Wal Marts Sustainability Strategy Management Essay

Wal Marts Sustainability Strategy Management Essay Wal-Mart attained its present stature as a leader of discount retailer solely due to the innovative vision of its founder Sam Walton. Wal-Mart still today follows the traditional goals and philosophies left behind by Sam, coupled with the practice of keeping one step ahead of ever changing technologies and the nature of the business environment in which it operates. In spite of the controversies over different issues confronting it and still being faced, the future is bright, if and only if it strikes a comfortable balance seen increasing in its profit and recognizing its social and ethical responsibilities. Evaluation of Design process: The success of Wal-Mart lies mainly due its sound managerial decisions and the innovative implementation of sustainability strategies to dramatically reduce the companys impact on the global environment and in an effort to become the most competitive and innovative company in the world. The company believed in the three cardinal principles, that is To be supplied 100 percent by renewable energy; to create zero waste; and to sell products that sustaining our resources and the environment. The gist of the decision implementation by Wal-Mart lies in its ability to build a solid working relationship with both suppliers and employees, taking note of the most intricate details in store layout and necessary merchandising techniques, capitalizing in every cost saving technique, and creating a high performance spirit. Below are some of the important strategies implemented by Wal-Mart which were responsible for its success. One of it first initiative was to launch a campaign to encourage its s uppliers to provide environment friendly and safe products in recyclable or biodegradable packaging at no additional cost. Wal-Mart intended to influence its suppliers to spend more on RD so as to find the safer modes of processing and packing and that too without passing the cost on to them. This wasnt a strategy indented to make it rich, but it was a started as a campaign for environmental benefit and which earned them a lot of good will among environmentalist. Wal-Mart also started creating green shelf tags to mark the products the vendors created that were environmentally friendly. This was one of it first step towards sustainability. But slowly company lost track of its primary strategic priorities. Wal-Mart soon realized this and started to revamp its sustainable strategy in an effort to make it to be long lasting and deeply embed it in its operations as envisaged by Scott. Scott lead the sustainability strategy to keep the environmental improvements tightly coupled with the business value and profitability for the strategy to succeed as well as challenged themselves to find new ways to drive measureable results. Several proposals were considered and many of which had bigger ideas on how Wal-Mart could profitably reduce environmental impacts. In the initial proposals put forward Wal-Mart wanted to differentiate itself from its competition, maintain a license to grow, and remain consistent to its commitment and serving customer with everyday low prices by perusing an offensive strategy. The management realized that sustainability could represents the biggest opportunity for the 21st century and proposed that Wal-Mart and its complex supply chain could become even more efficient by making its operations even more environment friendly. They believed if sustainability was to be taken seriously, it meant not just the environment and but also includes health care, wages, ethical sourcing and globalization and everything as a whole. With this in mind Wal-Mart started its campaign initially focusing on the environment. Large part of it efforts were spent working with the various Government and Environmental agencies to identify which of its products and processes created greatest environmental impacts. After its large scale investigation Wal-Mart narrowed down the problem to 3 primary areas: Energy, Waste and Products, and decided that it would focus its environmental goals for reducing the Wal-Marts impact on the environment. Increasing energy efficiency, transitioning to renewable energy, and reducing waste in retail operations were decided to be the direct goals à ¢Ã… ½Ã‚ ¯ goals that could be achieved by making changes that were within Wal-Marts more immediate control. It understood that providing more sustainable products was an indirect goal which would also require the involvement of Wal-Mart suppliers and their help to accomplish . Wal-Mart also learned that the best way to generate good will is to serve society as it did for the hurricane Karina victims. It actively participated in helping provide relief to the people of New Orleans and its surrounding areas as a result earned the trust of every one. Next the company came up with 14 sustainable value networks with a leader identified who would be driving the sustainability in different parts of the business. As the sustainability effort picked up momentum it was quick to realize that the sustainability doesnt involve extra work but is only a new way of approaching ones own work. Hence it started assigning new responsibility for people in their existing position rather than creating new jobs and made it an integral part of the work every one performed. Other notable change of the implementation was to look outside, which was a major shift from the usual way Wal-Mart used to conduct its operations focused internally. The strategy represented a major cultural change for the organization, seeking ideas from all consultants, NGOs suppliers, eco-friendly competitors, academicians and even its critics. It is also engaged in a dialogue with the government regarding climate change and a curb on green house gas emissions. The collaborativ e approach was doing wonders and it decided to make it a part of the ongoing sustainability model. All across the 14 value networks, hundreds of external entities where asked to join and participate on an ongoing basis and the primary criterion was to include and engage folks who are genuinely committed to desired future outcomes. Wal-Mart started engaging in dialog with government policy makers regarding climate change. It opposed a carbon tax as it will be passed on to customers and therefore advocated a cap and trade system and endorsed proposals for market based programs for reducing green gas emissions. The networks were encourage to develop a sensing organization that is aware of the external business environment, and able to incorporate this perspective into business decisions that create long term value. The networks were give the freedom to define their own sustainability objectives and plot their own course. The strategy can briefly be summed up as ENGAGE , EXPLORE and EXP AND. Engagement mean looking beyond Wal-Marts traditional stakeholders to identify and work with a broader community of participants that could provide information, subject matter expertise, and other resources to help Wal-Mart further define and achieve its environmental goals. Exploration included analyzing the life cycle of particular products. Exploration included analyzing the life cycle of particular products or services and investigating the related environmental issues. Determine where and how the company could change its business model to address the needs and concerns of this broader community, as well as its traditional stakeholders. Global logistics were able to leverage existing programs and quickly started to making progress by improving the fuel efficiency by 25 percent. As China is a geography and the fact that it touched all the networks Wal-Mart was in a fix as what is to be done. Wal-Marts goal was to build strong relationships and develop overall business partners for capable to attain excellent standards in ethical and environmental areas in the supply of quality and safe products and components and then spread this to other suppliers with whom business is to be developed. IN addition Wal-Mart intends to provide suppliers with Valuable knowledge and process assistance through relationships with NGOs in its networks. Wal-Mart set up compliance organization that monitored supplier performance in China and other countries around the world. Wal-Mart complains audit primarily focused on health and safety issues and it measured suppliers against its four identified metrics- Water treatment, Waste management, Banned chemicals and air emissions. Improvement in seafood network around the world was made possible through possible though implementation of MSC- accredited certifying agencies. MSE certification was entrusted to third parties which audited and certified fisheries and processes to ensure that products were managed sustainably from boat to plate. MSE certification firstly was to address sustainability of wild caught fish and later to ACC certification for farm raced fish. Wal-Mart identified 5 primary initiative for setting up of group to rally around MSC certification : Certification, Cluster Farming, Marine Reserves, Public Awareness, External collaboration. Wal-Mart goal was to increase the number of fisheries and processing plants in the MSC certification program. Supplies would refer the fisheries to MSC and have them use MSC eco labels on their products, in order to start buying as much certified fishes as possible. The direct cost of MSC certification was paid for by boat operators and processing plants. Immed iate benefits were seen through the certification initiative because of greater transparency in the sea food supply chain. As MS required a chain of custody to guarantee that the fish was virtually indistinguishable from the rest. Benefits through sustainability were seen in improved transportation efficiencies, elimination of stock-outs and raw material shortages, reduction in supplier costs though standardized packaging, etc. Wal-Mart delegated the implementation of MSC to the suppliers and the suppliers motivated to building the relationship were compelled to adopt the strategies there by gaining trust of Wal-Mart. This building relationships allowed Wal-Mart to talk on behalf of suppliers, defend their points and explain to other associates the importance of this relationships. In Electronic network Wal-Mart identified six key areas of focus: Material innovation, E-Waste, Legislation, Green Engineering, Metrics, Training and Education. Their strategy was to provide their customers with sustainable product choices utilizing a supply chain that improves the quality of life of all stakeholders. Wal-Mart had to make guaranteed orders to the suppliers sell only RoHS-compliant products to customers. By five years they made sure that every computer that they bought in US was RoHS compliant. Wal-Mart also introduced many initiative at reducing e-waste by starting may programs like recycling take-back programs. Wal-Mart also focused on advocating for national standards for both hazardous substances and e-waste. Organic cotton innovation project received top priority of the textiles network. They adopted clear standards (USDA guidelines) for organic cotton farming and manufacturing processes. Got permit to use a certain hazardous chemicals were safer substitutes were not yet commercially available. The strategy in cotton textiles is to develop and environmentally garment made of renewable material combine with he process is efficient with minimum wage and use of inputs with a minimum toxicity. When three chemicals were identified. with a negative ratings it encourage suppliers to use most sustainable substitutes. Wal-Mart was cautious in not sharing widely these metrics for a fear of boomerang on other products in itself, but only told customers that it cared for their health. The game changer project is to reduce the impact of environment and textile manufacture, which of recent origin. It also played it safe by not putting its green tags, not forced the manufacturer to take responsibility for promoting environment and health benefits for their products and left if for them to decide To conclude Wal-Mart saw and overwhelmingly large array of opportunities that remain untapped and decided to continue to identify and pursue the opportunities with max environmental benefits and business value. Improvements in Design and Design Process: Following are some of the strategies that they could implement to improve their business All the Wal-Mart stores can be made using Green constuction all over the world. Green buildings often include measures to reduce energy consumption, Water efficieny, Waste reduction etc. Solar panels could be installed at each the store locations, their by reducing the energy wastage. Energy for extravagant use can be reduced. The neon lights use for advertisement and display of products during late night hours can be given up, energy saved is energy produced. Expand activities in international markets beyond China in the Asian Sub continent. Instead of sticking to price alone importance may be given to quality with a marginal increase in price by Wal-Mart and let the neighborhood stores deal with products of low price to meet corporate social responsibility and to minimize resistance from neighborhood associations . To cut down costs the finished items which are of lesser weight compare to their original raw state like fish and textile may be processed at the place of their availability (even in foreign places) itself and move only the finished items to the distribution centers, and also taking advantage of differential labor cost in to consideration and their logistic advantages. Intense and mandatory training for all employees must be organized. All employees must have profound knowledge about the goals and strategy of the organization. we dont know the formulation, Manufacturers would decide to do this based on their own level of confidence in the sustainability-related attributes of their products Should never happen. Wal-Mart must have a good understanding about the product they sell. Wal-Mart identified three chemicals which has bad impact on health such as chemicals which can cause Cancer and birth defects. Wal-Mart urged suppliers and vendors to use substitutes for these harmful chemicals. Although these three chemicals were substituted, Wal-Mart was unsure about the formulation and aftereffects of these chemicals which made them reluctant to promote or putting their green tags. As the result, the manufactures were forced to complete the necessary scientific research on these substitutes and use safe chemicals. Wal-Marts employees have a basic understanding about the green initiatives. The internal communication programs and external media coverage helps the associates to know more about Wal-Mart Strategy. The most beneficial and valuable input Wal-Mart receive to promote its green products is through its associates as associates are often Wal-Mart customers. These inputs helps Wal-Mart to save time as their employees need a little time to learn about customers preferences. The success of wal mart lies in its sound managerial decisions and the innovative implementation of these decisions. The company believed in the three cardinal principles of :- 1) Customer value and service 2) Partnership with its employees who are regarded as associates, and 3) Community service The gist of the decision implementation by wal mart lies in its ability to build a solid working relationship with both suppliers and employees, taking note of the most intricate details in store layout and necessary merchandising techniques, capitalizing in every cost saving technique, and creating a high performance spirit. All steps are taken to provide customers what they want at the apt time and that too at competitive prices and to build and maintain a reputation for absolute trustworthiness, The wal mart stores operate on every day low prices by passing on savings to their customers, the stores make constant efforts to improve key business process, managing them centrally and investing in them heavily for long term pay back. The stores were quick in testing , adapting and applying a range of cutting- edge merchandising approaches and was able to learn quickly from the success and failures of competitors. The company invested heavily in its unique cross -docking inventory system to achieve economies of scale, making it possible to supply goods just in time and at low prices. Cross- docking at the store level. The company provides individual managers more control at the store level. The company owns its own transportation system to move goods in time from warehouse to shelves much faster than their competitors. It has its own largest and most sophisticated computer system. Its Manually Parallel Processor computer system helps in tracking stock movement and collect timely information related to sales and inventory position disseminated through satellite communication system Wal mart has leveraged its volume buying power with its suppliers. It negotiates the best prices from its vendors and expects commitment of quality goods. The purchasing agents are much focused people. Even though it is a tough negotiator for rock bottom prices, the company worked closely with its suppliers to develop mutual respect and forge long term partnerships for mutual benefit. It also has an automated recorder system linking computers between P G and its stores and distribution centers. The interaction between P G and Wal Mart helps greater co-ordination; P G can reduce costs and pass on savings to wal Mart. Wal Mart buys American products whenever and wherever possible, if these products provide the sane quality and affordability as their foreign counterparts. Environment concerns the wal mart significantly .A prototype store was opened in Lawrence, Kansas, which was designed to be environment friendly, provide environment education and recycling centers. Wal Mart also adopts the low cost theme for its facilities. Temperature is controlled centrally to conserve energy (How successful is wal mart get details of increase in sales, debt position, operating costs, cost of sales and then comment) Problems Wal mart replaced the then leaders -Sears and Kmans in 1991 in retailing. Its strong competitive position and rapid growth performance cant be guaranteed for long. The top position enjoyed by it can be wiped out by one small bad move wiping out all good things in stroke, therefore every single move in its business operations will have to be well thought out and properly executed Wal marts success is mainly due to the single Business Strategy and its Corporate Social Responsibility. It would like to continue its strategy and push hard to increase its market share if not at least maintain it. This strategy has the risk of putting all eggs in one basket. Secondly, if the present trend continues Wal Mart will reach its zenith in the near future. Once this is reached, it will slow down and Company requires diversifying for future growth. Retail stores can compete on several grounds -service, price, exclusively, quality and fashion on which Wal Mart has the competitive edge. However, other merchants object to the entry of Wal Mart as they can not face the competition due to their small scale and many neighborhood stores were driven out. Mounting opposition to big retailers is now a serious problem with neighborhood associations promising to fight the retailers tooth and claws. As a result the road ahead of Wal Mart may not be smooth as expected in the future. Wal Mart increased the number of retail stores and also Super centre divisions to take up grocery retailing also. Wal Mart moved to overseas markets through joint ventures with an international division formed in 1944 to manage international growth located in South America, Europe and Asia. In 2005 October. Lee Scot, wat Marts President announced that Wat Mart was launching a sweeping business sustainability strategy to drastically reduce its impact on the global environment and thus become a competitive and innovative company in the world. He urged the associates and suppliers to be a good steward of the environment under the same time be profitable. He declared that Wal Mart is committed to the three aspiration goals of being supplied with 100% renewable energy, reduce waste to zero level and to sell product that sustain natural resources and the environment. Against it his background, Andrew Ruben, Vice President of corporate and business sustainability and director Tyler and Elm led the sustainability strategy and recognized the fact that the environment can be protected coupled with business value and profitability. With this end in view, Wal Mart focused on the companied three focal areas-sea food, electronics and textiles- and their effect in the companies operations, supplier relationships and results; and explain how the companies measuring and communicating its ideas about sustainability to its associates, customers and the general public.