Located in Bentonville, Arkansas, Wal-Mart’s information technology (IT) department has a global reputation for being a leader in information technology innovation. However, significant challenges have characterized the activities of the company’s IT department for the past few years. For example, unlike its domineering status as a global retail giant, Wal-Mart has been unable to transcend the success of its online rivals, such as Amazon and Tesco (MIS Group, 2013). Consequently, the company has had dismal online success.
This dismal performance in the virtual sphere has challenged the company to improve and expand its online presence. This paper uses Wal-Mart’s organizational chart to identify inadequate research, failure to link customer and organizational needs, and the lack of a proper communication strategy as the main issues affecting the company’s IT department. Consequently, this paper proposes that Wal-Mart needs to overcome these challenges to succeed in the virtual space.
Methodology for Identifying Issues
As described above, this paper identifies Wal-Mart’s IT challenges through an assessment of the company’s organizational chart. The background of this analysis shows that many dependencies exist between different departments, people, and stakeholders in the organization.
The organizational chart approach acknowledges that communication breakdowns among different stakeholders may distort the best intentions for the stakeholders (Calley, 2010). Particularly these best intentions manifest when it is difficult to diagnose organizational issues because, like how medical practitioners diagnose health complications, business experts also have to understand the causes of problems, and not their symptoms (Muller, 2001). Therefore, when done right, the organizational chart approach easily identifies the main organizational issues affecting Wal-Mart’s IT infrastructure/department, as shown below (Calley, 2010).
Critical Information Technology (IT) Issues
Disconnect with Customers
Wal-Mart’s IT department has mainly survived on creating a digital platform that expands its business activities beyond the non-virtual space. However, the greatest drawback to this method is the replication of the challenges affecting the non-virtual platform in the virtual platform. For example, Wal-Mart’s IT platform has failed to eliminate the problem of providing products and services that are not in-tune with customer needs (analysts have associated this problem with the non-virtual platform) (MIS Group, 2013).
For example, the failure of high-end customers to buy upscale products on the company’s online platform stems from the fact that Wal-Mart’s core customers are not high-end customers. Therefore, if high-end customers fail to buy upscale products at the physical store, it is difficult for the same group of customers to buy the same products online (Shane, 2009). Wal-Mart’s online strategy has failed to recognize this fact. Consequently, its online platform is disconnected with its customers.
While observers consider Wal-Mart’s supply chain system as the best in the market, the company has had a history of adopting the wrong technology for this purpose. The failed adoption of the radio-frequency identification (RFID) technology is perhaps the most notable incident highlighting inadequate research as a weakness of Wal-Mart’s IT department (Cecere & Chase, 2012).
At the height of its adoption, the retail giant required most of its suppliers to install the technology on their products, for easy traceability and identification. However, because of the lack of proper research regarding how the technology would fit in the company’s supply-chain model, it failed to achieve its objectives (Sehgal, 2011). Instead, the installation of the technology amounted to increased costs of operations for the suppliers. Moreover, the company lacked enough personnel to implement the technology in the company’s supply chain model.
Albrecht (2005) says Wal-Mart’s suppliers also barely understood what RFID meant, or how it fit into the business relationship they shared with the company. The viability of the RFID technology would only have made economic sense if other retailers adopted it. However, since this did not happen, many analysts likened the adoption of the technology to the adoption of fax machines in modern-era (Cecere & Chase, 2012). This way, its continued adoption posed a threat to the company’s growth. The failed attempt to introduce RFID technology is one example of Wal-Mart’s IT failures. The failure to conduct proper research, especially during the introduction of new technology, therefore highlights a significant weakness of Wal-Mart’s IT department.
Ineffective Communication Strategies
The failure of the IT department to develop a positive relationship between Wal-Mart and its customer base is also a significant downfall of the company’s IT department. Besides developing an online platform for customers to buy goods online, Wal-Mart has done little to create a strong online presence that existing and new customers could associate with. For example, the company does not have a strong “online buzz” that would propel its online platform to new heights of interest (that some of its online competitors enjoy). For example, Wal-Mart recently received significant backlash from the online community for creating a “fake” relationship with a target market of young online shoppers (MIS Group, 2013).
In detail, Wal-Mart used the MySpace website service to create a new online platform (the hub), which it used to monitor online activities. According to techdirt.com (cited in MIS Group, 2013), a corporate intelligence and analysis website, the online retail giant used “fake teenagers” to talk about their online shopping experiences, regardless of the authenticity of their experiences. Later, users flagged this attempt as having the hallmarks of a desperate effort to create an online buzz among teenagers (MIS Group, 2013). More criticisms came from Facebook users and other social networking sites, thereby forcing the company to close the site.
Another failed attempt of Wal-Mart’s IT department to communicate with its customers emerged when the IT department created a Facebook group, roommate style match. This group aimed to appeal to more than 30 million teenagers and college students by encouraging them to buy school products via the company’s website (Malone, 2013). However, most of the comments received on the online platform criticized Wal-Mart for its unethical business practices (such as “killing” small businesses), thereby forcing the company to be defensive of its practices, as opposed to marketing teenage products. Observers consider this attempt as an unsuccessful effort by Wal-Mart to integrate with its target market (Malone, 2013). This has been a serious setback for the company’s operations.
Summary – The Most Critical Issue
Based on an assessment of the three common IT issues discussed above, the failure to conduct proper market research emerges as the most critical issue facing Wal-Mart. A deeper assessment of this issue shows that the failure to conduct proper market research causes the company to adopt ineffective communication strategies, adopt wrong communication strategies, and create a disconnect between customer and organizational needs. Therefore, the failure to conduct proper market research is at the center of Wal-Mart’s IT problems.
The identification of this issue stands at the pinnacle of understanding Wal-Mart’s organizational chart because a proper market research would easily identify the organizational needs of every stakeholder. This acknowledgement would easily prompt the retail chain giant to use the correct communication or expansion strategy. For example, an understanding of supplier needs would have easily prompted the company’s management to stop the use of RFID. However, the company has not solved such issues. Consequently, Wal-Mart needs to overcome these issues for its online platform to succeed.
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