Walmart Org Case Dev – Final Post

Walmart: America’s Low-Cost Leader or America’s Outdated Business Model?

     Walmart 1

  Dwayne Wiley

University of Alaska Fairbanks

MBA 617 Organization Theory

I. Case Development

     a. Background and Overview

Walmart is a multinational mass merchandiser that provides consumers with low-cost options on many products; mainly groceries and consumables. In 1962, Sam Walton opened the first Walmart in Rogers, Arkansas (Walmart Corporate, n.d). The store was based on the success of his previous store called “Walton’s 5&10” (or Walton’s Nickel and Dime store). The business model was a low-cost high-sales model that, while won’t offer high individual profit margin, will offer high sales volume and cumulative high profit margin. Walmart’s success grew tremendously over the next 53 years. By 1967, Walmart had 24 stores and annual sales of $12.7 million (Walmart Corporate, n.d.). In 1970, Walmart went public at an opening stock price of $16.50 (Walmart Corporate, n.d.). 30 years after the opening of his first Walmart, Sam Walton passed away, but not before the company reached new heights. At the time of his death, Walmart employed over 371,000 employees at 1,928 stores and clubs (Walmart Corporate, n.d.). Today, with annual sales of $485 billion, 11,500 stores in 27 countries, Walmart is currently the largest private employer in the world with 2.2 million employees (1.4 million in the U.S.) (Corporate Walmart, n.d.).

Walmart officially competes for sales in the $25 trillion a year retail industry ($4 trillion in the U.S. alone), although with their mixture of sales in groceries and other consumables, they unofficially compete in the consumer goods sector. Walmart generates 4x more revenue ($482 billion) than the next closest competitor (Costco at $114.5 billion) and more than the next 4 competitors combined (Costco, Kroger, Carrefour, Tesco) (Soni, 2015). Walmart is able to generate enormous amounts of revenue by offering products at a lower price than their competitors and offer price match guarantee in the rare cases that they aren’t. This enables Walmart to capture a market share of approx. 11% of the Retail Industry in the U.S. (Soni, 2015).

     b. Organizational Structure and Culture

As a low-cost leadership strategist, Walmart’s structure allows them to operate according to the local environment, thus ensuring that the local culture is taken into account and increasing the chances of success (Daft, 2010). Walmart continues to scan the external environment to determine what organizational structure changes need to be made. Currently Walmart’s organizational structure is a strict divisional organizational structure; which is designed for maximum efficiency. This structure enables each operational unit (i.e. Walmart U.S., Walmart International, etc..) to operate with complete autonomy and achieve Walmart’s mission statement is “We save people money so they can live better.”

Walmart’s Board of Director’s is a 15 panel member group that includes: Tom Horton (Former Chairman and CEO of American Airlines), Samuel Robson Walton (son of Sam Walton), and Kevin Systrom (CEO and Founder of Instagram) (Corporate Walmart, n.d.). Doug McMillon is the organization’s CEO with Greg Foran (President and CEO, Walmart U.S.), David Cheesewright (President and CEO, Walmart International), Rosalind Brewer (President and CEO, Sam’s Club), and Neil M. Ashe (President and CEO, Global eCommerce and Technology) making up the top level executive leaders of the organization (Corporate Walmart, n.d.).

Walmart offers employment at various positions such as store manager, cashier, accountant, and many other positions that are common in a corporate, retail, and industrial settings. Walmart uses a very rigid pay scale that is designed for efficiency and objectivity however, it offers very little in wage increases for lowered tiered workers and creates an uneven pay distribution between hourly employees and salaried management (Hines & Wilkie, 2012). Walmart offers many advancement opportunities, as nearly 75% of their store management staff started out as hourly employees (Corporate Walmart, n.d.). The benefits offered by Walmart however, are less than the industry standard. Walmart offers a medical, dental, and vision plan that covers less than what their competitors offer however, more than half of Walmart employees do not have access to these benefits due to the practice of keeping employees hours less than full-time (Hines & Wilkie, 2012). This is considered even more jarring when it is noted that many Walmart stores offer access to Pharmacists, but employees do not receive a discount on prescriptions.

     c. Changes and Challenges

As a leader in the retail industry, they have effectively stayed ahead of their peers by being able to analyze their environment and introduce innovation into their organization. Their supply chain management system is one of the best in the world because of the high-tech informational systems it has implemented. Their sheer size and technological advances in logistics have allowed them to operate efficiently and effectively.

Walmart faces 2 major challenges: their negative image and Amazon. Walmart’s biggest challenge is their negative image. According to Jerry Bowman “Walmart is reviled for…poor treatment of workers, anti-competitive practices…and gender discrimination.” (Here’s Wal-Mart’s biggest threat – The Motley Fool, n.d.). Walmart has countered this by creating a large public relations department to counter these claims.

Walmart may be the retail revenue leader, but they are facing a serious challenge from Amazon. Amazon is in a different industry, but are gradually taking potential customers away from Walmart. Walmart’s online revenues were ¼ of Amazon’s for fy15. While Amazon’s impact on Walmart’s sales may be minute and the real damage may not be felt for years (or possibly a decade) it is something that must be addressed soon or Walmart could find themselves in the same category as Blockbuster.

Despite the considerable challenge from Amazon and the negative public relations from different entities, Walmart has a bright future because of their technological innovations with their supply system and their sheer size and influence. Walmart had a 1.9% increase in revenue from fy14 to fy15 ($476 billion to $485 billion) (Corporate Walmart, n.d.). If Walmart is able to continue this trend, then their future demise could be greatly exaggerated.

II. Critical Evaluation

     a. Issues with Organization

As organizations grow, they can experience new challenges. Some of these challenges are a direct result of the external environment (i.e. legal challenges) or they could be a result of internal strife (i.e. a merger causing layoffs). As stated earlier, Walmart has 2 key issues, an external event and an internal event, that could hinder their growth and development: negative public relations and Amazon.

Walmart’s negative public relations image is two-fold. It is a result of their size; large companies are often easy targets for criticism. They are often labeled as job-killers by the media because smaller businesses often decline once they enter a market. The mayor of New York, Bill de Blasio, released a report that detailed the economic impact Walmart has in a market once it moves in. The report states that “for every 2 jobs Walmart creates, Walmart kills 3 jobs. Also, for every $100 spent, Walmart recirculates only $43 back into the local economy; while the local businesses that it replaced recirculated $68 back into the local economy.” (De Blasio, 2013).

The other reason they have a negative public relations image is because they have horrible pay and benefits practices. Walmart offers wages and benefits that are sub-par for its size and its industry resulting in high employee turnover. There have been many critics of their willingness to keep their front-line employees’ wages and benefits low while increasing the wages and benefits of their upper level management. Most of Walmart’s employees are hourly and make less than $10 an hour. A retired Walmart manager was recently quoted as saying “70 percent of the workers at his outlet were part-time, meaning they worked no more than 32 hours a week… as a means of saving costs on benefits such as medical insurance.” (Hines & Wilkie, 2012).

The biggest physical threat to Walmart is Amazon. The domination of the online retail market by Amazon is starting to encroach on Walmart’s brick and mortar store sales. Walmart’s overall sales revenues has increase, but the margin of deficit between Amazon and Walmart in online sales is increasing as well. In 2014, Amazon had $89 billion in online sales compared to $12.2 billion for Walmart (Peterson, 2015). While this doesn’t put a damper into Walmart’s overall sales, it does show a cause for concern. Black Friday 2015 marked the first time ever that there were more online sales (103 million) than in store sales; continuing the steady uptick in online sales on the busiest shopping day of the year (Wahba, 2015).

     b. Recommendations

  1. Increase Public Relations through positive measures

To increase their public relations image, Walmart must continue to fight fire with fire and go on the offensive. They have taken steps to do this by promising that every employee will make a minimum of $10 per hour (Jamieson, 2016). Walmart should also increase the number of full-time employees so that they can have access to the medical and dental benefits offered to employees. Walmart must change the benefits that are offered to their employees. They should offer different tiers of benefits to part-time and full-time employees; and decrease the out-of-pocket expenses for both tiers. They can continue the aforementioned positive steps by promising to hire workers that are displaced by their arrival into their new market, increase the funds that are donated to local charities. These additional measures will provide additional tax relief, an increase of expenditures in the local economy, and an increase in positive public relations.

  1. Enhance utilization of supply system

Walmart has a top notch supply chain system however (Robinson, 2015); they are not utilizing it effectively when it comes to online sales. Walmart sales the same items as Amazon, but Amazon uses their space more effectively. Walmart could use the same approach as Amazon by introducing a consignment approach to online sales. They would advertise the product online, but the suppliers would manage the storage and shipping of the item to the consumer. They could also introduce the “preferred” supplier (just like Amazon) and offer guarantees through these suppliers or free shipping to home. The ship to home service is another opportunity that they could improve. Walmart offers free shipping to their stores however, in the increasingly internet driven society, most people like the comfort of having their product delivered directly to their door steps. Walmart charges for any and all deliveries to homes.

  1. Diversify portfolio offerings

Lastly, Walmart could improve its future outlook by diversifying its portfolio. All of Walmart’s current ventures are related to their retail stores, which isn’t bad however, there is an excellent opportunity that exist for Walmart to enter the digital movie industry. Amazon offers access to free digital movies as part of their membership. They could offer memberships with perks, similar to Amazon. Walmart could partner with Hulu, Netflix, or Vudu and offer their services as part of the membership perks.

     c. Management Implications

The management implications of the suggested recommendations will be profound. Management will have to take a more active role in communicating with hourly employees and their concerns. From my research, the only concern of management has been the financial aspect of the organization. The measure of success will no longer be based on purely on financial returns, but management will have to take a more balanced scorecard approach to results.

Collaboration will also be key to implementing the recommendations. Walmart can no longer use its size to bully suppliers, but must forge partnerships to remain viable in the next decade. Managers must be able to effectively communicate across the aisle and express their wishes instead of making demands, as they currently are able to do. Managers will also have to manage conflict that arise through collaborations. Because of the different hierarchal reporting requirements between the different organizations, managers will have to work with their counterparts to de-conflict issues that arise from resource management, scheduling concerns, and product support.

III. Conclusions

Walmart is in a simple, unstable environment (Daft, 2010). This means that there are relatively few elements to contend with however, consumer demand changes very rapidly. Walmart is a lot more stable than other retailers in this environment because of their size, large customer base, and ability to dictate lower prices from suppliers. Although Walmart’s environment isn’t complex, they have had to adapt to an onslaught of negative public relations, causing damage to their image (Hines & Wilkie, 2012). This is unusual for the environment that they are in however, as the biggest bullies on the block and their low wage and benefits practice, they are an easy target.

Walmart is currently one of the best in the business at operating efficiently and effectively due to its ability to demand lower rates from its suppliers, their integrated supply system, and the ability to charge less than nearly every brick and mortar store however, with the increased competition by online retailers that are able to charge similar prices, and in some cases less, they must find new and improved ways of increasing their efficiency and effectiveness to remain profitable and not received the same fate as so many of their past competitors.

References

Daft, R. L. (2010). Organization theory and design (10th ed.). Mason, OH: South-Western Cengage Learning.

De Blasio, B. (2013, August 14). New Report: Wal-Mart Destroys Local Economy. Retrieved March 06, 2016, from https://www.popularresistance.org/new-report-wal-mart-destroys-local-economy/

Here’s Wal-Mart’s Biggest Threat — The Motley Fool. (n.d.). Retrieved February 03, 2016, from http://www.fool.com/investing/general/2014/12/02/this-1-thing-is-wal-marts-biggest-threat.aspx

Hines, A. & Wilkie, C. (2012, November 26). Walmart’s Internal Compensation Documents Reveal Systematic Limit On Advancement. Retrieved February 22, 2016, from http://www.huffingtonpost.com/2012/11/16/walmarts-internal-compensation-plan_n_2145086.html

Jamieson, D. (2016, January 20). Walmart To Hike Its Minimum Wage To $10, Raise Pay For 1.2 Million Employees. Retrieved March 05, 2016, from http://www.huffingtonpost.com/entry/walmart-10-raise_us_56a01acde4b0404eb8f03b26

Peterson, H. (2015, November 09). There’s one thing that everyone is getting wrong about the war between Walmart and Amazon. Retrieved March 06, 2016, from http://www.businessinsider.com/walmart-vs-amazon-online-sales-2015-11

Robinson, A. (2015, May 13). Walmart: Keys to Successful Supply Chain Management. Retrieved March 06, 2016, from http://cerasis.com/2015/05/13/supply-chain-management/

Soni, P. (2015, February 18). Welcome to Market Realist. Retrieved February 07, 2016, from http://marketrealist.com/2015/02/analyzing-walmart-worlds-largest-retailer/

Wahba, P. (2015, December 22). In 2015, Amazon Ate Even More of Walmart’s Lunch. Retrieved March 06, 2016, from http://fortune.com/2015/12/22/retail-ecommerce-2015-amazon-walmart/

Walmart Corporate – We save people money so they can live better. (n.d.). Retrieved February 07, 2016, from http://corporate.walmart.com/

 

Appendix A

          Executive-Level Organizational Structure

 

 

Walmart 2

 

 

Appendix B.

          Lower-Level Organizational Structure

 

 Walamart 3

Decision Making

The Money on the Mind video relates to the thought processes of people with power. The video says rich people, but I said power because we usually associate money with power. As a matter of fact, we often use the words “money”, “rich”, and “power” interchangeably. The video shows how people on the top view other people as lecherous and thus aren’t willing to help others as much those without the same type of power/influence, when in actuality, it is often the person on top who is the more deceitful, conniving, treacherous of the two. The person with power is more likely to feel that it is their hard work and not the contributions of their team that allowed her/him to succeed. The implications of this study can be applied to management. When a person is able to get in a position of power (i.e. management) it is possible that they will feel a sense of entitlement and are more likely to take a majority credit for a project’s success and deflect a project’s failure onto their team. A person in power will also be more willing to conduct themselves in an unethical manner if they feel that they can get away with it. The study can be used as a teaching point for management on what to expect and the managers can be trained on how to combat these traits. Managers need their team to achieve their organizational goals and this can only be done when management fosters a culture that is conducive to meeting those goals.

Culture Exercise

  1. The organization is very personal, much like an extended family.
  2. Management style is characterized by innovation and risk-taking.
  3. Management style is characterized by teamwork and participation.
  4. The organization is dynamic and changing, where people take risks.
  5. The organization is stable and structured, with clarity and established procedures.
  6. Management style is characterized by high performance demands and achievement.
  7. The organization is achievement oriented, with the focus on competition and getting jobs done.
  8. Management style is characterized by security and predictability.

Clan culture- total for questions 1, 5:  Total score of 4

Adaptability culture- total for questions 2, 6: Total score of 6

Mission culture- total for questions 3, 7: Total score of 13

Bureaucratic culture- total for questions 4, 8:  Total score of 13

My most compatible culture is the clan culture. I believe this to be the case because I believe employees to be the most important asset an organization has. I would like to have a sense of purpose and belonging in the organization. I also would like to feel valued. I think that is the most important thing to me. I need to feel that my voice matters.

My least compatible culture was a tie with mission culture and bureaucratic culture. With mission culture, in my opinion, I believe that when you place an extremely high premium on performance alone, you tend to lose focus of the individual and start to think of employees in terms of dollars and cents instead of as human beings. The bureaucratic culture is a culture that I have experienced before in the military and I hated it. It is too mechanistic and it frowns upon the individual mentality. I need freedom every now and again.

Walmart Organizational Complexity

1: How complex is your organization internally?

With over 2.2 million employees worldwide (1.4 million in the U.S.), over 11,500 stores in 28 countries, and $483 billion in revenue (Walmart Corporate, n.d.), Walmart utilizes a strict divisional organizational structure which is designed for maximum efficiency. Walmart’s vertical and horizontal differentiation far exceeds the >5 requirement; making them a symmetric organization internally. Walmart’s Board of Director’s is a 15 panel members. Doug McMillion is the organization’s CEO with Greg Foran (President and CEO, Walmart U.S.), David Cheesewright (President and CEO, Walmart International), Rosalind Brewer (President and CEO, Sam’s Club), and Neil M. Ashe (President and CEO, Global eCommerce and Technology) making up the top level executive leaders of the organizattion. Walmart continues to scan the external environment to determine what organizational structure changes need to be made. Walmart uses a very rigid pay scale that is designed for efficiency and objectivity however, it offers very little in wage increases for lowered tiered workers and creates an uneven pay distribution between hourly employees and salaried management (Hines & Wilkie, 2012). This has led Walmart to be criticized constantly in the media for their pay practices. As a result of the constant media blitz, Walmart created a large public relations division to constantly monitor the external environment, counter negative communications about the company, and look for creative ways that Walmart may be seen in a positive light. Walmart’s organizational structure creates a strong top to bottom informational flow and allows management to effectively control all aspects of their area of responsibility.

Organizationalcomplexity diagram

2: Locate your organization on the figure, what is the complexity?

Walmart’s complexity is symmetric. They have high vertical and horizontal differentiation. Walmart’s employees have specialized tasks, although most of the tasks require very little to no training at all. They separate their employees through pay grades (similar to the military); with the least being cart-pushers and the highest being supervisors. Upper level management is spread across 4 divisions and reports to the CEO of Walmart Stores Inc.

#3: Does your organization’s complexity fit its structural configuration?

Walmart’s structural configuration fit’s the organization’s complexity. Due to the large amount employees worldwide and the number of stores in different countries, Walmart must tailor its strategies to the local culture or they could risk failure. This demands more autonomy than the other structures provide.

Circle one of the types in each of the following categories:

 

  Type 1 Type 2 Type 3 Type 4
Organizational complexity       Symmetric
Configuration     Divisional  
Environment       Turbulent
Strategy types       Analyzer with innovation
Organizational goals       Efficiency and Effectiveness

#4: Is there “fit” across the organization’s components? What do we know now about how our organization aligns across these categories? What would make them more effective? Should your organization change its structure based on its complexity?

All the organization’s components fit all facets of the organizations internal complexity, goals, and operations. Each component has managers that follow strict guidelines/policies developed for their business. This ensures uniformity and objectivity across all units; except when the host nation’s culture dictates a change in the policy. Each component uses objectives developed from the organization’s mission statement that helps to contribute to achieving the organization’s goal. Walmart’s mission statement aligns well with each of the categories. As a low-cost leadership strategist, Walmart structure allows them to operate according to the local environment, thus ensuring that the local culture is taken into account and increasing the chances of success. As a leader in the retail industry they have effectively stayed ahead of their peers by being able to analyze their environment and introduce innovation into their organization. Their supply chain management system is one of the best in the world because of the high-tech informational systems it has implemented. Their sheer size and technological advances in logistics have allowed them to operate efficiently and effectively. Walmart’s focus going forward should be to increase the traffic to their online site. Their revenues were ¼ of Amazon’s for FY15. This new focus combined with a renewed commitment of increasing their hourly employee’s salary should help to improve customer satisfaction and increased revenues; thereby making them more effective. Walmart’s current organizational structure fit’s the current environment however, they must be ready to adjust to the inevitable changes that the future will bring.

References

Daft, R. L. (2010). Organization theory and design (10th ed.). Mason, OH: South-Western                        Cengage Learning.

Hines, A. (2012, November 26). Walmart’s Internal Compensation Documents Reveal                          Systematic Limit On Advancement. Retrieved February 22, 2016, from                                          http://www.huffingtonpost.com/2012/11/16/walmarts-internal-compensation-                      plan_n_2145086.html

Leadership. (n.d.). Retrieved February 22, 2016, from http://corporate.walmart.com/our-                  story/leadership

Lombardo, J. (2015, August 15). Walmart: Organizational Structure & Organizational                              Culture – Panmore Institute. Retrieved February 22, 2016, from                                                      http://panmore.com/walmart-organizational-structure-organizational-culture

Thompson, A. (2015, September 07). Walmart: Human Resource Management – Panmore                  Institute. Retrieved February 22, 2016, from http://panmore.com/walmart-                              human-resource-management-hr-management

Walmart Corporate – We save people money so they can live better. (n.d.). Retrieved                            February 22, 2016, from http://corporate.walmart.com/

 

 

Walmart Environmental Complexity

#1: List out as many elements affecting your company as you can for each of the sectors below.

Industry:

  • Competitors:
    • The top 10 competitors for Walmart are: Amazon, J.C. Penny, Kohl’s, Macy’s, Dollar Tree, Costco, Target, Tesco, Carrefour, and Kroger
  • Industry Size:
    • Walmart operates in the Retail Industry (more specifically the Department/Retail Specialty Stores Sector)
    • The retail industry is a $4 trillion a year industry in the U.S. and is expected to gross over $25 trillion worldwide in 2016 alone. (Retail Sales Worldwide Will Top $22 Trillion This Year, 2014)
    • Walmart generated over $482 billion dollars for fy15. This represented an increase in revenue by 1.9% (Soni, 2015)
  • Competitiveness:
    • Walmart generates 4x more revenue ($482 billion) than the next closest competitor (Costco at $114.5 billion) and more than the next 4 competitors combined (Costco, Kroger, Carrefour, Tesco) (Soni, 2015)
    • Walmart offers products at a lower price than their competitors and offers price match guarantee in the rare cases that it isn’t.
    • Walmart has a market share of approx. 11% of the Retail Industry in the U.S.
  • Related industries:
    • None

 

Raw Materials:

  • Suppliers:
    • Walmart has over 3,000 suppliers that they work with including: GE, Johnson Controls, and Tracfone. Walmart also uses a house brand that allows shoppers to choose a less expensive comparable product. The house brand is called Great Value and is serviced by many suppliers such as ConAgra, Sara Lee, and Del Monte.
  • Manufacturers:
    • Walmart doesn’t own any manufacturing plants however, as a retail provider of various products, they sell products that include material made from cotton, silk, gold, diamonds, plastic, polyurethane, propane, wood, and many other items that are too numerous to list
  • Real estate:
    • Walmart has over 11,500 supercenters, neighborhood stores, Sam’s Clubs, and distribution centers worldwide. They are operated on every continent in the world except Australia and Antarctica.
    • Walmart’s real estate is valued at over $116 billion.
    • Walmart headquarters operates out of Bentonville, AR
  • Services:
    • Walmart offers various retail goods in their stores and online such as: groceries, exercise equipment, and clothes
    • They also offer services at certain locations such as: gas, tire and lube, and health and beauty spas.

 

Human Resources:

  • Labor market:
    • According to the Bureau of Labor, the retail sales worker is expected to increase 7%(n.d.).
    • Walmart offers employment at various positions such as store manager, cashier, accountant, and many other positions in a corporate setting, a retail setting, and industrial setting.
  • Employment Agencies:
    • Jobs for Walmart are advertised on their website.
  • Universities:
    • No affiliations.
  • Unions:
    • Walmart does not deal with unions however; Walmart has come under fire for threatening employees who wanted to form a union. There are numerous other groups that have been critical of Walmart employee practices as well.

 

Financial Resources:

  • Stock Markets:
    • Walmart is a publicly traded company on the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ)
  • Banks:
    • Walmart has nearly $7 billion dollars in cash and over $205 billion in total assets. (WMT Balance Sheet | Wal-Mart Stores, Inc. Common St Stock)
  • Private Investors:
    • Walmart is a publicly traded company.

 

Market:

  • Customers:
    • Walmart serves over 260 million customers worldwide each week.
    • Walmart’s customers are those who are seeking a product at the lowest possible price. They serve many customers
  • Clients:
    • Walmart Realty, a division of Walmart Stores Inc., serves commercial clients looking to open at current or former Walmart locations
  • Potential Users:
    • Walmart is always looking at new opportunities. They are opening over 300 new store in over 11 countries this year

 

Technology:

  • Techniques of production:
    • Walmart uses an integrated supply system that allows for accurate inventory and for on demand delivery.
    • The supply system allows suppliers and the distribution center to independently verify levels of sales as they occur and adjust deliveries as needed
  • Computers:
    • None
  • Information Technology:
    • Integrated Supply Chain.
  • E-Commerce:
    • Walmart had over $12 billion in online sales in 2014 however; this paled in comparison to Amazon’s $89 billion in online sales.

 

Economic Conditions:

  • Recession:
    • Unlike most retailers, Walmart actual thrived during the last economic recession. Same store sales rose 5.1%, doubling analysts’ predictions (2.4%); while competitors like Target lost more than 4% in sales (Lamotta, 2009).
  • Unemployment Rate:
    • Because of its size, Walmart is able to affect the unemployment rates of the local economies of the population they are serving.
  • Inflation Rate:
    • Walmart’s pay practices have been long considered an economic predictor of Inflation. Whenever Walmart increases the pay of their hourly employees, inflation usually follows.
    • Due to their size, Walmart is relatively unaffected by inflation. They are able to control the costs of their goods from their suppliers.
  • Growth:
    • Walmart has recently closed 250 stores, but they also opened more than 300 stores.
    • As a low-cost provider of goods, Walmart will continue to enjoy growth into the foreseeable future.

 

Government:

  • City, State, and Federal laws, regulations, and taxes:
    • Walmart adheres to the laws and regulations of all local cities, states, territories, and countries in which they operate
    • Walmart paid $6.2 billion in U.S. corporate taxes in 2014 (Picchi, 2015).
    • Walmart has recently come under fire for 15 undisclosed tax havens valued at over $76 billion (Picchi, 2015). While it is legal, it has reignited the debate regarding tax shelters for corporations.

Sociocultural:

  • Age:
    • Walmart hires all ages legally able to work. The large majority of Walmart’s workforce is over 30.
  • Values/Beliefs:
    • From Walmart’s website: “Our beliefs are the foundation of our culture: service to our customers, respect for the individual, striving for excellence and acting with integrity. Our adherence to these principles has created a unique work culture at Walmart.” (Walmart Corporate – We save people money so they can live better.)
  • Education:
    • Walmart does not release education data of its employees.
    • Walmart offers Tuition Assistance through American Public University
  • Religion:
    • Walmart CEO spoke out against religious freedom bill in Arkansas that will allow businesses to bar people from entering on the basis of religion.
  • Work ethic:
    • The work ethic of the employees of Walmart are similar to other companies.
  • Consumer and green movements:
    • Is committed to becoming 100% green. Give preferential business to suppliers that meet or exceed their green commitment.
    • Targeting 0% waste by reducing plastic bag use by 38%, utilizing the 3Rs (reduce, reuse, recycle), and beginning an electronic recycling program at more than 3,800 stores.

 

International:

  • Competition from and acquisition by foreign firms:
    • As the largest company in the world, Walmart’s competition has a long way to go to be considered a threat. The 2 largest competitors combined, Tesco and Carrefour, made less than half of Walmart ($ 482 billion vs $202 billion)(Wal-Mart Stores, Inc. Competitors)
  • Entry into overseas markets:
    • Walmart operates 6,500 stores in 27 foreign countries on 5 continents (not available in Australia and Antarctica) (Walmart Corporate – We save people money so they can live better.)
    • Walmart is opening 300 new stores worldwide
  • Foreign customers:
    • See above
  • Regulations:
    • Walmart adheres to the local and federal regulations of their host country.
  • Exchange Rate:
    • None

 

#2: Is the organization internationally diversified?

  • Yes

 

  • If yes, where are they currently?
    • Walmart operates in 28 countries: Argentina, Botswana, Brazil, Canada, Chile, China, Cost Rica, El Salvador, Ghana, Guatemala, Honduras, India, Japan, Kenya, Lesotho, Malawi, Mexico, Mozambique, Namibia, Nicaragua, Nigeria, South Africa, Swaziland, Tanzania, Uganda, United Kingdom, United States, and Zambia (Walmart Corporate – We save people money so they can live better.)

 

  • What markets should they expand to?
    • With the decent returns from online sales, Walmart needs to invest more in the E-commerce market to keep their company growing. They should also invest in mass streaming media to allow compete with Amazon’s growing presence.

 

  • Who are their major competitors?
  • Tesco and Carrefour are the largest international competitors.

 

#3: How complex and unpredictable is the organizations environment? Which environment does your organization exist in?

  • Walmart is in a simple, unstable environment. This means that there are relatively few elements to contend with however, consumer demand changes very rapidly. Walmart is a lot more stable than other retailers in this environment because of their size, large customer base, and ability to dictate lower prices from suppliers. Although Walmart’s environment isn’t complex, they have had to adapt to an onslaught of negative public relations, causing damage to their image. This is unusual for the environment that they are in however, as the biggest bullies on the block and their low wage and benefits practice, they are an easy target. Walmart countered this by spending millions on a new PR department aimed at defending itself from criticism and to act as a “first strike” weapon. (Daft, 2010)

 

#4: Does your organization’s strategies and goals fit their environment?

  • Walmart creates most of the complexity and instability in their environment for their competitors.

 

Circle one of the types in the following categories that you have found your company to portray: environment, strategy type, and organizational goals.

 

  Type 1 Type 2 Type 3 Type 4
Environment Calm Varied Locally stormy Turbulent
Strategy types Reactor Defender Prospector Analyzer with innovation
Organizational goals Neither Efficiency Effectiveness Efficiency and Effectiveness

 

 

#5: Did your organization align across environment, strategy type, and organizational goals?

  • Yes

 

If yes, where do you think the organization should go now? Do you predict changes in their environment?

  • The brick and mortar stores where Walmart does over 90% of its business will eventually start to dwindle. Amazon has the right concept; Consignment and E-commerce. Amazon allows non-primary suppliers to “advertise” their supplies on their website, but Amazon still receives a share of the revenue. Amazon also doesn’t have the brick and mortar purchase sites that takes away from profits. In 2014, Walmart made about 1/6th the sales online as Amazon ($12 billion vs $81 billion). Consumers are finding it easier to let their fingers do the walking versus their feet. I am predicting online sales to be the dominate form of retail transactions within the next 5 years. Walmart has to start investing more capital and resources into improving its foothold in his market or they could find themselves on the opposite end of the bullying tactics that they made so famous.

 

References

Burtless, G. (2015, February 24). Wal-Mart boosts pay of its low wage workers: Is inflation just around the corner? Retrieved February 07, 2016, from http://www.brookings.edu/research/opinions/2015/02/24-walmart-pay-boost-inflation-burtless

Daft, R. L. (2010). Organization theory and design (10th ed.). Mason, OH: South-Western Cengage Learning.

LaMotta, L. (2009, March 05). Wal-Mart Scoffs At Recession. Retrieved February 07, 2016, from http://www.forbes.com/2009/03/05/walmart-aeropostale-abercrombie-markets-equity_retail.html

Picchi, A. (2015, June 17). Report: Walmart has $76 billion in offshore tax havens. Retrieved February 07, 2016, from http://www.cbsnews.com/news/report-walmart-has-76-billion-in-offshore-tax-havens/

Retail Industry Analysis 2016 – Cost & Trends. (n.d.). Retrieved February 07, 2016, from https://www.franchisehelp.com/industry-reports/retail-industry-report/

Retail Sales Worldwide Will Top $22 Trillion This Year – eMarketer. (2014, December 23). Retrieved February 07, 2016, from http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

Soni, P. (2015, February 18). Welcome to Market Realist. Retrieved February 07, 2016, from http://marketrealist.com/2015/02/managing-walmarts-supply-chain-cross-docking-tools/

 

Summary. (n.d.). Retrieved February 07, 2016, from http://www.bls.gov/ooh/sales/retail-sales-workers.htm#tab-1

WMT Balance Sheet | Wal-Mart Stores, Inc. Common St Stock – Yahoo! Finance. (2016, February 05). Retrieved February 07, 2016, from https://finance.yahoo.com/q/bs?s=WMT Balance Sheet

Wal-Mart Stores, Inc. Competitors. (2016, February 05). Retrieved February 07, 2016, from http://www.nasdaq.com/symbol/wmt/competitors

Walmart Corporate – We save people money so they can live better. (n.d.). Retrieved February 07, 2016, from http://corporate.walmart.com/

Walmart announces Q4 underlying EPS of $1.61 and additional strategic investments in people & e-commerce; Walmart U.S. comp sales increased 1.5 percent. (n.d.). Retrieved February 07, 2016, from http://news.walmart.com/news-archive/investors/2015/02/19/walmart-announces-q4-underlying-eps-of-161-and-additional-strategic-investments-in-people-e-commerce-walmart-us-comp-sales-increased-15-percent

 

 

 

 

 

 

 

 

Walmart SWOT Analysis

Strengths:

  • Wal-Mart Stores Inc. is the largest private company in the world in terms of revenue ($480 billion) and employment (2.2 million). They also have the largest customer base in the world, which enables Walmart to offer lower prices than many, if not all, of its competitors. They consistently have suppliers that are willing to sell to them at lower prices than their other competitors.
  • The integrated logistical system that Walmart uses is one of the best in the world. It is interconnected with their suppliers and delivers up to the second status of goods. This system allows for timely distribution of goods, fewer goods in storage, reduced transportation costs, less time in-transit, and more money in consumers’ pockets!
  • Walmart uses its size to leverage suppliers into paying lower prices. There are many stories that flood the internet, where Walmart has pulled the playground rules on a competitor; “Play by my rules or I am taking my ball and going home!”. For example, Vlasic was selling a gallon jar of pickles in Walmart for $2.97. Walmart and Vlasic were only making 1-2 cents per jar, but Walmart wanted it more as symbol of their power. When Vlasic wanted to increase the price 50 cents, Walmart threatened to discontinue business with Vlasic completely. Vlasic relented on the price because Walmart supplied about 30% of their business.

 

Weaknesses:

  • Despite the ability to be able to offer prices lower than anyone, this approach does have its drawbacks. The most obvious is that the product the consumer receives will be of lesser quality than some of their competitors (or in the words of Paris Hilton when asked if she ever shopped at Walmart “Do they sell walls there?”).
  • Walmart offers wages and benefits that are subpar for its size and its industry, resulting in high employee turnover. There have been many critics of Walmart’s willingness to keep their frontline employees’ wages and benefits low while increasing the wages and benefits of their upper level management.

 

Opportunities:

  • Walmart has a top notch supply chain system however; they are not utilizing it effectively when it comes to online sales. Walmart online products are similar to Amazon’s, but Amazon uses their space more effectively. Walmart could use the same approach as Amazon by introducing a consignment approach to online sales. They would advertise the product online, charge for the services and have the suppliers store and ship the products to the consumer. They could also introduce the “preferred” supplier (just like Amazon) and offer guarantees or free shipping to home.
  •  They could offer memberships with perks, similar to Amazon, such as free shipping to customers residences. Walmart offers free shipping to their stores however, in the increasingly internet driven society, most people like the comfort of having their product delivered directly to their door steps. Walmart charges for any and all deliveries to homes.
  • Walmart could improve its revenue by diversifying its portfolio. All of Walmart’s current ventures are related to their retail stores, which isn’t bad however, there is an excellent opportunity that exist for Walmart to enter the digital movie industry. Amazon offers access to free digital movies as part of their membership. As part of the prior statement, Walmart could partner with Hulu, Netflix, or Vudu and offer their services as part of the membership perks.

Threats:

  • As a low priced jack of all trades retailer, Walmart does specialize in any one particular area. This allows business to develop niches and compete with Walmart for certain customers.
  • The biggest physical threat to Walmart is Amazon. The domination of the online retail market by Amazon encroaches on Walmart’s brick and mortar store sales.
  • Washington DC poses a new threat to Walmart. There have been many legislations introduce that places penalties on business that sells products that are predominately overseas. These types of bills aren’t new however, they have been gaining new traction since the recent economic recession.
  • Walmart’s image has suffered greatly in the past and continues to suffer today. Whether it is because of unfair wage policies or its bully tactics that force suppliers to lower prices; leading to lay-off workers, this causes millions of dollars in lost revenue.

 

 

Sources:

http://cerasis.com/2015/05/13/supply-chain-management/

http://corporate.walmart.com/_news_/executive-viewpoints/walmart-us-president-and-ceo-bill-simon-delivered-remarks-at-the-companys-year-beginning-meeting

http://finance.yahoo.com/news/managing-walmart-supply-chain-cross-230540171.html

http://www.fool.com/investing/general/2014/12/02/this-1-thing-is-wal-marts-biggest-threat.aspx

http://www.investopedia.com/articles/personal-finance/011815/how-walmart-model-wins-everyday-low-prices.asp

http://money.howstuffworks.com/wal-mart.htm

http://www.usanfranonline.com/resources/supply-chain-management/walmart-keys-to-successful-supply-chain-management/#

Dream Job

My dream job was to become a doctor. I have always wanted to help people and I love science so I wanted to be a doctor. I would create a company called Healing Touch. The company would be a group of doctors that would only make house calls. They would have no “formal” office which to see patients, but would use a mobile health van if necessary. Once a week, they would roam the streets, providing basic health services to the homeless and displaced people in their region. The organization would be a for-profit organization and its mission goal would be “To provide more personal, human touch to your healthcare needs”. My five operative goals are to: Increase the profit margin of each quarter in FY16 by 5% from the previous quarter and the year-end margin by 20% for a cumulative total of $22.6 million (starting base of $5 million from last quarter of previous year), Creating a pilot program through the University of Alaska Medical School system that will pay for tuition of aspiring doctors and nurses who commit to a minimum of 5 years of service with us after completion of their programs, thus enabling the company to grow, Increase our regional market share in Anchorage from 2% to 15% by the end of fy16 with advertising targeting the elderly and disabled, Install employee retention programs aimed at retaining the most talented employees such as 30 day paid vacations and employee vehicle purchase programs (a $30K cash assistance) designed for employees that commit to an additional 5 years of service, and a $40k innovation award for employees who are able to improve process or create inventions that result in a 10% decrease in expenses or a 5% increase in profits. I believe the organizational structure most appropriate for my business would be functional. Doctors are intelligent people, but anyone who has ever worked with one will tell you that they are the worst at organization because of the amount of work involved in day to day operations. Let the doctors do what they do best; help people! Here is what my organizational chart would look like: Functional Organizational Chart