nitschke, 2011). Evading costs through outsourcing mainly refers to giving out some tasks that would cost the entity much operating costs to more specialized entities. Since these specialized will not only outsource cheaply but also of much quality because it their core business (Copeland & Labuski, 2013). While vertical integration involves the expansion of the presence as well as the influence of the business, outsourcing involves contraction of some information of the business to those who provide services to the business externally.

Advantages of vertical integration

Vertical integration gives the firm the ability to lower its prices because they cease to buy supplies from other profit-oriented organizations. According to Porter’s diamond in regards to national advantage, the related and supporting industries are advantageous to the firm when there is a strong competition among the suppliers (Nitschke, 2011). However, with Walmart’s vertical integration, they do not need the suppliers. Moreover, the company gets complete as well as total control of all its business aspects. This is vital in ensuring high profit margins in the case of Walmart since it export its goods to the foreign countries with smaller markets.

Disadvantages of vertical integration

With vertical integration, the company’s flexibility suffers a great hindrance such that the company finds it difficult to adapt to new things. Therefore, if rivalry in the global context is high as in the case of Walmart, the company suffers as suggested by Porter’s Diamond of National advantage (Nitschke, 2011). Besides, the company requires a lot of capital with vertical integration. Therefore, large global firms that engages in global transactions such as Walmart when uses vertical integration could suffer capital surge (Nitschke, 2011).

Advantages of outsourcing

Outsourcing enables a company to make cost as well as efficiency savings. With increased savings, especially cost savings, the company gets large profit margins (Nitschke, 2011). Therefore, the company can be easily and effectively involved in global competition as in the case of Walmart according to Porter’s Diamond of National advantage (Bunker, 2011). Since, the profits that it realizes besides used to cater for its staff and shareholders; the entity has utilized it to make more expansions (Nitschke, 2011). Rapid expansion of any given entity as with the case with Walmart, is due to high profit margins after learning and implementing ways on how to reduce their costs. Besides, outsourcing enables the business to build its focus around core activities hence reduce unnecessary spending which could in turn decrease the profit margins (Nitschke, 2011). Therefore, outsourcing helps Walmart in global competition against other retailer.

Figure. Porter’s National Diamond of Advantage (Segal-Horn & Faulkner, 2010)

Disadvantages of outsourcing

Walmart has significantly outsourced jobs in the American Warehouses. The famous low prices as offered by Walmart carries with it a hidden cost for the employees of the distribution centers of the company throughout the country (Nitschke, 2011). Contracting out therefore is common in the rapidly growing Walmart (Copeland & Labuski, 2013). Walmart has outsourced workers toil at the hierarchical bottom intermediate as well as in alternative employments. Therefore, it has prevented the growth of the local competitors. According to Porter’s diamond of National advantage, local competition increases the global completion of the company hence Walmart suffers due to this effect (Nitschke, 2011). The result of this has been lowly paid staff besides in certain instances quality being not consistent because some of the outsourcing entities might end up altering the processes meant to make certain items. Though not widely stated, any given entity that prefers outsourcing has been marred by lawsuits lodged by some of their staff who were either retrenched or forcedly made to retire due to their inability to attain certain targets whereby Walmart is not an exception (Copeland & Labuski, 2013).

The Boston Consulting Groups growth-share matrix 

The Boston Consulting Groups growth-share matrix constitutes a planning tool useful in portraying the portfolio of the firm on a quadrant in line with the axis of relative market share as well as the axis for the market growth speed.

Figure. The Boston Consulting Groups growth-share matrix (Fortenberry, 2013)

Relative market share

In the year 2013, Walmart had a high market share, which resulted in extremely high returns from the market (Copeland & Labuski, 2013). The firm had increased production, hence its benefit from economies of scale as well as experience curve translated into higher profits. Therefore, the company was not a dog owing to its relatively high market shares. However, the company gained adequate cash from the cow and adequately invested them to support and help in the maintenance of the market share (Copeland & Labuski, 2013).

Market growth rate

Not only had 2013 done Walmart experience high market growth rate but also the previous years (Copeland & Labuski, 2013). The company therefore realized high earnings as well as profit. As in the previous years, the firm used the money generated for further investments, which stimulated greater growth and development of the company (Copeland & Labuski, 2013). Walmart operates in stars and invests the money obtained into the cash ‘cow’ for further development. However, the company did not succeed from the question marks of in the year 2013.

Recommendation for Implementation of strategies

An appropriate way for Walmart CEO to implement leadership strategies includes reviewing the strategies of the business and implication for the new requirements for leadership (Copeland & Labuski, 2013). The analysis calls for a team of experts comprising of the individuals who are well conversant with the business as well as others who can ensure that the company acquires, retain and develop the talents for leadership. The first step involves identification of the strategies drivers, the key choices made by the leaders like the CEO on positioning the organization to be advantageous of the strengths, weaknesses, opportunities as well as the threats in the market. The CEO should make unexpected variations in decision making to curb laxity as well as involve changes in the structure of planning.

Reference

Bunker, K. A. (2011). Responses to change: Helping people manage transition. Greensboro, N.C: Center for Creative Leadership.

Copeland, N. & Labuski, C. (2013). The world of Wal-Mart: discounting the american dream. London: Routledge.

Fortenberry, J. L. (2013). Nonprofit marketing. Burlington, MA: Jones & Bartlett Learning.

Nitschke, C. (2011). Outsourcing vs. Insourcing in the Automotive Industry - The Role and Concepts of Suppliers. Munich: GRIN Verlag GmbH

Segal-Horn, S. & Faulkner, D. (2010). International strategy. London: Thomson Learning.