Wal-Mart Information Technology Company Analysis - Research Paper Example

?Running head: WAL-MART INFORMATION TECHNOLOGY COMPANY ANALYSIS Wal-Mart Information Technology Company Analysis 0 Introduction Wal-Mart is the world’s largest retailer with over 9,700 stores. Its stores command a market share of 11 percent of the United States retail market. In the quarter from May to July 2011, Wal-Mart sales were 108.64 billion dollars, with 61 percent of this coming from the United States. Wal-Mart started in 1962 as a small store in Arkansas. It has grown over the years to become the largest store in the world. Wal-Mart owes much of its success to the early adoption of an Information Technology as compared to its competitors. The store has continually evolved to adapt to changing market needs through enhancing its Information Technology strategy. This has given it a competitive edge over other retailers by enabling it to price its products more competitively. Information Technology use by Wal-Mart continues to enhance its market leadership and dominance. 2.0 Information Technology characteristics and dynamics of Wal-Mart Despite of Wal-Mart’s large size, it has one centralized information system that is developed internally giving it much advantage in operations that enables it price its products competitively in comparison to other retailers. In 95% of Wal-Mart’s Information Technology endeavors, much of the development is done by internal staff, managing programming and process engineering and not relying on commercial software or outsourcing. The company has also been able to maintain its Information Technology budget at a lower rate than its market competitors. These costs do not grow at a similar rate to sales despite the entire Wal-Mart business model relying heavily on Information Technology. Wal-Mart as a whole relies on information technology to attain its business objectives and meet the needs of its clients (Sullivan, 2004). The information system at Wal-Mart is a centralized system that manages supplier and consumer data all in one avenue. The centralized system analyzes data from Wal-Mart’s Discount stores, Supercenters, Sam’s clubs, Neighborhood markets and world wide stores from one location. The Information Technology staffs concentrate on building software for all its systems, both at home and in international markets. As a result, any new code affects the global operations of the entire retail store. This leverages the Information technology efforts resulting into massive savings in investments in the department (Sullivan, 2004). Wal-Mart’s system enables it capture all of a day’s sales and product information in real time from all of its global operations. This information is instrumental in making timely decisions as regards sales of particular products. The information is also used by buyers to make buy decisions that eventually affect Wal-Mart’s sales. Availing real time data is one of Wal-Mart’s Information System’s hallmarks. This information enables decision makers at Wal-Mart to act fast and decisively and to take immediate corrective measures where a problem is noticed. This has worked to enhance Wal-Mart’s market leadership over the competition (Sullivan, 2004). Wal-Mart also seeks to synchronize its online operations as well. This it will be achieved through the synchronization of its online sites such as walmart.com, samsclub.com, asda.com, walmartmexico.com.mx. Such synchronization will result in similar efficiencies as those experienced through the centralization of the brick and mortar stores operational information. The platform to host this system will be scalable, Java based and running on IBM’s WebSphere and Informix database. The aim of this is to achieve efficiencies in growth and enhance scalability with the ultimate goal of cost effectiveness that translates to more affordable products for the final consumers enhancing its market leadership (Sullivan, 2004). One of the more identifiable uses of Information Technology by Wal-Mart is the use of radio frequency identification in tracking stocks. The RFID tags are placed on cases and are read when inventory is entering store rooms, when at the floor and when empty packs leave the store rooms. This information is used to inform Wal-Mart’s suppliers and customers about the items in stock and their level. This is achieved through Retail Link software, which is web based and enables customers and suppliers to check in on Wal-Mart’s. The impact of the RFID is expected to have a high impact on operations and to further reduce the required inventory levels and as a result cutting operational costs (Sullivan, 2004). RFID among other things creates information that assists in determining when to get additional stock, if too much stock is ordered by a store and so on. This it will achieve by accessing the movement of stock from a holding area and the amount of time such a product sits while in the holding area reflecting its slow movement. To ensure global data synchronization, RFID has to enable data sharing with industry registry, EPC global, to ensure that accurate and consistent product information is exchanged among partners. To enhance communication between Wal-Mart and its partners such as the suppliers, UCCnet will be used. For the system to succeed, collaboration is required among industry players to develop more user friendly applications for their global suppliers. RFID decreases stock levels and increases sales volumes through focused selling. How the system will impact on supplier’s operations is just as important as the benefits that Wal-Mart seeks to achieve from the business, since that is what will ultimately determine its success or failure (Sullivan, 2004). Technology in Wal-Mart has contributed towards Wal-Mart’s business in three key areas. First, it has enhanced the setting up of performance targets and key performance indicators as well as the measurement of actual performance against these key indicators. The process of automation has also resulted in the driving out of unnecessary costs and a reduction of critical process times such as the time it takes for supplies to move from the supplier to the final consumer. The information system has also enhanced data collection and sharing. This in turn has resulted in better understanding of the consumer and an increase in overall Wal-Mart sales (Grean & Shaw, 2003). Through joint supply chain information systems with some of its suppliers, efficiencies have been created and enhanced in the supply and delivery of products to the final consumers. Collaboration of Wal-Mart with Procter & Gambler for instance in developing information systems resulted in the creation of a data highway that provided vital information about the activities of the two organizations, customer behavior, profitability of product groups and the impact of marketing efforts. This created better consumer information flow from the retailer to the raw material supplier, leading to lower costs throughout the system. This and other such integrated supply chain systems give Wal-Mart its advantage on costs enabling it to price its products competitively (Grean & Shaw, 2003). The success of Wal-Mart’s Information Technology department is driven in part by the organization and alignment of the department in relation to the whole Wal-Mart business. The department develops information systems that will advance Wal-Mart’s core business and result in the realization of high benefits. The department does not face governance and budget bottlenecks. Resources and budgets are assembled to channel resources to what is most important to Wal-Mart’s business. Steering committees that would otherwise unnecessarily increase obstacles to financing are not present, a fact that enhances speed in trying out new ideas on a small scale and concentrating on the specific parts that promise most value to the business. The Information Technology department at Wal-Mart is concerned with how to increase ease, speed and efficiency for everyone in the Wal-Mart community, from the operators to the customers and suppliers (Sullivan, 2004). 2.1 How organizations within Wal-Mart adapt to changes in IT strategically Organizations within Wal-Mart can adapt to changes in information technology strategically through using the technological avenues provided by Wal-Mart in enhancing there own processes. Retail information and inventory movement information provided through RFID is useful in providing information on consumer trends. This information can be strategically used by organizations within Wal-Mart to identify and respond promptly to market trends raising their standards and approach. This will in turn increase their overall market responsiveness and enhance customer satisfaction. Such an approach has created great success with Proctor & Gambler (Grean & Shaw, 2003). In addition to this, organizations within Wal-Mart should implement changes in information systems and business processes. These changes would typically involve the coordination and collaboration of individuals within the organizations and information technology staff to come up with solutions that improve their own internal processes through advancements and adaptation to the changes in information technology (Betz, 2002). 2.2 The rationale behind such strategies Organizations within Wal-Mart should seek to analyze and balance risk within their individual Information Technology portfolios. Such an analysis should cover and counter competitive risk, through leveraging information provided to them by the Wal-Mart information technology systems. Five dimensions should be considered when developing such a competitive advantage. These are the primary strategic resource which in this case is the information system, the competitive strategy to be used in leveraging the benefits of this system, the strategic target, mode and competitive Information Technology orientation (Kangas, 2003). Information technology adoption strategies are important to the overall success of Wal-Mart. This is because they facilitate the provision of cheaply priced goods by Wal-Mart to its customers. This systems help push down costs, enabling Wal-Mart to attain the price advantage that is at the center of its business strategy. Until September 2007, Wal-Mart’s strategy was, ‘Save Money. Live Better.’ This changed to, ‘Always Low Prices,’ an indication of its need to maintain competitive pricing at the core of its strategy (Wal-Mart’s Supply Chain Management Practices, 2011). The strategic adaptation of its organizations to information technology is thus important in maintaining this leadership. 3.0 Conclusion Information Technology is important to any organization. It enhances key organizational competencies and core business activities. Business objectives are more likely to be achieved when information technology is employed. Wal-Mart has enhanced its competitive advantage through the use of information technology. This has resulted in great efficiencies in its operations which in turn enable it price its products better as compared to other retail stores. The result is a global leader in retail business that commands over 11% of the American retail market share. References Betz, F. (2002). Executive Strategy: Strategic Management and Information Technology. New York: John Wiley and Sons. Grean, M., & Shaw, M. J. (2003). Supply-Chain Integration through Information Sharing: Channel Partnership between Wal-Mart and Procter & Gamble. Retrieved October 10, 2011, from http://citebm.business.illinois.edu/it_cases/graen-shaw-pg.pdf Kangas, K. (2003). Business strategies for information technology management. London: IRM Press. Sullivan, L. (2004). Wal-Mart's Way. Retrieved October 10, 2011, from http://www.informationweek.com/news/47902662 Wal-Mart’s Supply Chain Management Practices. (2011). Retrieved October 10, 2011, from http://www.casestudyinc.com/case-study-walmart-supply-chain Read More