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Walmart Organization Challenges And Organizational Change Analysis

Walmart Organization Challenges And Organizational Change Analysis

WAL-MART

COMPANY PROFILEWalmart Strategic Human Resource Management Case Study Solution

Wal-Mart Stores, Inc. was founded by the late Sam Walton. The first Walmart store was opened in the early 1960s in Rogers, Arkansas. Mr. Walton was only 44 years-old when the first retail store was opened. The company grew to become one of the largest retail stores in the world. The company went public in 1970. The huge profit margins financed a steady expansion of the retail store. The company’s success is attributed to the fact that over the years, the company has effectively applied appropriate strategies to reach the company’s vision and mission.

Walmart Vision and Mission

Walmart was started with a vision of being the best retailer in the hearts and minds of consumers and employees. The company’s aim to become a top retailer in the retail industry has already been achieved. The company has also greatly influenced the minds of consumers and employees in terms of financial benefits. The company’s employees earn wages while consumers save money thanks to the subsidized prices of Walmart’s commodities.

Walmart’s mission is to save people money so that they can live better lives. The company’s slogan, “Save money. Live better,” is synonymous with the company’s mission. Walmart sells commodities at reduced prices, and this helps consumers save money.

Walmart Values, Culture, and Guiding Principles

Culture is the foundation of all operations at Walmart. According to Walmart, culture is value in action. The company serves to deliver superior customer service, create a great front-line work environment and improve performance to achieve the purpose of saving people money so that they can lead better lives.

The company’s values are service to the customer, respect for individuals, striving for excellence, and action with integrity. Walmart fosters a culture of integrity, and this is promoted by global ethics. Walmart upholds their policies for ethical behavior everywhere they have operations.

The company is guided by the principles of a winning work environment, being true to who they are, and enhanced experience.

Walmart Company Management

Walmart’s management philosophy is commitment to business, to control company expenses, celebrate success and effective communication with company partners. Other features of the company’s management philosophy are motivation, listening, and appreciation, exceeding customer expectation and forward progression.

Walmart’s leadership structure is made up of an executive management team lead by Doug McMillon, the President, and CEO of Walmart, and a board of directors chaired by Gregory Penner.

The management style at Walmart is mainly based on transformational and transactional management. Other aspects of management at Walmart include charisma, vision, ethics, strategy and even distribution.

Company financials and market position

In 2016, Walmart reported a total revenue of $482 billion. The company had 2.3 million associates, more than 11,500 retail locations, 16 e-commerce websites in 11 countries, apps and a dynamically optimized supply chain. The company was able to return more than $10 billion to shareholders through dividends and share purchases. The company also announced a dividend increase to $2.00 per share.

Walmart is the world’s largest retailer and grocery chain by sales. Walmart’s business segments include Walmart stores, Sam’s club and Walmart international. Walmart stores are responsible for the company’s largest revenue, accounting for approximately 65 percent of the company’s revenue. Walmart international and Sam’s club account for 25 and 10 percent of the company’s revenue respectively. The company depends heavily on China for manufacturing its market merchandise, and many of the company’s suppliers also manufacture their products in China.

Walmart Organization Challenges

Walmart is restructuring its U.S. store operations, and this will see the business consolidate its business divisions from six to four. The company’s restructuring comes in the wake of the recent changes in the global business dynamics. Walmart completed the acquisition of jet.com in January 2017 in a bid to widen its online presence and gain ground on their competitors.

SWOT analysis of Walmart

  • Strengths

Walmart’s main strength over the years has been its brand image. Walmart has been and still is one of the biggest brands in the retail industry.

Walmart’s financial position is also solid as evidenced by the company’s total revenue in 2016. The company earned a total revenue of $482 billion through its business segments, Walmart stores, Walmart international and Sam’s club. The company has also returned more than $10 billion to shareholders through share purchases and dividends.

The company has an excellent IT infrastructure to support its rapid growth and serve its large customer base. 

  • Weaknesses

Recent times have seen the sales growth of Walmart decline. This is attributed to reduced retail spending from customers despite lower fuel prices. The company is under pressure from deflation in key product categories such as food. The effects of the dollar abroad also have an impact on Walmart’s operations. The company’s heavy reliance on China for manufacturing makes it more vulnerable to currency rate changes.

Walmart has also been criticized for the low wages that they offer their employees. Walmart’s wages have been said to be too low to make ends meet. The company has also been criticized about the long-term effects of the company’s large-scale sale of cheap and sometimes hazardous imported goods.

Walmart’s management has also been questioned on a number of times. The management at Walmart has been in the spotlight because of what many have termed failure to connect with customers. The company has been said to have many managers, and this has had an impact on customer service.

The company failed to keep up with changes in the retail environment. Organizational change, management, and transformation have become prominent and permanent features of the business landscape. Business organizations need to be able to adopt such changes to their operations to keep abreast with their competitors. Walmart hasn’t been able to adapt to these changes, and this has hurt their business operations. Walmart missed the managerial revolution that has swept the American enterprise.

Some of Walmart’s business segments such as Sam’s club and e-commerce are struggling against their rivals. The area of e-commerce, for instance, is lagging behind Amazon’s, and this translates to a slower and weaker growth than Amazon.

  • Opportunities

Management strategy is an area in which Walmart can improve on. Recently the company improved employ wages, but the management strategy remains unaddressed. A large scope for further changes remain, and this could be addressed through strategies to improve employee working conditions and morale. Organizational and management restructuring would also improve customer experience and lead to larger profit margins.

Emerging Asian markets also present major opportunities for the brand to gain and form strategic partnerships with the local brands. Exploring auxiliary markets would work for the best interest of the underperforming business segments such as e-commerce and Sam’s club.

  • Threats

Walmart faces significant competition both domestically and internationally. The e-commerce business segment as mentioned earlier faces stiff competition from Amazon. Another company that poses a major threat to Walmart is Costco.

Walmart heavily relies on China for its manufacturing, and thus a strong dollar translates to low-profit margins for the company. The dollar has been growing stronger in international markets, and this has seen Walmart’s profit margins decline.

Walmart Organizational Change Analysis

Walmart’s organizational structure is hierarchical and functional. The company’s organizational structure is made up of two features, hierarchy and function-based. Hierarchy is the vertical line of command and authority. Every employee, except the CEO, has a superior. Directives from the top levels of management are implemented by middle managers down to the rank-and-file employees in their stores. Function-based organization feature involves a group of employees fulfilling certain functions, for example, human resource management, information technology, marketing and the likes.

Organizational change affects a host of systems within a business structure. An organizational change in Walmart would among other things affect the management structure and the company’s workforce. Walmart’s organizational restructuring will see the number of regional managers reduce from 44 to 36. Departmental leadership will also in effect be restructured with an aim to increase the company’s competitiveness in the retail sector. A huge labor workforce will also have to be released during the restructuring of the retail company.

Force Field Analysis

The need to maintain competitiveness and its status as the largest retail company in the world forces Walmart to change its organizational structure. A change in the structure of the organization will cause a restructuring of the company’s management structure for example integration of leadership teams and reduction of the company’s labor workforce. The restructuring will also lead to the creation of new positions.

Leavitt’s Model

The Leavitt’s model of organizational development proposes that particular variables within an organization are responsible for development and functioning of an organization and they are interdependent. These variables include task variables, structure variables, technological variables, and human variables. The advancement of technology has caused increased competitiveness in the retail sector and has thus prompted Walmart to change its organizational structure to keep abreast with its competitors.

Likert Organization System Analysis

Likert described four systems of management within an organization and proposed that an organization’s management system determined the organizational development of a company. Likert’s framework proposes that a management system could be a participative group, consultative, benevolent-authoritative or exploitative-authoritative. The organizational dimensions addressed include motivation, communication, interaction, decision making and goal setting. Walmart’s operations are aimed at achieving a set of goals mainly to save people money so that they can lead better lives. Walmart’s management has in the past been criticized for lacking in employee motivation skills and poor communication and interaction between the employees and their managers.

Open systems theory

The theory proposes that organizations are social systems which are dependent on the environment they exist for inputs. This could be said so in the case of Walmart. Walmart owes its success largely to its employees. The environment is flooded with overpriced commodities and this augers well with Walmart’s objective to save people money to help them lead better lives.

The Burke-Litwin Model of Organizational change

The model proposes that organization development interventions directed towards structure, management practices, and systems result in a transactional change whereas interventions directed towards mission and strategy, leadership, and organization culture result in transformational change.

Walmart should focus on restructuring their organization in a way that will promote both transactional and transformational changes. Management practices within the organization should be directed at improving customer relations and growing their customer base worldwide. Walmart in its bid to keep abreast with its competitors should also direct effort towards strategy and leadership which have previously been faulted for declining sales growth.

Organization development interventions

Organization development interventions should be directed at different levels within the organization. There are three basic approaches to organizational development. Structural, technical, and behavioral changes are the three basic approaches to organizational change and development.

Structural changes are aimed at the organization’s hierarchy and may involve adding or removing layers to the organization’s hierarchy, downsizing of an organization’s taskforce or decentralization or centralization of an organization’s operations. Structural changes at Walmart would help in the development and restructuring of the organization.

Organization development is not restricted to the top people within an organization. Technical changes in machinery, methods, automation and job design would enhance productivity within an organization. Technical changes in Walmart’s operation in the face of restructuring will enhance the organization’s productivity.

A behavioral approach to change emphasizes better utilization of human resources, and this fosters inclusivity of employees through participation, motivation, and empowerment. Employee participation, motivation, and empowerment will, in turn, enhance performance. A teamwork approach can also lead to solutions that can contribute to the development of organizations. Teams create synergy and thus teaming up at both the levels of employees and leaders will lead to solutions that will positively help the progression of the organization.

Parallel learning structures promote innovation and organizational development. Groups representing various levels and functions work together to create new channels of communication parallel to the normal hierarchical structure. Parallel learning structures will help in capturing an organization’s collective expertise. Walmart should use a parallel learning structure to help advance its operations and smoothen the process of organizational restructuring.

Stream Analysis chart

Walmart Organization Challenges And Organizational Change Analysis

Resistance and Engagement

Resistance to organizational change and development is a normal phenomenon, and the organizational changes and development at Walmart will not be any different. Resistance will be met at both the leadership and employee level. To mitigate resistance and enhance engagement of organizational change and development, changes should take place in stages so that the leadership and employees get accustomed to change.

Education and communication are key to minimizing resistance. The leadership structure and the employees should be informed about the nature of an organizational change and the logic behind it through reports, memos, group presentations or individual discussions. Negotiations and rewards are other tools that can be used to minimize resistance and enhance engagement in the event of an organizational change.

To foster engagement, it is also important that both an organizations leadership and employees understand the current state of the organization. The leadership and employees at Walmart should be alive to the fact that the company has been experiencing a decline in growth sales. The company should also lay out the desired future state of the organization.

Stability is also important since it reduces anxiety. The company should remain aligned with its vision, mission, culture, core values and guiding principles among other things. Organizational change should be implemented in an orderly manner, and the transition process should be managed effectively.

FINAL RECOMMENDATIONS AND SUMMARY

The most successful organization development at Walmart would be a change in the leadership and labor taskforce structure. Walmart’s leadership has been in the spotlight and has been blamed for poor organization and declining growth sales. The labor taskforce, on the other hand, has been reported to be poorly paid and this has no doubt demotivated the employees.

Organization development and change at Walmart has been long overdue, and the change, therefore, could not come at a better time. Once the organizational structure is developed and changed, Walmart will no doubt surpass its competitors even in the e-commerce business segment, a sector which Walmart has failed to dominate.

Also Study:

Walmart Strategic Human Resource Management Case Study Solution

Walmart SWOT Analysis

References;
  • Organizational Diagnostic Models: A Review & Synthesis. Sunnyvale, CA: Leadersphere, Inc; 2017. Available at: https://www.iei.liu.se/fek/frist/723g16/files/1.120328/Orgmodels.pdf. Accessed November 12, 2017.
  • Lombardo J. Walmart: Organizational Structure & Organizational Culture – Panmore Institute. Panmore Institute. 2017. Available at: http://panmore.com/walmart-organizational-structure-organizational-culture. Accessed November 12, 2017.
  • Ferguson E. Walmart’s Vision, Mission, Generic & Intensive Strategies – Panmore Institute. Panmore Institute. 2017. Available at: http://panmore.com/walmart-vision-mission-statement-intensive-generic-strategies. Accessed November 12, 2017.
  • Walmart 2017 Annual Report.; 2017. Available at: http://s2.q4cdn.com/056532643/files/doc_financials/2017/Annual/WMT_2017_AR-(1).pdf. Accessed November 12, 2017.
  • Managing Organizational Change. Inccom. 2017. Available at: https://www.inc.com/encyclopedia/managing-organizational-change.html. Accessed November 12, 2017.

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