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Strategic Controls in Place

According to Salvendy (2001, p. 46), ‘strategic controls are designed to assess continuously the effect of changes in environment risks on the business, formulate business risk control strategies, and align the organization with those strategies’. Sam Walton achieved this control through a revolutionary approach to distribution and inventory management. Taking the company public in 1970 enabled Walton to use the subsequent funds to build his own distribution networks of giant warehouses that each had its own transportation system, linked up with 175 Wal-Mart stores.

This network ensured that Wal-Mart handled its own distribution, saving millions of dollars on freight costs. Its competitive advantage, therefore, comes from its network of store locations, backed by an unmatched ability to manage and deliver its inventory in optimal ways. These competencies interact, reinforcing each other. Without its exceptionally efficient and effective supply chain management competencies, it would not be a low-cost provider of groceries and other goods.

The distribution network also had tremendous bargaining power because of the number of stores served. Walton underlined this power by ensuring that no supplier provided more than 3 per cent of the total Wal-Mart inventory. The message is that if the supplier does not price as low as possible, the organization will switch its business elsewhere. The increased economies of scale in distribution and purchasing perpetuate the cycle of still lower costs. Tactical Controls in Place

What distinguishes Wal-Mart’s success is the firm’s ability to identify where it wishes to compete. But once it has focused on a geographic segment or product market, it adopts a flexible stance on the tactical imperatives needed to succeed in the general merchandise retailing market – such as the desired customer segment or product market; with which products, and through which customer channels, it wishes to compete; and the precise pieces – and sequence – of its business system that it wants to control.

The key tactical control to Wal-Mart’s success as the largest and most profitable retailer in the world lay in a simple logistical technique called cross docking – an inventory replenishment system whereby goods arrive from suppliers at Wal-Mart’s regional warehouses, where they are sorted, repackaged, and shipped immediately to individual stores. Additionally, not only were its stores sited in small towns, they were invariably situated in low-cost industrial parks, where operating its large fleet of delivery trucks on tight time schedules is a cinch.

Bose (2003) asserts that like Honda, Wal-Mart knew precisely which parts of its business systems it wanted to tightly control – location and logistics initially and now supplier management and pricing. It is important not only to be thoughtful about the when, where, and how, but also be smart about the way the individual decisions about each one of these tactical criteria are combined or are sequenced to develop tactics. No two combinations of these tactical criteria are combined or are sequenced to develop strategy.

This is precisely the reason why Kmart’s and Sears’ attempt to copy Wal-Mart’s pattern of decision making have failed: their strategies were not unique enough for their needs, indeed they were often a regurgitation of Wal-Mart’s. Use of Financial Controls For Wal-Mart, financial and logistical information moved through data systems with an automated ordering of inventory from suppliers, receiving and shipping distribution centers; and receiving, selling and reordering at retail stores.

Wal-Mart requires all components and subsidiaries to operate within a standard systems framework and do not allow individual systems development. In fact, because of its financial control in the United States, Wal-Mart was able to demand special censored versions of CDs for its stores, a demand that most major companies complied with.

WORKS CITED

Bose, P. (2003). Alexander the Great’s Art of Strategy. New York: Gotham Books. Salvendy, G. (2001). Handbook of Industrial Engineering: technology and Operations Management. Canada: John Wiley & Sons, Ltd.

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