Good Example Of Wal-Mart’s Soft AND Hard Technologies Essay
Wal-Mart thrives on scale and cost leadership, and it has not hesitated to deploy technology to further or protect its competitive advantages. The company has invested heavily in efficiency-creating information technology, and other technologies. Perhaps one of the areas where the company has long set the standards is the supply chain management, but Wal-Mart also has an enterprise resource planning systems, human resources management systems, customer relationship management systems, and point of sale (POS) systems, etc.
Perhaps the most important hard technologies used by Wal-Mart are the heating, cooling, and refrigeration systems necessary to ensure products, mostly perishable ones have a longer shelf life, and the buildings are acceptably air-conditioned/heated. Wal-Mart super centers (and other stores) require many huge, industrial scale heating, cooling, and refrigeration systems. The company also uses sound systems, escalators, lifts, computing/networking hardware (including the Wal-Mart cloud infrastructure), LCD display screens, packaging technology, vehicles, mechanical movers, simple trolleys, and water fountains, etc. The company also uses radio-frequency identification (RFID), which is a technology that comprises three key components i.e. a reader, a tag, a computing system loaded with the appropriate software. The RFID tags with encoded product information are then attached to products/packaging, and may be tracked by the company’s system throughout the period that it will be in the system. Naturally, Wal-Mart has an extensive network of computer hardware, to support its operations, from point of sale computers to the administrative machines. Others include servers, networking devices (e.g. wireless access points, routers, bridges, media converters, Network Interface Cards, and switches).
Barriers to the Use of Technology
Other than frequent industrial actions by minimum wage employees and frequent scandals of Wal-Mart’s supply chain in the low cost countries such as Mexico, Vietnam and Sri Lanka employing questionable work and ethical practices, the company is struggling with rapidly changing competitive environments in the more than 125 nations in which it has operations. Sustainability and energy efficiency has quickly become a major issue for Wal-Mart
Perhaps one of the most important technological developments has been the Internet and the attendant electronic commerce. Internet retailing has holds immense promise for the industry across numerous countries. The US Department of Commerce estimates that ecommerce grew from $169.3 billion in 2010 to $297.4 billion in 2014, and the trend is expected to keep up in the short run. This has created new competitive sphere in which companies like Amazon.com, EBay, and Alibaba are in direct competition with Wal-Mart, and doing markedly better (MarketLine, 2015; Yip & Hult, 2011).
Even most importantly, the fast changing soft and hard technologies, render investing in any single technology massively risky. For instance, Wal-Mart has invested billion in in its own cloud infrastructure, which will result in massive capacity to support its own operations, and probably support other companies. However, the cloud technology remains at an early stage of its lifecycle, and faces an uncertain future. If the technology fails to take off, Wal-Mart may lose billions of dollars of its investment (Wal-Mart Labs, 2015; Rogers, 2003). Further, rolling out technology across the company’s global operations presents multiple problems, both technical and cultural. Other than resistance to change, different regions have varied technological needs (e.g. because of variations in infrastructure) and the company’s 2.2 million-strong labor force require training and orientation, which can be an enormous undertaking (MarketLine, 2015; Yip & Hult, 2011).
Continued investment in technology is essential in creating efficiency for Wal-Mart, but since the company is not a technology firm, it should play a less pronounced role in driving innovations. When the company must not hesitate in investing in proven technologies for its purposes, betting its lot with different emergent technologies. Secondly, in order to mitigate the size concerns, and the difficult of reducing the difficulties involved in managing change across its global networks, delegating some, if not most of the changes could help. By allowing individual stores, branches, or geographical sections, etc., to direct their strategic decisions with respect to technological acquisition, let resistance and administrative bottlenecks would be eliminated. This should also help achieve greater efficiency. Further, investment in alternative energy sources to curb Wal-Mart’s carbon footprint should help the company overcome the sustainability and energy efficiency concerns. Lastly, while investing in electronic commerce is necessarily positive, diversification of Wal-Mart’s technological investments should have the consequence of mitigating the risk of individual investments.
Wal-Mart’s rapid expansion and domination of the retail market stemmed from its low cost model that was built around scale, low cost labor, and low supplier power. However, with the intensification of the competition in the industry, the company is increasingly finding it difficult to sustain its competencies. Massive technological investments are central to the maintenance of competitive advantages in the modern retail market, and it is undoubtedly the right strategy by Wal-Mart. However, a focus on sustainability and energy efficiency across the company’s operations will make its investments more affordable, and better for some stakeholders (notably environmental groups) to accept and support Wal-Mart’s technological investments. It may help for the company to measure and report its sustainability achievements through acceptable and standardized frameworks such as the UN’s Global Compact and the Global Reporting Initiative.
MarketLine. (2015). Company Profile: Wal-Mart. New York: MarketLine.
Rogers, E. M. (2003). Diffusion of Innovations, 5th Edition. New York: Simonand & Schuster.
Wal-Mart Labs. (2015, Feb 18). Why we chose OpenStack for Walmart Global eCommerce. Retrieved Jan 2, 2016, from http://www.walmartlabs.com/2015/02/why-we-chose-openstack-for-walmart-global-ecommerce/
Wal-Mart Stores, Inc. (2015, July 14). Our Story. Retrieved Sept 19, 2015, from http://corporate.walmart.com/our-story/
Yip, G., & Hult, T. (2011). Total Global Strategy. New York: Pearson Education.
Global Reporting Initiative. (2011). Sustainability Reporting Guidelines . Global Reporting Initiative. New York: Global Reporting Initiative.