Wal-Mart Organizational & Environmental Pressures

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Introduction

Sweeping demographic changes, emerging technological innovations, geopolitical shifts, and pressures arising from the internal environment are combining with concerns for security as well as the current fast-moving and disruptive business environment to create substantial pressure for organizational change (Wischnevsky, Damanpour, & Mendez, 2011).

Wal-Mart, a leading company operating retail stores in different formats across the world, has experienced these and other pressures ever since it was founded by Sam Walton in 1962 (Wei, Wang, Zhang, & Ao, 2014; Yue, Rao, & Ingram, 2013).

Drawing from this description, the present paper illuminates some of the most influential organizational and environmental pressures that have impacted Wal-Mart to date, how these pressures have influenced the company from financial and human resource perspectives, and how the firm has reacted to the identified pressures.

The paper also presents proposals for dealing with the pressures.

Table 1: Organizational and Environmental Pressures for Wal-Mart

Description of the Identified Pressures

Organizational Pressures

Employee and Labor Relations

With over 2.2 million employees globally, the leading retailer continues to face a torrent of lawsuits related to low wages, poor working conditions, insufficient capacity to meet employee healthcare needs, and lack of employee representation in labor unions.

Additionally, the company continues to fight a higher turnover rate illustrated by the fact that over 70% of its workers resign within the first year of employment (Johansson, 2009).

More importantly, the company continues to be criticized due to allegations of wrongful dismissal and racial discrimination. This organizational pressure started in the late 1990s and continues to date.

Structural complexity

Wal-Mart’s organizational structure has become increasingly complex as the retailer enters new markets in America and internationally.

The ongoing structural complexity has pressured the retailer to change its management structure with the view to allocating more authority and decision-making capacities to middle-level managers and supervisors (Matusitz & Lord, 2013).

This organizational pressure evolved as Wal-Mart sought to reach more geographical locations and it still persists to date.

Strategy

Wal-Mart has changed its business-level strategy numerous times to keep up with competitive pressures and also to streamline its operations.

Today, the global retailer has adopted cost leadership and differentiation strategies not only to develop the capacity to provide a variety of products and services with the same or better quality and at a much cheaper cost than competitors, but also to significantly reduce operating costs while maintaining competitive levels of differentiation (Wei et al., 2014).

Environmental Pressures

Media and Civil society Organizations

Media and civil society organizations in the United States and abroad have been at the forefront in scrutinizing and criticizing Wal-Mart due to the company’s recent blunders and unprecedented growth rates.

Indeed, available literature demonstrates that “the attacks on Wal-Mart cite the harmful policies and effects of the company’s behavior on sectors of the economy including but not limited to healthcare, employer discrimination, urban sprawl, outsourcing, and wage suppression” (Davis, 2007, p. 2).

Although this pressure started in the mid-1990s and reached its peak in early 2000s, it was not until 2005 when Wal-Mart started to respond by implementing more progressive employee, community, and environmental practices (Shao, 2009).

Stiff Competition for Market Opportunities

Competition is yet another environmental pressure which has necessitated Wal-Mart to shift its strategy and operating style. Owing to stiff competition from other global retailers such as Tesco, Home Depot and Target, Wal-Mart has been forced to adopt an expansionist growth strategy and cost leadership (Yue et al., 2013).

Competition is guided by prevailing market pressures and has been around ever since the global retailer opened shop in 1962; however, it has intensified in recent years.

Technology

Emergent technological innovations have kept Wal-Mart extremely busy as it attempts to maximize on its capabilities and competitive advantages through the use of technology.

Indeed, judging by how the firm prioritizes the deployment of innovative solutions in logistics, distribution and inventory control, it can be argued that technology is at the core of Wal-Mart’s competitive advantages over its rivals (Basker, 2007).

Wal-Mart installed a computer in its first distribution center in 1969 and has in the recent past made heavy investment decisions on emergent innovations such as bar-code technology, Radio Frequency Identification, and Retail Link software.

How Organizational and Environmental Pressures Impact Wal-Mart Financially

Organizational Pressures

In employee and labor relations, it is worth mentioning that the frequent lawsuits commenced by aggravated parties against the company are costly financially and do contribute to the deterioration of the firm’s image and reputation (Shao, 2009). Such destruction of the company’s image and reputation has entrenched financial implications.

In structural complexity, it is evident that the firm may be using more financial resources to run an intricate web of departments and structural levels, each represented by a manager.

However, the costs involved in running these complex structural levels are recouped from an expanding sales base arising from the ongoing growth strategy.

Lastly, in business-level strategy, it can be argued that Wal-Mart has benefited financially from the adoption of a strategic approach that stresses cost leadership and differentiation due to an increasing customer base and expanding operational efficiencies (Basker, 2007).

Environmental Pressures

In media and civil society organizations, it is documented that the negative stories saw between 2 and 8% of Wal-Mart shoppers discontinue their patronage in 2004 alone, leading to loss of substantial amounts of money (Davis, 2007).

Additionally, owing to negative attacks emanating from the media and civil society groups, a number of American communities have rejected attempts by Wal-Mart to enter these communities due to the actual or perceived fears of what the company can do to the local economy (Yue et al., 2013).

Such denial of entry means a further loss of profits.

In competition for market opportunities, the company continues to invest heavily in its expansion and growth strategies to remain at a vantage point competitively.

However, the changes arising from this environmental pressure (e.g., geographical expansion and diversification) seem to be paying off in increased sales revenues and overall profitability (Ailawadi, Zhang, Krishna, & Kruger, 2010).

In technology, it can be argued that the company has been impacted positively by its desire to adopt latest technological innovations and assimilate them in its operations.

Indeed, it can be argued that technology has served as a source of competitive advantage for the firm not only in terms of substantially reducing operation costs but also in ensuring the smooth flow of operations (Basker, 2007).

How Environmental and Organizational Pressures Impact Wal-Mart’s Employees

Organizational Pressures

The pressure on employee and labor relations is important to workers as it directly affects them in terms of low motivation, high employee turnover, absenteeism, and unhealthy management-employee relationships.

The pressure on increasing structural complexity benefits employees by virtue of providing opportunities for upward mobility (Fishman, 2006). The pressure on business-level strategy may have caused some employees to quit the organization owing to the usual confusion associated with strategic changes and pressures.

However, more employees stand to benefit from this strategic pressure due to increased sales and expanding job opportunities.

Environmental Pressures

Negative stories emanating from the media and perpetuated by civil society have decreased employee productivity and enhanced employee turnover due to the unconstructive publicity.

Stiff competition for market opportunities has posted mixed results for employees in that Wal-Mart’s vigorous growth strategy has created many employment opportunities, helped the company to remain competitive, and increased its sales revenues.

However, employees are required to work for more hours and are rarely sufficiently compensated for the extra work (Greenwood et al., 2008).

Lastly, the continuous adoption of emergent technologies has eased the burden of manual work and provided a framework that could be used by employees to create new customer experiences.

Wal-Mart’s Reaction to the Identified Pressures

Wal-Mart has reacted to the pressures identified in Table 1 by initiating change efforts and also adopting other strategies aimed at dealing with the pressures.

In the environmental pressure emanating from the media and civil society, for example, Wal-Mart has reacted by changing its labor policies and strengthening its social responsibility component to attract customer loyalty and improve its image.

The underlying imperative is that Wal-Mart has reacted to all the identified pressures by implementing some form of change in its operations, strategies, structures, processes, or operating style.

This reaction lends credence to the assertion that the changes made by organizations range extensively and include “the creation and modification of products or services, the adoption of new technologies or the improvement of existing ones, shifts in strategy or culture, and the introduction of new management systems and processes” (Wischnevsky et al., 2011).

Wal-Mart has used similar pathways in implementing changes aimed at addressing the pressures.

Proposed Strategies for dealing with the Identified Pressures

Strategy for Organizational Pressure

To deal with the various issues emanating from employee and labor relations, Wal-Mart needs to streamline its human resource department with the view to ensuring that the unit is able to identify and address employee issues.

This may require a strategy change or an overhaul of the company’s human resource component to facilitate the setting up of a new unit with capacity to deal with various employee issues as they arise. A change of policy should also be effected to ensure that workers are compensated based on skills and input, rather than basic pay.

Strategy for Environmental Pressure

To reduce the environmental pressure arising from media and civil society organizations, Wal-Mart needs to develop and implement a strong public relations and reputation management department with the capacity to professionally pre-empt the negative attacks.

Reputation management, according to Davis (2007), “refers to the set of strategies that companies develop to cope with the expectations of their audiences, manage interpretations those audiences make, and to build favorable regard” (p. 9).

Here, a good strategy entails strengthening Wal-Mart’s sustainability program with the view to establishing good relationships with local communities.

Conclusion

This paper has succeeded in not only illuminating the most influential organizational and environmental pressures that have impacted Wal-Mart ever since it was established in the early 1960s, but also in demonstrating how these pressures affect the global retailer from the stated perspectives and how it continues to react to the identified pressures.

In view of this analysis, Wal-Mart needs to evolve and change further in order to sufficiently address some of these challenges while at the same time sustaining its competitive advantage as a leading global retailer.

References

Ailawadi, K. L., Zhang, J., Krishna, A., & Kruger, M. W. (2010). When Wal-Mart enters: How incumbent retailers reach and how this affects their sales outcomes. Journal of Marketing Research, 47(4), 577-593.

Basker, E. (2007). The causes and consequences of Wal-Mart’s growth. Web.

Davis, N. D. (2007). Corporate reputation management, the Wal-Mart way: Exploring effective strategies in the marketplace (Undergraduate thesis, Texas A&M University). Web.

Fishman, C. (2006). The Wal-Mart effect: How the world’s most powerful company really works — and how it’s transforming the American economy. Westminster: Penguin Books.

Johansson, E. (2009). Wal-Mart: Rolling back workers’ wages, rights and the American dream. Web.

Matusitz, J., & Lord, L. (2013). Glocalization or globalization of Wal-Mart in the US? A Qualitative analysis. Journal of Organizational Transformation & Social Change, 10(1), 81-100.

Shao, M. (2009). Social pressures affect corporate strategy and performance. Web.

Wei, L., Wang, S., Zhang, J., & Ao, Y. (2014). Strategic analysis for Wal-Mart. Web.

Wischnevsky, J. D., Damanpour, F., & Mendez, F. A. (2011). Influence of environmental factors and prior changes on the organizational adoption of changes in products and in technology and administrative processes. British Journal of Management, 22(1), 132-149.

Yue, L. Q., Rao, H., & Ingram, P. (2013). Information spillovers from protests against corporations: A tale of Wal-Mart and Target. Administrative Science Quarterly, 58(4), 669-701.

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