Operations Management at Walmart
Operational management in Walmart.
Quality management principles at Walmart. 5
✔️Principle 1: Customer Focus.
✔️Principle 2: System approach to management.
o Principle 3: Process-based approach.
Walmart’s Supply Chain Management.
Cross Docking As a Method for Inventory Tracking.
Sustainability in Supply Chain.
The Role of the Information System and Its Impact on the Supply Chain.
International expansion and logistics.
Walmart is a US-based multinational retailer that operates chains of discount stores founded in 1962 by Sam Walton in Rogers, Arkansas, based on a strategy of low prices; its expansion occurred quickly, boosting productivity, helping in large part to reduce inflation and increasing purchasing power of Americans (WalMart, 2016). Since its inception, the company has heavily invested in logistics and information infrastructure to facilitate the efficient flow of goods and information (Chopra, Meindl, 2008, p. 7). Furthermore, the company has been the leader in the planning, design, and operation of a supply chain aimed at success.
Even so, the changing market and the endless views on quality management and consumer rights forced the supermarket chain to implement more expensive logistics models. Therefore Walmart developed a new one to support the supply chain and traditional logistics activities; the System Reverse Logistics, which seeks to optimize round trips to the centers of distribution and supermarkets to carry out a selective collection of both defective products such as packaging and packing, avoiding as much as possible that there are trips without load, this practice has allowed them in recent years to reduce costs. It even reduces CO2 (carbon dioxide) emissions by contributing to sustainable environmental policies (Dunne & Lusch, 2005).
Walmart took 30 years to net the territory of the flat logistic system from which the systematic conquest of local markets was launched. The company passed the billion mark dollars in turnover per year in 1980, from billion per month in 1986 to billion per week in 1992. It is now more than five billion US dollars in weekly sales (Chandran, 2003). It collects an average of almost 100 million customers per week. The strength of the corporation is remarkable: the sales are higher in comparison to its direct competitors combined (Sears, Target, Kmart, Kroger, Safeway, J.C. Penney), and lastly, in the US, sales denote 7.5% of all those in the die trade tails (excluding auto parts) (Emiliani et al., 2007).
For over 40 years, Walmart management has had only one obsession: reducing costs to maintain low prices and selling more. This goal inspires the innovations implemented by Wal-Mart. To this end, the frugality of the bosses of Wal-Mart, who continue to share their hotel rooms to reduce costs, is legendary, and the head office of the inter-outlet is a drab building without extravagance (Chiles & Dau, 2005).
Finally, another characteristic of Walmart’s structure is its strategy of continuous lower prices, which eradicates promotions. In this manner, the corporation ensures more stability within its sales, avoiding over-stocking or out-of-stock issues arising from the hazards of demand (Johnson, 2008).
Operational Management in Walmart
Format: Walmart operates different branches: Discount Stores, Supercenters, Neighborhood Markets, Sam’s Club, Wal-Mart International, and Walmart.com. All of these with different areas. Additionally, it handles various formats of points of sale (neighborhood, international and express).
Product: This team conducts market research; for example, they shop at the competition, present the points of sale, attend merchandise shows, and analyze their packaging. Inside the warehouse, they also focus on ensuring that their items are adequately and assertively displayed and that their performance appeals to the customers.
Value: For its visitors, the retailer giant offers lower prices, a wide range of products and services, and high quality.
Personal: Employees are motivated and trained by encounters and celebrations with renowned personalities.
Communication: The company appropriates the new slogan: “Save Money, Live Better.” Every element present in the store seeks to communicate something to the customers. Walmart cares about serving three kinds of target segment: the common North American, the more cultured customer, and the consumer whose only priority are organic products. In addition, their main interest is to remain associated with the community through activities like supporting youth groups, helping in emergencies, and support for the soldiers’ families.
Providers: It operates with small suppliers to that of larger companies such as Procter & Gamble and with foreign suppliers.
Source: Gattorna (2006)
Challenges of organizational management at Walmart
In the current volatile economic environment, businesses are forced to develop and implement effective organizational strategies to manage endowed individuals. This situation is particularly acute for those businesses that continue to expand in new markets (Kohlbacher, 2010). Building and sustaining a management team that can remain effective even when the store plans to expand activities in other regions is very challenging for Walmart. According to a survey carried out by Ernst and Young, organizations operating in multiple regions find it very difficult to create an effective management team mainly because of cultural differences, inconsistencies in impending talent management, difficulties in using both international as well as local talent in a balanced way as well as the lack of reliable leadership (Cania, 2011).
Performance Management | Walmart
This is a relatively novel concept that is assimilated with performance evaluation results. These reports help the management team assess the degree to which the employee holds responsibilities concerning the position (Agulles & Prats, 2011). The management style in Wal-Mart involves minimal consultation or discussions related to change with the employees. The senior staff level and the management levels have different management styles. In addition, wages and salaries are not aligned with the change in working hours, and very minimum compensation is allowed for any extra work done.
Walmart should address the needs of the employees’ welfare and ensure that their compensation is a fair reflection of the services they offer. Other programs should also be initiated to appreciate efforts and encourage the employees’ hard work. In addition, increasing or revising the pay scale will encourage and motivate them to attain organizational goals even in harsh economic times like the COVID-19 pandemic.
The current state needs to address issues that are related to the number of increased grievance cases. Additionally, the turnout is relatively high. This eventually results in bad performance on the part of the company. This can be associated with a management theory presented by Henri Fayol, which discusses equity and remuneration; the stability of the employees’ tenure is the key to developing effective organizations (Akbar, 2012). Hence, Wal-Mart should continue to implement the main principles presented by Fayol to overcome this organizational challenge.
Total Quality Management | Walmart
Total quality management (TQM) is a continuous improvement process that is committed to constantly improving product quality (Decenzo, Robbins, & Verhulst, 2010). This strategy requires the organization to ensure that the product or service meets the standard agreed upon by both the company and the consumers. This approach is different from the traditional approach where a quality department would check and monitor the quality and then dispose of those which are not in accordance with TQM and requires the employees and the whole company to maintain the reasonable levels that the management desires (Jafar, Mohammad, Fariba, & Mehrdad, 2010). When a company enacts the TQM approach, the entire process becomes seamless. Innovation is a by-product of a higher quality (Perdomo-Ortiz, Gonza´ lez-Benito, & Galende, 2009).
Total Quality Management as a Strategy in Walmart
Quality appears as the principle of a company in the 21st century and is linked to that organization that seeks to consolidate, grow and develop to be successful. The principles of quality management are the great premises used to transmit by the organization’s top management.
The quality management principles cannot be closed; when the ISO 9001 standard is implemented, the company should not suffer. For this standard to be helpful to the organization, it must be taken not as a system to be implemented but as a reference system. The desirable thing is that it is a continuous improvement process in which the ISO 9001 standard acts as part of the principle of a quality organization (Natto, 2014).
Principle 1: Customer Focus in Walmart
Businesses depend on customers and hence should have an in-depth understanding of the present and future needs of these customers, make efforts for customer requirement satisfaction, and endeavor to exceed employee expectations. Additionally, the business should also ensure that the customer needs are not static and dynamic, which means that they are changing with time and becoming increasingly informed and demanding customers. The company has to strive to meet using offering products and services as well as managing them and trying to exceed expectations regularly (Narayanan & Raman, 2004).
This retailer offers its customers a wide selection of products from recognized brands with the best quality. To make this happen, the organization has a supply and distribution network equipped with high technology, standards, and quality, guaranteeing that consumers will always be provided with what they want. Moreover, the concepts of quality and guarantee are also applied to the entire market. An example of its customer service is that if a customer does not find its meat products to be fresh (cold cuts, fresh products, meat and bakery), they can make a purchase return. This policy is valid for 15 days from purchase, and only the receipt or expiration date of the products must be presented; if the customer is not satisfied with the merchandise, they will be given double the value of the merchandise or two identical products (Lee, 2004).
Principle 2: System Approach to Management in Walmart
The ultimate goal pursued is the achievement of the objectives set. Identifying, understanding, and managing interconnected procedures as a system contributes to an organization’s effectiveness and efficiency in attaining its set objectives. It will, hence, be essential for the company to notice and manage all the interrelated processes correctly.
The chain is the leader in costs since it is that supplier who tends to assume that the items are generated through inventory, promotional activities within the warehouse, space leasing, and the restocking of the point of sale. If the spaces are misused – either because there is no product rotation or because there are exhausted ones – the supplier must assume the equivalent that the company ceases to receive. Additionally, this must be adjusted to Wal-Mart’s requirements. This retailer invests permanently in technological aspects, which helps reduce costs (for example, “chips” for merchandise, which allows the supplier to review inventory in real-time and thus can restock the shelf) (Krajewski, Ritzman and Malhotra, 2013).
Principle 3: Process-Based Approach in Walmart
A desired result is most efficiently achieved when the events and related resources are managed seamlessly. The actual change can be traced from the idea of the company. It has halted serving as an organization with functional areas or departments to be a company by processes to create value for customers.
Walmart has a division focused on company logistics and has several distribution centers. Some logistics concepts handled by this chain of warehouses are:
“From there to here” logistics is how the retailer obtains its products from suppliers to the shelves and the heart of the supply chain of warehouses. The retail giant shifts several millions of products for its consumers and uses the most advanced sustainable and ecological practices for each procedure.
Distribution Centers: The retailers’ chain comprises one of the biggest distribution operations. Walmart owns more than forty regional distribution centers, and each of the distribution center space measures more than a million square meters and is operated round the clock, 24 hours a day7 days a week, to maintain the movement of its trailers and tractors. In every distribution center, the conveyor belt installed is more than five miles long, which moves 9 thousand different product lines. One must note that these distribution centers supply between 75 and 100 warehouses within a 250-mile radius.
Additional Distribution Centers: The Company has also set up distribution centers for particular product classifications, like jewelry, food, medicine, and shoes/wardrobe. There is also the recognized “DotCom Distribution Center,” which extends support towards the operation of Walmart.com, and the “Site-to-Store” program, the subdivision with the most accelerated growth of the whole supply network of the retailer giant. Focusing on the distribution work, the company maintains its focus on three core fundamentals: Cross docking, concentrating, and distributing itself. It also has its fleet of trucks; they deliver 24 hours a day and have 60% of trips compensated.
Source: Mark (2014)
Workflow and Productivity | Walmart
Workflow is a repeatable pattern of business activity enabled by the systemic organization of the resources within processes, which tends to transform materials, process information, or provide services. It can be considered as a sequence of operations or one or more complex or straightforward mechanisms (Eder, 2009).
Productivity can be defined as a concept determined by the ratio of what is received after what was invested. It is basically the ‘output versus input. This can involve several factors, like the performance of the employees or workforce, time involved in manufacturing products and services, use of equipment, and the return on capital (Iona et al., 2008).
Walmart’s Supply Chain Management
Wal-Mart concentrated its efforts on expanding a highly organized supply chain management strategy and improving its competitive advantage, thereby assuming a leadership position in the market.
Strategic and Efficient Association: Establishes alliances with most of its suppliers. The network of warehouses, suppliers, and stores is determined as one firm. Their focus on its control is less centralized than frequent and informal cooperation (Wal-Mart, 2012).
Value concepts: To add value, Walmart has designed a format to handle various points of sale (neighborhood, international, express, and web). For the design of its Products, it conducts market research; for example, they shop at the competition, present the points of sale, attends merchandise shows, and analyzes merchandise packaging. Customers can appreciate the value of its high quality, low prices, wide variety, and trendy products (McNally, 2005).
Back Haul Logistics Service: Wal-Mart’s transportation goes to the supplier’s warehouse and takes it to the corresponding distribution center.
Inbound Logistics Service: The staff that goes through the merchandise to the supplier’s warehouse reviews it in more detail; it is a specialized service for shipping merchandise to the distribution center (Market Wire, 2006).
Porting Logistics Service: Refers to the porting service, a trustworthy pre-receipt area that sends the merchandise to a destination CEDIS; the charge is per pallet depending on the CEDIS that was sent.
CEDI – Distribution Center: In logistics and traffic, CEDIS is used as an alternative to improve freight and freight costs, both raw material and finished product (Global 500, 2017).
Innovation in Walmart’s supply chain was initiated when the company abolished certain links within it. In the 1980s, Walmart began directly functioning with the manufacturers to lower costs and better manage the supply chain.
Manufacturers manage products in Walmart warehouses as part of the Vendor Managed Inventory (VMI) initiative. Walmart expected to close with 100% merchandise restocking (Grean & Shaw, 2002).
A Strategic and Efficient Partnership | Walmart
In exchange for the lowest prices possible, wal-Mart institutes strategic coalitions with many suppliers by giving them the probability of long-term, high-volume purchases. Additionally, Walmart improved its supply chain network by developing communication networks with suppliers to improvise the material flow with low inventories.
The behavior of Wal-Mart’s network of warehouses, suppliers, and retail stores is defined as if it were a single firm. Suppliers operating in the supply chain network align their demand predictions to be a part of a collaborative forecasting, planning, and resupply scheme. It can be said that all links within the supply chain are linked through technological tools, inclusive of a central database, a satellite network, and a store-level point-of-sale system (Freeman et al., 2011).
In recent years, Walmart has used radio-frequency identification (RFID) tags and numerical codes, which are assessed from a certain distance for tracking product movement during the supply chain. Since Walmart and the suppliers should manage inventory levels, Walmart has invigorated its suppliers to use RFID technology (Jones et al., 2005).
Wal-Mart’s approach results in less centralized control of informal and frequent cooperation between the distribution centers, stores, and suppliers. What makes Walmart so innovative is that it has been constantly sharing all this information with its partners when previously, no organization did. Many even paid third parties to obtain that information.
Taken together, these exemplary supplier relationship techniques allow a company to deliver products of higher quality in a timely fashion, eventually resulting in customer satisfaction.
Cross Docking As a Method for Inventory Tracking
In logistics, cross-docking relates to order planning (a function of a logistics warehouse) devoid of employing merchandise in the stock or inventory or receiving. It allows the transit of materials to various places or combines goods bought from different regions (Manuj & Mentzer, 2008).
The logistics practice of cross-docking is an integral component of Walmart’s strategy to restock inventory effectively. It states the un-deviated product transfer from an inbound truck to an outbound truck without using an extra storage facility.
Suppliers tend to deliver products to the distribution centers of Wal-Mart, where they will be shifted to another truck, which is on the duty of delivering those products to the stores. The cross-docking keeps transportation and inventory costs lower, reducing time to transport and eliminating inefficiencies.
Cross-docking makes it possible to avoid resting the inventory idle for longer periods; since the suppliers send the products to the Wal-Mart warehouses, they are automatically sent to the stores. The procedure involves 24 hours or less. This strategy allows Wal-Mart to reduce costs considerably and transforms them into exceedingly competitive consumer prices (Magretta, 2002).
Technology in Walmart
Technology plays an essential role at Wal-Mart by being a fundamental basis of its supply chain network. In its persistent quest to reduce prices, the retail giant has embraced technology to emerge as an innovator in tracking store inventory or merchandise and restocking shelves, allowing them to cut costs. The retailer has the most extended technological infrastructure than any other corporation internationally. Its network designing and state-of-the-art technology lets it accurately predict demand, control and envisage inventory levels, create highly effective transportation routes, and manage logistics for customer service and relationships (Traub, 2012).
For example, Walmart was the first to implement UPC (Universal Product Code) barcodes throughout the company, with which information can be gathered at the store level and immediately analyzed. Moreover, the retailer has developed a technological facility called the Retail Link, a global satellite network database system. This technology is linked with the analysts who forecast demand, which displays information on real-time sales from the cash registers to the distribution centers.
Even recently, the company initiated the application of intelligent labels, read by a handheld scanner, through which the employees can immediately know which product needs to be supplanted to make the shelves constantly filled up and inventory tracked closely.
As per the University of Arkansas analysts, there has been an almost 16% drop in out-of-stock issues since Walmart implemented RFID technology within its network supply chain. Experts also identified that brands applying electronic product codes restocked three times quicker than items using only traditional barcode technology (Perret et al., 2007).
Additionally, Wal-Mart also connected its suppliers through computers. For example, they created a collaboration model with Proctor and Gamble for maintaining inventory in stores. They created an automated reordering system, which connects all systems in the factory of P&G through satellites. In such a way, P&G delivers products to Wal-Mart, either in one of its distribution centers or shipping directly to that outlet or store where it is required.
Wal-Mart’s underlying management strategy has given it a chain of competitive advantages, inclusive of improved product costs, lower inventory management costs, improved selection within the stores, and hence, a low price that is competitive for the consumers. This management strategy has helped the company remain dominant in a highly competitive international market. As technology progresses, Wal-Mart emphasizes implementing innovative processes or systems to improve the supply chain for increased efficiency (Wal-Mart Corporation, 2003).
Purchasing Policy of Walmart
Walmart’s policy is based upon the simple norm of “cutting” costs to the lowest price possible and selling more. The group’s purchasing policy is hence predisposed to this principle. Wal-Mart defines two angles of thinking to keep prices low:
First, Wal-Mart does a market analysis. It ensures specific stability of its sales by practicing a policy of constant low prices. Thus, it avoids delicate situations of overstocking or out of stock, a consequence of fluctuations in demand. Secondly, it makes a rigorous selection of suppliers. The giant rarely takes the first step to finding a new supplier. It takes a leadership position and is placed in a position of strength by letting others take the initiative. The selection of suppliers is made according to Wal-Mart standards and criteria. Some suppliers have reformed their products so that their products are a better match for the Wal-Mart image.
For the giant, being a specialist in its sector, knowing your market perfectly, offering targeted products, and being ready for anything are the essential characteristics of a good supplier. Following this first choice, Wal-Mart analyzes the company’s politics and functioning. The corporation invests time with potential suppliers to understand their cost structures (Wal-Mart International, 2006).
Finally, the negotiations start. Once common ground is established, a “Win-Win” relationship develops between the supplier and Walmart. The giant imposes minimized margins, and profitability is based on volumes. Suppliers commit to prices; in return, Wal-Mart ensures their production. Thus some suppliers manage to obtain a monopoly on the manufacture of a product. In conclusion, the giant’s purchasing policy can be concluded with a stern selection of its suppliers and establishing a win-win relationship while imposing minimum margins to offer low prices. It is also characterized by containing contingencies due to the variations in stocks undergone by an uncontrolled demand (Lu, 2014).
Wal-Mart provides its partners with a computerized system (Retail Link) to link all stores. With real-time sales information, suppliers can anticipate and optimize supplies. Between processing information, ordering, and delivering the products to the store. Priority is given to information and processed as quickly as possible. In Wal-Mart warehouses, more than half of the products processed only pass through. They stay for a few minutes and are sent directly to the stores. Upon arrival in the stores, the goods are immediately placed on the shelves.
Sustainability in Supply Chain in Walmart
In the aspect of sustainability within operations, Walmart announced that from 2010 they have managed to eliminate 120 thousand metric tons of emissions. Thereby saving $231 million by recycling packages and doubling its supply of local produce (Mujtaba, 2007). In addition, the Global Responsibility Report (GRR) indicates that Walmart’s ecological initiatives have reduced their environmental impact. However, increased the effectiveness of its supply chain and points of sale and addressed social issues. The three main goals are using 100 percent renewable energy, generating zero waste, and selling products. It will bring benefit both people and the ecosystem.
The company declared that in the first quarter of the fiscal year 2013-14. It obtained profits of 3,742 million dollars, which is equivalent to a year-on-year increase of 10.1%. This result is partly due to the 2.6% increase in sales made in its stores located in the US.
During this period, the retailer experienced a 9% increase in its cost of production, which amounted to 85,186 million dollars (whereas in a similar period in 2011, this figure was only 78,177 million dollars) (Jones, 2006). The company announced that it expects that, in the 2nd quarter of the same fiscal year, can achieve a net profit per share that in 2012, it was confirmed by Fortune magazine that the oil company Exxon Mobil positioned itself as the biggest corporation in the United States, dethroning Wal-Mart from this privileged position. According to prominent publications in North America, Exxon Mobil reached a turnover of 452,926 million dollars in the last fiscal year, and Walmart – in this same period – reached 446,950 million dollars (Wailgum, 2014).
On the other hand – referring to the expansion plans that this retailer has – Rob Walton (President of the United States Board of Directors of the retail chain) stated that he does not rule out that this franchise decides to start operations in other countries; the ideal conditions must exist to allow this opening. Additionally, Wal-Mart evaluates that it could increase its sales in the United States by approximately 5 billion dollars annually, thanks to the strategy of fully supplying its points of sale.
The retailer has been working on improving its sales and inventory level for more than a year and thus made a decision to hire Retail In-sight (in England) as well as Acosta Inc. (in the US) for both firms to take a tour of the stores and analyze the level of stocks. Expert sources say that the five thousand million in additional sales would be above the income reported in 2011 by Wal-Mart stores in the United States (3,930 million dollars) (Clara, 2014).
The Role of the Information System and Its Impact on the Walmart Supply Chain
The retailer’s information system is at the core of its network of supply chains. When its first distribution center was set up, it had a warehouse management system (retail link). This high-tech device links all suppliers to all the stores of Wal-Mart. Thus, they can keep up-to-date on daily product sales and react in real time to store restocking. Maintaining a history of several weeks also helps them manage their stocks better. This information saved allows for optimizing, adjusting, and even anticipating supplies. Good management of the sales network demands the automation of business operations (Johnson, 2002).
One of Wal-Mart’s successes is also logistics management. Walmart entrusted this part to SCM Supply, a British giant Tibett & Britten subsidiary. This one counts as prestigious client brands such as IBM, Nike, Gap, Carrefour, or Metro. In this area, too, information is at the center of concerns. No aspect is left to chance; the whole thing is planned. The movement of all the goods is recorded and documented. At a given time, more than 80,000 references are managed, recorded, and traced (Handfield & Nichols, 2002).
In warehouses, more than half of the products only pass through and return to the stores. This notion of speed is at the heart of supply chain management at WalMart. The main objective is to sell the merchandise quickly so that customers pay it before the supplier pays. It is the customers who ensure the cash flow of the firm.
International Expansion and Logistics | Walmart
Sam Walton founded Walmart in the seventies; its growth level registered strength for the company until it became the biggest retailer in the US, having an annual sale of approximately 32.6 million dollars registered in the early 1990s. This growth to a potential level that led a mid-sized Arkansas retailer to emerge as a company that is recognized nationally was based on a top-notch management team, which established a series of operating strategies that were highly innovative, thus extending support to the commitment of the company to offer the consumer a varied selection of high-value merchandise at a low cost (Mujtaba, 2006).
Wal-Mart ventured into a circular distribution system, in which the central warehouse distributions are strategically situated for supply groups of stores; such a situation was used to reduce inventory and logistics costs. In addition, Wal-Mart was the pioneering organization that implemented a computerized information system for tracing the sales of stores and immediately communicated this information to the suppliers. Information obtained from these computer-based systems is used for determining both the pricing and the storage strategy, along with improving the management and control of inventories.
Therefore, Walmart remains to be a leader in information systems presently. WalMart stores, suppliers, and distribution centers are interlinked by sophisticated information systems as well as communication systems through satellite, which allow the adjustment of stock prices and orders on a daily basis.
Its success rests on the nature of the strategic control systems that its founder, established for the company, Sam Walton, created a strategic control system that provided employees at every level with feedback related to their ongoing performance and that of the company (Mujtaba, 2007).
Walmart has developed a culture and a control system that creates incentives for both associates and managers to do their best for the company. This culture is supported by a generous plan of stock ownership and profit sharing with all the employees, including managers. In addition, Wal-Mart, a pillar in the development of a dynamic and egalitarian culture, provides authority to warehouse managers, heads of departments, as well as individual employees (known as associates); they are given special treatment however at the same time, a higher level of, as well as excellent performance, is required.
To achieve this, a system of financial control was developed which gave managers the power to monitor performance daily in all aspects of the business; The information regarding the store’s profits and the turnover rate of the goods is provided to the managers who, in turn, communicate it to the employees; Thus, by information sharing, the Walton Method enables all the managers to understand the basics of the retail business to improve it. If a store has underperforming associates or managers, the associated reasons can be discussed, and a solution can be derived to enhance the performance level (Leenders et al., 2006).
Walton devised and established an intricate control system based on rules and budgets to determine the behavior of employees. Top-level managers visit stores that report problems and dedicate Saturdays to meetings debating the financial results of the week and its implications in the future. To do this, Walton insisted on linking performance with the level of rewards. The individual performance of each manager is measured by their capability to meet precise production goals or objectives and is reflected in salary increases and promotion opportunities. To do this, Walmart promotes and incentivizes from inside the company rather than hiring managers from other companies. In the same way that top-level managers are given huge stock options related to the performance objectives and the price of the shares of the company; ordinary associates can also benefit from such action;
For example, a manager who joined in the 1970s, by this time may have gathered more than $ 250,000 in stocks due to the rise in the stock of Walmart over time. Each store will perform its undertakings in a similar manner. All the employees will be receiving similar training so as to train them how to behave in front of customers, so Walmart can handle standardized operations, which records greater cost savings and allows making changes in stores with greater flexibility; Walmart is not satisfied with just using behavioral controls and monetary rewards.
They are engaging their employees in business and encouraging them to develop such behaviors at work which is more focused on the provision of quality customer service, developing strong cultural values and company norms, most notably the ten-foot attitude developed by Walton during his visits to stores, where he encouraged his managers to pledge that as long as they were within ten feet of the distance of a client, they would look them in the eye, greet them and ask if they could help him; the rule of the fall of the sun, which establishes that employees must endeavor to respond to customer requests at sunset on the same day they receive them; and the Wal-Mart cheer (give me a W, give me an A and so on) that is used in all stores (Simchi-Levi et al., 2003).
Irrespective of successes Walmart faced significant problems in 1991. With more than 1,500 stores operating nationwide, the company’s growth prospects in the US are minimal; as a result, it decided to start expanding its business operations outside the US, hence creating an international brand. Walmart considered Several options closely related to its expansion, including providing licenses to franchisees. However, they immediately decided that it would be a lot better to expand operations by means of wholly owned subsidiaries in the countries whose local regulations made it possible.
Finally, the management concluded that the competitive advantage is based upon a blend of information systems, culture, and supporting logistics. This strategy can be a tough job to convey to the franchisees; it was also considered that the managerial knowledge that underpinned its system and culture failed to correspond to the concept of franchising (Peterson, 2014).
As part of its penetration strategy, once a store in a foreign country has been established or attained, the retailer transfers some American managers to that particular store for at least 2 – 3 years to establish the administrative systems and transfer its culture to the new associates. The strategy has worked; Walmart’s international stores contributed around five billion dollars in sales and 120 billion dollars in revenue, representing their profits. Today the giant Walmart has several stores worldwide, from Canada to Latin America and from the United States to Asia, including “old Europe” (Wal-Mart Inc., 2014).
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