Company at risk: identifying vulnerabilities and mitigation strategies

Company at Risk

In the past Wal Mart has built their reputation based upon offering low prices and high quality brand names. However, the company has recently become a part of some of the major product recalls that have been occurring. This is because there was an emphasis on finding the lowest costing items available. Once this occurred, it meant that they were unprepared about how to deal with these issues. At which point, their levels of customer service dropped and they were seen in negative light. To avoid these kinds of challenges, Wal Mart needs to create a strategy for dealing with these issues. Otherwise the odds increase that they could lose market share to key competitors.

Over the last several years, Wal Mart has been continuing to face a number of different challenges. Part of the reason for this, is because they are having a variety of product recalls in their Homes and Gardens segment. As a host of customers, have been complaining about defective weed eaters and lawn mowers. To make matters worse, when they do comeback with these issues, they are told to leave. ("Consumer Complaints," 2011) This is problematic, because it means that Wal Mart is continuing to be seen negatively when it comes to customer service. The reason why due to the fact, that they have built their reputation on offering everyone the lowest prices available. To make matters worse many consumers also want to purchase items that are of good quality. This means that anything sold at Wal Mart, that is subject to a product recalls will hurt the image of the organization. The reason why is because, consumers will often use this as a way of determining the overall amounts of quality in comparison with other retailers. (Bianco, 2007, pp. 27 -- 49) Once this takes place, it means that Wal Mart will have trouble improving their same store sales. To avoid the kinds of problems, the company needs to refocus on how they are dealing with: what particular techniques should be utilized during these situations. This is the point that we will have specific insights that can help Wal Mart to address these issues and improve their overall reputation among consumers.

Backgrounder

Define the Problem

The problem facing Wal Mart is that they are seeing a shift in the kinds of products they are selling. As they have some of the lowest prices available, yet many of these goods are inferior to what their competitors are selling. Once there is product recall, these issues become even more troubling. The reason why, is because each incident that they are involved in, is further proof that they are not practicing the highest ethical standards. At which point, the image of the entire organization will suffer and shoppers will begin going elsewhere to find what they are looking for.

Explore key issues and how could it be best resolved

The key issues that Wal Mart is facing with their strategy, is that the combination of them are having an effect on the operating environment. As all of them together are: creating changes in consumer perceptions and how the company reaching its different objectives. A few most notable that they have been dealing with are: the quality of the products they are delivering and the services they are providing. As far as the quality of their products is concerned, Wal Mart has been purchasing greater amounts of low end items. This is when various goods may not be superior to others, because they have some kind of small defect. In effort to maximize their profits, the manufacturer will often sell these items at a lower discount. In the case of Wal Mart, they have begun purchasing more these items and then selling them as new. The problem is that when someone begins using them. They will find out that there are a host of issues with them. Once they go to the store to seek out some kind of service, is when they are often treated poorly and the situation is not resolved. This is the point that customers will begin shopping at a competitor because of these issues.

To deal with these challenges, Wal Mart needs to embrace several different principals including: purchasing products with the belief that there could be problems, improving communication and staging practice recalls. Purchasing products with the idea that there could be issues will help buyers to focus on those goods that are of higher quality. This will change what everyone is concentrating on and how they deciding what items the company will be purchasing. Improving communication is when you are training everyone as to: how the customer should be treated in these situations and the best steps for dealing with them. This will prevent most people who have a problem, from complaining about how unhelpful staff members were. Staging practice recalls is when you are teaching everyone as to how they should be dealing with these situations. Once this happens, it will help to more effectively prepare Wal Mart for these kinds of issues in the future. (Spotts, 2005, pp. 37 -- 45)

How the crisis occurred and developed

The crisis began when Wal Mart began to seek out lower wholesale providers and they started purchasing various products directly from the manufacturer. On the surface, this appears to be a good idea, as the company was lowering their cost basis, increasing competitiveness and improving their profit margins. However, the reality is that this allowed executives to begin purchasing products that were of inferior quality. Over the course of time, the means that any kind of product recalls could have an effect on Wal Mart. This is because they were buying the cheapest brands. Once this take place, it means that the odds improve of seeing a particular recall affecting various retail locations. (Soderquist, 2005, pp. 81 -- 102)

How you could avoid the crisis?

The way that crisis could have been avoided is that executives should have place an emphasis on purchasing products that met particular standards of quality. This means that Wal Mart will not purchase the lowest cost items. Instead, they would concentrate on if it met certain specifications. If this kind of approach could have been embraced, it would have prevented Wal Mart from becoming involved in different product recalls. This is the point that the firm would have seen higher profit margins and better customer perceptions about their organization. (Augustine, 2000, pp. 7 -- 11)

What action plan was developed?

The action plan that was developed was to issue a product recall and pull all of these items off the selves. In the event that customers began to complain, the company would refer them to the manufacture for further information. This is important, because this basic approach that was being utilized was designed to: reduce the amounts of liability. (Marquard, 2007, pp. 216 -- 228)

Identify the offense and defense tactics used

Basic offensive tactics were to announce to the public that Wal Mart was having a recall on various items. At which point, they would give the public a certain length of time to return it for a full refund or another exchange. Once this occurred, executives believed that they were dealing with their legal liabilities. However, when it came to defensive tactics, they were facing more severe issues. This is because the firm did not train employees and managers about how to deal with these issues. This means that once someone came into their store, they were faced with unhelpful staff members. Over the course of time, this would frustrate many consumers to the point that they began shopping elsewhere. (Bianco, 2007, pp. 39 -- 51)

Analyze what security was needed

The security that was needed is that Wal Mart must have greater amounts of control in improving communication about these issues and how to effectively deal with them. This is problematic, because it meant that most stores were unprepared for recall that was taking place. The reason why is: these individuals were following the company's policy when dealing with customers (which was to provide as little service as possible). If they had explained to everyone what the recall meant and how they should handle these issues. Wal Mart more than likely would have been able to protect their brand images and provide a level of service that was satisfactory to the majority of their consumers.

Evaluate the chain of accountability

The chain of accountability was separated between executives on the corporate level and those were in the different locations. This is troubling, because managers at headquarters were often announcing to the public that a recall was taking place through a host of different channels. However, once they went beyond this level is when their communication severely declined. This occurred, on the store level as they would send managers a notification about what was taking place. In these kinds of situations they were made aware of the recall but, there was no directives given to them as to how it should be handled. This is the point that customers would go different locations and they received poor service. The lack of accountability is what contributed to the communication breakdown.

How could the crisis be avoided?

The way that this crisis could have been avoided, is by implementing a policy of improving employee training and communication. The way that this could have been conducted, was to teach everyone on the store level how to deal with irate customers and stay within company policies. This would have prevented these situations from spiraling out control, by satisfying their needs and admitting to possible mistakes that were made. Once this occurred, it would have meant that the image of the company would have improved.

Prepare to manage, recognize, contain, resolve and profit from the crisis

The best way to deal with these kinds of issues is that Wal Mart must completely revaluate these situations. The way that this could have been accomplished was to have executives watchful of possible recalls that were occurring. They could have then, worked with all of the various departments to quickly admit that there was a problem and they were doing everything they can to fix it. Next, the company should have encouraged customers to come back to their different locations. During this stage of the process, is when they would work with staff member to learn how to deal with issues. Once this took place, it meant that their customer services would improve by addressing their needs. This would have allowed them to profit from the crisis by showing that they are going the extra mile for them. Over the course of time, this would have meant that same store sales and profit margins would increase dramatically.