Wal-Mart's company structure and strategic management .
...ryone through the Supercenter stores. This may cause some confusion among consumers as to what Wal-Mart?s product offerings may actually be. As we all have learned in marketing, you can?t be everything to everyone. Furthermore, Wal-Mart?s ability to provide a convenient shopping experience is becoming more burdensome to consumers as they experience difficulties of getting in and out of Wal-Mart stores in a time efficient manner. This may be accredited to the expansion of the product offerings that the company provides, such as in food retailing. In short, the low cost of shopping at Wal-Mart may not even be worth it if convenience (like time efficient shopping/checkout) plays a vital role in a consumer?s shopping experience. Wal-Mart?s success in driving low-cost and hence low-prices opened new opportunities for the company to expand product offerings by tapping into food retail and mass merchandise to gain market share in these categories of consumer products through the creation of Wal-Mart Supercenters. By expanding on product offerings, an inherent threat of more competitors, such as those in the food retail industry is experienced. However, the company?s cost structure of delivering lower prices for consumers has become one that is difficult for any competitor to compete against. Wal-Mart has achieved the number one position as the nation?s leading food retailer ahead of competitors such as Kroger, Albertson?s and Safeway. Wal-Mart has taken advantage of the opportunity to conduct business through e-commerce by establishing their presence online. This has generated a slow growth for Wal-Mart in that the company has not yet found their niche online. The investment through online sales may not be effective for Wal-Mart since many consumers view the company as a store in which one would shop to satisfy immediate needs. Therefore, to gain online sales, Wal-Mart has product offerings online that one may find difficult to obtain through store locations. Wal-Mart may face threats in the U.S. market through their rapid expansion. The U.S. market may become so saturated with Wal-Mart stores and Supercenters that a slow-down or loss related to same store sales may be experienced in the future. Wal-Mart?s pursuit to expand internationally may offset such a threat. Wal-Mart can use profits gained in the U.S. market to create their presence internationally creating new opportunities for the company. Analysis of Company?s Business Level Strategy Business level strategy consists of decisions that are made on how to compete within a given industry, and more specifically, how to gain a competitive advantage in that industry. (Porth, 10) Wal-Mart must decide on how to compete with companies like Target, K-Mart, and other retail stores, as well as companies like Kroger and Albertson?s in the supermarket industry. Wal-Mart successfully integrates their corporate strengths into their business unit strategy. Wal-Mart?s greatest competitive advantage is its supply chain management. Wal-Mart, through aggressive partnering and large volume buying has been consistently successful in achieving low prices from its suppliers and then passing the savings on to the consumer. Since Wal-Mart is the largest buyer in the industry they are able to demand lower prices than any of their competitors. This is strategically significant because it is very difficult, if not impossible, to duplicate. Wal-Mart?s strategy then is to purchase and sell items of nearly every retail product at lower prices than any of its competitors can. To nurture and support this strategy of low price leadership through industry leading supply chain management, Wal-Mart must continually make sound financing, investing, and operational decisions. One such example of Wal-Mart?s investing decision is in its shipping method for its product. Wal-Mart invested in its own transportation system. This vertical integration not only helps keep prices down, but also ensures that items are delivered quickly and Wal-Mart?s shelves are always stocked. (http://academic.emporia.edu/smithwil/000sumfall02/mg476sum/eja/mcneal/Wal_Mart.html 6 April 2003) Wal-Mart continues to make investment decisions to strengthen their corporate strategy into a low-cost leader. A recent study by the McKinsey Global Institute found that today?s economic reality is that high-tech decisions made in Arkansas play a larger role in boosting America?s productivity than decisions made in Silicon Valley or Seattle. Additionally, The New York Times stated ?by making goods cheap and available, Wal-Mart has raised the standard of living of average Americans.? (Wal-Mart Annual Report, 2002) With Wal-Mart continuing to expand into new markets and its commitment to technology in inventory and supply chain management, Wal-Mart is sure to maintain its competitive advantage in the retail and supermarket industry. Company Structure Organizational structure refers to the reporting relationships between different levels of the company, the lines of authority, the channels of communication, and information flow. Wal-Mart has been led from the top, the strategic apex, but run from the bottom by the operating core and middle line managers. Although recent growth has led Wal-Mart to add more management layers, senior executives strive to maintain its unique culture. Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale, which reduces its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Cross docking gives the individual managers more control at the store level. A company owned transportation system also assists Wal-Mart in shipping goods from warehouse to store in less than 48 hours. This allows Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart owns the largest and most sophisticated computer system in the private sector. It uses a massively parallel processor computer system to track stock and movement, which keeps it abreast of fast changes in the market. Information related to sales and inventory is disseminated via its advanced satellite communications system. Wal-Mart has leveraged its volume buying power with its suppliers. It negotiates the best prices from its vendors and expects commitments of quality merchandise. The purchasing agents of Wal-Mart are very focused people. Wal-Mart built an automated reordering system linking computers between Procter & Gamble ("P&G") and its stores and distribution centers. The computer system sends a signal from a store to P&G identifying an item low in stock. It then sends a re-supply order, via satellite, to the nearest P&G factory, which then ships the item to a Wal-Mart distribution center or directly to the store. This interaction between Wal-Mart and P&G is a win-win proposition because with better coordination, P&G can lower its costs and pass some of the savings on to Wal-Mart. Wal-Mart?s structure creates a very good fit with the organization?s ?Everyday Low Prices? strategy. It has shown how unique expertise in logistics and information technology can revolutionize even the most mundane business. The backbone of the company?s success is not the products or the stores but its 101-terabyte-computer system, which Wal-Mart says is the second largest in the world, surpassed only by the Pentagon?s. By analyzing the constantly updated information, Wal-Mart executives and store managers can track customer behavior with great precision. But this goes beyond traditional inventory management. By looking into the shopping baskets of its customers and by working closely with more than 7,000 vendors who have access over the Internet to the company? data, Wal-Mart is learning which items to stock near one another and can hammer out deals for special flavors and sizes. By constantly refining what works and what doesn?t, in real time, Wal-Mart has been able to outperform its competition by slicing its inventory costs (because goods sit on shelves for less time) and by increased sales per square foot. Recommendations Wal-Mart?s company structure is most closely matched to the matrix structure. It has a unique combination of both the functional and divisional structures. The employees at each Wal-Mart location have at least two different managers or bosses that they report to from time to time when they have a question or a problem. It is extremely vital when there is more than one manager at a store or company, such as Wal-Mart, for the managers to have good communication flows between them so there is no confusion among the employees. This could be a serious concern not only within one store but among all of the stores between top management and middle management as well. One way to maintain consistency would be to have management document significant decisions related to day-to-day operations. This would allow both peer management in other...