Challenges that Walmart and M&S Face - Term Paper Example

?Business Table of Contents Introduction 3 Walmart 3 Marks & Spencer 3 Business Operations 4 Recent Challenges 5 Retaining and Acquiring s 5 Logistics Challenges 6 Human Resource Challenges 7 Cost Challenges 8 Excellence in Operations and Customer Service 9 Assessment of the Impact of Various Factors and their Impact on Management Decision Making 10 Political Effect 10 Social Influence 13 Ethical Factors 15 Legal Factors 17 Conclusion 19 References 20 Introduction In existing business environments, there exists tough competition between the companies to acquire customers or increase their customer base. Cost minimization is another factor that the companies consider as strategy to gain competitive advantage in the market. To understand the recent impacts of different factors affecting the business operations, Walmart of the USA and Marks & Spencer of the UK are taken into consideration. From the comparative analysis of these two companies that face the similar situation in present business environment, it would be helpful to generate better understanding of the operations of multinational corporations. Walmart Walmart is a multinational corporation of the US that operates a large chain of discounted departmental stores. Sam Walton, the founder of Walmart opened its first store in 1962 with a discounting model of retailing. The Walmart has expanded and has its presence globally (Walmart, 2011). Marks & Spencer Michael Mark and Thomas Spencer jointly opened the Marks and Spencer store in the UK, popularly known as M&S, in 1894. M&S operates several retail shops in the UK and is present in other nations as well (Marks & Spencer plc, 2011). Business Operations Walmart has been able to grow internationally and operate in several countries. There were various challenges present from the diverse forces of business environment. However, they have been successful in establishing their brand and its presence all over the world. Similarly, M&S grew big with lot of challenges and created its brand image globally. Both the companies operate globally and are also well-known to be the largest retail chains in the world (North Dakota State University, 2003). The success of Walmart was its strategy of business operations. They based the operations on web-based application to support their motto of ‘everyday low pricing’ and enhance the satisfaction level of customers (North Dakota State University, 2003). The low pricing strategy and satisfaction level of customers were the major guiding principles of Walmart for their success. They are still following this concept with their existing products and new innovative ideas as well (North Dakota State University, 2003). The success of M&S was because of the innovative development of their knitwear in the UK market. It led to a significant change in the textile industry of the market. During the nineteenth century the market was dominated by the wholesalers, but in the twentieth century the retail industry started to rule the market. The M&S’s innovative idea of the product development made the brand international (Riello, 2003). Both Walmart and M&S have been successful in their host country first and then as they grew, they became international by opening different stores at several locations of the world. Recent Challenges M&S and Walmart are in the similar industry and operate in the international market. Their global presence has made them face global challenges in recent times. The pressures of international market upon the two are similar in nature as the overall retail industry faces the similar challenges. Retaining and Acquiring Customers The chief challenge that both M&S and Walmart are facing is that of customer retention. Retention of the customers both in the domestic and the international market has been the biggest challenge. In the recent times, the intense competition for retaining and acquiring customers has become the chief challenge and an important objective of the retailers. With the advancement of modern technical information system, the application has been developed to maintain relationship with the customers and retailers. However, there have been difficulties in managing the customers to be loyal to a particular store. Walmart and M&S face the similar challenges in retaining customers to their stores and acquiring them. The demands for merchandizes and services of consumers have been more diversified and their behavior for purchasing and shopping has changed vastly with the increase in the number of vendors available to customers via different means and through internet services. Walmart and M&S find it even more challenging to acquire and retain customers. Customer retention is known to be one of the major business ingredients in increasing profitability and it has become challenging for firms such as M&S and Walmart to retain them (Seock, 2003). Logistics Challenges The blockage of inventory in the warehouse and stores create a challenging problem to the retailers. Walmart and M&S try to minimize the inventory cost and sell more inventories of the stores to recover the capital cost associated with them. The logistics management plays an important role in delivering the best approach in managing the inventories. Delivery of right product merchandizes at the right time and right place is the problem faced by the retailers. Consumers’ beliefs and requirements have changed widely and their desire to wait has reduced and in recent times, they expect for instant merchandize availability and satisfaction. This has become the challenging problem for M&S and Walmart as they operate globally and the delivery of the merchandize is highly subject to certain conditions. Inability to manage this challenge will increase the cost as well as will result in loss of the customers for not providing appropriate merchandizes at the right time. The warehouse and distribution centre are expensive affairs which have been increasingly challenging for Walmart and M&S to maintain an enhanced system of logistics that operates globally. Due to its international operations at times logistics creates huge amount of problems and at certain times they need to bear the cost as well as lose customers (Fernie & Sparks, n.d.). Human Resource Challenges Walmart and M&S operate globally and the challenges of recruitment of employees, changing employees’ demographics and different cultural and legal requirements have made it complex for the human resource management in the retail sector. There are challenges that have been due to the diversified work group with different cultures, values and attitudes to align with the business policy and processes. It becomes difficult for Walmart and M&S to maintain common value and culture of the organization that can be inculcated by the employees. This effect is seen upon the customers. There are various skillful employees requirement in this industry and the retaining them is the biggest challenge. For running the efficient stores all across the globe, experienced personnel are highly demanded. The challenge lies in the retaining of these employees. They are trained and developed and when they leave, it is a cost to the organization. New recruited employees require training that adds up the cost and time of the customers. Retaining on global basis has been the challenges for M&S and Walmart. There are huge requirement of employees for the operations of the stores with experience in understanding the customers’ behavior and expectation. Loss of these employees directly affects the stores performance and level of service that is rendered to the customers (Augusta State University, 2009). Cost Challenges The operations of Walmart and M&S have become more complex and sophisticated in the current business environment. The high expectation of the customers and hard discounters has been the recent trends in the retail industry. Along with these, the opportunity cost in reducing the operational costs, inventory cost and other costs have become an increasing challenge for M&S and Walmart. The control over costs increases the profit margin of the company. To increase the share of profit Walmart and M&S are being challenged globally to reduce the costs (IESE, 2011). Walmart operates as a discounted retail store worldwide and to maintain the supply of low price merchandize it needs to reduce the costs as the margin of profit is low due to the discounting model. The challenge of Walmart is to maintain the similar pattern in all the stores. This is possible with reduction of cost that will facilitate the organization to increase the margin of profit. The challenge is still growing bigger with the increase in the inflation rates in the international market (Graff, 2006). Marks & Spencer also operates discount stores in the UK and other parts of the world. Since the mode of operation is based upon the discounting model, the company seeks to minimize the cost and increase the margin of profit. However, there are various challenges in terms of logistics, management operations, competitive pressure that increase the cost and is the biggest challenge in maintaining discount store model. The control over the cost has become a challenge for Walmart and M&S in the recent global business operations in the retail industry (University of Norte Dame, 2009). Excellence in Operations and Customer Service Walmart and M&S are facing the challenge of excellence in operations and customer service. The excellence in operations assists the organization to efficiently manage the operations with cost effective approach. This helps in reducing the cost and increase the efficiency in operations that assists in delivering enhanced customer service. Walmart in order to achieve excellence in operations and enhance the level of customer service had introduced the technology of Radio Frequency Identification Devices (RFID), but it increased the cost. The cost of compliance and customer privacy were the challenge. The benefit is not seen due to the international business environmental pressure till date (ISB, 2004). M&S’s operations are widely spread and require more efficient management techniques in achieving excellence in operations that will assist in delivering expected service to the customers and decrease the cost of operations. The operation of the stores in an efficient manner has become the challenge in delivering value to the customers. The changing customers’ behavior and attitude towards shopping and purchasing are difficult to perceive and deliver the expected service that becomes challenging in the operational activities of the stores. The operations of the store and customer service are closely related and interdependent and the retailers such as Walmart and M&S are being challenged with the changing customer behavior and structural changes in the operations to deliver valuable service and achieve excellence in operations. These have been increasing concern for both the retailers who are continuously facing the problem in domestic as well as international operations. The retention of customers is crucial as acquiring new customers is more costly than retention. For this reason Walmart and Marks & Spencer are trying to deliver value to the customers and stimulate the operational efficiency. Assessment of the Impact of Various Factors and their Impact on Management Decision Making Political Effect There are multifarious factors that influence the business operations and management decisions. One of the factors is the political influence upon the industry that ultimately affects the firms in the industry to change their management decisions. Walmart has influenced the political power of the United States of America. The change in the taxation policy of the government affects the management’s decision to change their choice in the operations according to the government set up of taxation system. The increase in the taxation policy will increase the tax liability of the company. Hence, the management needs to reconstruct its pricing policy. Mostly this situation arises when there are major calamities such as war and natural disasters. The tax increases in order to generate cash for the government. Predominantly, Walmart has been an anti-union company. However, in future if there are provisions and compulsory amendments of adopting the union system, Walmart will be forced to reconstruct the organizational structure and management needs to decide the overall structuring and adopt such measures (Frase, 2005). Walmart is planning to open various stores in Washington D.C. The first lady of the US focused upon the nutrition as a national priority. Walmart’s management has decided to stock healthier versions of Walmart’s private level brands in the store and sell fresh merchandizes. The decision of the important political delegates has made the Walmart management change their decision in the US (Anna, 2011). Marks & Spencer is highly influenced by the UK government and politics. M&S were forced to change their management decision when the government changed the standards of the agricultural food system. The fast moving consumer goods (FMCG) category that M&S dealt with had to undergo changes in the practice. The importance of FMCG was high as it affected the economy. To regulate it efficiently government raised the standards. This was due to the influence of the people. The political influence ultimately changed the policy of M&S business strategy towards FMCG goods (Ransom, 2007). The influence of politics has been always great either positively or negatively. Certain political influences in taxation policy made changes in the decision of Walmart to rethink their pricing policy. The influence of politics upon the FMCG goods forced the management’s decision of M&S to change the plan of FMCG products. The positive aspect was seen in case of Walmart where the nation expected healthier food as the first lady of the US has provided importance to healthier food consumption habit. There are positive and negative aspects of the political influence over the business operations. The business needs to be flexible to adopt the changes and run efficiently. The influence of politics has always governed the business decisions and is still present in the business society. To manage the influence the management of firms needs to adopt strategies that are flexible and provisions should be included especially during the political election period. Due to the change in the power or political party in the country there is every possibility of change in the policies and regulations. Provisions and backup plans of the firms should be developed in case of changes in power of the government so that the company can respond efficiently to the changes and can reduce any negative impact against the organization. Social Influence The social influence upon the business has greater impact than the political influences. The culture, attitude and behavior develop the social influence upon the business. Walmart in the US faces different kinds of challenges than other stores located in another nation. Walmart has the great ability to understand the societal needs of the American people and thus delivers the services and products according to the society. The changing behavioral pattern of the consumers is difficult to predict and judge. This has been the greatest influence upon the retailers. The influence of the American society forces the management to change its decision in rendering its services, products and discounts. M&S is highly influenced in the UK operations. The UK people have certain buying behavior that forces M&S to change their decision in the operation of the UK market. They offer services, products and discounts according to the UK people’s desire. This cannot be similar in other regions. They have different strategies as the social factor varies from region to region. From the buying pattern of the consumers, the trend of the society can be easily identified and according to this, the products and services can be made available to the customers (Oregon State University, n.d.). Customers have constantly been greatly influenced by each other during the phase of purchase decision. At certain times they seek for advice, observe and imitate each others’ decision making during their purchase. They develop the common pattern of purchasing during the process and act as a society. They tend to influence the management’s decision in depicting the pattern they follow. This influential power of the society forces to change the decision of the management firms of Walmart and M&S in order to introduce the products and services that the customers demand. Walmart in the US are facing different social influence than that of M&S in the UK. The US social influence is different because the consumption behavior pattern of the people of the US is different from the UK. When Walmart and M&S operate in the global market they consider the influencing power of the society where they are present. The decision of the management of Walmart in the US market differs from that which operates outside the US. The management decision is not possible to align with all the strategies for different markets as the influence of the society differs according to the region. The same is with M&S; the decision of the management of the UK differs from the operations outside the UK. Walmart and Marks & Spencer show similar business decision in the market of China. The Chinese societal influence forces Walmart and M&S to operate and decide the business operations according to the Chinese society. Depending upon the region’s social factors, the decision of the main office also gets changed. The management of China’s Walmart and Marks & Spencer influence the management decision of the US Walmart and the UK’s Marks & Spencer. The influence of social factor such as consumer behavior, attitude, consumption pattern and multifarious factors of the society affect the business decision of operations that are intended to benefit the society at a large scale. Since the social affect is huge, the management of Walmart of the US and M&S of the UK are forced to alter their decisions according to the benefit of the society. The customer retention and acquiring of them have been highly competitive, thus their decisions are focused towards benefit of the society. Ethical Factors Business ethics has become an area of greater concern in recent times in the corporate culture. There are certain systematic concerns that investigate the ethical value in political, economical, legal and other social systems, which affect the business operations. Ultimately the management of the business is forced to change their management decision for the ethical purpose (Cooksey & Kuchina-Musina, 2010). Walmart’s ethical decisions are based upon the political, economical, legal and other social systems of the United States of America. Similarly, M&S’s ethical decisions are based upon the political, economical, legal and other social systems of the United Kingdom. M&S is committed towards value, service, quality, trust and innovation. According to the code of ethics of M&S, “Trust is earned from others as a result of our commitment to long hold values and the ethical manner in which we behave that underpins them” (Marks & Spencer, 2006). The ethical concern of Walmart provides respect for individuals and satisfactory level of service to the customers; and the principal ethical code should be followed by every stores operating in the world even by the board of directors and associates of the Walmart (Walmart, 2011). Walmart management’s decision can be affected due to the ethical issues. Since they operate in different nations, the regulations and the law related to labor are different. The Code of Ethics is formulated according to the US standards. But the management’s decision regarding the ethics can get modified in different nations according to the changes in the ethical practice by that particular nation. The management needs to draft separate ethical codes of conduct for different nations along with maintaining the standard code of ethics of the US standards. Marks & Spencer’s code of ethical practice is based upon the UK standards. The decision of the management in respect of ethics can get changed in other regions of operations as the other nations follow separate ethical practices. The management needs to identify the law, political aspects and economical conditions of other operational regions and then draft the ethical practice. There are still a string of issues related to the ethical practice of Walmart and M&S in different regions; and the management is trying to acquire the knowledge about the region’s law, political aspect, economical conditions and other social systems in changing the code of ethical practice according to the region of operations of stores in various nations. Since the political, economical, legal and other social systems affect the business operation depending upon the nation in which Walmart and M&S operate, the decision of the management gets affected in formulating the ethical practice. There are several concerns that have recently developed for the ethical practice and corporate governance. The new development forces the corporate organizations to redraft and update their ethical practice, which force the management to decide the new practice of ethics in new business environment. Legal Factors Walmart and M&S are involved in the global business and they need to be familiar with the laws and regulations of their country. Countries have different laws related to employees’ minimum wages, insurance, other benefits, timing and various other factors. There are certain regulations regarding the product standards, quality, packaging, and product testing and safety concerns. The changing rules and regulations of the business operations vary from county to country and the management is forced to alter their decision according to the regulations (Angiello & Laguerre, 2004). An efficient low-cost legal structure governing the transaction of the business is the reason for efficient and smooth running of the business operations of the private sectors, Walmart and M&S (Holden & Howell, 2009). The expansion of Walmart and M&S in other nations might face legal problems in land acquisition or store development that are subjected to the regulations and laws of that particular country. This affects the management to change the decision with respect to the planning of the new stores in different nations. This will force the management to rethink the overall planning process and development. The legal force has greater impact upon the business operations that forces the management of organizations to alter their strategic planning. The regulations of the Labors’ Acts affect the managerial decision towards the employees in the organization. Walmart operating in China needs to redraft their policy towards employees in China as the Walmart of the US regulations of labor is different. This increases the intricateness of the business operations related to the employees. M&S operating in India redrafts the rules according to the Indian labor law. There is huge complexity in the decision making regarding the employees as understanding the legal aspects of different nations increase the difficulties in framing the common policy for the global employees. Another legal complication that Walmart and M&S might face is the international law that governs the international trade operations. Walmart and M&S operating in the international market needs to follow the international law with the home country’s laws and laws of the nation in which they operate. The effects upon the management decision related to legal aspects are huge. There are amendments in the regulations of the international and national law that forces Walmart and M&S to redraft their policies towards their product, employees and various operations. Conclusion The recent business environment is highly competitive and complex that constantly force the management of the organization to change their decisions. The retail industry has been growing in the current business environment and has to face innumerable complications. Retaining and acquiring customers, logistics challenges, human resource challenges, cost minimization problems and excellence in operations and customer service are the current challenges that Walmart and M&S face. They need to modify their strategic decisions in the global business environment in order to sustain, develop and gain competitive advantage. 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