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Wal-Mart Case Study

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Webster University | Management and Strategy | A glance into Wal-Mart | | Monica Kendra Leigh Spell | 2/5/2011 |

A case study of Wal-Mart discussing strategic initiatives |

Threats and Challenges
A SWOT analysis provides a description of an organization’s strengths, weaknesses, opportunities, and threats. It is an important tool in management decision making, because managers are able to look at what their areas of improvement need to be, what their strong points are, and how to integrate the two to benefit the organization. After conducting a SWOT analysis of Wal-Mart, a few threats and challenges were identified. Changes in executive leadership can and usually do pose challenges for an organization. In this regard, Wal-Mart is no different. Lee Scott took the post as CEO of Wal-Mart in January 2000. Some of his challenges throughout his reign as CEO were ethical issues, personnel dilemmas, health insurance reform, and pressures from external groups.
Ethics guides the managers’ decision making process by determining moral awareness, judgment, and character. The manager must acknowledge that an ethical issue exists, determine a solution that is within morals, and have the ability to carry out their ethical decisions. Managers must also wear a “veil of ignorance”, a term based on John Rawls experiment. This means that managers must place themselves in the group that the decision will negatively affect and weigh the decision. Ethical decision making also involves using the problem solving method. Ethics is important to the managers’ decision making process, because it can have costly consequences. The cost of unethical decision making include government fines, decline of employee commitment and morale, and an increase in government regulation. Unfortunately, Scott encountered some of these costs during his tenure as CEO.
Scott brought his wife a 5.7-carat pink diamond from Aaron Group, a Wal-Mart supplier. He paid $178,000 for it. Although, nothing became of the case, it was a public issue due to the circumstance. Wal-Mart has very strict policies on accepting gifts from suppliers. Their policies are stricter than the federal government’s! Thomas Coughlin created another ethical issue as he was departing his post as one of Wal-Mart’s top executives. Coughlin had been using gift cards to make personal purchases like buying contact lenses. The gift card program was used to reward lower level employees in the All Star program. The outcome was that Coughlin pleaded guilty to charges of wire fraud and tax evasion. Upon taking the position as CEO of Wal-Mart, Scott immediately faced challenges that came along with personnel management. Wal-Mart’s senior management team sided with either Scott or Thomas Coughlin, whom some thought should have been CEO. Scott strived to pull senior management in the same direction and lead them into the next century. Many of them were opposed to change. After the ethical issue with Coughlin, much of the opposition blew over. The part of the senior management team that had opposed Scott were now getting on board with the changes, because those that did not were fired. Health care insurance for Wal-Mart Associates has been criticized by many. Scott has worked to bring better health insurance options to employees. Through his tenure, the amount of insured workers with Wal-Mart has increased. The company also introduced the $4 prescriptions available at its pharmacies. The largest pressures from external groups for Wal-Mart have been unions and environmentalists. Wal-Mart does not want to allow its employees to organize under a union. Unions have tried to organize the Wal-Mart workforce since the late 19802 with no luck but more recently have changed their strategy to do so. The best strategy to use is quite possibly damaging the public image of the company and making customers wonder how is it that Wal-mart is able to offer such low prices. The recent scandals about Wal-Mart no paying employees for over-time or discrimination suits against women are two public issues that could help the unions make a case about organizing Wal-Mart’s workforce. The pressures from environmentalists include wastes from the stores and greenhouse gas emissions. At first, Scott was not overly concerned with environmental issues. However, he has since changed his attitude on the subject. His discussed his plans to make Wal-Mart more environment friendly in his “Twenty First Century Leadership” address in 2005.
“Wal-Mart: Twenty-First Century Leadership” address Priorities On October 24, 2005, CEO Lee Scott defined numerous priorities for Wal-Mart. His address discussed the history of Wal-Mart and its future as it applied to Associates, customers, and the community. Scott was also careful in mentioning how Wal-Mart is a business with an interest in making a profit. Environment was a priority set by Scott. At first, he did not think that it held relevancy, but he changed his mind after considering the factors and large scale in which Wal-Mart operates. The increase in greenhouse gases, air and water pollution, and destruction of habitats are all some of the environmental concerns. The release of greenhouse gases causes a change in the climate which in turn heightens the severity of weather-related disasters. Air and water pollution have an effect on the population’s health. Without safe habitats, life on Earth is threatened. Scott set three goals for Wal-Mart to tackle the issues of the environment: to run the company on 100 percent renewable energy, create zero waste, and sell products that sustain resources and the environment. He realized that these goals seem very ambitious and would probably be noted to his audience. Therefore, he explained how he planned to accomplish these goals. Wal-Mart has one of the most complex systems of delivery in the world. Their fleet of trucks would become more efficient by improving fuel mileage. The stores and clubs in the chain would be powered by cost-effective and environment friendly methods. These methods would reduce the cost of energy and greenhouse gas emissions.
Waste is another priority set by Scott. Reducing waste by changing the packaging would decrease the amount of trash put into landfills. Wal-Mart wants to encourage their suppliers to use as little packaging as possible for goods. The packaging materials need to be minimal and made from renewable and recyclable material. The plan of waste reduction could potentially add $28 million to Wal-Mart’s bottom line!
Wal-Mart does not want customers to have to make a trade-off when making purchases despite income. Trade-offs include having to choose organic versus non-organic. Unfortunately, some customers have to make these choices due to the significant price differences in these types of products.
Scott pledged to improve product sourcing by working to ensure suppliers with factories are treating their workers properly and improving factory conditions. Product sourcing is a topic frequently addressed by interest groups. Wal-Mart plans to engage with the industry, governments, and interest groups to work collaboratively on sourcing practices in developing countries. The company will also work on enhancing transparency of by third party monitoring.
Health insurance and wages for Associates were very important issues for Scott to address. Wal-Mart will be offering affordable health insurance plans to Associates which includes children. The company is increasing the choice of available plans and encouraging employees to take personal responsibility for their health care. The minimum wage until recently had not been changed in nearly a decade. On a business standpoint, it would be hard for Wal-Mart to increase salaries, remain competitive, and realize a profit. However, Scott stated that Wal-Mart is committed to paying competitive salaries to full and part-time employees.
Communities and diversity were the last two topics in which Scott discussed. Wal-Mart will use local architecture for store designs. An example of this can be seen in the Phoenix, Arizona and surrounding areas. There will be development of construction policy and local Corporate Affairs offices to address local needs. Wal-Mart will continue to ensure that their staffing population reflects the diversity in the local community and minorities and women will be represented in management positions. Other initiatives include: outreach to diverse college campuses, financial responsibility among finance officials, increase business to minority companies, and transparency in employment data.
Board Benefits Strategy document
Wal-Mart Initiatives in terms of Strategy and Public Relations “The tasks of crafting and executing company strategies are the heart and soul of managing a business enterprise and winning in the marketplace” (Gamble, Strickland, and Thompson 16). Obviously, Wal-Mart has recognized the importance of strategy, analyzed current economic conditions, and adjusted accordingly. Due to the economy, shoppers in every state of the U.S. are trying to save money. Wal-Mart has realized this and changed their operations to include local produce. This is helpful to the consumers, because they are purchasing local, safer, and cheaper produce. It appeals to the customers, because they feel like they are supporting their communities, have risks of infections like salmonella, and saving money. On the other hand, Wal-Mart is using their “local produce” produce policy to appeal to customers by it seem as if this corporate giant is more like a part of the community. Wal-Mart is also saving millions of dollars in fuel, transportation, and other costs by obtaining produce from local vendors. The term “local” in the Wal-Mart policy is any produce vendor within the state. Other rival companies use a certain percentage to determine their “local” standard. There are five steps in the strategy-making and strategy-executing process. Those steps are: developing a strategic vision, setting objectives, crafting a strategy to achieve the objectives and vision, implementing and executing strategy, monitoring developments, evaluating performance, and making corrective adjustments. As with any process similar to this is management studies, you must always revise, if needed, at each phase in order to achieve the desired outcome. One way that Wal-Mart implemented a strategy was by changing their slogan and traditional symbol. The marketing department’s goal was obviously to make their way into American homes by turning that corporate store image into more of a local part-of-the-community type image. As detailed above, consumers have effectively seen the vision, and Wal-Mart has developed a successful strategy in providing local produce. Employees must be accepting of this new vision and strategy in order for the vision to work and continued success of the strategy.
Strategic Social Challenges

References:
Gamble, John, Strickland A.J, and Thompson, Arthur. Crafting & Executing Strategy. New York: McGraw-Hill Companies, 2008.
Novak. Candice. "Can Wal-Mart Do 'Local'?," U.S. News and World Report 24 July 2008. 7 Aug 2008 http://www.usnews.com/articles/business/economy/2008/07/24/can-wal-mart-do-local.html

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