Human Resources IP5

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Unit 4 IP: Walmart Report

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Unit 4 IP: Walmart Report

Unit 4 Individual Project: Walmart Report

Human Resource Strategy MGT652-1503C-01

By

Andrew T. Robison

AIU Online

09/12/15

Walmart Report

Industry Competitive Position

The grocery industry is greatly diversified and, as such, houses several market players. Walmart, the leading retailer in the world prides itself in leading the industry in grocery sales. As a matter of fact, groceries represent fifty six percent of the company’s sales revenue which weighs in at around $188 billion (Soni, n.d.). In Walmart’s international activities, it faces stiff competition posed by numerous local supermarkets, hypermarkets and multinational retail chains. Some of the Company’s most significant rivals include Tesco of the UK, France’ Carrefour, Germany’s Metro AG and Costco. The U.S Department of Agriculture reveals that Wal-Mart was the highest seller of groceries in the year 2013. The Company was closely followed by Kroger and Safeway in the second and third positions respectively. In that same year, Publix Supermarkets came in at distant fourth position.

The grocery industry has some of the characteristics of a typical near-perfect market whereby there is fierce competition. There are a few barriers of entrance in the industry and the price margins are quite low. The margins are low as a result of various firms’ endless quest to top the market in sales records. The firms, therefore, set very low item prices in order to attract and retain customers which in turn directly translate to high sales. Companies competing in the industry must operate in large scale activities so as to edge out the stiff competition present. On that front, it is prudent to say that Wal-Mart is a large-scale retailer. The benefits of economies of scale driven purchases along with other advantages that include supply chain management and low fixed costs have enabled Wal-Mart to surge upfront in retail-market leadership. Wal-Mart offers lower prices than the smaller companies in the industry and, therefore, has used the same in formulating business strategies.

In order to capture the market share, the Company had to split into different segments that offer the same products but at different geographical locations. The competitive industry position that Wal-Mart has is largely due to the same. The segments: Wal-Mart U.S., Sam’s Club and Wal-Mart International have a burgeoning reputation which is quite unmatchable by the competitors’ market standards. The U.S segment serves all the fifty states of the nation in different retail store formats while Wal-Mart International operates in 26 countries outside the political jurisdiction of the U.S.A (Walmart SWOT analysis 2015, n.d). The 2015 fiscal year saw Wal-Mart generate a massive $485 billion worth of total revenue, $482 billion being accounted for by sales. Wal-Mart Inc. has designed the Everyday Low Price (EDLP) strategy from the economies of scale advantage it enjoys in the industry. The strategy has enabled the firm to attack the market aggressively and hence gaining a considerable market share portion advantage over other companies. The strategic pricing approach implemented by Wal-Mart has served to enhance its reputation as an industry leader.

Comparator Group Competitive Position

The Comparator Group comprises of direct rivals, along with companies that would qualify as business competitors under uniform conditions of human resource practices, product range, geographic territories and target market. Therefore, this Comparator Group competitive position analysis pits Wal-Mart against its direct industry competitors. It is imperative to state that Wal-Mart’s scale of operations is unmatched the world over, hence the Company’s strong position of influence over both competitors and suppliers. Consequently, Wal-Mart is the world’s largest private employer with over two million and two hundred thousand employee names on their payroll. Wal-Mart is not only a market leader in the United States of America but also in all the other markets where it conducts business operations (Walmart SWOT analysis 2015, n.d). The table below is an illustration of Wal-Mart’s superior position in the Comparator Group competitive position analysis as presented by the Strategic Management Insight website.

	Wal-Mart	Carrefour	Costco	Tesco
Revenue (USD)	$485.651 billion	About $100 billion	$110.212 billion	About $110 billion
Locations	11453	10105	671	7305
Countries Served	27	34	9	12
Employees	2.2 million	364969	195000	505544
Retail Space (Sq. feet)	1.1 billion	-	95 million	41 million

Recent statistics point to the fact that Wal-Mart recorded a total revenue of over $476 billion in the year 2015, more than the combined total of Costco, Carrefour, Tesco and Amazon. Not only did the giant retailer employ twice as many persons as the other companies but also owned five times more in terms of retail space. According to Forbes Magazine, Wal-Mart is at position 19th overall in terms of value which is about 23.3 billion. The only direct competitor that featured in the most valuable brands list published by Forbes is Amazon. Carrying the tag of largest world retailer means a lot to Wal-Mart. The Company has a competitive edge over the other companies in the comparator group because of the following reasons:

· Economies of scale. Wal-Mart distributes the fixed costs over all the products sold and, therefore, the Company manages to sell at lower prices compared to the other firms in the industry.

· Efficiency and effectiveness in the use of resources. Since the Company has stores in numerous locations, it is possible to effectively put to use such resources as skills, knowledge, distribution facilities and information systems.

· Gains from the implementation of best practices. Wal-Mart can possibly identify ways of executing tasks, hiring new employees or managing the retail stores and, as such, can amass significant gains through vast implementation of the same across all the stores. If the Company had fewer stores, the direct advantage over direct rivals would’ve been negligible.

· Riskless tests. The large number of retail stores at the company’s disposal provides a reasonable margin for error in conducting various experiments. The risk of losing revenue or profits is greatly mitigated by the vast number of stores available.

· Power over competitors and suppliers. The fact that Wal-Mart is a worldwide brand implies that the Company has the power to dictate the prices of goods bought from suppliers. In the same spirit, Wal-Mart can also kill competition by selling products at excessively low prices, even if it means incurring losses for a considerable period of time.

Human Resource Risks

The Company is exposed to a wide variety of human resource risks. Some of the risks include legal risks, integrity risks and internal recruitment risks.

Integrity Risks

Several companies have in the past succumbed to the losses and adverse effects created by the attachment of integrity risks. It is common to hear about big firms and even governments, grappling with bribery and corruption scandals. Wal-Mart is no exception to the integrity risk problem. Among the most closely-observed alleged malfeasance cases, Wal-Mart’s bribery scandal of April 2012 ranks highly alongside the most notable ones. The story was cast into the light for everyone to see through the activities of New York Times that involved publishing of an investigative article that alleged the involvement of Wal-Mart in a Mexican bribery scandal (Heineman, 2014). The Company was alleged to have tried to cover up the activities of its top officials in Bentonville, Arkansas. The integrity risks pose serious governance issues which could bring down the Company. One of the governance issues that such a risk would present is the perpetuation of a culture of silence that could directly lead to concealment of fraud in the organization and incompetence in management.

Inefficiency Caused by Internal Recruitment

Recruiting individuals at an internal level poses a human resource risk to Wal-Mart. Anne Fisher once claimed in Fortune Magazine that forty percent of newly found leaders fail to deliver according to their expectations during the first one-and-half years (Bradt, 2013). The main reason for such occurrences is the failure to fit, adjust or deliver as per the Company expectations. The surprising fact is that this happens to people getting promoted from within the organization also as opposed to the general expectation that the same would only happen in the case of external recruitment. As much as the people promoted from within Wal-Mart are less likely to experience a clash with the company culture, they also face the delivery and adjustment related risks. The fit problem sets in when there is a mismatch between the firm’s “Behaviors, Relationships, Attitudes, Values and Environment” (BRAVE) and the promoted individual’s personal preferences (Bradt, 2013). In the event that there is a poor fit, the firm has to naturally reject the new recruit. The delivery problem arises because of organization alignment issues, role expectations, poor relationships, slow learning or failure to build a well-performing employee team.

Legal Risks

Wal-Mart also faces the risk of fighting legal challenges against former or current employees seeking compensation or other monetary-related claims in court. Employees who don’t receive reasonable compensation from the Company in the event that injuries occur to them in the cause of carrying out employment tasks could file lawsuits in court for the same.

Human Resources Opportunities

The majority of Wal-Mart’s opportunities revolve about improving business practices and expansion (Smithson, 2015). The opportunities are intertwined with the world’s economic situation. The issues that the human resource wing of Wal-Mart faces represent opportunities for the Company to improve on the same. Some of the human resource opportunities include improvement in human resource practices, improvement in ethical standards and adoption of better company training policies.

Improvement in Human Resource Practices

The Company has an opportunity of improving its human resource practices so as to reduce the number of former employees seeking compensation in legal lawsuits. If Wal-Mart were to put into place proper regulations to safeguard employees against unwarranted and careless injuries, significant financial gains would be observed in the mold of saved litigation costs.

Improvement in Ethical Standards

The fact that Wal-Mart was embroiled in a corruption scandal about five years ago implies that there is an ethical gap that the Company needs to bridge. The Company needs to put in place measures to regulate the management’s behavior in handling business operations. Wal-Mart should have a sound policy that provides for effective whistle-blowing upon suspicion of the occurrence of bribery or corruption activities.

Adoption of Better Training Policies

The risk of failure caused by recruiting top officials from the internal talent pool exposes flaws in the Company’s training methods. The opportunity presented to the Company indirectly by the internal recruitment risk provides a chance for improvement on the available recruitment strategies. Wal-Mart should focus on introducing new strategies to achieve global competitiveness on the human resources front. The workforce at Wal-Mart can be termed as locally competitive while the major aim would be to gain global competitiveness. Therefore, Wal-Mart should tailor-make their internal training methods to nurture globally competitive managers who would turn out to be instant successes when promoted to the position of administrators.

Overall Assessment of the Company’s Human Resource Competitive Position

Wal-Mart has a track record of using flexible training programs in a bid to increase the employee abilities, business knowledge and worker skills. The Company makes such commitments regularly along with providing employees with an opportunity to attend retail-business seminars ("Wal-Mart: Human Resource Management - Panmore Institute." Panmore Institute, 2015). The person-firm fit program places Wal-Mart in a reasonably high position in the human resource competitive scale in the grocery industry.

The other companies’ approach towards talent management gives the impression of a fairly consistent competitive platform. Wal-Mart’s human resource strategy involves several management assessments and the art of developing knowledge around the same human resource talent group or individual. It is prudent to say that Wal-Mart Inc. aims at conducting the development of Company executives in relation to the market leadership competencies in the industry. Therefore, there is still room for improving the Company’s human resource operations by mitigating risks and capitalizing on the available opportunities. Wal-Mart is neither a market leader in human resource operations nor the worst performing company.

Reference List

Artkinson, W. (n.d.). Enterprise Risk Management at Wal-Mart. Retrieved September 11, 2015, from http://www.ezodproxy.com/ameron/2011/proxy2011/PDF/ameron-proxy2011_0026.pdf

Bradt, G. (2013, June 1). Promoting from Within. Retrieved September 11, 2015, from http://www.forbes.com/sites/georgebradt/2013/06/04/promoting-from-within-onboarding-risks-for-wal-marts-next-ceo/

Heineman, B. (2014, May 15). Who's Responsible for the Walmart Mexico Scandal? Retrieved September 11, 2015, from https://hbr.org/2014/05/whos-responsible-for-the-walmart-mexico-scandal/

Soni, P. (n.d.). Welcome to Market Realist. Retrieved September 11, 2015, from http://marketrealist.com/2015/02/competitive-forces-walmart-dominates-grocery-industry/

Smithson, N. (2015, August 13). Walmart SWOT Analysis & Recommendations - Panmore Institute. Retrieved September 11, 2015, from http://panmore.com/walmart-swot-analysis-recommendations-case-study

Walmart SWOT analysis 2015. (n.d.). Retrieved September 11, 2015, from http://www.strategicmanagementinsight.com/products/swot-analyses/walmart-swot-analysis.html

"Walmart: Human Resource Management - Panmore Institute." Panmore Institute. 7 Jan. 2015. Web. 29 Aug. 2015. <http://panmore.com/walmart-human-resource-management-hr-management>.