Managerial Analysis of Walmart PDF

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North South University Department of Management

Managerial Analysis of “Walmart” Submitted to: Lecturer Syed Asif Hossain (Sys) Deparment of Management Submitted by: Ariful Islam Saad-Bin-Aziz A K M Rangumul Mofid MD. Habibullah Emon

ID: 1612816630 ID: 1620195630 ID: 1430087030 ID: 1620500030

Submission Date: 17/12/2016 1

December 17, 2016 Syed Asif Hossain Faculty of MGT210 North South University Semester: Fall 2016 Subject: Submission of Report Dear sir, We are pleased to submit the report that you have assigned on us, we tried our best to work on it carefully and sincerely tried to answer all the given question as per requirement. This report has given us an exceptional experience that might have vast uses in the future aspires and we sincerely hope that it would be able to fulfill your expectations. We have put our sincere effort to give this report a presentable shape and make it as informative and precise as possible. We thank you for giving us this unique opportunity. Sincerely yours, Saad-Bin-Aziz Ariful Islam A K M Rangumul Mofid MD. Habibullah Emon

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Acknowledgement: We have taken efforts in this report. However, it would not have been possible without the help of many individuals. We would like to thank those who have contributed to it a lot. Unfortunately, the list of expression of thanks, no matter how extensive is always incomplete and inadequate. This acknowledgement is no exception. At first, we would like to thank Almighty Allah for giving us the strength and perseverance to complete this project. Thanks, must go to the group members, whose tireless patience for creative work, and long hours made the project possible under the pressure of knocking deadline. We are greatly thankful to our honorable faculty Syed Asif Hossain who guided us throughout this process, without his help this report could not have been possible and well organized. And finally, we are indebted to the official website of Wal-Mart, different site describing the management of WalMart for bringing the managing information of the organization(Wal-Mart) so close to us and keeping us updated in this advancement by providing us the most recent information and managerial work process for this report.

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Table of content: 1. Executive summary………………………………………………………………………………………………………………. 5 2. Introduction…………………………………………………………………………………………………………………………. 6 3. Mission of the organization……………………………………………………………………………………………....... 7 3.1. Planning mythologies…………………..................................................................................... 7 3.2. Organization strategy…………………………………………………………………………………....................7 3.3. Industry, customer and competitors……………………………………………………...........................8 4. Organization of the firm………………………………............................................................................9 4.1. Formal structure and in formal entities………………………………………………………....................9 4.2. Chain of command in decision making……………………………………………...............................10 4.3. Departmentalization………………………………………………………………………….............................11 4.4. Management in dynamic environment.............................................................................12 5. Internal and external analysis...................................................................................................13 5.1. PEST analysis.....................................................................................................................13 5.2. Capabilities and core competence....................................................................................13 5.3. Industry analysis................................................................................................................14 6. Leadership style………………………………………………………………………………………………......................16 6.1. Organizational heroes.......................................................................................................16 6.2. Motivational environment................................................................................................17 6.3. Organizational communications.......................................................................................18 7. Process of control.....................................................................................................................18 7.1. Type of control................................................................................................................. 18 7.2. FCF control approach........................................................................................................19 7.3. Financial control............................................................................................................... 20 8. Corporate social responsibilities...............................................................................................22 8.1. Ethical practices and CSR activities...................................................................................22 8.2. Social responsibility strategy............................................................................................23 4

9. Conclusion................................................................................................................................24 10. Reference………………………………………………………………………………………………………......................24

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1.Executive summary: This report is done as a part of our study which helped us to understand the management of an organization by doing an in-depth managerial analysis of an organization. We have chosen Wal-Mart Inc. as the organization of our report. As Wal-Mart Inc. is a world-renowned retail corporation it has one of the best organization management system out of all other organizations. By doing an indepth managerial analysis we came to see all their managerial work formats, strategies, plan and work process that they do to manage this world-class retail corporation. They have a clear mission for the corporation which says- “Saving people money so that they can live better” on basis of which they are running their business. With their proper organization strategies, they set a fine example of how to set strategies and plan. The structure of the organization is somewhat different from other organization which is matrix/hybrid structure. The hierarchical chain of command has made it easy to have control over this large corporation. Also, its departmentalized to a great degree. we have identified its customer competition, capabilities and core competence, its organizational heroes, motivational environment, types of control they use, its FCF approach, CRS activities and many other managerial components. We have also got much idea from their PEST analysis, Industry analysis, financial control etc. we have also assessed the importance of its different strategies used and effectiveness of organizational communications. Here in the report we discuss and do methodically analysis about their organizational strategies and other managerial components by researching the internet and other social media thoroughly.

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2.Company Introduction: Walmart stores, Inc. is an American multinational retail company that operates a chain of hypermarkets, grocery stores and discount department stores. Sam Walton founded the company in 1962. And it was later incorporated on October 31, 1969. They have head quarts in Bentonville and Arkansas. As to the date of October 31, 2016, Walmart has 11,593 stores and clubs in 28 countries, under a total of 63 banners. The company operates under the name "Walmart" in the United States and Canada. It operates as "Walmart de México y Centro América" in Mexico and Central America. It also operates in as "Asda" in the United Kingdom, as "Seiyu" in Japan, and as "Best Price" in India. It has totally owned operations in Argentina, Brazil, and Canada. The Sam's Club retail warehouses is also owned and operated by them.

Walmart is the world's largest company by revenue, per the Fortune Global 500 list in 2016. It is also the largest private employer in the world where about 2.2 million employees work. Walmart is a family-owned business. And the company is controlled by the Walton family. Sam Walton's heirs own over 50 percent of Walmart through their holding company "Walton Enterprises" and through their individual holdings. It is also one of the world's most valuable companies by market value. It is also the largest grocery retailer in the U.S. In the year of 2016, 62.3 percent of Walmart's US$478.614 billion sales came from its U.S. operations only.

In the year 1972, the company was listed on the New York Stock Exchange. The company rose from a regional to a national giant in the late 1980s and early 1990s. Within the year of 1988, Walmart became the most profitable retailer in the U.S. and by October 1989, it was the largest in terms of revenue. Up to the mid-1980s it was geographically limited to the South and lower Midwest. By the early 1990s the company's presence spread from coast to coast—Sam's Club opened in New Jersey in November 1989 and in July 1990 the first California outlet opened in Lancaster. Bringing the main store to the Northeast, a Walmart in York, Pennsylvania was opened in October 1990.

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3.Misson of organization: 3.1. Planning mythologies: The company, WALMART, traces its success to the founder, Sam Walton. These ideals are accented in Walmart’s vision statement “To be the best retailer in the hearts and minds of consumers and employees.” So, they plan on the basic of this goal statement. They use both the strategic plan and operational plan for the organization. On basic of its targeted goal they form a well-defined plan. Its target is to be the best, largest and most effective in the retail industry in the World. Based on the current situation, the company already has fulfilled the best retailer part of the vision. Walmart’s vision also points to the hearts and minds of the people which matters a lot to the retail industry. Thus, when thinking of Walmart, the first thing that comes to mind is the yellow starburst and the flat baby blue bold letters. In realistic this company influenced the mind of employees and consumers in their financial benefits. Through Walmart’s low prices employees earn money while consumers save money. So, they have already proved the heart component of the vision statement. The mission statement is “Saving people money so that they can live better”. Walmart’s slogan is “Save money Live better” which is synonymous to their mission statement. Consumers save their money by Walmart’s least selling prices. However, Walmart’s very low paying structure which is hardly enough for the employees for making ends meet is criticized. Also, there are criticisms of the long-term effect of the firm’s large-scale sales of low prices and often hazardous goods which are imported from different countries.

3.2. Organization Strategies: Business Strategy Walmart uses a combination strategy of cost leadership and differentiation. They provide a wider variety of products and services with the same or better quality at a price that is cheaper than their competitors can provide. Walmart concentrates on finding ways to lower their costs by constantly rethinking how to complete their primary and support activities to reduce costs still further while maintaining competitive levels of differentiation. Their successful supply chain management is an important way helping them to implement the cost leadership strategy. They have effective inbound logistics by using just-in-time inventory. And they have cut costs from outbound logistics by creating better fuel efficiency in their trucks, getting more pallets on a load, and decreasing empty miles driven by their trucks. Walmart also reduces costs by buying in large blocks. Technology plays a key role in Walmart’s supply chain too, it allows Walmart to accurately forecast demand, track and predict inventory levels, create highly efficient transportation routes, and manage customer relationships and service response logistics. In conclusion, Walmart's successful overall cost leadership/differentiation strategy leads to high entry barriers for competitors.

Corporate Strategy The major reason behind the success of Walmart lies in the fact that the company believes and concentrates on the strategy of single business, which means more than 95% of its revenue comes from their grocery business. Over 30 years, the strategy of single business has been contributing greatly to the success of Walmart, they have never believed in the concept of diversification for the sustenance of its growth and its advantages at the competitive level.

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International strategy Walmart has been able to successfully enter the global market because of the use of multinational business strategy. This strategy involves that customers of different countries are treated differently and hence productivity and profitability are high. It is imperative for Walmart to cater every region's differences in product preferences; thus, they work under the "Different Stores for Different Folks" philosophy.

3.3. Industry, customer and competitors: Industry Walmart is in the retail industry. Now it is operating its business all over the world. Again, it is the market leader of this retail industry. The retailing industry is comprised of the sale of products and merchandise from a static location, such as a store, or by mail, or online. Retailers purchase products from manufacturers, importers, or wholesalers and then separate the products via their channels before proceeding to sell the goods directly to consumers. Walmart is the industry leader in retail industry. Its product differentiated in many ranges. Other retails focus on specific market. For example, sears focus on furniture, best-buy focus on electronic device. Indecent years, on-Line retail industry grows so fast. Amazon is the leader in online retail industry. Amazon also goes international and does well.

Customers Their main customers are the regular middle class and lower-class people of those are where they serve.

Competitors Walmart faces increasing competition from local, regional, national and international retailers. Competitors can benefit from the same low offshore manufacturing costs that Walmart has. For the scope of this assignment, we will focus on Walmart’s North America market and briefly touch on the competition in some foreign markets. In North America, Walmart’s primary competition includes department stores like Targets, Kmart, Canada’s The Real Canadian Superstore, and Mexico’s Commercial Mexicana. Competitor of Walmart’s Sam’s Club division are Costco. Meanwhile, several smaller retailers, primarily dollar stores, have been able to find a small niche market and compete successfully against Walmart for home consumer sales. Target would be Walmart’s direct competitor. Target is the second largest retail stores after Walmart. A strategy for Target is that they can deliver discount goods at a higher quality as well as offer more product variety to its customers compared to Walmart. This strategy attracts high-income customers and generates higher revenue. Their main customer base has an average income of $50,000 per year compared to Walmart’s $35,000 per year. Target also aims to expand globally with its acquisition of 200 Canadian Zellers stores. Target isn’t the only one slowly eating away at Walmart’s retail lead. Costco is also outperforming Sam’s club by most measures. Costco grew 26.1% from 2008 to 2012, more than double the rate of Sam’s Club. Costco is also larger than Sam's Club, with $97.06 billion of revenue last year versus $53.8 billion, so it’s growing more quickly from a bigger base. Walmart also 9

faces fierce competition within their foreign markets in German and South Korea. Walmart entered German market in 1997 and remained a second player behind Aldi with a 19 percent share. In2006, Walmart announced its withdrawal from Germany. Its stores were sold to German company Metro. After entered the South Korean Market in 1998, Walmart withdrew and sold all 16 of its South Korea outlets to Shinseki, a legal retailer, for $882 million. Shinseki re-branded the Walmart as the E-Mart stores.

4. Organization of firm: 4.1. Formal structure and informal entities: Wal-Mart uses divisional structure at the top management and uses functional structure of organizational design at lower level.

From the top management structure, we see that under Walmart store Inc. there are 4 divisions namely •

Walmart U.S.

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Walmart International

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Sam’s Club

•

Global eCommerce and technology

Each division is given enough resources and independence and has its own functional workforce.

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Under the CEO of each divisions there is a functional structure. Each functional group only deals with their own division. The functional group’s structure of different division is somewhat different from each other but the basic are same. About informal entities, there isn’t any fixed or authentic document that can be found. But since every organization has an informal structure Wal-Mart must also have it. Mostly it is the social structure among the employees that determines how they work together and govern their behavior in work. It may differ from people to people.

4.2. Chain of command in decision making process: There is a clear chain of Command from the top to the bottom. The chain of

command in decision making process is as same as the formal structure of management. The chain of command extends from the upper organizational level to the lower organizational level. The Chief Executive Officer of Walmart Inc. is at the top of the chain. He takes all the important decision of the organization and creates plan for over all organization. Under him all the four CEO of 4 divisions are posted. They take decisions for their own divisions under them are the senior managers for different functional structure. At the store level the chain of command starts at the general manager. He decides the

decisions about his/her store. Under him/her there is Co-manager who follows the General manager. Thus, the chain of command goes from co-manager to assistant manager, assistant manager to support manager, support manager to COS, CSM and from COS/CMS to the lowest part of chain Cashier/Sales Associates. The overall organizational decisions are taken by the Senior part of the management. The decision regarding stores are taken by the later class of management. The chain of command is followed as the hierarchy of the organization and is maintained with importance. The span of control is narrow as the organization has management teams that come to a decision how products gets priced, how items are shipped, and other items that require to be managed.

4.3. Departmentalization: Wal-Mart is mainly departmentalized into functional and geographical departmentalization.

Functional departmentalization: As for the functional departmentalization, the 4 divisions are departmentalized into functional units. Although the functional departmentalization of the 4divisions are different from each other the basic functional departments are: •

Administration and Human resource department

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Project department

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Manufacturing department

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Engineering department

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Marketing department

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Public relation department

Each department has its own functions that they need to do. By doing their own respective functions they help in achieve the overall success of the organization. Administration and human resource department do the function of administrating the work performance of the whole division and manages the jobs among the employees. The project department are in for...