On Functional strategy; Wal-Mart Company
Issue affecting Wal-Mart
Functional level strategies aim at ensuring that the business level strategies are implemented effectively (Wheelen & Hunger, 2012). Wal-Mart, which is one of the leading retail corporations in the world, endeavors to succeed in the global retail industry. The firm has established operations in 27 countries. The firm’s success has arisen from effective strategy formulation and implementation. In 2014, the firm ranked as the leading public corporations amongst the Fortune Global 500 companies. The company’s sales revenue over the past few months is estimated to be $ 476.294 billion. However, industry analysts are of the opinion that the firm’s revenue fell short of the estimates (Coyle, 2014).
The decline is associated with the struggling US economy. Moreover, the firm’s revenue was also affected by the food stamp cuts by the government. The reduction in food stamps will significantly affect the consumers’ purchasing power, and thus the ability of discount stores such as Wal-Mart to maximize its revenue and profitability levels. Thus, the firm’s competitiveness, which is the core objective of its business level strategy, will be affected adversely. In addition, the firm’s corporate level strategies, such as its effectiveness in expanding into the global market might be affected.
Functional areas
Wal-Mart has formulated a comprehensive functional strategy, which is focused at maximizing its revenue. The firm intends to achieve this goal through the efforts of its marketing and finance departments.
Functions’ essential goal
The marketing department intends to increase the firm’s sales revenue by ensuring that a large number of customers can conveniently access the firm’s products. The One of the ways through which the firm intends to achieve this goal is by ensuring that its stores around the world are stocked effectively. Secondly, the firm announced its intentions to increase its workforce in order to provide sufficient in-store support services.
The finance department is focused towards ensuring that the organization’s operations are negatively affected by lack of the necessary resources. Thus, the department intends to allocate a sufficient amount of finances to all the functional departments. This will improve the overall organizational operational efficiency.
Resources
A substantial amount of resources will be required in order to improve the effectiveness with which the firm achieves competitiveness through the above strategies. The firm will be required to train the employees added into the organization in order to improve their effectiveness and efficiency. One of the areas that the firm should focus in its employee-training program relates to customer-service. The objective of investing in this area is to improve the point of contact between employees and customers, which is a vital element in fostering customer loyalty. On the other hand, the firm will also be required to allocate a substantial amount of money in its supply chain management practices. For example, the firm should invest in an effective inventory management system in order to minimize the lead-time. This move will ensure that the stores’ shelves are stocked sufficiently.
Measures to indicate attainment of the desired results
After the implementation of the functional strategy, it is imperative for the firm to assess its effectiveness. This goal can be achieved by evaluating the changes in the firm’s sales revenue over time. A systematic increase in revenue will indicate the strategy’s effectiveness while a decline will indicate that the strategy is ineffective. Additionally, the firm can also evaluate the effectiveness of the strategy by assessing the consumers’ repeat purchase behavior, which can be achieved by implementing a customer loyalty program.
Strategy implementation
Meaning of six-sigma to Jack Welch
Achieving optimal product quality is a critical element in an organization’s pursuit for business excellence. Subsequently, it is vital for organizations to invest in a continuous quality improvement program. The six-sigma is one of the most effective analytical methods that organizations can adopt in their quest to achieve near-perfect results in their production processes. Jack Welch, the former General Electric chief executive officer, asserts that six sigma is critical in an organization’s quest to implement change. In his opinion, six-sigma improves the effectiveness and efficiency with which change is implemented in an organization. As the GE’s CEO, Jack Welch was in a position to change the company, hence improving its performance. Within a period of 5 years, GE increased its savings to $12 billion.
His commitment arose from his drive towards winning. As the company’s CEO, Jack Welch considered achieving profitability and winning as the core elements of corporate social responsibility (CSR). In his opinion, winning companies are in a position to invest in CSR in addition to fostering a favorable working environment. General Electric adopted six-sigma in undertaking different strategic management practices, which include employee training, leadership, and mentoring.
Application of Six-Sigma in GE
General Electric implemented six-sigma in its employee training process. Employees undertook a comprehensive 13-days training on various six sigma methodologies. The training program mainly emphasized on the various six sigma skills, which include the DMAIC procedure. Furthermore, a comprehensive follow-up program was implemented in order to assess the extent to which employees appreciated the skills gained in executing their duties.
The firm’s optimal performance has also arisen from investing in effective mentoring programs, which are based on the six-sigma belts such as the Master Black Belt and the Black Belt. The firm hired fulltime master black belts, who were charged with the responsibility of implementing the six-sigma. Additionally, the employees selected for the master Black Belt training are also required to mentor the key process employees. In an effort to improve performance, GE adopted the project-based approach throughout the organization. The implementation process was undertaken under the watch of a team constituted of the Black Belt level employees. The adoption of the master and the black belt has greatly improved the General Electric’s effectiveness in implementing the project.
Strengths and weaknesses of six-sigma
One of the major strengths of the six-sigma is that it enables organizational managers to develop a comprehensive understanding of the problem faced. Additionally, it provides organizational managers with the steps that they can integrate in order to eliminate the problem faced, which is critical in continuous improvement. The concept enables organizations to eliminate product and service defects, hence improving their operational efficiency.
However, one of the greatest weaknesses of the strategy is that it can lead to bureaucracy in an organization’s operation processes hence hindering creativity. The concept is complex, which means that its application is dependent on the extent to which the employees are trained on the concept. Additionally, the concept is a long-term quality improvement method, which means that an organization cannot rely on the method to deal with short-term problems faced.
Continuous improvement in Wal-Mart
Large-scale retailers such as Wal-Mart are experiencing a challenge in their quest to nurture a high level of customer loyalty. The challenge arises from the changing consumer tastes and preferences. Consumers are increasingly anchoring their satisfaction on the quality of service delivery. Customer satisfaction is one of the fundamental elements that organizations in the retail industry should consider in their quest to achieve competitiveness in their respective industries.
Wal-Mart should invest in a continuous improvement program with regard to customer satisfaction through customer service training. Numerous complaints have been levelled against Wal-Mart for its lack of commitment towards customer service. One of the major complaints regarding the firm relates to bad attitude from employees. The lack of effective customer service arises from the view that the firm’s positioning and business model are based on low prices. Subsequently, the firm has not been in a position to focus on ensuring an optimal level of customer service.
On evaluation and control
Application of the traditional model [Norton & Kaplan]
Different performance measures have been formulated in an effort to assess an organization’s performance. Some of these measures assess an organization’s financial and non-financial aspects. The balanced scorecard, which was developed by Norton and Kaplan, assesses both the financial and non-financial aspects [key performance measures], which include the customers, financial, learning and innovation, financial, and internal business perspective.
Customer perspective
In its quest to attain an optimal market position, Wal-Mart Corporation will be focused at achieving a high level of customer satisfaction. This goal will be achieved by assessing whether all activities undertaken by the firm are customer oriented. The firm will evaluate whether customers receive high quality products and services. This aspect will provide the firm with an opportunity to determine the extent to which the firm is effective in adhering to the value-chain management practices.
Internal business process
Wal-Mart will also improve its business processes through innovation. The firm will invest in a comprehensive market research. The market research will facilitate in identifying gaps in its operation. Subsequently, Wal-Mart will be in a position to undertake continuous and new product development. Additionally, assessing the effectiveness of its internal business processes will enable the firm to improve the level of customer satisfaction. In its quest to improve its internal business processes, Wal-Mart will also conduct a comprehensive competitor market analysis, which will aim at comparing the firm’s internal business processes with that of its competitors. Therefore, the firm will identify gaps in the competitors’ operations. Subsequently, the firm will be in a position to exploit the gaps, thus gaining an edge over its competitors.
Learning and growth
Wal-Mart is committed towards achieving competitive advantage in the retail industry with regard to human capital. However, this goal can only be achieved if the firm nurtures an effective and efficient workforce. In order to achieve this objective, Wal-Mart intends to improve the rate of employee retention, which is greatly affected by the level of employee satisfaction. The firm will assess the level of customer satisfaction by assessing the extent to which employees are satisfied with their jobs. One of the measures that will be considered includes the degree of organizational identification amongst employees.
Financial measure
Currently, Wal-Mart is experiencing a decline in the level of its profitability arising from the poor economic performance and the change in government policy. However, the firm is committed at maximizing its sales revenue. Subsequently, the firm will assess its performance with regard to sales growth, which will assist in determining whether its functional level strategies are effective.
Illustrative model on the application of balanced scorecard at Wal-Mart
The model below illustrates a summary of the areas that Wal-Mart will consider in its quest to improve its performance. The model is based on the traditional model.
On Good and bad strategy
Three elements of the Kernel
A good strategy is comprised of a number of elements, which are commonly referred to as the kernel of a strategy. These elements include
- Effective diagnosis of the prevailing situation.
- Selection of the guiding policy.
- Formulation of a coherent course of action.
Wal-Mart is experiencing a challenge in its quest to achieve competitive advantage. The challenge arises from the external market environment. In order to survive in the retail industry, Wal-Mart will be required to implement an effective functional strategy by conducting a comprehensive market research in order to understand the existing challenges. Secondly, the firm will be required to formulate a guiding policy. The policy will focus on developing a comprehensive understanding on all the factors affecting the consumers’ purchasing power. Finally, the firm will invest in effective marketing activities such as ensuring that the stores are stocked adequately and offering customers optimal customer service. This aspect will enable the firm to nurture a high level of customer loyalty.
Difference between good and bad strategy
Good strategy refers to a business or corporate level strategies that take into account the challenges faced by an organization in its operations. Additionally, it also outlines the various avenues that a firm can implement in order to overcome the challenges faced. On the other hand, bad strategies refer to strategies that do not appreciate the problems faced coupled with ignoring the importance of implementing effective actions to eliminate the strategy.
In the course of its operations, Wal-Mart has implemented different corporate level strategies such as growth strategies, which is evidenced by its success in penetrating the global retail industry. This move has enhanced the firm’s ability to maximize its sales revenue. However, the firm failed in its quest to enter the German market. Its failure arose from lack of appreciating the cultural differences between Germany and the US in its market entry phase.
Confronting the future
What does Wal-Mart bring to the world
In an effort to achieve long-term success, Wal-Mart has integrated sustainability as one of its areas of focus. The firm intends to promote the concept of sustainable development amongst organizations in the retail industry. This will be achieved by taking into account the various forms of sustainability, which include economic, environmental and social sustainability.
Does the difference matter
Investing in sustainable development will enable the firm to develop an effective market reputation. For example, environmental sustainability will ensure that the firm’s operations are conscious of the environment. On the other hand, social sustainability will entail taking into account the needs of the society in which it operates. Thus, the firm will be able to improve its long-term competitiveness.
Uniqueness of the strategy
The firm intends to achieve long-term survival by ensuring that its new and continuous product development processes are eco-friendly. Some of the aspects that the firm focuses on entail ensuring that the products developed are safe to consume and environmental friendly. Through eco-friendly operations, the firm will be able to differentiate its products.
Taking care of the future
In its pursuit for long-term sustainability, Wal-Mart will invest in on the concepts of reduction, re-using, and recycling. Through such strategies, Wal-Mart will be in a position to improve its market position.
References
Coyle, E. (2014). Wal-Mart’s strategy; keep shelves stocked, workers employed. Web.
Wheelen, T., & Hunger, D. (2012). Strategic management and business policy;Â towards global sustainability. Upper Saddle River, NJ: Prentice Hall. Web.