Business Issues of Walmart
How it works
It is a well-known fact that Wal-Mart is the largest retail organization in the world. Understanding that growth can only go so far without change, Wal-Mart made it clear early on they were willing to make bold industry changing innovations in their operations. Its operational innovations have kept Wal-Mart on the cutting edge of technology and supply chain management and has given Wal-Mart an industry leading competitive advantage. However, it has been slow to make changes in their organizational structure and culture to address employee dissatisfaction and poor customer service.
Through a series ground breaking innovations that produced lower operating costs and lower prices than its competitors, Wal-Mart experienced record breaking growth between 1972 and 1992, sales grew from “$44 million to $44 billion. (Hammer, 2016) During that time, Wal-Mart was moving from straight forward cast registers to POS inventory systems at the registers, reinventing its purchasing operations and distributions, and supply chain management. One of their most cost-effective innovations is cross-docking. Cross-docking has been around since the 1930’s, however, Wal-Mart perfected the technique, and is now referred to as the “cross-docking king. For Wal-Mart, Cross-docking is a process that involves “goods being trucked to a distribution center from suppliers that are then immediately transferred to trucks bound for their retail operations without ever being placed into storage. (Hammer, 2016)
How it works
As with any organization Wal-Mart’s organizational structure is the skeleton or bones of the organization and its culture is its heart and soul.
Wal-Mart’s has a two-feature structure that operates both as a hierarchy and a functional structure, a “hierarchical-functional organizational structure. (Lombardo, 2017) The hierarchy structure is the vertical structure though which all communication, directives and mandates begin at the very top and are directed down to operations through a strict chain of command. The functional part of their structure refers to the various departments within the organization. These include: human resources, the IT department, sales and marketing, just to name a few. (Lombardo, 2017)
Wal-Mart’s culture has been center on three basic beliefs since its conception: Service to customers, Respect for the individual and Strive for excellence. Wal-Mart’s long-term success has been the successful integration of their organizational structure and its culture. (Lombardo, 2017) However, recently Wal-Mart has been criticized about the number of its employees on government assistance due to its low wages and its ongoing struggles with satisfactory customer service. In light of reports of dissatisfied customer as it reflects on “Service to customers and the low wages of their rank-and-file employees as it reflects on “Respect for the individual and how the combination of these two problems reflects on Wal-Mart’s “Strive for excellence it would seem that Wal-Mart’s organizational structure is no longer honoring the culture that has been the heart and soul of the organization since the beginning. Additionally, its strict hierarchy results in sluggish communication and slow approval process between the very top executives and the operations managers within their retail operations.
A possible solution to these problems would be more open lines of communications from the retail operations up so that when problems arise they can be address immediately rather than wait for days for permission to take action. Another solution would be for Wal-Mart to raise its beginning wages and lower the requirements to receive medical insurance so that the majority of its employees would not need government assistance. In regards to poor customer service, employees are often not knowledgeable about the departments that they are assigned to. This is often due to moving people around to fill holes on the floor due to scheduling restraints. If there were more emphasis on cross-training employees so that they may be qualified for the positions they are being put in to fill holes the Assistant Managers would not be scrambling to find qualified people and customers would be better served by trained employees rather that greeted by someone with no knowledge of the department to which they are assigned for the night. Some areas such as electronics, pharmacy, and TLE to name a few require significant knowledge of the departments and the products in those department. Giving Assistant Managers more information and freedom to make decisions on the fly would also go a long way to resolve some of these problems.
In conclusion for Wal-Mart to maintain its competitive advantage it needs to get back to the basics of their core beliefs of: Service to customers, Respect for the individual and Strive for excellence. They also need more open lines of communication so that issues can be addressed in a timelier manner in this ever changing fast moving retail environment. Especially with competitors in the online retail market like Amazon breathing down their neck. They cannot afford not to become more flexible and open within their organizational structure.