UNIVERSITY OF LUCKNOW

DEPARTMENT OF BUSINESS ADMINISTRATION

PRINCIPLES OF MANAGEMENT &

BUSINESS ETHICS
MBA CC 101

ASSIGNMENT

TOPIC: Case Study on Wal-Mart and Answer the Questions

PREPARED BY: SUBMITTED TO:

NAME: NIKHIL KUMAR VISHWAKARMA DR. ANU KOHLI

CLASS: MBA SEM 1 SECTION: B ASSISTANT PROFESSOR

ROLL NO: 210019025042 DEPARTMENT OF BUSINESS

ENROLLMENT NO: 18200526 ADMINISTRATION

 Case Study on Wal-Mart
Question 1. With a saturation of stores in the rural areas in America, can Wal-Mart employ the
same strategies for setting up stores in the cities? Why or why not? What difficulties may the
company encounter?

Solution: As determined by the IE Matrix, Wal-Mart fits into the category of grow and build strategies.
Thus, the aforementioned strategies would fit Wal-Mart very well. All three of the strategies that we
decided on are grow and build types. The three strategies that Wal-Mart would benefit most from are:
market penetration, market development, and product development.

1. Market Penetration:
The market penetration strategy is when a company is seeking to increase the market share for
present products or services in present markets through greater marketing efforts. This is also an
appropriate strategy for Wal-Mart to implement because they can take advantage of the bankruptcy
of K-Mart. Through the increase of Wal-Mart's marketing campaigns, they can attract and retain most
of K-Mart's customers. Also, because K-Mart has been closing hundreds of stores, Wal-Mart has a
distinct advantage of controlling markets where both Wal-Mart and K-Mart are located. Also, because
of Wal-Mart's economies of scale against its rivals, they have the power to influence markets in their
direction.

The company culture is also well suited for this type of strategy. The management of Wal-Mart has
ingrained in the employees the core values needed to excel at increasing their market penetration.
Again, their EDLP and Rollback campaigns can readily be diffused into markets where they do not have
as much of a market share as they want. This will also have a positive impact on the company culture
because of the increased opportunities available to current employees. As their market share
increases, they would also probably begin to add to their product offerings in that area. This will, in
turn, allow employees the ability to grow with the company and be promoted into higher positions.

2. Market Development:
The costs involved with market penetration are not nearly as great as with market development. Wal-
Mart only needs to increase its marketing campaigns in the target areas.

3. Product Development:
Creation of products with new or different characteristics that offer new or additional benefits to the
customer. It may involve modification of an existing product or its presentation, or formulation of an
entirely new product that satisfies a newly defined customer want or market niche.

Product development is a broad field of endeavour dealing with the design, creation, and marketing
of new products. Sometimes referred to as new product development (NPD), the discipline is focused
on developing systematic methods for guiding all the processes involved in getting a new product to
market.
There are a number of organizations dedicated to supporting product development professionals,
such as the Product Development and Management Association (PDMA) and the Product
Development Institute (PDI). According to the PDMA, the organization's mission is "to improve the
effectiveness of people engaged in developing and managing new products - both new manufactured
goods and new services. This mission includes facilitating the generation of new information, helping
convert this information into knowledge which is in a usable format, and making this new knowledge
broadly available to those who might benefit from it."
The process of product development is-
 Idea Generation.
 Idea Screening.
 Concept Development and Testing.
 Business Analysis.
 Beta Testing and Market Testing.
 Technical Implementation.
 New Product Pricing.

The slogan of Wal-Mart is “Always Low Prices. Always.” Wal-Mart’s main strategy is to focus on a
specific type of customer and the needs of that customer, namely, the budget customer who doesn’t
want to spend a lot for the things they buy. Hence, the middle circle is the focus of their strategy. This
main focus permeates every decision they make regarding the other two circles.

“Almost anything as long as it doesn’t cost a lot.” You’ll never see expensive products in a Wal-Mart
store. This is because whenever they decide to offer a new product to their customers, the main
criteria it has to meet is affordability. It must focus on their main strategy of meeting the budgetary
needs of their target customers.

While their Web presence is increasing, their main focus has been strategically located retail stores.
You’ll probably never see a Wal-Mart store located in an expensive neighbourhood. That’s simply not
their target customer and they know it. Literally every decision they make about accessing their
customers is based on the main focus of targeting the budget customer. I know this in part because I
live in Utah. Utah residents are well known for their conservative spending habits. From my home I
can drive to four different Wal-Mart stores within 30 minutes. I’m told that these four stores are
among the highest revenue-generating Wal-Mart stores in the world.

So, Wal-Mart’s circles of business strategy look like this:

Wal-Mart knows that by choosing this strategy there will be trade-offs involved. There will be desirable
products that they won’t sell, customers that won’t shop at Wal-Mart, and geographic markets in
which they will never be able to put a store. However, they’re willing to accept these trade-offs and
let those customers go elsewhere. As with Jiffy Lube, they understand that their chosen strategy is
determined as much by what they’ve chosen not to do as it is by what they’ve chosen to do.

Considering those strategies and functions, it is recommended that, with a saturation of stores in the
rural areas in America, Wal-Mart can successfully employ the same strategies for setting up stores in
the cities.

The difficulties that Wal-Mart may encounter are-

 Being number one means that you are the target of competition, locally and globally.
 Being a global retailer means that you are exposed to political problems in the countries that
you operate in.
 The cost of producing many consumer products tends to have fallen because of lower
manufacturing cost. Manufacturing cost has fallen due to outsourcing to low-cost region of
the world. This has led to price competition, resulting in price deflation in some ranges.
Intense price competition is a threat.
 Because of a huge span of management, Wal-Mart could leave it weak in some areas.
 Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may
not have the flexibility of some of its more focused competitors.

Question 2: Can the organization culture, which was so effective in the United States, be
transferred to other countries? What changes, if any, would you suggest?

Solution: Yes, the organization culture can which was so effective in the United States be
transferred to other countries.

Wal-Mart organization culture is built on three basic values promulgated by Sam Walton. It was
established in 1962 and still permits the organization. The values are (1) respect for the individual,
(2) service to the customer and (3) striving for excellence. Other factors influencing the organization
culture include exceeding the expectations of customers, assisting people so that they can make a
difference, quickly approaching customers to help, doing today what can be done today rather than
postponing it, and pricing for providing value to the customer. The organization culture has an
impact on the staffing function. Associates are created with respect in this lean organization. Having
a great of authority motivates people. Training is decentralized with management seminars offered
at the distribution centres instead of at the company headquarters. The company atmosphere
encourages employees to submit suggestion, many of them being implemented through the “Yes we
can sum” Suggestion system. Associates are rewarded bonuses for cost reduction through the
“shrink incentive plan”. Supervisors and managers received a salary as well as incentive
compensation base on store performance. Associates can also participate in profit sharing plan. With
Wal-Mart is contributing a certain percentage. Above strategies will work in every corner of the
world. As they provide better goods at low cost through highly competent employee and skill
management and as they maintain good relationship with its supplier, they can provide vital input
which will help it to grow in any sphere of the world. Their management is decentralized, that’s why
department managers can take decision of their own. So they can take decision according to the
demand of that market in which they are operating. As the scenario varies from country to country,
they can easily cope up with the unique situations that may arise in case of operating outside of the
United States.

Their strategy “everyday low prices” obviously would be welcomed all over the world, but it might
create some questions in the mind among certain communities “are they providing quality goods? In
this case they may clarify through providing information about their strategies in case of going for
operation in a new country.

Only one thing that can be recommended in this case of them is that they should focus on their
employees’ health care benefits. If employees remain satisfied, then they will create value for the
organization.

Question 3: Could competitors copy the inventory system of Wal-Mart?

Solution: An inventory control system is a process for managing and locating objects or materials. In
common usage, the term may also refer to just the software components.

Wal-Mart is the world's largest and most profitable retailer, with $44 billion in 1992 sales and 380,000
employees. Its growth from a single store in Rogers, Arkansas to almost 2,000 bright, attractive stores
in 43 states is legendary in American business. As it is the largest retailer company, its inventory system
is unique and of course better and bigger. It has an effective, efficient inventory control system, or
inventory management system. Wal-Mart's system helps it maintain its signature "everyday low
prices" by telling store managers which products are selling and which are taking up shelf and
warehouse.

Wal-Mart uses the SMART system. SMART is basically a tracking system, it keeps track of all inventory,
the on-hand counts, and can automatically reorder product that is low or empty. As stated last week,
most interaction with the SMART system is through the Telxon. Just to recap, the Telxon is a 900 MHz
wireless handheld terminal equipped with a barcode scanner. When a barcode is scanned, almost
instantly the item numbers, a short description, on hand counts and amount on order are displayed.
The Telxon is linking to the SMART database to retrieve all of this information. All from a simple thing
like a barcode which is just a set of numbers that are unique, like a primary key.
Strength of SMART:
The actual database has to be enormous. There are so many products that the Wally keeps track of.
All of which must be in the same database because products we don't carry will still scan and give all
the relevant information. This is helpful because it allows people to return products from a "Super
Centre" that carries a much larger stock than we. Another strong point of the SMART system is that it
is linked to the cash registers. When a product is sold, inventory is updated automatically. On hand
counts are updated and on some products they are reordered automatically, depending on how many
are left.
So it is not easy for the competitors to copy the inventory system of Wal-Mart. For copping the system
the competitors have to big enough and have to maintain a huge database and the SMART technology
as well.

Question 4: Would you like to be a manager at Wal-Mart? Why or why not?

Solution: Managerial work is a conceptual work. Becoming a manager may mean that the status of a
project becomes more important than the technical nuances of that project. It’s going to be a different
focus from what you’re used to so you’ll need to prepare yourself for it. One change that the shift to
management will bring is that you will now represent your co-workers when interacting with your
boss. Your boss may not want to hear every technical detail and may be more focused on whether the
project will be completed successfully and on time. You’ll need to start thinking like a manager before
you can act like one.

Many techies want to go to the office and work in solitary confinement. However, if you want to
mentor others and guide them through their tasks, then you may very well make a good manager.
Being a manager and accepting responsibility for those under you by definition places you in a high
profile position. I find that developing my employees’ skills and seeing them advance in their careers
is the most valuable part of being a manager.

A manager doesn’t necessarily have to be a people person, but it helps. Managers spend most of the
day working with others so it’s generally a good idea to have strong interpersonal skills. Managers
have to solve people problems and it helps to feel a sense of accomplishment after doing so.

There is a difference between a manager and a leader, but each manager must have some basic
leadership skills and the desire to influence co-workers. A good manager is not only responsible for
himself, but also for his team. Leadership is something that you’ll have to be comfortable with if you
want to be a manager. The ability to make decisions and the capacity to carry them out are essential
management skills.

A good manager has to understand group dynamics and how best to facilitate employees working
together. If you see a challenge in interacting with co-workers and their personalities, then
management will provide you with those challenges on a daily basis. It takes patience and
understanding to be able to guide employees and to build consensus during team meetings. A good
manager knows how to bring out the best in his team and that usually requires maintaining a delicate
balance between team members’ personalities.

Being a Wal-Mart manager is a chance to stand at the forefront of retailing. It’s a job with big
responsibilities, and one which requires true leadership and in-depth knowledge of our stores.
Millions of customers come to Wal-Mart Stores each week looking for great values, and our
managers are vital in helping them return home satisfied.
Wal-Mart’s three levels of store management—assistant manager, co-manager and store manager—
call for individuals with great communication, organizational and financial skills. These qualities help
managers motivate their teams and ensure that our stores continually move forward. Above all, we
look for individuals with great people skills, because the most important product we offer is
customer satisfaction.
Considering my managerial level of skills and Wal-Mart’s functions, position as well as organizational
environment, I would like to be a manager of Wal-Mart.

Question 5: What should Wal-Mart do to be successful in other countries?

Solution: In 1991, Wal-Mart became an international company when they opened a Sam's Club near
Mexico City. Just two years later, Wal-Mart International was created. They’ve created stores with
different styles and formats to fit in with local customer needs, desires, and customs. More than 75
percent of our international stores operate under a different banner than Wal-Mart. But, whether
they’re Pail in Costa Rica, Todo Dia in Brazil, or Despensa Familiar in Central America, all of our stores
share a common goal: Save people money, so they can live better. Today, Wal-Mart International is a
fast-growing part of Wal-Mart’s overall operations, with 4,573 stores and more than 730,000
associates in 14 countries outside the continental U.S. In fact, on November 29, Wal-Mart confirmed
an offer to acquire 51 percent of Mass mart in South Africa.

Wal-Mart has expanded its operation in Argentina, China, Honduras, Nicaragua, Brazil, Costa Rica,
India, United Kingdom, Canada, El Salvador, Japan, Chile, Guatemala, Mexico, and Salvador.

But Wal-Mart doesn’t succeed in all those areas. Wal-Mart’s strategies fail in Europe especially in
Germany. The main reason behind this failure was Wal-Mart’s attempt to apply the company’s proven
US success formula in an unmodified manner to the German market, however, turned out to be
nothing short of a fiasco. Moreover, instead of attracting consumers with an innovative approach to
retailing, as it has done in the USA, in Germany the company does not seem to be able to offer
customers any compelling value proposition in comparison with its local competitors.

So, it is recommended that, to be successful in other country, Wal-Mart should follow the following
strategies:

1. Different methods of communication across different cultures:

Communication is the process of conveying messages. ‘’Successful communication in the international
business environment requires not only an understanding of language, but also the nonverbal aspects
of communication that are part of any community. Different countries are going to have different
ways of communicating. If certain executives of a company want to do business with people from
different countries, they need to understand how to communicate clearly with them, without
mistakenly doing something wrong. The most obvious way of communicating with different people is
with words, and therefore, some executives learn how to speak the language spoken in the foreign
country. This act can show that the executive is truly dedicated to the work, and that he is willing to
do anything to complete the deal. Greeting rituals are sometimes overlooked, but they shouldn’t be
because they are more important in some parts of the world than others. In Japan, failure to show
respect by exchanging business cards can get negotiations off to a very bad start. While in France,
greetings are highly personal and individual…as workers expect to be greeted individually. Another
form of communicating is through hand gestures. Often goes unnoticed, hand gestures are as
important as words themselves because they too have meaning behind them. Cultures located in
southern Europe and the Middle East employ a wide variety of gestures frequently with
purposefulness. Some hand gestures have different meanings in different countries. For example, the
hand gesture where the index finger and thumb touch and create a ‘zero’ can mean different things
in different places. In the US and UK, it means ok. In Russia it means zero. In Japan it refers to money.
While in Brazil, it is viewed as an insult.’’ Time is another communication system. In western cultures,
people like to get to the point of the matter in business meetings and conversations. However, in other
countries like Saudi Arabia and Russia, it is customary to converse first about unrelated matters before
starting the business discussions for which the meeting was arranged. Barging straight into the
business issue, without informal small talk at the beginning, may make them very uncomfortable and
may ruin the negotiations.
2. METHODS OF MANAGING ACROSS CULTURES:
(a) Hierarchy: This refers to the way people view how much they defer to people in authority,
whether they feel entitled to express themselves and how empowered they feel to take the
initiative on matters before them. For example, Canada believes in egalitarianism, while
nations like India, Japan, China, Germany, and Mexico are highly hierarchical.

(b) Group focus: This refers to whether people consider that accomplishment and responsibility
are achieved through individual or group effort, and whether they tend to identify themselves
as individuals or members of a group. Canadians are individualists while Brazilians, Chinese,
Mexicans and Japanese are group-focused.

(c) Relationships: This is about whether trust and relationships are viewed as a prerequisite for
working with someone. Canadians focus primarily on the transaction, rushing to deal, while
the Chinese, Italians, and Spaniards, for example, focuses on nurturing relationships first.

(d) Communication styles: This covers matters like verbal and non-verbal expression, how directly
or indirectly people speak, and whether brevity or detail is valued in communication. Israel,
Denmark, Germany and Sweden use a direct style, while indirect communication styles are
the norm in China, United Arab Emirates, and Japan.

(e) Time orientation: This refers to the degree to which people believe adhere to schedules
United States, Germany, Denmark and Switzerland follow schedules while countries like Saudi
Arabia, Spain, Thailand, and the United Arab Emirates are unconcerned about schedules and
deadlines.
 (f) Change tolerance: How people are comfortable with change, risk-taking and innovation. Along
with Australians, Canadians are the most tolerant of change, while Saudi Arabia, Indonesia,
Mexico and Russia are change-averse.

(g) Motivation: work/life balance: This characteristic examines whether people work to live or
live to work. Canadians are driven by work and the status it provides - although not as much
as people in China, Japan, and the U.S. - while in Norway, Saudi Arabia, United Arab Emirates,
India and Mexico, family-work balance is treasured.

Last of all, it is recommended that, at the same time, Wal-Mart also should stable on its legendary “we
sell for less – always“, “everyday low prices” and “excellent service” and “value Proposition”.

Question 6: How can Wal-Mart control the global enterprise?

Solution: Control is one of the managerial functions like planning, organizing, staffing and directing.
It is an important function because it helps to check the errors and to take the corrective action so
that deviation from standards are minimized and stated goals of the organization are achieved in
desired manner. According to modern concepts, control is a foreseeing action whereas earlier concept
of control was used only when errors were detected. Control in management means setting standards,
measuring actual performance and taking corrective action. Thus, control comprises these three main
activities.
According to Henri Fayol, Control of an undertaking consists of seeing that everything is being carried
out in accordance with the plan which has been adopted, the orders which have been given, and the
principles which have been laid down. Its object is to point out mistakes in order that they may be
rectified and prevented from recurring.
According to Harold Koontz, Control is checking current performance against pre-determined
standards contained in the plans, with a view to ensure adequate progress and satisfactory
performance.
CHARACTERISTICS OF CONTROL:

 Control is a continuous process.

 Control is a management process.
 Control is embedded in each level of organizational hierarchy.
 Control is forward looking.\
 Control is closely linked with planning.
 Control is a tool for achieving organizational activities.
The culture of Wal-Mart can be defined in one word: control. The company has grown to be the
world’s largest retailer through a process of tightly-managed aggressive expansion. From the
supplier’s stockrooms to the store’s shelves, the corporate model of Wal-Mart is one that permits little
deviation. It is therefore unsurprising that attempts to compel the company to change its ways have
been doomed to failure.

PROCESS OF CONTROLLING:
 Setting performance standards.
 Measurement of actual performance.
  Comparing actual performance with standards.
 Analyzing deviations.
 Correcting deviations.

In normal thinking, Wal-Mart can control the global enterprise by following those normal controlling
process. But the most important part of Wal-Marts controlling process of global enterprise are
organizational control and operational control.

Organizational Control: The concept of organizational control is implicit in the bureaucratic theory of
Max Weber. Associated with this theory are such concepts as "span of control", "closeness of
supervision", and "hierarchical authority". In contrast, Wal-Mart operate and "control" the system
with respect to the daily inputs of material, information, and energy. In both instances, the elements
of feedback are present, but organizational control tends to review and evaluate the nature and
arrangement of components in the system, whereas operational control tends to adjust the daily
inputs. The direction for organizational control comes from the goals and strategic plans of the
organization. General plans are translated into specific performance measures such as share of the
market, earnings, return on investment, and budgets. The process of organizational control is to
review and evaluate the performance of the system against these established norms. Rewards for
meeting or exceeding standards may range from special recognition to salary increases or promotions.
On the other hand, a failure to meet expectations may signal the need to reorganize or redesign.

Operational Control: Operational control serves to regulate the day-to-day output relative to
schedules, specifications, and costs. The most difficult task of management concerns monitoring the
behavior of individuals, comparing performance to some standard, and providing rewards or
punishment as indicated. Sometimes this control over people relates entirely to their output. For
example, a manager might not be concerned with the behavior of a salesman as long as sales were as
high as expected. In other instances, close supervision of the salesman might be appropriate if
achieving customer satisfaction were one of the sales organization's main objectives.
Control mechanisms are used by organizations to help regulate processes which add to company-wide
goals. Wal-Mart is a huge industry functioning to meet the needs of its customers, employees and
suppliers by using controls; controls consist of market control, clan control, manager audits, and
performance standards. Each control is important to prosper efficiently in the business world; in
addition, increasing customer, employee and supplier assurance. The efficiency of each control
impacts the four functions of management; organizing, planning, controlling and leading. Wal-Mart’s
success is motivated by control mechanisms that are regulated and constantly evaluated.