Walmart Strategic Analysis Research Paper

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Brief History and Background

Sam Walton founded Wal-Mart and quickly grew the company by offering goods at the lowest prices. The stores were originally smaller than the stores of today, and focused in rural areas of the South that were otherwise underserved by retail stores. The current Wal-Mart model emerged by the 1980s as a large format store selling a wide range of consumer goods. The company would later extend its product lines with groceries, pharmaceuticals and online retailing. Wal-Mart has also successfully expanded internationally, into Mexico, China, Canada and other large markets around the world. Today, Wal-Mart is the world’s largest retailer, and one of the world’s largest companies. Its fiscal year revenues for 2016 were $485.9 billion, with operating cash flows of $31.5 billion, and 2.3 million employees (Wal-Mart 2016 Annual Report).

Ethics System

Wal-Mart’s ethics system revolves around its core competencies, which lie in the area of efficiency. The company’s basic strategy is to compete as a price leader, and in order to do this it is focused heavily on eliminating waste in its organization, and extracting as much value as possible from its supply chain. As a result of these efforts, Wal-Mart is considered to be a global innovation leader in its supply chain (Robinson, 2015). This business model is also embedded in the company’s system of ethics.

Each year, Wal-Mart publishes a Global Sustainability Report, highlighting how it applies its philosophy to sustainability efforts, a key component of the company’s ethical leadership. In that report, there is a statement of intent: “We want to make a difference, and we want to be a trusted retailer that customers, associates, communities and shareholders are proud of.”

In the Global Sustainability Report, the company also outlines its culture of ethics and integrity, and the governance structures by which it implements these ethical values. The company publishes WalMartEthics.com to outline its ethical guidelines. This is aligned with best practice, which calls for companies to make their ethical guidelines public for both internal and external stakeholders, so that outsiders and insiders alike can help to hold the company accountable. Transparency and accountability are two of the basic tenets of ethical leadership.

The company’s ethical program spans a range of activities and areas of concern, including anti-corruption, anti-trust, consumer protection, anti-money laundering, labor and employment compliance, environmental compliance, trade, product safety and privacy. The comprehensive nature of the company’s policies aligns with best practices in a couple of ways. First, since Wal-Mart is one of the largest companies in the world, it can and should have such a broad and deep scope for its ethical initiatives. Thus, it meets what expectations for it should be in that respect, and not every company does.

The other way that this aligns is that it provides specific guidance for the company’s managers. They know what the expectations that the company has for them are, because those expectations are public, and there will be accountability.

However, there are a couple of issues with the ethical values of Wal-Mart. First is that they are focused mainly on compliance. The company has perhaps adopted the view that compliance is the same thing as ethics. There are programs that exist beyond compliance, but some would argue those programs are not enough. Wal-Mart’s initiatives on things like sustainability tend to emphasize efficiency, which is basically what Wal-Mart wants to achieve for profitability – sustainability is a nice side effect. The other issue is that Wal-Mart defines its own ethics; outside groups do not always agree. It is important of course, to have defined ethics, but there is an argument to be made that outsiders should have some say in defining what ethical practices are. After all, on its own Wal-Mart can set standards that it will easily meet, and can ignore ethical outcomes entirely if it wants, simply by not including them. Some of the criticisms of Wal-Mart like outsourcing US manufacturing jobs or putting mom-and-pop stores out of business, are not addressed at all in the company’s ethical guidelines.

Leadership

Wal-Mart has the ability to attract good quality leaders, and does so. While there are areas where it might struggle – it has a web development office in California because it couldn’t attract enough such talent to Arkansas – merchandisers, logistics experts and technologists of many types rightfully recognize Wal-Mart as a prestigious employer, and are attracted to the company in order to work with the best and learn from them.

The company’s current leadership comes from within, and that has generally been the case for Wal-Mart over its history.

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The current CEO is Doug McMillon who served from 2009 to 2014 as the President and CEO of Wal-Mart International. Before that he was President and CEO of Sam’s Club. McMillon started working for Wal-Mart in 1984 as an hourly summer associate, and worked his way up the ladder to his current role. His experience running the company’s two major subsidiaries makes him a particular strong candidate, as does his commitment to the company’s culture.

Other members of the executive team include Greg Foran (President & CEO of Wal-Mart US), a New Zealand native who entered retail in his home country but eventually joined Wal-Mart and once ran Wal-Mart China. David Cheesewright is the current President and CEO of Wal-Mart International. He used to run Wal-Mart EMEA and Canada and comes to the company via Asda, which Wal-Mart now owns. John Furner runs Sam’s Club, and was a VP there prior. He started at Wal-Mart in an hourly role. Marc Lore is the President and CEO of Wal-Mart eCommerce US. He founded jet.com, before that company was acquired by Wal-Mart.

Bose (2017) also notes that the company is willing to shuffle leaders around the company. In one move earlier this year, Walmart recognized leadership at its food division, bringing in leaders from other areas of the company in order to help alleviate a crisis cause by price wars in the grocery space. It made a similar move earlier in 2017 to move leaders from different departments into its online division in order to boost performance there, where the company has been lagging Amazon in growth (Reuters, 2017).

That said, it’s not just about being ruthless. The company has a training program in order to improve its quality of leadership. It has an Academy to help train future leaders, identifying strong managerial candidates, and taking them through this training program in advance of their joining or moving higher in the executive ranks (Donlon, 2013). This training helps the leaders be better, not just in their current roles with Wal-Mart, but in general. Such programs typically have a strong payoff, even if a few leaders leave because they’ve increased their skills, the upgraded skills of hundreds of other leaders make a huge difference to organizational outcomes.

Organizational Culture

Efficiency and cost savings are central to the organizational culture of Wal-Mart. This appears to be the one common theme with the company, as otherwise there is sort of one culture for management and one for the majority of the workers. The management culture not only focuses on efficiency and cost savings, but on the ethics and execution of strategy. The company can be quite demanding for these managers. They live in a data-driven world. Wal-Mart is a leader in providing internal business intelligence, and its managers typically receive data in near real time, and are expected to use that data to drive decision-making. This approach makes for highly competent managers, which is one of the attractions for talent to work at the company. As an example, the company recently cut 20% of its leadership staff in order to increase efficiency (Hauss, 2017) – it doesn’t just cut low level workers, and in fact sees its managers as being basically profit centers – managers have to prove their ROI to the company.

The culture at lower levels can be quite a bit different. Wal-Mart seeks to establish a positive atmosphere among its associates, offering flexibility and training programs, in order to make the company a retail employer of choice. They have need to constantly hire at the retail level, and creating a fun, positive, team-oriented atmosphere and organizational culture is one of the approaches that the company takes to reduce turnover.

One of the most important aspects of any company culture is executive buy-in. The current President and CEO of Wal-Mart started with the company as an hourly associate in 1984, and worked his way up. He is also known to be a strong proponent of the company culture. That story makes for compelling stickiness for the organizational culture, as anybody in the company can look to the CEO and know that at some point along the way, he was one of them. In a company where there can be sizable gaps between the hourly associates and management, this has a lot of importance.….....

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