Home » Education » Sustainability Strategy of Walmart

Sustainability Strategy of Walmart

by admin
26 views

Introduction

Wal-Mart is multinational retail chain that started its operation in 1962 in Rogers as a single store (Wal-Mart, 2012, p.3) with a strategy of reducing their prices compared to other stores thus increasing sales and revenue. From that time the company has attained massive expansion and is currently operating under different brand names. It is one of the most successful groups with operations in 27 countries, has more than 10,000 stores with different departments and employs over 2 million people. (Wal-Mart, 2012, p.3). The aim was to improve the lives of the people by saving their money while making profit through reduced expenses and improved management. They operate as supercenters, food and drug store, restaurants, general merchandise stores, warehouse clubs, small markets, discount stores human and cash and carry stores.

Its strategic management has been based on five principles: resource development, reduced expenses, online shopping services, satisfied customers and social and environmental responsibility (Sullivan, 2010, p. 156). These have led to the rapid growth in revenue, customer base and workforce. Like any other large international companies, there need to develop a proper management strategy to ensure the business fulfills its mission. This paper will critically analyses the challenges facing Walwart international and gives its recommendation on how to overcome these challenges with keen consideration of seafood supply chains.

Sustainability Strategy of Walmart

Challenges of Wal-Mart’s Supply Chain

Employees

The company employs over two million employees across the world and has been accused of violating their rights. According to Marshall (2012, p.3), their employees went on strike in Los Angeles after several months of trying to reach out to the company’s executives with success. Prior to this strike, there was also demonstration in other regions, with the employees complaining of low wages, healthy risk   and poor treatment while at work. There has been case of firing of workers that are actively involved in their trade union OUR Wal-Mart (Marshall, 2012, p. 4). OUR Wal-Mart has filed several cases on unfair treatment of the workers Such as termination, warnings or reduced working hours. Most complain seem to be a strategy by the executives to reduce the cost of labor and eventually reducing the operational cost.  The reduction in expenses is supposed to increase in sales and revenue. Staff reduction can hinder proper management of day to day activities in the stores as well as in factories. Each outlet has different management and this has worsened the situation, some stores lack proper safety facilities, do not give employment contract to their employees, and poor sanitation. Poor working conditions can affect the quality of their products especially food and this pose greater health risk to the consumers. Thestrikes, demonstrations and poor working conditions, not only have negative impacts on the employees but also create a negative image of the company thus affecting business.

Competition

Like any other company in profit making business, Wal-Mart faces stiff competitions from other large stores, small stores and international companies and sometimes has been forces to close down their stores. This has forces them to change their mode of marketing as well as their mode of doing business. Being an international company poses greater challenges because of different ways of doing businesses in these countries and also different cultural back grounds of their customers. Sea food store in China almost closed down due to the way chines prefer to choose their sea food, they were forced to display them while uncovered and this led to high sales. According to Ellickson at el (2012. P 750) Wal-Mart has changed the pricing strategy of supermarkets to reduce completion. Its entrance in the market led to closed down of other business but this is just one sided opinion since it has also faced competition. Their low price strategy has worked well for the low and middle income earners but not for the high income earners. Their strategy offer constant low prices with slight fluctuations, this strategy sometimes face competition from high priced stores that offer periodical promotions. During the promotion the customer prefer the high end stores and this affect demand on the low priced stores. High income earners also associate low price with poor services and poor products and services quality and therefore still choose to remain loyal to higher priced stores.

International Trade

Most companies expand by investing in different countries and Wal-Mart being an international company is creasing its profitability by increasing its presence in different countries. Success of global trade depends on the strategy the company adopt, their products and the purchasing power of the host country’s citizen. In grocery retail most of the trade is dominated by the local companies, but in china Wal-Mart has performed well due to its low prices and long-term investment plan as it took almost 15 years tote profitable (Corstjens and Lal, 2012, p.107).This is because in China, purchase decision is influenced by the price and value (Mass Grocery Retail, 2012 p.49). However this has not always been the case because the company has been forced to close doors or change their strategy in other countries due to completion from the locals and the trade laws in these countries. For instance in UK, Wal-Mart purchased Asda but the deal was not successful and led to the resignation of one of the manager Bob martin (Corstjens and Lal, 2012. p.106). Investment in new countries requires a lot of capital input, to become profitable the company must expand faster and increase its sales due to low profit margin of the groceries. Low profit margin has been one of the major hindrances in globalization of the retail stores.  According to Corstjens and Lal (2012. p.107)  international retail stores takes time ton archive its targeted growth and must have a strong attracting factor compared to local retailers. It’s also difficulty for a company to penetrate a developed market as it was the case when Wal-Mart tried to enter South Korea because most established entities are not will to merge with them (Corstjens and Lal. 2012, p.107). It’s hard for a company to start their own establishment due to high starting capital, stiff completion from established retailers and lack of strategic sites.

Environment

Strategic managements involve profitability of the company as well as reducing its impact to the environment. Wal-Mart is one of the largest retail outlets in the world. It occupies massive buildings in form of superstores, supermarkets, clubs, restaurants and warehouse and also commands a larger market share. These translate to occupation of large amounts of lands, large labor force, land and amount of electricity consumption (All this factors can have negative impacts on the environment. These impacts are felt all over the world in both urban and rural areas due to carbon emissions and long distance travelled by Wal-Mart shoppers (Cook, 2007). The impacts are inform of land degradation in undeveloped areas, air pollutions, and rise in temperatures, global warming and climatic changes. The company has committed to reducing its carbon emission by two million metric tons over a period of six years. However due to its massive expansion by opening new stores these may not be achieved due to increased customer base, new buildings and larger work forces. The company has ventured to remote areas which were unexploited and had natural forest, historic towns, mountains and farms but caused massive destruction due to construction and high flow of customers (Cook, 2007). These impacts have affected the growth rate of Wal-Mart. the company has also incurred heavy penalties for breaking environmental laws.

Economy

Wal-Mart is the largest retail supply chain in America and every supplier would want to have its products on the Wal-Mart shelves. The major problem is their low pricing strategy and thereforeWal-Mart pushes its suppliers to low prices and offshore business (Gereffi and Ong, p.46). Though the suppliers are able to record higher sales in short period, this can affect their business in the long term. These effects affect the operations of the suppliers who try to reduce their operation cost by producing low quality products and poor working conditions for their employees or worse still laying-off their employees. It mostly imports low priced products from China and their main concern is to win the supplier from china rather than consumers (Gereffi and Ong, p.46). These have led to growing rate of unemployment in America and low wages in the countries like China.

Recommendations

Investments on the Labor Force

Most low cost business model believe in maintaining the labor cost as low as possible, but according to Marshall( 2012, p.7) investing on the employees in terms of better salary, health insurance and training can help the business due to increased efficiency, low staff turnover and customer satisfaction. This can also increase management cost because a company can be penalized for breaking labor laws. The company should centralize their human resource management for easier implementation of the labor laws. Satisfied employees translate to high production and proper customer service. To achieve this, the company should issue all the employees with their employment contract stating clearly the terms of the engagement, their benefits and penalties in case any party breaks the contract. Secondly the company should ensure safety at the work place by providing proper safety trainings, providing protection gloves, masks and ear plugs where necessary. Third the company should provide health insurance cover as well as social security insurance. It should also increase the number of their employees to fit the labor laws requirements and also come up with a structure to compensate workers for overtime.

Pricing

Wal-Mart store have adopted a low price strategy in attracting customers and this have worked well for them and also reduced cost of living for low income earners while still making profits (Agren at el, 2011). However this strategy offers small profit margin for each unit product. Theirstrategy also focuses on reducing the operation cost of the company especially in the human resources management (Agren at el, 2011) .The Company also faces competition from the high priced stores which target high income earners. The company should conduct a comprehensive study with them aim of finding ways to increase their profitability, one such ways is to establish high priced stores that tap these other market. The high income earners are attracted to quality services rather than lower prices, this form basis for strong company- customer relationship.

Increase Efficiency in Well Established Markets

Venture into a new country takes time to be self-sustaining. Each market poses different challenges and a company can be able to overcome them in the long-term. When a company wants to venture into new markets, they think it’s easy and profitable to trade there and may shift their attention from home market to concentrate in the new area (Corstjens, 2012, p.107). This can be a costly mistake since oversea business initially depends on the profitability of the home business. Wal-Mart should use their position in USA as a market leader to penetrate global market by satisfying their customers.  Corstjens (2012, p.107) used a case of Carrefours to demonstrate this. This means that the Wal-Mart should concentrate in increasing its market share in their already established market as well as in new markets. Companies should focus in tapping into new market segments in their home country by being innovated. Wal-Mart can do this through the already established stores like Wal-Mart supercenter, Sam’s club by improving their services to target High earning citizens and set up new establishments in new areas in USA. The Company must also focus in repositioning its products to be successful. Wal-Mart operates under different brand names offering different products. To reduce completion and increase customer base especially in areas where it has a strong customer base the company can diversify its operations by introducing new products. The Company therefore is supposed to conduct enough research before venturing to new market to know the best department to establish. This is to prevent repeat occurrence of the case of purchasing Asda in Uk- being creative always leads to the success of the business. The company should try to centralize its operation to cut the production cost in certain area like IT, finance, real estate management, logistics and human resources  however they is need to allow certain levels of independence because retail market differ from one country to another. Most people prefer local foods and sea food as an industry has not been left behind, this necessitates application of local laws.

Strategic Timing

A company should plan well when they want to enter new market. Proper timing can determine the success of the business depending on what the company is offering. Wal-Mart is a low priced retail and can enter a market any time since customers are always looking for ways to save their money. However considering that most food commodities requires local supplier they should enter in the market when the supply is high and supplier are willing to work with new clients. Proper timing also relates to availability of labor force and site acquisition which sometimes is difficult because most available sitesare not strategic. For the well-established stores, proper planning is also required to ensure the company have maximum reap during peak seasons like holidays (Mass Grocery Retail, 2012). During the holidays, most high priced stores and other competitors offer lower prices and discounts to attract customers and these offers can pull away the Wal-Mart’s customers. These may have long term effects since the customers may choose to stick to these other stores. This planning can be inform of researching for the offers they will give, informing the suppliers on the products they need, Market research to determine what  products they mostly require and the workforce they will need during the higher season. These high season holidays include Halloween, thanksgiving, black Friday and other festive seasons (Mass Grocery Retail, 2012).

Embracing Environmentally Friendly Practices

Operation and expansion has indeed impacted negatively directly and indirectly on the environment. These impacts may not be completely eliminated but can be minimized and Wal-Mart has committed to this mission and is actively involved in public education. However, the methods adopted by Wal-Mart have not been effective and do not address the real causes of the environmental degradation. It has addressed environmental degradation by selling environmentally friendly products but the major concern now remains on the other factors such as construction work, overcrowding and other customer related activities such as driving to their malls. The company should channel more resources to educate its customers and also its suppliers. I the expansion process the company should construct more environmental friendly stores that have roofs that deflect sun rays and insulated walls providing a cooling effect on the stores (Sullivan, 2010, p.156). Sea food business depends on the wellness of the environment and the company should ensure that its suppliers adhere to the set laws on the sustainable harvesting. Currently there is greater concern on the overexploitation of the sea animals and the seafood retailers should commit to get their products from suppliers who are commuted to sustainable development (Rogers, 2011, p. i).

To show its commitment the company can even withdraw selling of some species from their store. For example ASDA of UK withdrew selling of dog fish species and skates in January 2006 (Green Peace, 2006, p.4). Wal-Mart is a massive store and any decision the take can also be followed by other corporations, therefore any action towards sustainable development can be replicated by other companies. It should as partner with shareholders and organizations involved in environmental conservation.

Supplier and Economy

There is no doubt that Wal-Mart has a positive impact on the manufacturing, farming, transport and construction sectors all over the world through its customers, suppliers and workforce. It has contributed immensely to the reduction in the inflation rate and poverty reduction in America due to its low priced products (Agren at el 2011, p.24). A part from cutting cost for their customer they also enlighten their supplies on the methods of cutting cost but this is not beneficial to the suppliers but it is passed on to the customers (Agren at el 2011, p.24) and this has had the negative effect on the economy. Wal-Mart should strive to strike a balance on the price benefits it has to the customer and their supplies especially the local companies in order to create sustainable business environment. The company should not only depend on the everyday low cost prices but adopt other method that can effectively attract customers to their stores. The company should be involved in the planning of their main supplier and allow their suppliers also to share in their strategy and planning. This helps the supplier predict how their business will benefit from Wal-marts expansion plan. Wal-Mart has also increased its import from china have impacted negatively on the local companies inform of low sales. The company should set policies that allow specific percentage of their supplier be local especially for the electronics. This will help to increase local companies revenue thus more employment opportunities and hence increasing the purchasing power. The company has been criticized for causing unemployment but this is not the case since their growth also means more labor force. It should conduct research on their employees verses the lost jobs from other company to disapprove these claims and therefore rebuilding their image.

Security

Security is a major concern for any growing business and their expansion and day to day activities should not lead to insecurity. Security should be a major concern for Wal-wart because of the large number of people who depends on it. In their growth and expansion process the company moves to bigger and better facilities leaving behind unused buildings and empty parking lots (Fitzgerald, 2008) that can be used as robbers hind out thus a security risk. Wal-Mart should ensure these buildings are reoccupied or provide security until they get new tenants.

Competition

Wal-Mart is indeed the largest retail chain in the world and their prices can be compared to no other especially in America. However, it still faces completion from other Retail chains and small local enterprises. The community also has a negative feeling about it in regards to unemployment and environmental degradation and their competitors can use these as marketing strategies. Wal-Mart should concentrate in countering their competitors; this can be done through repositioning and venturing in to new areas such as banking and insurances. Their loyal customer will most probably seek these services from them. Currently the company allows its customers to pay for selected products in installments and collect them after final payments at no extra cost. They can tap into these by offering loan services at a considerable interest, these will attract more customers and also more revenues from the interest charged. These can be successful because customer can get more services at one outlet at a lower price and for the fact that most people lives approximately 15 miles from their outlets (Fitzgerald, 2008). This extra income can help improve their employees working conditions.

Management

The company has an open door policy for its supplier, employees, customer and general public. The management has made positive responses to most raised concerns. However the management has paid much attention to the image and public perception (Plambeck and Denend, 2011, p. 17) of their company rather that addressing the required changes. This may have short term effects on their performance but it has proved to have long term negative effects and sometime loss of revenue through fines by the concerned authorities.Wal-Mart must understand that their success is not only based on public image and higher sales but also on happy suppliers, satisfied employees and other stakeholders. The management should address the raised accusation on violation of laws and rights in a transparent way, this will ensure smooth running of the company. Moving forward the company should also follow the laid out standard on business operation in each region they are doing business. Successful business encourages sustainability and delivering what they promise to offer.

Conclusion

Wal-Mart is one company that has super passed its growth target in terms of customer base and expansion rate as well as profitability. It is one company but with different outlet indifferent areas, different brand names, different identities and different customers and has massive influence on the economy. However it has received a lot of critic from different authorities in areas of being a bad employer, causing massive environmental degradation, causing unemployment and killing other businesses which are not necessarily their competitors. With little adjustment this is one company that can have a strongest customer Loyalty.

Reference:
  • Agren, D, Ogier, T, and Bamrud, J 2011, ‘Wal-Mart: Latin American Success’, Latin Trade (English), 19, 4, pp. 24-27, Business Source Complete.
  • Cook, J 2007 ‘Wal-Mart: An Environmental Issue’: Wal-Mart is an Environmental Problem All Itself
  • Corstjens, M, & Lal, R 2012 ‘Retail Doesn’t Cross Borders’, Harvard Business Review, 90, 4, pp. 104-111, Business Source Complete
  • Ellickson, P, Misra, S, and Nair, H 2012 ‘Repositioning Dynamics and Pricing Strategy. Journal of Marketing Research Vol. XLIX p. 750–772
  • Fitzgerald, T 2008 ‘The Wal-Mart effect: Poison or antidote for local communities’ Fedgazette January 2008.
  • Gereffi, G and Ong, R ‘Wal-Mart in China: Can the World’s Largest Retailer Succeed in the World’s Most Populous Market’: Harvard Asian Pacific review
  • Green Peace, 2006. Recipe for change: defending the ocean. Canonbury Villas London, Marshall, J  2012 ‘Wal-Mart’s labor problem: limit of low-road business model.
  • Mass Grocery Retail, 2012. China Retail Report, 4, 2, pp. 48-59, Business Source Complete.
  • Plambeck, E, and Denend, L 2011. The greening of Wal-Mart Supply chain: Supply Chain Management Review.
  • Rogers, E 2011. Exercising Responsibility in the Seafood Supply Chain: A Case Study on How a Retailer Implements its Commitment to Sustainable Seafood & Experiences of Other Seafood Buyers. IIIEE, LUND, Sweden Sullivan, R 2010, ‘Towards more sustainable supply chains’, Ecos, 156, pp. 18-19 Wal-Mart, 2012. Annual report.

You may also like

Leave a Comment