Sam Walton -- founder of Wal-Mart -- demanded that expense be kept to a bare minimum. His belief was that you offer the lowest prices possible and volume. Wal-Mart's focus is on chipping prices, be this with the goods they sell, or the way they run the store including their notorious low wages, frugal corporate cultures, and push to make suppliers sell items at increasingly cheaper prices.
Wal-Mart's driving goal is to keep retail prices low, and everything - including technology and corporate culture -- work towards frugality. To that end, Wal-Mart's suppliers are pushed to cut prices as low as possible. In "The Wal-Mart effect," author Charles Funishman describes how a four-pack of GE light bulbs decreased from $2.19 to 88 cents, and how Wal-Mart buyers demand that suppliers either lower the price or increase quality every year on every item. Wal-Mart's philosophy is "plus one"
It aims to be a discount stores that offers its consumers everything from nails to food and beyond -- everything that one can possibly need -- under one roof at the lowest price (David & Graces, 2009).
As WalMart itself writes its mission to be: "Save money. Live better." That is its credo.
What are the external and internal issues facing the organization?
The external issues are certainly Wal-Mart's notorious reputation for its labor relations and the contemporary social trend that is disturbed by such treatment. One of the world's largest and most successful corporations, Wal-Mart is exemplary of all that is considered worst of capitalism: greed, poor ethics, selfishness, non-Christian self-centered focus on me as one and charity as last and poor worker treatment. Criticized for its exploitation of workers, as well as for its resistance of union organizations and campaigning, Wal-Mart has been boycotted by some and criticized by many.
Wal-Mart is notorious for its frugal culture including paying meager wages to its employees and providing stingy health-care plans. Store managers are expected to work overtime without pay, and often work more than 70 hours per week. The stores are under heated in winter and go tight on their air-conditioning in summer. Wal-Mart is headquartered in a cheap, rather than expensive city like New York. Its headquarters is drab; their executives are expected to go frugal on personal and store expenses. Their executives work long hours, arriving at work before 6.30and working half-days on Saturdays.
Wage abuse, sex discrimination, and anti-unionism are just three of the allegations that Wal-Mart faces. Women comprise a high 70% of their organization, but they are mostly in sub-clerical roles, and all of Wal-Mart's employees without exception suffer from miserly work conditions and below-standard treatment. Their treatment of their employees consequents in diminished market share with the impression of a cheaper environment and more common, dissatisfied staff (whether true or not) when, for instance, compared with Target whose polished interior and seemingly more sophisticated impression as well as content staff gives Target the appearance of being a chain of slightly higher quality and retail appeal. Poor pay, whilst helpful in certain aspects, lowers the shopping experience fro consumers who may find employees not only under-motivated but also rude and uncouth. Wal-Mart's competitiveness, therefore, may inadvertently benefit from customer dropout despite Wal-Mart's bargain-basement prices.
Cited as an external problem, Wal-Mart's poor labor relations may well be considered an internal problem too, since research consistently shows that comparable retail giants have demonstrated that better work benefits, fairer wages, encouragement of social interaction amongst employees and some level of personal autonomy all contribute to a more versatile and competent employee. As we will see with Branson later, it was all of these elements that led to the success of his company.
Low wages can also lead to high employee turnover, never good for any company least of all for a corporation that has to always expend money in recruiting, attracting and training new staff (Patterson & Biagi, 20030.
What is the vision for the next five years?
Wal-Mart's goals for the future, as specified by the company's chief executive, Lee Scott, are to: (1) make the company a better place to work; (b) improve the shopping experience, particularly for women, and (c) be more aggressive in buying merchandise.
In practical terms, and as specified by Mike Duke, CEO of Wal-Mart Stores Division, practical visions for change that involve better customer service are staffing the checkout lines better in order to cut down on lines. Attention too will be turned on the customer "who is willing to pay for a little better quality and style." Those are the consumers who have left Wal-Mart for a Target and Wal-Mart seeks to attract them back. In fact, they are making this is their top priority for the coming years, by aggressively widening their appeal in order to attract a larger pool of consumers (Anderson, 2005).
More interestingly, Wal-Mart has whispered that it needs to clean up its stores and treat its employees better, as well as formulating some goals about introducing organic food and upscale products like trendy clothes, all in the aim to target wealthier clients. Their aim is to improve merchandise, particularly apparel and house ware in the hopes of drawing more middle- and high-income shoppers to its stores.
Outlining its vision as a "company of the future" (Maestri, 2008), Wal-Mart has said that it will push for advances such as electronic health records or hybrid cars which whilst being ideally useful to the environment, will most importantly help Wal-Mart cut costs.
As Scott pronounced, Wal-Mart is actively working towards making its energy intensive products 25% more energy efficient within the coming years.
Wal-Mart also intends to be tougher with suppliers than it has yet been in order to cut down on the slew of recalls and its vision includes some wild ideas such as hybrid electricity of plug-in electric cars and eco friendly energy to customers which would help them cut down their price.
Appealing to social trends, Wal-Mart's 2011 Global Responsibility Report has outlined three goals; 1. To reduce their global plastic shopping bag waste by an average of 33% per store by 2013; 920 partnering with suppliers to improve energy efficiency by 20% per unit of production in the top 200 factories in China form which they directly source by 2012; and (3) doubling sales of locally sourced products by the end of 2015 (Schwartz, 2011)
Other goals and visions include their company serving 1 billion customers a week in 20 years' time and adding 500,000 jobs in the next five years (McIntyre, 2010)
Whilst minor focus is directed to improving labor relations and customer care, the brunt of Wal-Mart's attention remains classical: to aggressively cut down on cost as much and as often as possible.
What changes must you make to achieve the vision?
Given the various challenges that Wal-Mart has faced on the legal and public relations front, it is little wonder that it is setting its attention to addressing its working conditions. But too little is being done, whilst its primary goal is still focused on "being more aggressive in buying merchandise" (Anderson, 2005). Wage abuse, sex discrimination, and anti-unionism are just three of the problems that Wal-Mart experiences. Others include streamlining and standardization of effective recruitment methods as well as drafting of ethical standards for personnel treatment, better work benefits, encouragement of social interactions amongst employees, and enhanced personnel autonomy. Wal-Mart has accrued a lot of criticism for its stinginess. Its power prevents it from being corrected in ways that it ought to be. Its treatment towards employees, for instance, seems to overstep the legal requirements regarding working conditions. Altogether, Wal-Mart seems to be an oligarchy that needs to be controlled for whilst it is attractive in providing clients with low prices, its frugality has become ugly and legal action is desperately needed to correct a wrongful and unjust situation.
A compensation plan better aligned with industry standards, a recruitment strategy designed to bring aboard talented rather than low-paid personnel and more clearly defined ethical standards will ultimately make Wal-Mart a better corporate citizen and, therefore, more successful. Minor changes would include a more efficient automation process, where more effective cost- and time-saving strategies would be realized. Wal-Mart should also work on providing better training as well as improving its customer care. Its reward, salary, and remuneration system should be transparent, and open to the public. The company should also possess medium and long-term strategic plans that are made in such a way that the core cultures and regulatory principles of the company are reviewed and changed with time so that it does not seem o be a change stack company. Apparently sliding into smugness due to its inordinate success, Wal-Mart is recommended to never forget that competition is strong and struggling to overtake it - and may well do so in the future -- unless they improve their game. Forgetting God and considering themselves to be God, the Company will do well by being more humble,…