Abstract – This document will discuss and identify the various types of control mechanisms that Wal-Mart uses. The number of control mechanisms Wal-Mart uses is four and these four control mechanisms will be compared and contrasted. The effectiveness of the research will examine and determine the negative and positive
The research will determine the effectiveness of these control mechanisms and will examine the positive and negative feedback to the use of such controls. In closing, this document will highlight how the four functions of management impact the controls of the company.
Company Overview- Wal-Mart is the world’s largest retailer and for such a feat, Wal-Mart is less than 50 years old. (CNN 2008) In 2008, the company’s sales revenues exceeded $100 billion, which is impressive in such trying times. (Wal-Mart 2008) In 1962 the first Wal-Mart opened its doors in the city of Rogers, Arkansas. The company’s mission was to bring fair priced quality products to each and every consumer. The mission still remains with the company today, as Wal-Mart will match any competitor’s price, period. Wal-Mart employees over 650,000 employees and operates over 2,900 stores worldwide. In addition to the traditional Wal-Mart, the company also has a Super Wal-Mart division that sells food and beverage products along with house wares and automotive products and services along with a pharmacy. All of these factors make Wal-Mart a one stop shopping experience. The third branch of the Wal-Mart family is the Wal-Mart neighborhood grocery stores. These stores focus on food, beverage and pharmacy products only. The stores are smaller but have all the factors of a traditional grocery store. The fourth branch of the Wal-Mart family is the Sam’s Club discount bulk chains. These centers sell bulk sized products at discount prices.
Price is the first Control Mechanism – When it comes to pricing, Wal-Mart is the world’s leader. There is not one retailer who can consistently sell their products lower than Wal-Mart can. Why? Wal-Mart is large enough and has a significant market share that the business dictates to the vendors the cost it will pay for each individual product that is sold in its stores. The drug companies are one of Wal-mart’s largest vendor base, as the chain’s pharmacy sells all of today’s prescription drugs and if the drug is not in stock, the chain will have it in stock the next day for a patient in need. In addition to these factors, the company affords those without health insurance a low cost generic drug program. Any consumer without drug coverage is afforded generic prescriptions for between $4.00 and $10.00 per 30-day generic prescription. (Wal-mart 2008) Those who have limited and small incomes are now able to spend their dollars saved on prescriptions in the store itself, generating greater revenues for the giant.
Logistics is Control Mechanism Two - With a Wal-Mart located in each state in America, allows the company total logistic control. Many stores have locations in many states, but not at the same rate and size as Wal-Mart. By having such logistical control, Wal-mart has no true competitors. In some instances the brand is met with resistance when it wants to open a new store. But, in reality, the brand employs local citizens, pays significant taxes and provides services that are wanted and needed. When these factors are combined, they are combined as logistics or strategic planning. With strategic planning comes the control mechanism.
Product Stock is Control Mechanism Three – Most likely you have been to Wal-Mart and have noticed that almost all items are in stock every day. It is rare that the chain is out of a particular product. How can this be? The company has the most intensive product replacement program today. “Here’s how it works. Ten tagged cases arrive at the back of the store. Two are brought out to the sales floor. Wal-Mart’s inventory system knows how many items can be stored on the shelf and how many are in a case. So let’s say the shelf can hold 16 items, and each case contains eight. The inventory system knows that the shelf is full.” (RFID Journal 2008) This tells us that the competitive advantage is significant as the chain provides what the consumer wants and meets the demands of the need. This mechanism is crucial to market share gains.
Marketing is Control Mechanism Four - Wal-Mart has a $580 million advertising budget that allowing a control mechanism that controls the airways and saturates the market. (Business Week 2007) This amount is more than many businesses earn in a year and Wal-Mart spends this amount on marketing its brand and the products the brand offers. By constantly promoting themselves and constantly advising of the sales and products the chain has to offer allows the consumer to be “Wal-martized” as the brand’s advertising is repetitive and the repetitiveness advising of the savings brings the consumer to the store in droves. It must be stated that no chain can match Wal-mart’s prescription drug program. None.
Compare and Contrast - Is there truly a way to compare and contrast this brand? Somewhat. Wal-mart has its Sam’s Club bulk discount stores located throughout the United States and in over 10 countries worldwide. Its competitor is Costco. Costco has bulk warehouse stores but it does not have grocery locations. The Target chain has pharmacies located inside its stores but the chain does not have a full service supermarket. Circuit City was a competitor that sold DVDs and electronics, but the chain recently went out of business. Was this due to Wal-Mart’s low prices? There is no proof to that, but it must be noted that Wal-Mart was Circuit City’s biggest competitor.
Effectiveness of Controls – When looking and reviewing today’s large chains and then comparing them to Wal-Mart, truly there is no comparison. This shows how the control mechanisms of Wal-Mart outperform the control mechanisms of all other chains outright. While many companies have been in business for many years, such as Sears and JC Penny, these two chains are not close to Wal-Mart in price or market share. When consumers; income is low, such as in today, pricing is everything as each consumer must stretch his or her dollars as far as they can. Wal-Mart knows this and is dedicated to using is control mechanisms to achieve this task.
Control Examination- Positive and Negative – The negative aspects of Wal-Mart’s control mechanisms are the local stores that lose their market share when Wal-Mart enters the demographic. Small mom and pop stores generally loose their entire market share to Wal-Mart, as they just cannot compete. The negative aspect is not to Wal-Mart itself, but Wal-Mart’s competitors. The positive aspects have already been stated, and they are marketing, price, product stock and logistics. The four major players in any business environment and Wal-Mart knows how to properly use them.
Impact of Controls on the Four Functions of Management – Knowing that the four functions of management are planning, organizing, leading and controlling, we can see how Wal-Mart uses these controls to its advantage. Wal-Mart’s planning is strong. The company sells products less than its competitors. The brands organization of the store’s products is clear and concise. Any manager or employee at any time can press a button on his or her computer to know what is on the shelves, what has sold that day and what needs to be replenished. The company leads and leads will. Wal-Mart does get a bad rap for paying low wages and hiring mostly part-time employees, but it must be noted that Wal-Mart’s employees are not forced to work at the stores. By keeping its expenses low, the brand can offer low prices and it does. Controlling closes this subject. The company wisely controls is products and locations ensuring that the community it serves prospers.
In closing, Wal-Mart is a leader that many can learn from. The brand brings the best products to the consumer at the lowest prices. The consumer saves on drugs, electronics, food, clothing, car repairs just to name a few. The citizens Wal-Mart employs keep many off of unemployment and the tax dollars generated are impressive. Keep up the good work.
References
Helm, R (2007) Wal-Mart’s New Adman, Business Week,
http://www.businessweek.com/bwdaily/dnflash/
content/jan2007/db20070112_110022.htm?chan=search
Wal-Mart Corporation’s Corporate Website, www.walmart.com
Wal-Mart National Map, http://www.allstays.com/c/wal-mart-locations-map.htm
Wal-Mart Tackles Out Stocks, http://www.rfidjournal.com/article/articleview/1551/3/160/