Walmart’s ICMT Strategy
Walmart is the world’s largest retailer, known for its low prices and streamlined supply chain processes. The company commits itself to providing everyday low prices to customers to enable them live better. Technology plays a huge role in the achievement of this mission. The company uses networking and RFID technologies to communicate with suppliers, and ensure that goods are available on the shelf when customers need them. Moreover, these technologies help to ensure that transportation and storage costs are kept low. The cost savings are in turn passed on to the consumer in the form of low prices. This is just one aspect of Walmart’s ICMT strategy. This report reviews the effectiveness of Walmart’s overall ICMT strategy, and how it contributes towards the achievement of the organization’s strategic initiatives. It also provides recommendations on how the same could be improved to ensure that the company maintains its leadership position in the retail industry.
Table of Contents
Save Money, Live Better
Fast, friendly and Clean
ICMT Aligned to Strategic Goals
Walmart is an American-based multinational corporation headquartered in Bentonville, Arkansas. The company was founded in 1962 with the aim of providing discount goods to customers to enable them live better (Walmart Inc., 2015). It went public in October 1969 to be able to achieve this vision. Today, the company operates more than 11,000 stores in 27 countries, dealing in a wide range of merchandise, including foodstuffs, groceries, clothing, furniture, apparel, toys, communication and media technologies that the company uses to achieve its strategic goals (Walmart Inc., 2015). The research was limited to the store in West Hills, California. I reviewed the company’s strategic reports, and interviewed the store’s assistant manager to obtain information on the organization’s ICMT strategy.
Walmart’s mission is to ‘Save People Money so they can Live Better’ (Walmart Inc., 2015). Consumers save money through the company’s low-selling prices, which it is able to sustain because of its large size and broad scale of operations. It relies on this mission to achieve its long-term vision of becoming the best retailer in the world in the hearts and minds of consumers and employees. This vision clearly points to employees and customers as the most important stakeholders of the company. As such, the company strives to keep these groups satisfied and contented. One of the ways through which it achieves this is by maintaining an innovative ICMT plan responding to the needs of these groups.
ICMT Components Defined
For purposes of this research, the term ICMT was defined as the various media and technological devices used to receive, store, manipulate, or transmit digital information from one point to another.
Any ICMT system comprises of five major components:
People: The entire system revolves around people; people are responsible for supplying data to the ICMT system, and also making judgments from the output supplied by the system
Data: This is the raw material that is input into the system and processed to produce output
Hardware: The physical components that make up the system. They are the communication devices needed to send data across networks. They include computers, and mobile devices such as tablets and smart phones.
Software: These are the computer programs that provide step-by-step instruction to get the job done. They include word processing software, database software, accounting packages, and customer-relations management software
Information: This is the result of data processing. It is the output from the ICMT system
Large Scale of operations: Walmart is the world’s largest retailer, operating more than 11,000 stores worldwide (Walmart Inc., 2015). This large scale of operations gives it high bargaining power over suppliers and places it in a good position to negotiate the best possible prices for its commodities. Moreover, the company is able to take advantage of scale economies to maintain sufficiently lower prices than those offered by competitors.
Information systems: Walmart achieves significant cost savings from the use of RFID technology in its supply chain, which enables the company’s suppliers to track sales, inventory levels and orders in real time (Kosasi & Saragih, 2014). This helps the company make goods available on the shelf for customers whenever they need them.
Broad product range: Walmart deals in a wide array of merchandise, incorporating both branded and own-label goods. This wide commodity range makes it possible for the company to take advantage of economies of scope, and pass the same over to the customer in the form of low prices.
Labor-related lawsuits: Walmart regularly faces labor-related law suits in regard to female discrimination, unpaid overtime, low wages and poor working conditions (Fox News, 2012). These suits cost the company huge chunks of resources and make more skilled workers less willing to work for it.
Negative publicity: Questionable practices such as poor work conditions and bribery of authorities impact negatively on the company’s reputation (Fox News, 2012).
Emerging markets: the emerging markets of India, China and Brazil offer huge growth opportunities for Walmart. The company could increase its presence in these markets to sustain future growth
Increasing acceptance of own-label products: A Canadian report on the state of global private-label brands revealed that consumers are developing a preference for own-label products at the expense of national brand products (International Markets Bureau, 2010). Walmart could take advantage of this by increasing the number of private-label products sold at its stores.
Trends towards healthy lifestyles: The current trend of consuming healthy diets has resulted in an increased demand for grocery products. Walmart could increase its profit margins by increasing quantities of grocery in its stores.
Movement towards online shopping: Online shopping is becoming popular among consumers. Walmart could capitalize on this trend by increasing its presence in the online retail market. The company could offer lower prices than its competitors in the online market as a way of attracting consumers.
Resistance from locals: Walmart supercenters impact negatively on the operations of local retailers. At times, these retailers are forced to go out of business as they are often unable to match the low prices offered by Walmart.
Rising product prices: inflation squeezes Walmart’s profit margins and erodes its main source of competitive advantage. As commodity prices go up, the cost difference between retailers is decreased and price no longer serves as a source of competitive advantage.
This research was geared at determining how Walmart uses ICMT to maximize on its strengths, address its weaknesses and threats, and take advantage of its opportunities.
In 2009, Walmart introduced ‘Project Impact’, which was meant to help the company maintain its position in the retail industry between 2010 and 2020. The project was based on two strategic initiatives: ‘Save Money, Live Better’ and ‘Fast, Friendly and Clean’ (Murray, 2015).
Save Money, Live Better: In this initiative, the company commits itself to delivering low-cost commodities to consumers using the following strategies: i) becoming a price leader in the industry; ii) increasing its low-cost, private-label offerings; and iii) streamlining the global supply chain processes so that cost savings are realized and passed over to the customer (Murray, 2015).
Fast, Friendly and Clean: Walmart commits itself to increasing its level of efficiency both inside and outside the store (Murray, 2015). The company enhances its overall efficiency in the supply chain through processes such as cross-docking, which eliminate unnecessary storage and handling of commodities at the distribution center (Murray, 2015). Moreover, the company champions for green policies in the supply chain. In recent years, it has recorded successes such as a 21% increase in fuel efficiency (Murray, 2015).
ICMT Aligned to Organization’s Strategic Goals
Walmart uses its ICMT strategy to realize its strategic goals and maintain its low-cost leadership position in the retail industry. As a way of ensuring the fast replacement of replenished commodities on the shelf, for instance, the company forms strategic partnerships with its suppliers, where the suppliers’ computers are linked to those of individual stores through a satellite network so that suppliers are able to monitor movements in inventory, and replace the same once the reorder level is reached. This ICMT strategy supports the company’s ‘Fast, Friendly and Clean Initiative’.
Moreover, Walmart uses RFID technology to forecast demand, track movements in inventory, and ensure that goods are available on the shelf when customers need them (Kosasi & Saragih, 2014). This is a communication technology that allows for the storage and transmission of large amounts of information on chips that can be read by readers located miles away, without a line of sight (Kosasi & Saragih, 2014). This technology allows the company to communicate with suppliers in real-time. This in turn helps to ensure that the costs associated with delays in the flow of demand information are avoided (Kosasi & Saragih, 2014).
Evidently, Walmart has done a lot to ensure that its ICMT strategy aligns effectively with the company’s strategic goals. However, the company has done little to ensure that ICMT is used effectively to respond to threats in its external environment. One of the core threats facing the company is the overall increase in product prices in the global market. This is threatening to eliminate the company’s main source of competitive advantage — as commodity prices go up, the cost difference between retailers will decrease. This only implies that the price difference between commodities offered by Walmart and those offered by competitors will become negligible. In such a case, quality would become more of a determinant of demand than price.
I recommend adopting the following quality-assurance technologies as a way of boosting the company’s quality standing:
i) CAPA (Corrective and Preventive Action Management) — this technology works by triggering notifications and alerts to help the company identify and resolve quality issues in its transportation and storage processes so that the goods available on the shelf are of the highest quality (Roberts, 2014). The company could install this software into its computers at the main distribution points.
ii) Supplier Risk Scorecards — risk scorecard technologies allow an organization to effectively rank its suppliers to determine which ones are riskier in failing to meet the quality standards set by the organization (Roberts, 2014). This would help the company make informed decisions on which suppliers to choose.
Walmart is the world’s largest retailer, with a presence in more than 27 countries. It commits itself to offering everyday low prices to consumers to enable them live better. Its strategic initiatives revolve around providing low-cost commodities to consumers when they need them. The company’s ICMT strategy contributes significantly to this mission. Through RFID technology and the networking of the company’s computers with those of vendors, the company has been able to realize cost savings in its supply chain. Consequently, it has been able to realize its mission of providing goods to consumers at a discount. The company’s low-cost strategy is its main source of competitive advantage. However, this may be eroded in the coming years as the prices of goods and services in the global market continue to rise. When commodity prices rise, the cost differences between retailers are eliminated. This only implies that Walmart will need to develop a new source of competitive advantage. This report recommends an increased focus on quality. The company could incorporate two technologies — CAPA and supplier risk score cards — into its ICMT strategy to boost its quality standing.
Fox News. (2012). Again? Walmart Rep Takes Another Beating. Fox News LLC. Retrieved 16 December, 2015 from http://www.foxnews.com/us/2012/05/11/again-wal-mart-rep-takes-another-beating/
International Markets Bureau. (2010). Global Private Label Trends. International Markets Bureau. Retrieved December 16, 2015 from https://www.gov.mb.ca/agriculture/market-prices-and-statistics/food-and-value-added-agriculture-statistics/pubs/global_private_label_trends_en.pdf
Kosasi, S. & Saragih, H. (2014). How RFID Technology Boosts Walmart’s Supply Chain Management. International Journal of Information Technology and Business Management, 24(1), 29-37.
Murray, M. (2015). Walmart’s Strategic Initiatives. About.Com. Retrieved December 16, 2015 from http://logistics.about.com/od/industryfocus/a/Wal-Mart.htm
Roberts, M. (2014). Seven Technologies Manufacturers Use for Supplier Quality Management. Quality Digest. Retrieved December 16, 2015 http://www.qualitydigest.com/inside/quality-insider-article/seven-technologies-manufacturers-use-supplier-quality-management.html# http://corporate.walmart.com/
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