Walmart Case Study

WALMART

CASE STUDY

Professor: Dr. Kurt Miller

Management and Strategy

September 12, 2015

The very first Wal-Mart store opened in 1962 in Rogers, Arkansas.  It was founded by Sam Walton who had a passion for customer satisfaction and everyday low prices.  Wal-Mart is now the world's biggest retailer, and the world’s biggest employer - with over 2 million people.  It not only operates in the U.S, but 12 other foreign countries as well.  As of April 2009 the company had 7,928 retail units worldwide.  Wal-Mart reported over 401 billion dollars in sales in 2009 with a net income of 13.4 billion in 2009.

Wal-Mart is by far the largest retailer in the United States.  It consistently puts competitors out of business and has sales larger than the Gross National Product of most countries.  Yet the retail giant faces many threats and challenges to its success.  While Wal-Mart isn’t the only organization criticized for its policies, it has become a leader for much of what is wrong with employers.  Wal-Mart, surely has enough money to rectify some questionable workplace practices, for example; low ages, cutting of hours and unaffordable healthcare.  On average it pays its employees lower wages than most retailers and has been accused of using contractors who use sweat shop labor overseas to produce goods that have been labeled made in America. Wal-Mart is said to have increased the need for social services in areas where its stores are the leading employers, as many employees qualify for public assistance.  One thing we know for sure, its core demographic is the lower middle class.  For a long time, this was the ingredient for rapid growth.  But the neighborhoods are pretty much full of Wal-Mart stores, the lower middle class is struggling harder and spending less and there's more competition on the "lower prices" than there used to be.  If Walmart doesn't act fast and get their act together, disgruntled employees and filthy stores might become more than a minor irritation. In order to rectify this, Wal-Mart rolled out a new wage model that would increase starting pay to $9.00 an hour in April 2015 and by February 2016 all current associates will earn at least $10.00 an hour.  As well as, the pay of department managers starting at $13.00 an hour and by early next year 2016 to $15.00 an hour.  This seem all well and good but has caused turmoil with more tenured associates and Wall Street.  Stock prices have fallen sharply due to Wal-Mart reported lower than expected profits.  Tenured associates have felt the brunt of the pay increase in three ways; no pay increase, same pay as new associates and the cutting of hours worked which leads to disgruntled workers and employee turnover.  Employee turnover creates, long lines, dirty stores and poor customer service.  Moreover, the retail giant faces stiff competition from its competitors, being number one ensures everyone’s best effort against you.  For example, Whole foods is attacking Wal-Mart in an unexpected way by lowering it price points on certain goods.  Most people associate Whole foods with better quality products, consumers of any type who see reduced prices on good brands will buy them.  That has given Whole foods a competitive edge in cheaper goods as well as humanly raised meats and organic produce which consumers are buying in larger quantities.  Another threat the retail giant faces are lawsuits, for example, the charges filed a year ago in relation to Black Friday back in 2012, when Walmart managers accelerated their efforts to threaten and discourage workers from going on legally and protected strikes.

In his “Wal-Mart “: Twenty-First Century Leadership” address, CEO Lee Scott, set priorities such as; diversity, community involvement, product sourcing, healthcare, jobs and environmental impact, all of which the company in the past had dealt with in a defensive posture.  Scott felt Wal-Mart needed to view the priorities in a different way to build a 21st Century Company.  In fact, Scott says those priorities represent gateways for Wal-Mart in becoming the most competitive and innovative company in the world.  

• Diversity – A way Wal-Mart will continue the effort in becoming a world leader:

• Increase the hiring percentage of women and minorities in management positions.
• Increase outreach to colleges and universities with large diverse enrollment.
• Accountability for officers with incentive bonuses to achieve diversity goals.
• Conduct more business with minority companies
• Be more transparent with employment data.

• Communities – Wal-Mart rely on the communities to keep their legacy alive.  They’re committed to the following:

• Engage in a community process that will include more input from other business leaders.
• Improve the existing community relationships in which they operate.
• Open Corporate Affairs offices in local metro areas.
• Will continue to build “stores of the community.”
• Will develop a policy that addresses environmental and social needs of the communities.  

• Product Sourcing – Being one of largest purchasers of goods in the world, Wal-Mart is committed to transparency in the following areas:

• Reorganizing the way they do business globally.  Support and treat workers fairly from other factories, no matter where they are.
• Promote a proactive dialogue that encourages positive business practices.
• Incorporate an independent monitoring system help to with the transparency of the certification program.

• Healthcare – This is has been a hot topic for a very long time.  Wal-Mart vows to start taking care of their own and focus on the following:

• Make insurance affordable for everyone, regardless of their position.
• Provide different choices of plans for associates to choose from.
• Educate the associates on healthcare spending.

• Wages – Like healthcare, the topic of wages has taken a life of its own.  Wal-Mart is dedicated to the following:

• Valuing the associates and their families.
• Competitive wages for both full and part-time positions.

• Environment – Environment was the least relevant.  Wal-Mart prides themselves on recycling and not being wasteful.  Wal-Mart environmental goals are simple and straightforward:

• To be supplied 100% by renewable energy.
• To create zero waste.
• To sell products that sustain resources and environment.

“We are a large company.  For Wal-Mart to be successful and continue to grow, we must operate in a world that is healthy and successful” (Twenty First Century Leadership, 2005, by Lee Scott).

Wal-Mart, Board of Directors retreat produced nine limited risk initiatives that required little or no tradeoff between cost, associate satisfaction and public reputation.  They felt these initiatives should improve associates satisfaction slightly, however, the initiatives would not have any significant impact on public reputation.  The initiative are as follows: