According to one recent study there is little for the employees to fear concerning outsourcing.
The results show that although service outsourcing has been steadily increasing it is still very low, and that in the United States and many other industrial countries insourcing of services is greater than outsourcing” (Amiti, 2005, p. 308). The core team concept helps to emphasize the fact that many companies are outsourcing by insourcing, and therefore alleviates the fears of the employees.
Additionally it must be kept in mind that outsourcing can be a big boon to the companys bottom line. “A recent article portrayed this situation well, stating, “it is apparent the millions of Indian and Chinese engineers, software developers and service providers can do all this sophisticated stuff as well as or better than the Americans at a tenth of the cost” (Prestowicz, 2004, p. 40). A tenth of the cost can be a huge savings depending on the needs of the company in regards to software and systems maintenance. Whether the information systems have to be totally designed, created and implemented by using outsourcing capabilities is at the behest of the company managers. The decision will have to include not only the internal workings and operations of Wal-Mart, but would also have to take into consideration the external marketing opportunities available.
Since Wal-Mart in this case study is already considering outsourcing a portion of its technology needs and services, the company should probably consider the use of e-commerce as well. Integrating e-commerce possibilities the informational systems design makes sense.
While integrating e-commerce and informational systems into the overall scheme in entering a market, especially a market like Germany that Wal-Mart had initially had such high hopes for, would be a natural extension of the retail market, and one that could have assisted Wal-Mart immensely. A note of caution in this regard was issued recently by one expert, who stated, “Companies that state they are users of e-commerce may in fact only have a promotional website rather than a fully-fledged, interactive, transaction-based interface” (Fillis, 2007, p. 445). The question becomes a matter of whether e-commerce would have been an effective and profitable complement to Wal-Marts retail business, at least in the sense that would have assisted Wal-Marts attempts at gaining a foothold in the Germany market. The answer derived from this case study is that every complementary event may have added up to enough of a profit to at least continue in business, rather than folding the tents and taking a $1 billion loss. Another consideration for Wal-Mart when implementing informational technology systems that are going to be worked on primarily by outside sources is the privacy issue that can be breached through online sources or nefarious systems developers.
Identity theft is currently a large societal problem, and steps need to be taken by companies to ensure the safety and privacy of the individuals who work for or with the company. There are characters in the world who would like nothing better than to steal personal information from a companys informational system(s).
One expert speaks of the dissemination of information to those who need to know and those who do not, in the following manner; “information may only surface in a legitimate comprehensive background check, but in a more menacing scenario, it may wind up in the hands of a remotely located identity thief without the consent or control of the person the information identifies” (Ciocchetti, 2007, p. 55).
This type of situation is probably especially worrisome when entering a market in a foreign country. Safeguards can be established that will assist in addressing this issue, including, but certainly not limited to; inserting firewalls into the system that prohibits those without authority from accessing information, as well as implementing procedures that all employees understand the consequences of if they are caught disregarding them. Wal-Marts internal operations, due to both their size and complexity, would have to take into consideration the myriad of personalities involved in implementing such procedures, and an example would have to be set from top management all the way down to the local retail manager. It is especially important to have a standardized program that holds all employees responsible for their own actions. Integrating technology into any business requires that human interactions and choices be as above board as possible, primarily because technology can be manipulated since it knows not the hand that manipulates it.
Integrating technology into almost any business decision can produce benefits the company, employees and consumers.
At times those benefits can be the difference between generating a profit, and taking huge losses. Another aspect of competitiveness that the case study will present is the fact that Wal-Mart has been so efficient in delivering the product most desired by the customer at the exact time the customer wishes to purchase it. This has been accomplished in the United States and in other markets by using technology in a very efficient manner.
The use of bar code reading tools at the retail level allows Wal-Mart to know exactly what products are being sold and at what locations. This information is then transmitted to a central location that allows Wal-Marts buyers to analyze consumer trends and buy products accordingly. Once the purchases are made at the wholesale level the trucks carrying the products are dispatched to the locale retail stores. Because the product is ordered from a central location and on a wholesale basis, the cost is much less than if done so using other methods. Wal-Mart planned on using this same type of system in Germany but ran into a couple of snags along the way, which ultimately forced them from the market.
There are a number of barriers that companies have to overcome when attempting entry into other markets, which is especially true when entering into foreign countries. Wal-Mart had successfully instilled its culture on the citizens in other foreign markets but when Wal-Mart attempted to instill its conservatism and frugality on its German managers and shoppers but failed miserably.
Wal-Mart also faced well-established rivals in Germany, like Metro, and hard discounters such as Aldi and Lidl, already comfortable with razor-thin profit margins. Many retailers in Germany are owned by wealthy families whose business priorities are not always the maximization of shareholder value.” (Wal-Mart 2004).
UK analyst, Bryan Roberts had this to say; “Wal-Mart will be looking at its whole European strategy in the wake of the German debacle. He speculated that Wal-Mart will have to go after one of the major French retailers, such as Auchan, if it wants to expand on the continent.” (Wal-Mart 2006).
Wal-Mart south of the United States border commands a whopping two percent of the national economy of Mexico, approximately the same as in its home country, the United States. It has grown to that size in a short twelve years. In 1992 Wal-Mart bought into a 122-store chain in Mexico called Aurero-Bodega, and then five years later, Wal-Mart took over the chain completely. “Wal-Mart now owns 687 super stores in 71 Mexican cities under the marquis logos of Wal-Mart, Aurera-Bodega, Superama and Sams Club – plus 52 Suburbias, a more upscale department store chain, and 235 VIPs restaurants.” (Ross 2005).
Unlike Germany and South Korea, Wal-Mart was able to instill its culture on Mexico due to a number of factors that were similar to the culture of the United States. In Mexico, employees were hired that were non-unionized just as they are in the U.S.
John Ross states; “As in the U.S., the bottom line is gospel in Mexico and no unions or other troublemakers are tolerated on the premises. Non-union Mexican Wal-Mart “associates” earn an average of 13 pesos an hour (about $1.20 USD) as compared to their non-union U.S. associates $9.50 (unionized supermarket workers make $19.)” (Ross 2005). In Germany, as mentioned before, some of the largest retail chains are owned by families and therefore the approach used by those in charge are different than what is used by Wal-Mart. Families dont necessarily make the bottom line the top priority.
Completing a SWOT for Wal-Mart allows for some intriguing analysis. What is intriguing is the fact that many of Wal-Marts strengths can also be discerned as the companys weaknesses as well. Wal-Marts strengths include the fact that they are the worlds largest retailer. This can be seen as both a strength and a weakness.
It is a strength because of the power wielded by the biggest is an aphrodisiac to those retail shoppers who wish only to purchase by price. One of Wal-Marts most competitive advantages is because they have the size and power to dictate pricing in almost any market. This is also a weakness because many individuals will not shop at a Wal-Mart (or any retailer who touts how big they are) primarily due to the size. These individuals would much rather pay a few dollars more, or will shop for higher quality items.