Wal-Mart Case Study

Wal-Mart Case Study

Wal-Mart has been operational for more than half a century. The unique ability to survive market changes is one of the major strength of the hyper-store. However, it is notable that the firm faces multiple challenges ranging from corruption scandals to competition from the emerging market. Still, the expansion of the firm beyond the Americas demonstrates resilience and ability to adapt to a new business environment. Wal-Mart sales failed to pick up in developed countries such as Germany and South Korea because of market saturation and flooded cheap products. Wal-Mart mission is enshrined in the provision of quality products at an affordable rate. The organization targets low-income earners as they are the majority. While Wal-Mart is one of the most dominant multinational in the United States and South America, rivaling business entities are rapidly gaining a foothold (Head, 2004). This prompts its management to rethink its strategy and long-term goal to accommodate market variations and current consumer needs.

Challenges

Corruption

It is a common phenomenon for large multinationals like Wal-Mart to be plagued by controversial business transactions and shoddy deals. In 2005, Wal-Mart de Mexico’s executives made allegations regarding the payment of bribes through local fixers to Mexican officials. In exchange, the authorities were to submit information, construction permits, and other favors to earn Wal-Mart a competitive edge. As the firm’s investigators noted in 2012, there is credible evidence that American and Mexican laws were broken (Barstow, 2012). Today, there are concerns that America’s Wal-Mart officials engage in unethical business practices to cover up unfair activities in the internal business environment. While the move is a desperate bid to guard Wal-Mart’s image, revelations through the media outlets threatens to do more harm than good. In fact, statistics shows that more than 56% of the company’s customers are classified as conservatives. Thus, news about scandalous activities can signal a tragic end of its operations in the affected regions. 

Integrating Digital Services

Information technology plays a critical role in today’s business environment. Its adoption slashes the operational costs through automation of service provision. The management of Wal-Mart is aware of the implication of IT to the business performance. At the same time, there are concerns that large-scale automation of business operations can trigger employee protests, especially due to fears of job loss and insecurity. One of Wal-Mart’s main goals is to offer job opportunities to the local population. This way, the firm is assured of consumer loyalty (Luchsinger, 2009). Besides, it is the firm’s policy not to focus on charitable activities. Instead, the resources are channeled towards improving the stakeholder’s relationship with the organization.

Information technology system that allows for online orders and delivery is an efficient way to improve operational efficiency. However, its integration should be gradual to avoid raising eyebrows and drawing concerns from employees and business activists. This is a tested strategy that enables the organization to evolve and adapt to the market trends at the same time remaining competitive. 

Loss of focus in Customer Service Provision

The rapid expansion of Wal-Mart threatens its future downfall. Customer needs often escape management’s attention as the base widens. Recent surveys indicate that an increasing number of customers are becoming unsatisfied with the company’s PR strategy. For instance, the majority are concerned about poor communication channels between them and  staff members. In fact, a significant number of loyal customers are having second thoughts regarding the need to embrace emerging rivals. In china, for example, more than 110 million citizens have joined middle-class earners. This explosion threatens a doom to a low-class-oriented Wal-Mart.

Fresh Goods

            Grocery stores demand an undivided attention to ensure consistency in quality product provision. As inventory pile up in the back rooms, there is a high tendency of fresh farm produce going stale. The cost of providing refrigeration services is high. In fact, the management is looking into ways to minimize storage cost for instance Just in Time (JIT) delivery. Currently, a realization of this target is at a distant future. It is clear that the leadership should source for a short-term solution to the problem. A failure can lead to compromise of product quality hence customer dissatisfaction.

            Interestingly, health inspection authorities deduce a failure of Wal-Mart stores to meet the required standards of tidiness and cleanliness. Therefore, the attention of the management for the year is shifting towards improving the conditions through upgrade and renovation measures. The poor conditions are blamed on the rising number of customers and understaffing. 

Lee Scott Priorities

Lee Scott delivered his speech one month after hurricane Katrina's devastation. He admitted that the natural calamity took a toll on Wal-Mart's operations. The catastrophic event was an eye-opener for the management to source for means to tame climatic changes. Not only did the firm suffer losses, but also its customers in Mississippi and St. Louis were affected. Faced by a threat of lock-down and cease of operation, Lee Scott understood that precautionary measures should be taken to tackle future disasters. One of his priorities, as highlighted in the speech, is to install preventive measures to diminish the wrath of nature in the future. 

            Lee Scott cited Sam Walton’s (Wal-Mart’s founder) dream of providing services to the underserved population in the United States and across the world. Given that the hurricane affected the majority of low-income earners, it was an opportunity for the company to give back to the society through various corporate social responsibility activities (Plambeck et al., 2008). It did not escape Lee Scott's attention that during the early 2000s, Wal-Mart faced sharp criticism over a wide range of issues. After careful deliberations and wider consultations with the stakeholders, the management conceded that the business should embrace change. Therefore, his priorities included job creation, health care provision, and environmental concern. Others are embracing diversity, sourcing of products and services and involving local communities in business decision making. 

Environmental Protection

Prior to Hurricane Katrina, Lee Scott, and the management team were convinced that the organization engaged in ethical business practices by recycling responsibly. However, the extent of devastation necessitated a reassessment and a complete overhaul of its environmental management policies. It was evident that an increase in greenhouse gasses contributed by Wal-Mart’s activities threatened human and natural health systems. In addition, dumping of its waste to the water bodies trigger water-borne diseases while threatening the aquatic life. According to Lee, this should change. A 100% utilization of a renewable energy will create zero waste (Scott, 2005). Besides, he prioritized a sale of products that can sustain the environment.

Lee projected that by 2015, Wal-Mart can save up to 310 million dollars through a 25% increase of fleet efficiency. The business entity has the largest private fleet of trucks in the US alone. Changing its fleet stamps the organizations' position as a market leader. Some of the benefits accruing from the initiative will include cleaner air, job creation and improvement of productivity in the United States.  Moreover, the impact will be felt in the energy security sector. 

                                                          Technological Revolution

In his speech, the CEO prioritized utilization of a technological revolution to slash energy usage in stores by more than 30%. He gave an example of the use of solar energy in a Texas store and its positive outcome. He observed that the success of this sustainable energy initiative should set a trend for the future of Wal-Mart’s stores across the America. In this consideration, he projected an investment of 500 million dollars annually on innovation and technology. Specifically, the allocated resources will be utilized in the reduction of greenhouse gasses, prototype designs, and dissemination of the research outcome for use by allied firms and competitors alike.

Waste Minimization

            Wal-Mart’s CEO prioritized waste reduction as a second goal. This is due to its representation as the organization’s most visible opportunities. He exemplified that throwing used products instead of recycling mandate replacement purchase. Reversing the existing vicious cycle means a reduction of supplies. Nonetheless, all the supplied products will be recycled. He estimated that a sale of recyclable products to manufacturing firms will add up to $28 million annually.

Product Sourcing and Improvement

            Scott Identified the need to eliminate trade-offs for customers that acquire products from Wal-Mart stores. He connotes that it is not imperative for an individual—especially a US citizen—to be high-income earners to afford basic commodities. In addition, he hinted a progress made by a collaboration of the company’s subsidiaries in western countries and its allies regarding organic baby products. In essence, the sustainable goods shall be priced similarly to others in the market.

Healthcare

            Motivation stems from a healthy workforce. The CEO is convinced that the employees and the customers deserve proper healthcare. It is because of this reasons that he proposes affordability and ease of access to quality medical attention. He commits the organization towards a creation of innovative programs for communities, loyal customers, and business associates. Lee Scott is keen to ensure that the firm plays its part in the development of solutions and eliminating challenges in the regional system of healthcare. This vision can only be achieved if the insurance cover is brought closer to all associates. Furthermore, the choice of benefits and plans offered should be increased and diversified to meet the population needs (Jacobs & Eggbeer, 2012).

Board Initiatives

            Supplemental benefits documentation captured most of the raised issues affecting associates, public reputation, and the benefits' growing cost. The board retreat focus was on healthcare provision and the concern for the aging employee population. It was reported that Wal-Mart's employees were getting sicker than the general population. Moreover, a section of the subordinate staff made an inefficient healthcare consumption. A survey indicated that associates were satisfied with their benefits package. Nevertheless, they strongly opposed provider choice restrictions and high deductibles.

            The initiatives of the board members were categorized into two: limited-risk initiatives and old steps. The first category required no or little trade-off between associate satisfaction and public reputation. On the other hand, the latter proved difficult to successfully execute. However, the bold steps wielded greater impact.

            Limited-Risk proposals included a realignment of health insurance eligibility requirements. This is to enable qualification of associates and their families to qualify after a specified number of hours. The board projected that the initiative will ensure simplicity in external communications thus increasing competitiveness in the labor market.

            The second initiative entails a reduction in spouse cross-subsidization. The proposal is made possible by adopting higher premiums (Stores, 2006). Covering spouses is remarkably expensive even for a retail giant like Wal-Mart. An increase in periodic premium rate offers an opportunity to cater for extra costs and the allocation of more resources. Further, it was proposed that associates ought to be educated on the use of health care and health insurance. Implementation of the initiative enables the target audience to make informed decisions.

 Apart from health insurance, board members intended to offer a bundle of other benefits such as paid leave, discount cards, and education. Their provision will be segmental to satisfy individual tastes and preferences. In addition, an exploration of additional clinics within the stores was tabled for consideration.

            Bold Steps included a movement of associates to ‘customer-driven’ healthcare plans to ensure a health savings account build-up and control cost variations. Top- level managers unanimously agreed to fine-tune a retirement program to cut expenditures and encourage associates to save for retirement. It entails complete overhaul and redesign of retirement program details, and job specifics to attract more productive and healthier workforce.  

Wal-Mart Initiatives in Terms of Strategy and PR

            An initiative to channel resources towards environmental protection causes is strategically set to attract like-minded liberal consumers. In PR terms, it is intended to uphold Wal-Mart's position as market leader and a top competitor to rivaling firms. In fact, it ensures an establishment of a cordial relationship between the company, the government authorities, and stakeholders.  The return on investment in the long-run is worth the current expenditures.

 Improving customer service provision is a strategy to boost the organizational performance. Slumping revenues are traceable to poor service delivery and neglects on marketing basics such as an establishment of effective communication channels. Successful businesses leadership understands that ‘customer is the boss’. Thus, this consideration guarantees business survival in a competitive environment (Denend & Plambeck, 2007). On the other hand, the move is an intentional PR tool for establishing a brand image admirable all across the country and beyond.

Strategic Social Challenges

 Wal-Mart is a multinational and is expected to comply with formalized laws and regulations set by international bodies. There are multiple legal ramifications for the company should it violate stakeholders and employees rights. Hefty fines have been levied on many organizations that mistreat the labor force. As such, the organization has a challenge of implementing initiatives supported by the rule of law (Bonini et al., 2006). An introduction of revolutionary policies demands caution to avert denting company's reputation and image. 

 The conservative nature of Wal-Mart's customers encourages laxity in operation. As a low-income retail store, the organization attracts low-class individuals to its workforce. Resultantly, many workers are suffering from obesity, hence costing a fortune to Wal-Mart in terms of healthcare provision.  

            Not all the issues currently faced by Wal-Mart were already evident in 2003 case study. Some challenges emanate from 2005 hurricane Katrina and the 2008 global economic crisis. Today, the United States is yet to fully recover from a resultant recession. Economic tremors and business shocks have become increasingly common in today. This triggers market uncertainties hence impacting on Wal-Mart’s overall performance. Still, issues such as the need to embrace green energy were evident as early as the millennium’s dawn (Ghemawat et al., 2004).

            In summary, the massive size of Wal-Mart and its status as a global leader in retail services exposes it to market risks. The management's initiatives are poised to spark sweeping changes that not only transform the company's future operations but also that of its competitors.

References

Barstow, D. (2012). Vast Mexico Bribery Case hushed up by Wal-Mart after Top-Level Struggle. New York Times, 12.

Bonini, S. M., Mendonca, L. T., & Oppenheim, J. M. (2006). When Social Issues Become Strategic. McKinsey Quarterly, 2, 20.

Denend, L., & Plambeck, E. L. (2007). Wal-Mart's Sustainability Strategy. Stanford Graduate School of Business, Stanford University.

Ghemawat, P., Mark, K. A., & Bradley, S. P. (2004). Wal-Mart Stores in 2003. Harvard University School Publishers.

Head, S. (2004, December 16). Inside the Leviathan. New York Times, p. 1. Retrieved from http://www.nybooks.com/articles/2004/12/16/inside-the-leviathan-2/

Jacobs, M. O., & Eggbeer, B. (2012). Health Insurance Exchanges Bring Potential Opportunities. Healthcare Financial Management: Journal of the Healthcare Financial Management Plambeck, E. L., & Denend, L. (2008). Wal-Mart. Stanford Social Innovation Review, 6(2), 53-59.Association, 66(11), 44-6.

Luchsinger, V. (2009). Strategy Issues in Business Sustainability. Business Renaissance Quarterly, 4(3), 163.

Scott, L. (2005). Wal-Mart: 21st Century Leadership. Speech by Wal-Mart CEO, 24.

Stores, W. M. (2006). Inc. Supplemental Benefits Documentation: Board of Directors Retreat FY06 Wal-Mart Stores, Inc.