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Analysis of Walmart
Name of Student
Institutional Affiliations
Introduction
The company was started by Sam Walton with goals of delivering highest levels of value and customer service. The owners believed that they could be successful in the competition by leading through better quality of services provided to the customers. The first venture of the owners started in the name of Walton's 5&10, which inspired them to top open the first Walmart store in 1962 in Arkansas. There was a general thought that better services and lower prices may not work at all for this business, but Wal-Mart was a big success, and the owners shared this success with related stakeholders, especially those who were involved in providing services to customers. This practice was very new to the industry, and sharing success with associates has been one of the major success factors for Wal-Mart CITATION Wal19 \l 1033 (Wal-Mart, 2019).
The company came up with ten principles for a successful business, which includes some aspects related to management. One of these principles relates to motivating partners who will play an important part in service delivery. Communication is also an important part of management in any organization, and Wal Mart has managed to communicate in a way that helps the management because every person is very clear about his or her role. There should be clear policies for the valuation of contributions by different employees so that each person can be rewarded accordingly.
This paper will analyze in three parts in the first section, there will be an analysis of environment by applying the five forces by porter on Wal-Mart. Next, we will analyze the four major functions of management and how they are applied by managers. The last section will provide some recommendations for the company to implement for improvements.
Environment
To analyze the situation faced by the company, a PESTEL study will be undertaken to go through political, economic, social, technological, environmental, and legal factors affecting the business. These aspects cannot be changed by the company itself, and they affect all companies equally.
Political and Legal
The U.S. is a system of government where the President heads both government and the state. Some differences are present in the political system of the U.S. and other European countries. There is a greater degree of power available to the upper house of legislation and more authority at the hands of Supreme Court. The political stability in country provides ample opportunities for businesses to grow themselves and Wal-Mart has taken advantage of this aspect by opening large number of stores all across the country. In terms of legal environment, the company has to fulfill many requirements while doing business in the U CITATION Rob191 \l 1033 .S. (Greenspan, 2019). There are laws that force companies to speak truth in their advertisements. These laws also affect the message that businesses can convey to their customers. These laws are implemented by federal trade commission at the federal level. Customers have the right to take legal action against the business, which has lied in terms of product features or attributes of service. Overall a stable political system and a strong legal system present a stable environment to Wal Mart to operate in which allows the company to maximize the customer value through innovative policies.
Social
The demographics of the U.S. reveal that a majority of people are white, with 72.4% in all. Christianity is the most common religion in the country, with 72.4% of people following it. There has been an increase in consumer power and demand at the same time, which means that the stores have to be in continuous contact with their customers. The case of a retail store like Wal-Mart is different because these stores will buy their inventory and sell that to the customers. These businesses need to keep a closer eye on the changes taking place in consumer behavior. An appropriate example can be given about the age of people in a society. An aging population will mean that the business will have to keep more products related to old age people. Social changes and factors allow businesses to use their resources efficiently by segmenting the market appropriately according to different criteria CITATION Bak05 \l 1033 (Baker & Stacy, 2005). The increased demand presents various opportunities for Walmart, but increased power can pose serious threats to it.
Technological
This is the most important aspect of this analysis when we talk about Wal Mart because almost all the consumers are affected by technology in one way or the other. Most important technological aspect is the internet, which has changed the way people buy and businesses sell. The customers have more variety of goods available for purchase through a number of clicks. They also have the opportunity to compare and contrast the offers by different competitors. As far as the businesses are concerned, they can opt for the online sale option through its website, which Wal-Mart is already doing. The technological aspect is very tough to manage because there are very quick and abrupt changes in it. In terms of advertising and marketing, there has been a huge change in the introduction of social media. This aspect has helped both businesses and customers, at the same time, providing a platform for both to make better choices. Walmart uses social media for advertising major campaigns with minimal cost and reaching a large number of customers at a time. Various applications have been developed to help customers buy combination of various products. Thus, the technological environment presents both opportunities and threats for businesses to cope. Walmart has been trying to be a considerable competitor to Amazon in the online retail business, whereas Amazon is trying to show more and more physical stores.
Environmental
There have been huge concerns over the environmental issues raised, especially by the usage of plastic bags and related materials. Walmart has to keep an eye on all the major environmental concerns and incorporate relevant responses. These concerns may also affect partners of a company in the whole supply chain.
Porter Five Forces Model
Competitive Rivalry in the industry
In the retail industry, there is a strong rivalry among firms that are participating in the market. A large number of firms are providing very similar products to their customers. Walmart has to face these aggressive factors because there is tough competition in the market. Strong competition will mean that a company will have to develop its competitive advantage over a much longer period. The approach used by Walmart is to lower the prices of all its products so that there is a higher volume of sales to be enjoyed.
Bargaining power of Customers
There are huge numbers of buyers who have distinct characteristics, and it is impossible for them to unite. This factor makes its bargaining power much weaker in the case of Walmart. Another aspect is that there is a very small percentage of purchase made by individual customers so they cannot have any impact on overall sales of the company. All these factors make the bargaining power of buyers much weak. In the present era, there have been many changes in the retail industry, including technological aspects, which have increased the influence of buyers on various firms. The customers now have various options to change their preferences regarding retail stores quickly.
Bargaining Power of Suppliers
This force is also weak in the retail industry because there are a large number of suppliers available in the market, and Walmart and other huge chains purchase in huge quantities from them, which makes the position of suppliers much weaker. Walmart has ignored this aspect of the model and made sure that suppliers are considered a part of the value generation process of the company. The company has tried to involve all the components of supply chain in value generation process.
Threat of Substitutes
There has been a huge variety of goods offered by Walmart stores which makes it difficult for any other store to compete. The huge variety does not allow other firms to bring in any substitutes to these products. Another barrier is the nature of these products which does not allow any substitute to creep in. In the past, the company used physical stores and online sale could was thought as a substitute which has been changed initiating the online sales through company website and social media advertising.
Threat of New Entrants
There is a strong threat of new firms entering in the market because there are no legal barriers to start a retail business CITATION Gar19 \l 1033 (R.Jones & George, 2019). There are a lot of suppliers and any new firm can choose from among them. There is a low amount of capital required to start a retail store so this is a strong force against Walmart. Walmart has extended its network to a huge area and offers lowest price with higher quality services. These factors make it difficult for the new entrants to affect their sales and market share but entrance of new firm means that there will be more players in market causing further saturation of market.
Role of Managers
In the environment like this, managers have to be proactive in their approach. This will require that there is maximum control in the hands of top and middle management so that timely decisions can be made and implemented. They will also keep an eye on all factors of the PESTEL analysis to look for any major changes in these factors and appropriate changes have to be made to company policies and strategies.
Managerial Perspectives of Walmart
Planning at Walmart
Planning is concerned with setting up the organizational goals and objectives and defining the plans through which these objectives will be attained. A plan is a written set of the way in which goals and objectives will be attained. The current issue for the company is that there are more and more people going towards the online option of buying goods. The company has traditionally focussed on the physical stores which sell goods to customers directly. One goal is to increase the online sales by 20% over a certain period of time. A second objective set is that there must be an option in all stores which will allow customers to book their orders from home and they come in to pick their orders later CITATION She14 \l 1033 (Banjo, 2014). The third objective will be to make sure that the delivery of goods is made on time by the company to customers so that they are satisfied. In order to plan these activities, company has to determine what steps will be required. Firstly, there has to be a certain level of training offered to employees so that they can know exactly what changes are required and how will they be incorporated? The technological system of the company should be improved. Should the company put in all the goods for selling online or some specific goods only? What steps can be taken to make sure that orders are delivered on time and at reasonable costs? Being a huge organization, Walmart has enough resources to run this campaign successfully but the most important aspect is to allocate these resources in a way that can maximize the output. This step will have to take the maximum time if management wants to be successful in future.
Organizing
Once the goals and objectives have been set, the next step is to set up various resources for the attainment of the set goals and objectives. The first thing will be that employees will have to be trained regarding online sales. Even before that there should be new devices installed on all stores which will help the employees to track the orders of customers. There will be new employees hired who will handle these devices and also help other employees to learn about them. There will be a considerable amount of financial resources required for purchase and installation of devices. All these resources have been organized and now they will have to be allocated. The company will have to increase advertising on various online platforms so that more and more people can know about any offerings. A contract will have to be established with a courier company to take the goods from godowns and deliver them to customers without any delay. This contract should be made for a specific period of time after which it will be renewed. An insurance company will also be involved in the whole process.
The major role in this step will be played by the managers and many of their skills will be tested. Negotiations with couriers, shipping and insurance companies will test their negotiating skills as well as their ability to convince others to follow budgets. Communication skills will also be properly implemented by managers because they will have to communicate with internal and external stakeholders. Walmart has a norm of clear communication which will mean that all managers dealing with outside parties will have ample information about how to settle things. One more aspect of Walmart’s culture is that it wants to make sure that no stakeholder is at a loss in any deal finalized. There will be step by step communication between the middle and top-level management which will mean that all levels stay updated about the happenings. Once all resources are organized, they will be put in place to make sure that there is ample movement towards achieving the goals.
Leading
Leadership can come in two ways namely transformational and transactional. Transformational leadership is the style that modifies the lives of people and society significantly. Walmart is following this thought of leadership which means that it is trying to bring changes in the lives of people and society. The increase in online sales provides customers with an easier option to shop. In some particular instances, the company also implements the transactional leadership which means that there are certain punishments if tasks cannot be accomplished in time. Transformational leadership is at the base of Walmart’s success but in this scenario, both leadership methods will be used by the company. The implementation of the online sales system will require transformational leadership because this will highlight the positive changes brought by this system to people’s lives and society as a whole CITATION Nea05 \l 1033 (Conan, 2005). This will also motivate the employees to learn new things and implement them in practice. In the second stage, transactional leadership will be used where employees will be rewarded or punished on the basis of results achieved. The managers in Walmart will have to practically show how to maximize benefit of online sales for customers and society as a whole. There have been regular visits by the top officials of company to individual stores to check the effectiveness of any change brought about by the company. This makes sure that top officials have ample information of ground realities so that the objectives are well known across the whole organization. Thus, leading plays an important role in making sure that there is coherence across organization regarding objectives and the way they are pursued.
Controlling
This aspect is related to evaluating the outcomes of efforts and matching them with the desired outcomes. The company has been able to increase online sales by 4 % over a period of one year which is lower than the desired outcome. There have been many cases where customers have complained about late delivery of goods all over the world. The analysis revealed that the online retail market was too competitive for the company to be able to get a 5% increase. The shipment costs to certain parts of the world were too high for company to handle. There were huge costs associated with inventory management as a result of late deliveries. Some employees were dropped off and some other were offered further training so that these problems could be rectified.
Recommendations
The first recommendation for the company is to divide its operations on the basis of geographical area which means that particular areas will manage their own sales and inventories. People from all around the world will be able to receive their shipments within stipulated time because they will receive them from nearby locations. In the countries where demand is higher, separate warehouses can be opened so that there is no chance of delays in delivery. Currently, the company follows a structure that is based on business activities like sales, marketing which limits the ability of company to address problems quickly. A change in culture will help the company to adapt to differences in various countries. Even in case of online sales, the company will have to change a little bit according to local culture. There should be sufficient adaptability in organizational culture in different countries.
There must be coherence between physical stores and the online pictures of these stores which means that customers will not feel strange online or coming to physical stores. Similarly, the product features should also be the same on both platforms.
The management should take more control in its own hands so that decisions are taken and implemented faster. This will require that the employees follow directions as required by their managers. Currently, the organization has empowered the employees too much which is creating a problem. The communication system has to be improved in a way that more information is transferred from top to bottom. The inability of the organization to achieve the suggested increase in online sales happened because employees had extraordinary powers and could not implement the suggested actions properly.
The company should continue the low pricing strategy because it will ensure huge sales in terms of volume both on physical stores as well as online. However, costs of shipment have to be controlled so that there is no loss to the business.
References
BIBLIOGRAPHY Baker, & Stacy. (2005). Defining Retail,post Wal-Mart. Pro-Quest Central.
Banjo, S. (2014). Wal-Mart Looks to Grow by Embracing Smaller Stores. Wall Street.
Buttler, B.Oss, & P.Murray. (2014). Contemporary Strategic Management. Wiley.
Conan, N. (2005, November 1). Analysis: At Wal-Mart, a mission to bolster image. Washington D.C., America.
Greenspan, R. (2019, December 13). http://panmore.com/walmart-five-forces-analysis-porters-model-case-study. Retrieved from http://panmore.com: http://panmore.com/walmart-five-forces-analysis-porters-model-case-study
R.Jones, G., & George, J. M. (2019). Essentials of Contemporary Management. New York: McGrawHill.
Wal-Mart. (2019, December 13). https://corporate.walmart.com/our-story. Retrieved from https://corporate.walmart.com: https://corporate.walmart.com/our-story
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