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Question:

Discuss about the Case Study of Wal-Mart.
 
 

Answer:

Introduction

Wal-Mart has been in business for over 50 years and served over 260 million customers across the 28 countries. Wal-Mart is both brick-and-mortar and an online retail company. The company operates in three segments; Wal-Mart US segment, Wal-Mart international segment, and the Wal-Mart Sam’s Club segment.

Wal-Mart owns branches in China, Japan, Brazil, United Kingdom, Argentina, and Mexico. There was a tremendous increase in income over the years and in 2008 income was $13,269, 2009 income was $13,753, and 2010 was $14,927. All these steady increases were due to the management need to pay pending bills; they had to turn cash (Wal-Mart corporate 2010). It was also reported that there were short term investments, increase in accounts payable and income tax payable including inventory. 

By 2013 the company showed a slight increase in the total assets which reduced in 2014 since the company made losses. The company recorded a loss because a large amount of cash was set away to accord for discounted operations and net tax. The ROE ratio of Wal-Mart has been on the decrease from 2012 to 2014. Today Wal-Mart blames its poor financial results on shoppers who have to decide to pay their debt using their tax refunds and their savings from the lower gas prices. The prospective shoppers are reducing at Wal-Mart lowering the profit margin (Lawless 2014). The strength of the dollar is also an issue at Wal-Mart; it lowered profit of the company by $14billion last year.  In 2017 $18billion of Wal-Mart market value was wiped out due to the rising stock price.

 

The weaknesses of Wal-Mart

Wal-Mart management is working hard to fix the impending issues. The company is investing in more fresh food, e-commerce, improving workers incentives and keeping its prices cheaper than its competitors. But is cheap good for the country’s economy?  Of course not, it pulls the economy down while strengthening the economy of the communist’s states like China.

Wal-Mart has suppressed all small companies and is now a monopoly because of its low pricing. Small companies fail to meet the expectations and pricing as designed by Wal-Mart.  The employees at Wal-Mart are paid very low wages. Thus they cannot even afford to plow-back their salary into the economy (Reason 2016). The supply chain is controlled by Wal-Mart, as the sole grocery store with much power, they pick suppliers who can match their prices, and the ones who fail are left to slumber. Wal-Mart wants to make much profit yet fail to support the country’s economy; for instance, they suppress other small grocery enterprises, the suppliers, and their own workers.

The domestic growth of Wal-Mart is slackening as compared to other retail stores in the US. Despite the steady US economy, Wal-Mart sales are still on the low.  The overseas market of Wal-Mart is grumbling due to the cultural barriers, changing shopping habits and change in brand preferences. Wal-Mart has been forced to close its stores in Germany and South Korea. The company is facing low profits in Brazil and problems in mislabeled meat in China.

The Return On Investment (ROI) has been on the decline since 2010, and there is no sign of an increase. In 2010 the Return On Investment was 19.25%, and in 2017 it is 16.25% which is a decrease (Wal-Mart corporate 2017).

The problems at Wal-Mart is deepened by customer satisfaction, from a survey conducted by the American satisfaction index in 2014, Wal-Mart was ranked the lowest with a score of 68, and the average score was 88. The company has been ranked below average in customer satisfaction eighteen successive times. In 2008, Wal-Mart fired a huge number of workers 12,000 leaving a store with fewer employees which greatly affected the customer service desk because the management never saw it as a priority.

The emergence of online retailers like Amazon grabbed Wal-Mart’s unique position they enjoyed; selling their goods at big discounts. Customers opted to use the online retailers offering discounts in the comfort of their homes. The number of workers going to Wal-Mart stores reduced drastically because they lost customers touch being understaffed.

The inventory management was poor at Wal-Mart from the beginning, and in 2013, Wal-Mart lost sales amounting to $3bilion simply because of the out-of-stock issues.  The poor inventory was as a result of communication breakdown which is a fault on the part of management. Unwanted good was overstocked while the highly demanded goods were under stocked.

The employees at Wal-Mart work off-the-clock without breaks. Unfair treatment of employees by the management has been reported in many of its stores.  From Wal-Mart’s Annual Report of 2009, Workers complain of working more hours without pay, but the company blames the mess on individual stores and department managers. This shows laxity and unprofessionalism in the management from the CEO; the stores lack coordination and direct communication from the top. Many lawsuits have been filed by the unsatisfied workers tainting the face of Wal-Mart as a multinational company.

All these mistakes are made because the management is not playing a major role in oversight. Training of the management team and the staff can be a solution in waiting. Wal-Mart must learn from the mistakes and consent to change.

Leadership at Wal-Mart

Wal-Mart leadership was passed down from the founder Sam Walton and is still in use to date. The current CEO Harold Lee Scott followed the footsteps of Sam Walton and uses two types of leadership styles which include transformation leadership and transactional leadership. With transformational leadership, a leader ensures change is brought to people’s lives and the community. Transactional leadership style focuses on reward and punishment in performances of employees and their contributions. The leadership styles best suit Wal-Mart since the transactional leadership oversees the transactions of the company while transformational leadership gives vision and company’s ways of doing things (Kriger 2013). 

 


Wal-Mart leadership visits the stores on a regular basis which has altered the working at Wal-Mart. The management gets to understand the realities on the ground and develop a strong partnership. But the world is changing, and the leadership styles must change too. The leadership style at Wal-Mart is outdated and is the main reason for low customer turnout.  

In the past, Wal-Mart operated the large stores, enjoyed low prices and had superb logistics that made it the giant grocery stores in the country and overseas.   With the changing regulations, Wal-Mart has lost its ground in big cities and in most international markets. The online marketing platforms have been challenged by Amazon offering services at low prices.

Customer service at Wal-Mart is of poor quality because its employees lack proper training. The management fails at its part to connect directly to its customers; the main reason for this is the middle-level management. They tend to harness the power and forget their crucial role in the company. Customer service is one big part they have forgotten and perceive as simple matters. Workers lack the required training and are forced to learn through guesswork (Kriger 2013). Managers attend to other special matters leaving workers to grumble with customers answering their queries which could have been solved by the middle-level managers.

Areas that need managed leadership

To save the company from falling, Wal-Mart needs to change the entire board of management and the CEO because they operate the company in a less business perspective. The retail environment is changing, and Wal-Mart leadership gave a deaf ear to the changes forgetting the buyer opt to adapt to the changing platform too

Wal-Mart leaders need to understand consumer behavior in the local and international market. Most stores are closing up because of the management of Wal-Mart failed to undertake a SWOT, PEST, and the five force analysis on the market. The Wal-Mart stores in Germany and South Korea were closed because Wal-Mart did not first learn the consumer behavior in the areas before gaining entry to the market. The German customers, for instance, prefer private shopping rather than using the big open supermarkets.

With advanced logistics system and strong human resource compared to its competitors, Wal-Mart forgot that all markets are never equal. The German market was a good lesson to Wal-Mart and its leadership (Kriger 2013). Expansion in the external environment must be done with caution; every new market needs a new market model and a new strategy since the market is flooded with competitors and political issues.

Wal-Mart needs to learn how to connect its strengths and opportunities to resist impending weakness and threats in the market. To thrive in an international market PEST analysis is supreme; the management must analyze the microenvironment, political situation, technologies present and the social behavior (Van Wart 2014). A stable political environment will eventually provide a good business environment with technology in place for efficiency in business.

The five forces analysis looks at the power of consumers and power of the competitors in the market. In Germany for instance, consumers have the power to choose; they can choose to shop at Aldi, plus or Wal-Mart. There is power in competition from Aldi who gives its groceries at low prices and located at a strategic position in the market. To maintain a leadership position and satisfy German consumers, Wal-Mart stores in Germany reduced the cost of its goods and introduced new warehouse system (Van Wart 2014).

Change Management Practices

Organizations are forced to change to adapt to the changing environment hence survive the turbulence.  Wal-Mart has been forced to alter its permanent policies, technology, strategy, and practices. The company opted for a change management practice that encompasses employees, leadership, organization structure, stakeholders and communication channel (Grant 2016). The change must be communicated perfectly to employees to be made aware and ready for the change. Employee participation will decrease isolation and improve autonomy thus a clearer change can be achieved. 

Change is always likely to meet resistance and preparation is the first command. In order to achieve long-term success at Wal-Mart, a change theory must be used. Lewin’s three step change theory will serve as a testimony as proof that change is inevitable. According to Lewin, a company must go through the three steps unfreezing, transition state and the refreezing (Burnes 2004).

Unfreezing being the first step echoes a condition of absolute stability. Unfreezing is aimed at overcoming possible resistance from employees. To successfully achieve this; the leadership at Wal-Mart must try to increase the driving force that will pull employees behavior away from the norm. Secondly, they must reduce any forces that may hinder successful movement. The company stakeholders must be given a chance to brainstorm on the solution which will build trust and prepare them for the coming change (Grant 2016).

 


Transition or movement is the second step which makes sure the new level of equilibrium is achieved.  Employees need to be convinced to view the problems in different perspective and try to get a pertinent solution to the issue at hand. This can make the accept change and support its implementation.

Refreezing is the third step which takes place immediately after implementation to prevent employees from possible reversion to the old equilibrium. This step ensures the new values are integrated to the company, policies and procedures are formulated to reinforce and institutionalize the new. Change can only be achieved if the driving force is promoted (Grant 2016).

Suggested Solutions to the critical issues

Use of the express plan model and the empress plan model.

The franchise model aims at creating a mutual environment between Wal-Mart and its customers hence avoid culture conflicts.  The express plan necessitates low cost, enhanced communication process, competitive advantage and convenience of business enterprise (Coombs 2014). The express plan which is the franchise model did not work well in Germany since there are only a few stores set up in gas stations. In terms of customer target, Wal-Mart employs the local people to improve communication within its stores. For the German consumer, convenience is key thus the Wal-Mart stores must be placed at strategic positions.  The express plan can help salvage the Wal-Mart’s market in Germany if fully implemented by the managers at Wal-Mart.

As compared with an express plan, the empress plan is best because of its long-term strategy comprising the marketing orientation and working management system. With marketing orientation, the company needs to develop a marketing strategy with selling as core and stimulate employee’s passion as they work at Wal-Mart stores.

Empress plan also aims at improving the brand image of Wal-Mart as opposed to building a new unique brand mark. Wal-Mart can achieve this through charity donations, taking part in protecting the environment and sponsorship; this will build a good reputation of the company to the public and hence increase their market share and increase consumer levels. For the working management system, three aspects are considered which include union strategy, development strategy, and human resource strategy (Epstein & Buhovac 2014). Wal-Mart will ensure the store employs excellent employees to improve customer care services and increase productivity increasing profit level of the franchisees.

Development of technology of spots.

This is another important aspect which helps build the narrative flow and improve the technology of spots in every store of Wal-Mart. For the union strategy USC (“Unique, Suitable and Convenient”) will be the new principle in the development of Wal-Mart products (Huchzermeier 2016). The products will be of low price to attract the low-end consumers.

Developing a different line of products

Another line of the product can be developed, handmade food like sandwiches and soup can be incorporated in the list of Wal-Mart products. The packaging of small portions will enable Wal-Mart to meet the rising need of small size consumers and suit the local culture and refrigeration of fresh products for convenience (Chekwa, Martin & Wells 2014). These entire put in place will help Wal-Mart thrive in international markets especially Germany and South Korea where they have already closed their stores.

 

Training

Training of employees will enable them to adapt to the changes in the retail landscape. To improve perfection training must be done. Supervisors and departmental managers need training on the changing trends in the consumer market.

The issue of inventory that led to lost at Wal-Mart can also be tackled through immense training on inventory ordering using modern technology. Store managers need to understand on restocking, and the order programs to avoid the bizarre incidence where low demanded good were highly stocked while the good that was in high demand were not restocked at the appropriate time (Chekwa, Martin & Wells 2014).

To improve customer satisfaction at Wal-Mart, employees need training on how to handle customers.  Train employees on what to say and what not to say in the form of a customer. Create Wal-Mart’s attitudes and behavior to be followed in the workplace

Conclusion

Being in the market since 1962, Wal-Mart has kept its low pricing to keep their consumers. The pricing strategy worked well for the company but failed the country’s economy and the Wal-Mart’s employees. For years Wal-Mart has maintained the low prices but failed to accept that the world is changing. To keep going for the sake of the large customer’s base, the company must accept change.

As the second largest retailer globally, it is prone to legal and ethical issues. The management must work to avert issues at their stores not to diversify the same issues. The organizational structure must be redesigned to meet the growing expectations and try hard to reduce cases of abuse, discrimination and working off-the-clock. Perfect leadership will eventually create a conducive working environment

 

Reference list

Bridges, W. and Bridges, S., 2017.Managing transitions: Making the most of change. Da Capo Press.

Bryman, A. ed., 2013.Leadership and organizations.Routledge.

Chekwa, E., Martin, J. and Wells, K., 2014. RIDING ON THE WAVES OF SUSTAINED COMPETITIVE ADVANTAGE: CONSUMERS' PERSPECTIVES ON WALMART CORPORATION.International Journal of the Academic Business World, 8(2), pp.13-25.

Coombs, W.T., 2014. Ongoing crisis communication: Planning, managing, and responding. Sage Publications.

Cornelissen, J. and Cornelissen, J.P., 2017. Corporate communication: A guide to theory and practice. Sage.

Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Deresky, H., 2017. International management: Managing across borders and cultures. Pearson Education India.

Dinh, J.E., Lord, R.G., Gardner, W.L., Meuser, J.D., Liden, R.C. and Hu, J., 2014. Leadership theory and research in the new millennium: Current theoretical trends and changing perspectives. The Leadership Quarterly, 25(1), pp.36-62.

Epstein, M.J. and Buhovac, A.R., 2014. Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts.Berrett-Koehler Publishers.

Grant, M.T., 2016. Managing Change in IT projects: Using Kotter's Eight Step Process to 

Examine Lewin's Unfreeze-Move-Refreeze Theory. Northcentral University.

Hesselbein, F. and Hesselbein, F., 2016.Ethical Leadership.

Huchzermeier, A., 2016. How Walmart built sustainability into the supply chain. The Business & Management Collection.

Kriger, M., 2013. Wise leadership in organizations: Integrating Eastern and Western paradigms. In Handbook of faith and spirituality in the workplace (pp. 255-269).Springer New York.

Lawless, J., 2014. Better Living at Walmart?.

Leuprecht, C. and Sokolsky, J.J., 2015. Defense Policy “Walmart Style” Canadian Lessons in “not-so-grand” Grand Strategy. Armed Forces & Society, 41(3), pp.541-562.

Long, S. ed., 2013.Socioanalytic methods: discovering the hidden in organisations and social systems. Karnac Books.

Moran, R.T., Abramson, N.R. and Moran, S.V., 2014.Managing cultural differences.Routledge.

Northouse, P.G., 2015. Leadership: Theory and practice. Sage publications.

Northouse, P.G., 2017. Introduction to leadership: Concepts and practice. Sage Publications.

Reason, J., 2016.Managing the risks of organizational accidents.Routledge.

Stewart, D.W. and Shamdasani, P.N., 2014. Focus groups: Theory and practice (Vol. 20). Sage publications.

Van Wart, M., 2014.Dynamics of leadership in public service: Theory and practice. Routledge.

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