A Case Study of Wal-Mart Stores Inc.

Executive Summary

This report mainly focuses on the organizational structure and the effectiveness of an organization to sustain in competitive market. The world today has become a too competitive place to survive and to become successful. Therefore, the purpose of this report is to find out appropriate organizational structure and effectiveness to solve any problems. For this report, Wal-Mart is preferred for analyzing depth study. Many organizations are developing this method and commencing to be successful to sustain in the market. U.S. Department of Education is successfully taking the approach of organizational effectiveness to solve its problems. As a methodology, secondary research approach is taken, where books, journals and other previous data has been used for this study. Major limitations of this report are avoidance of primary research and implications of methods in real world facts. The main issues of this report are to identify and measure organizational design and structure, classifying different dimensions of organizational structure, determinants of organizational structure, defining and measuring organization effectiveness with two different approaches, analysis of problems and finding solutions, and lastly concluded with recommendations. In this report, the use of Balanced Scorecard to evaluate the problems of Wal-Mart lacks customers’ loyalty, PR programs, and standardization of products & services. With the help of BSC model, the problems of Wal-Mart gained proper solutions and recommendations in this paper.

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Introduction

This piece of writing essentially comprises organizational structure and design as the core issue to consider for any specific organization. “Wal-Mart”, is a triumphant organization in conjunction with business growth in United States, and there is a meticulous discussion about it all through out. At first, Wal-Mart has classified according to its design and structure. Then, it is imperative to identify major determinants of organizational structure. After that, organizational effectiveness has measured in terms of critical analysis of existing problems regarding Wal-Mart. Last but not the least; there is a discussion about Wal-Mart’s tribulations along with appropriate solutions and recommendations with from the report.

Company Overview

Wal-Mart Stores Inc is a public corporation of United States, which brands as Wal-Mart and run a chain of large and discounted departmental stores. It has first founded in 1962 as Wal-Mart discount store in Rogers, Ark. In 1970, it has listed in New York Stock Exchange with traded shares in OTC markets. In early 80’s, it instigated 276 stores in 11 countries and it launched the first super center as complete grocery in 1988. Wal-Mart started its operation as international company in 1991 near Mexico City. These days, it serves 200 million times every week by 8,159 retail units, and 55 different banners in 15 countries’ customers and members. It is gaining more than $401 billion sales in 2009 with the help of 2.1 million employees working for them worldwide (Wal-Mart 2009).

Frederick (2009) stated that, a new Wal-Mart has opened in Manassas with features of full line groceries with 203,000 square foot store with bakery, deli, meats, beer, and wine by creating 350 new jobs.

In another journal, Plumb (2009) argued that, Wal-Mart is giving $300,000 to D.C. for celebrating the victory of Barack Obama in the President Election. According to Steven (2009), online Wal-Mart is selling makeup, diapers, vitamins and other items to customers’ homes. In so doing, it is competing to Amazon.com in online mode of transaction.

The success of Wal-Mart is depending on strong commitment in terms of ethics and integrity in operating the business. It is also reliable in the context of trust and ability to serve its customers and suppliers with highest standards every day (Wal-Mart, 2008).

Organizational Structure/ Design

Wal-Mart as an organization has to follow a structure. Organizational structure refers to the formal arrangements of jobs within the firm. For the management function, the importance of the organizational structure is immense. The construction of the organization fundamentally depends on the change of the structure, which is termed as the design of the organization (Robbins & Barnwell 2006). There are six major decisions associated with the organizational design. These are:

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Key Decision Regarding Organizational Design
Figure: Key Decision Regarding Organizational Design

Falomi (2005) argued that the impact of the organizational structure and design in the job performance of the employees is significant and the joint effect along with the task characteristics dictates the employee performance. Therefore, the structural orientation of an organization drives the success.

Classification of Dimensions of Organizational Structure

Krokosz (1998) proposed a four classified dimension for organization structure. These four dimensions are:

Dimensions of Organizational Structure (Self-generated)
Figure: Dimensions of Organizational Structure (Self-generated)

Specialization refers to the division of labor in the firm. That is the assignment of duties for the different official position. Standardization means the legitimated procedures and rules that come into action regularly, apply habitually covering different situation. Formalization states the degree to which the jobs of the organizations follow a written format of rules, procedures, instructions, and communication. Finally, the centralization refers to the extent to which the legitimate decision making is concentrated at the centre of the organization.

There can be some other types of structures like departmentalization, which is a modified approach of specialization. In departmentalization, the jobs had differentiated and had given to certain department for accomplishment. There are two types of departmentalization. One is the functional and another is the product. In case of functional the tasks have differentiated by the function and in product, the tasks have differentiated based on the product line.

In the organizational structure, Wal-Mart is using the functional departmentalization structure for different tasks like accountancy, audit, finance, advertisements, and marketing given to different department. Here the basis of the differentiation is the function of the tasks.

Current Design of Organization

The classification of the dimensions of the organizational design has done from two aspects. These are the traditional structures and the contemporary issues.

Dimensions of Organizational Design
Figure: Dimensions of Organizational Design (Self-generated)

Simple structure is the traditional form where the departmentalization is absent, control is wide spread, authority is centralized, and there is almost no formalization. Functional structures refer to the tendency to group the specialists based on their expertise. Divisional structure refers to the creation of separate semi autonomous units or divisions. Matrix structure means the differentiation for different projects where the specialists gather with different skills from different functional divisions. In addition, the network means a structure where the tasks have completed from outsourcing.

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According to the earlier discussion, Wal-Mart has planned in a divisional design as it is applying departmentalization structure. It has several divisions where a divisional manager is acting as the head of each division. Besides, the entire Wal-Mart group has three divisions- Wal-Mart stores US, Sam’s club, and Wal-Mart international. All these divisions are semi autonomous and the mother company is indifferently overseeing their operations.

The environment where the Wal-Mart is operating is fit for the divisional structural design, because to operate the retail business worldwide, a company must separate its home and abroad functions. Currently the business of is becoming too complex, which persuaded Wal-Mart to be divisional. The highly competitive business environment in the retail industry of USA is also perfect for the divisional structure. Therefore, Wal-Mart needs not to change its current organizational structure because this system brought great organizational success for itself.

Determinant of Organizational Structure

There are different determinants of organizational structures. Strategy, environment, size of the organization technology, culture and many other crucial things are the determinants. Strategy means the ways to do the operations perfectly. Size varies organization to organization and determines which structure is to follow. Environmental concern leads to design the production in a manner, which causes less harm to the nature. An organization must adopt the culture and the environment of the region where it belongs. In case of Wal-Mart, the socio cultural aspects and the geographical alignment cause pursuing the divisional structure. Wal-Mart operates in many countries obeying their cultures, traditions, and history (Wal-Mart 2009).

Reason of Adopting Present Structure

The company for many reasons adopts the divisional structure. These are:

The organization is large. Therefore, to maintain its huge business units it has to diversify its tasks and divide among different divisions. The strategy of Wal-Mart is to give the customers quality product in lower price. In a divisional structure, it becomes possible to minimize the price associated with the collection of the products.

Again, the Environment of the selected countries suits the operation of Wal-Mart. For example, the USA has a cold nature of climate, which gives the opportunities to the company to preserve the inventories naturally free from harm. The cultural aspects are also important. In USA, people have less tendency to buy used or second hand products. However, in many countries people choose to buy second hand products as they treat price as a major concern.

In-Depth Analysis of Major Determinants

Here the Environmental aspects of Wal-Mart could discuss to treat environment as a key determinant. In 2005, the company promised to become more environment-friendly. To do so, Wal-Mart introduced an approach named “Sustainability 360”. This is a comprehensive view of the business to minimize the environmental impact. Thus, the company always tried to be environment friendly. The company is targeting three aspects to be complete to become environmentally friendly. These are:

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  • to be supplied fully by renewable energy,
  • creating zero waste,
  • To sell products with ensuring the sustainability of the resources and the environment.

To become environmentally friendly and to implement these actions, the company had to divide its tasks, which lead to be divisional structuring. Thus, it is clear that the environmental orientation of Wal-Mart support divisional structure. With the division of tasks, the environmental concern would divide among different employees and thus the tasks will be finished accordingly.

Organizational Effectiveness (OE)

Dixon (2003) said that organizational effectiveness is an internal investigation of structures, processes, and outputs of any organization. The main reason for this investigation is to increase organizational development in terms of performance and to remain effective. In terms of Wal-Mart, organizational effectiveness is helpful to detect existing problems and possible outcomes regarding problems. It is a process of promoting awareness of Wal-Mart with strengths and weaknesses to meet up efficiency, quality and capacity according to move forward. In U.S., more than 101 organizations are adopting this process to avoid common method of bias by supervisors of the organizations (Zhang et al. 2004). Therefore, Wal-Mart should also measure organizational effectiveness by evaluating some approaches.

Evaluation of Effectiveness

To evaluate organizational effectiveness, Wal-Mart must follow some strategies, which have discussed in below:

Readiness: By OE, Wal-Mart has to design their strategy according to current actions and to meet up future tends more realistically. It has worldwide chain in departmental stores, which would evaluate with some common evaluation process, like timing of employees, driving of process by top-level management, significant change in strategies those are focusing on the readiness of OE of Wal-Mart in evaluation process.

Planning and Purpose: This area of effectiveness of Wal-Mart is monitoring the impact of models, informing future decisions by management, providing more channels of communication, and promoting continuous improvement. To implement these, planning is must for this organization for considering level of input, process, and results of effectiveness approach.

Completing Evaluation: According to readiness and planning of evaluation of effectiveness, Wal-Mart can complete evaluation in terms of:

  • Analyzing results within employees and board of directors
  • Collecting effectiveness way with complete results distribution internally
  • Distributing and discussing evaluation of effectiveness among recipients and stakeholders with final report of Wal-Mart.

Measurement of Organizational Effectiveness

There are two effective way to measure organizational effectiveness, which is also important for Wal-Mart and these are:

  • Competing Values Approach: Competing values approach is emerging as empirical studies for organizational effectiveness, where there are two dimensions to measure this approach, which are focus of organization internally and externally and contrast of stability and control in terms of flexibility of organization (University of Twente, 2004). According to these dimensions, competing values approach has four parts to assume the core competencies of model, which are:
Competing Values Approach
Figure: Competing Values Approach (Self-generated)
  • Internal Process Model: In this model, the emphasis is focus on measurement, documentation, and information management based on hierarchy to bring stability and control on the tasks, not time.
  • Open System Model: This model has emphasized on adoption, readiness, growth, acquisition, and support to bring innovation and creativity for inspiring people of organization.
  • Rational Goal Model: This model has emphasized on rational action to make profit according to productivity and efficiency of organization to clarify tasks and objectives according to actions.
  • Human Relation Model: This model has based on human resource and training, where people are considering as isolated, but to co-operate them into common social system as a concern of morale emphasis.
  • Balanced Scorecard (BSC) Approach: BSI (2009) stated that BSC is strategic approach of management system to translate the organization’s vision and strategy into implementation. It is operating smaller scale operational activities according to larger scale objectives, like financial, operational, marketing and development issues in a comprehensive view. There are four perspectives of BSC, which are:
 Balanced Scorecard Approach
Figure: Balanced Scorecard Approach
  • Learning and Growth: According to this perspective, employees training and corporate culture is interrelated with individual and corporate self-improvement. As technologies are changing in rapid way, so employees should adapt continuous learning mode with the help of training by mentors and tutors.
  • Internal Business Process: This process allows the managers about the way of business running, confirming mission, which can be developed by outside consultants.
  • Customer: Any business, customers’ satisfaction is being most important to meet the needs of organization according to their performance. This process is associating with customers and process of business to develop satisfaction of customers.
  • Financial: Accurate and timely financial data has given priority to handle and process for implementing corporate database as centralized and automated process.

Evaluation of Model

For measuring organizational effectiveness in Wal-Mart, it is important to use “Balanced Scorecard” approach because this approach is focusing more on all perspectives of any organization, rather than focusing on change of internal and external organization.

Problems Analysis

Mize (2009) stated that the reputation of Wal-Mart leased as overblown and outdated in context of other retailers in the market. This is being a major problem of Wal-Mart as retail giant in super center with direct competitors in most of the areas. Therefore, in the part of problem analysis, currently by which problem Wal-Mart suffered is identify and evaluate by OE approach.

Current Problems of Organization

Senne (2005) argued about the problem of Wal-Mart that customers are looking for more than lowest price. In competitive market with Kmart, Target Corp. also starting discount retailing with new standards. On the other hand, Bentonville, Ark is attracting low price consumers with fast checkout services. For these reasons, McGinn (2005) focused that Wal-Mart is facing problems in PR context as being no. 1 retailer in market.

Evaluation of OE Approach Regarding Current Problems

As, it is seen that, there are two different mode of OE approach- competing values and BSC approach, from which BSC approach is appropriate for evaluate the problems of Wal-Mart. The existing problems of this organization is related to reputation, customers, financials/ pricing and promotion, for solving these problems, BSC approach appropriate and applicable in market condition.

Application of OE Approach

In BSC approach, Wal-Mart is analyzing within four key areas to achieve objectives and efforts. There are four main terms in framework of BSC approach, which would define in context of Wal-Mart:

Main Objectives

According to four perspectives of BSC approach, there should have four main objectives to solve existing problems, which are:

  • Financial: To make profit and increase sales with maximum market share.
  • Customer: To make appropriate promotional activities in terms of PR, and attracting customers and non-customers with other facilities;
  • Internal Business Process: To satisfy customers and shareholders with value maximization other than competitors;
  • Learning and Growth: To maintain innovativeness and technological development to sustain in competitive market; (Bloom 2003)

Key Measurements

In this term, key measures of Wal-Mart have identified according to four perspectives and their objectives.

Targets

Wal-Mart is always low cost customers, but now a days; customers are also demanding standards of products/ services. Therefore, this organization should also target quality seeker customers.

Initiatives

According to every perspective and their objectives, Wal-Mart should take initiatives to meet up the demand of each target market at possible highest level.

Vision of Wal-Mart

As a vision of Wal-Mart, they are stating POD to save money of customers to give them a better life. Now, this commitment is being meaningful to 176 million customers in more than 13 countries in every week for improving customers’ life. In below, BSC approach has developed in terms of solving current problems of Wal-Mart according to vision of this organization:

BSC Approach of Wal-Mart
Table: BSC Approach of Wal-Mart (Self-generated)

Solutions

As mentioned earlier that the problems related to the preferences of the customers and the competitors, the company’s present effectiveness could use to solve the problems. The financial perspective, customer perspective, internal perspective and the learning and growth perspective are the key resources here.

Development of Solutions

  • More profit will help to reduce the price of the products. The reduced price will attract new customers.
  • Different benefits could give to the loyal customers so that they remain with the company.
  • Operate according to the company vision mentioned as “We save people money, so that they can live better”
  • Design training programs to train the employees so that they can serve better and design different promotional program to develop the brand awareness.

Viability Analysis

Among the above solutions, every development is possible for Wal-mart. However, the feasibility of giving customers extra benefit can be boomerang as some customers may perceived this as a weakness for the company. Again, The Company is still operating according to its vision but still facing problems. Therefore, this solution is not feasible also. Finally, the training programs of employee and the promotional program has positive impact in longer time but the company is looking for immediate success. Therefore, this solution is not feasible also.

Identification of Alternative Solution

From the above discussion, it can say that the most feasible alternative solution is to become more profit oriented. With the extra profit generation from different source other than the price of the products, the company will be able to reduce the cost of the products.

Recommendations

By the solutions of problems, managers of Wal-Mart can apply OE approach for maintaining customers and its relationship, attracting not only customers but also non-customers, satisfying shareholders, taking high promotional activities, and making high standards of products and services. With the effective use of BSC approach, these goals of Wal-Mart could meet up not only in the United States, but also all over the world.

Conclusion

From this paper of Wal-Mart, it is shown that, how it can effectively solve the problems regarding organization in terms of financial, customers, internal business process and learning and growth of Wal-Mart. Therefore, it can say that, organizational effectiveness is more important than any other factors. It is also true for Wal-Mart to remove current problems and maintain organizational effectiveness in competitive market.

Reference

Bloom, M. (2003) Developing a Balanced Scorecard Approach to Measure the Performance of Your E-Learning Initiatives. Web.

BSI (2009) What is the Balanced Scorecard? Web.

Dixon, C. (2003) Organizational Effectiveness. Web.

Falomi, B., L. (2005) The Joint Effect Of Task Characteristics and Organizational Context on Job Performance: A Test Using SEM. Journal of Business & Economics Research. Volume 3, Number 7. Web.

Frederick, M. (2009) Manassas Wal-Mart opens Wednesday. Washington Business Journal. Web.

Kaplan, R. & Norton, D. (2009) Balanced Scorecard Method. Web.

Krokosz, Z. (1998) Organizational Structure and Culture: Do Individualism/Collectivism and Power Distance Influence Organizational Structure? Web.

McGinn, D. (2005) Wal-Mart Hits the Wall; The No. 1 retailer always had reasons to smile. Now PR problems and a falling stock are giving it headaches. Web.

Mize, R. (2003) Wal-Mart Realty Says Reputation for Dodging Retailers Overblown. Web.

Plumb, T. (2009) Wal-Mart gives $300,000 to local nonprofits. Washington Business Journal. Web.

Robbins, S. P. & Coulter, M. (2002) Management. 7th ed. New Jersey: Prentice-hall.

Robbins, S., P., & Barnwell, N (2006) Organization Theory: Concepts & Cases. 5th ed. New York: Prentice Hall.

Senne, S. (2005) Wal-Mart struggles with deeper problems. Web.

Steven, E. F. (2009) Walmart.com selling vitamins, makeup, diapers for home delivery. Washington Business Journal. Web.

University of Twente. (2004) Competing Values Framework. Web.

Wal-Mart (2008) Wal-Mart Annual Report, Web. 

Wal-Mart (2009) Global Sustainability report. Web. 

Wal-Mart. (2008) Statement of Ethics. Web.

Zhang, M., McCullough, J. & Wei, R. Y. (2004) Effects of organizational structure and information technology capability on organizational effectiveness in emerging markets. Journal of the Academy of Business and Economics. Web.

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