Innovation Strategies at The Wal Mart Stores
Weight: 20% (includes 15% for the written report and 5% for presentation)
The course project will entail:
1. Analyzing a change and innovation management situation facing a company, and
2. Describing (as well as sometimes developing or suggesting) responses to managing innovation
processes based on the learning from the course.
Group formation
You will be required to work in groups of 3-4 in order to complete this assignment. Each group will be
asked to:
Produce a detailed report (15%) and
Deliver a presentation of its analysis as well as recommendations in class (5%)
There are many benefits from working in a team, including access to a greater pool of time, resources
and individual skills. Each member of the team will receive the same grade for the written report
and the presentation. To prevent social loafing, students in teams experiencing problems with the
level of commitment of individual members are required to submit a Peer Evaluation form to the
instructor. Marks will be deducted for individual team members who do not live up to the group’s
expectations.
Solution
Introduction
The survival of any business, large or small depends on the ability of that particular
organization to improve its critical operations through innovation. Innovation is the process of
coming up with new and better ways of operations that add value to the company. For a
successful innovation process, all the people in the organization must be aware of the intended
business transactions, the benefits of the proposed activities that would take the firm to greater
heights once the actions are implemented. To engineer proper innovation aspect, it is important
to develop an innovation strategy. The strategy entails the coordination of various aspects of a
company. The process ensues with idea generation, prioritization, and finally, implementation.
The survival of companies in the current environment depends on successful innovations that
they come up with before their competitors. The study below looks at Wal-Mart Company and
how it has worked to achieve various levels of success based on successful innovations.
Background Information
Wal-Mart started in the 1960s with the idea of Sam Walton, who had the ambition to
register higher sales volumes by maintaining prices lower than his competitors continue. His
primary strategy towards achieving this objective was by reducing his profit margin. His strategy
was built on lowest prices anytime, anywhere. Walton’s ambitions brought many changes in
retail operations. The first Wal-Mart store was opened in 1962 by Sam Walton. By 1967, there
were about twenty-four stores, registering about $12.7 million in sales. The official incorporation
of the company into Wal-Mart and it went National in 1970, a period during which it made
incredible growth. The tremendous growth of Wal-Mart that saw its departmental stores rise to
INNOVATION STRATEGIES-WAL-MART STORES 6
fifty-one stores and a record sale of $78 million, led to its listing on the New York Stock
Exchange.
The Wal-Mart Foundation was established in 1979 and in 1980, the first Wal-Mart
Supercenter opened. The supercenter combined a supermarket and general merchandise. By the
same duration, the company had achieved $1 billion sales per year and had two-hundred-and-
seventy-six stores with over twenty-one thousand associates. In 1990, as the company
introduction of supercenters redefined convenience and one-stop shopping at all time lower
prices, it becomes America’s leading retailer. It went global in 1991 when it partnered with a
Mexican retail company, Cifra, and opened a Sam’s Club in Mexico City. By 1992, Wal-Mart
had 371,000 associates and over 1,928 stores and clubs. It purchased one-hundred and twenty-
two Wool Co stores in Canada and continued its expansion into other countries. By 2010, Wal-
Mart had entered many countries including China, Japan, Chile, and many others.
Innovation Trends in Wal-Mart
In 1980, Wal-Mart replaced cash registers with computerized point-of-sale systems to
enhance fast transactions and accurate checkout. Such a move made purchases in the stores more
efficient and effective. In 1987, the company installed the largest private satellite communication
system in the US. The innovation achieved milestone of linking Wal-Mart’s businesses via
voice, data, and video communication. In 2000, the company found a website, Walmart.com,
which enabled the customers in U.S to shop online. In 2007, it launched site to store service,
making it possible for customers to make purchases online and go for the merchandise in the
stores. It made shopping time shorter to customers as they would only come to pick what they
had already purchased.
INNOVATION STRATEGIES-WAL-MART STORES 7
Drivers of Innovation
Innovation entails contribution to a process that produces or adds value (Pablos & Lytras,
2012, p.12). Brouillette, (2014, p. 28) says that, innovation is a new idea, an effective process
that results in the application of better solutions to meet changing demands. Various factors drive
successful innovation, and these factors are referred to as drivers of innovation. They are
believed to singly, or in coordination bring about innovations successfully. Below are the factors
that drive successful innovation in various organizations.
Desire for Growth
The need for expansion in an organization may lead to creating more efficient methods of
business operation that would lead to expansion. Factors that lead to growth include new
methods of operation, new sales strategies, and best market positioning among others. The desire
for growth will lead to research and development on what best strategies to put into place to
achieve expansion. The research results to a finding of better processes and thus innovation. The
desire of growth made Wal-Mart come up with an acquisition as a method of expansion,
designing of a computerized cash system to increase accuracy in financial management, leading
to accumulation of more funds to facilitate growth.
Demand for Increased Profitability
The demand for increased profitability will push an organization to come up with better
processes in revenue management, high sales margins, and effective financial management. The
need for increased profitability has lead to firms coming up with effective automated or
computerized revenue management systems that record sales and revenues as they occur and
INNOVATION STRATEGIES-WAL-MART STORES 8
registers equivalent expenses to avoid human errors and unethical practices that may lead to
losing of funds. The desire to have increased profitability while still offering low prices to its
products pushed Wal-Mart to become more innovative. It came up with ways of increasing the
number of its customers through customer satisfaction. The site to store service was an
innovation that satisfied customers’ need for convenience and time saving and therefore more
customers got attracted, and the company realized higher sales despite offering low prices for its
products.
Commoditization
Commoditization involves making a process or the goods and services produced by a
company easy to obtain by ensuring uniformity in the process or design of the good or service
(Meige & Schmitt, 2015, p. 28). Commoditization comes from the ever-pilling pressure to drive
prices and margins lower through uniformity. It is achievable through innovation and the more
the need for commoditization, the more the drive for innovation.
Technological Revolution
The revolution that occurs in the world of technology has enabled different organizations
to come up with better systems and processes that add value to their business operations.
Effective financial management systems can be done through computer software that guarantees
efficiency and effectiveness. With access to better technological practices, innovation is
facilitated and driven faster in organizations that seek to have better processes in their operations.
Globalization
INNOVATION STRATEGIES-WAL-MART STORES 9
Competitors originate from any part of the world due to globalization. Companies,
therefore, strive to better their processes, goods, and services through innovation so that they
remain competitive. Globalization makes competition stiff since people all over the world can
purchase products from any part of the world in companies they perceive to be offering the best
value for their money. The only sure way to guarantee quality is via innovation of better methods
and practices.
Innovation Strategy
An innovation strategy is a plan that an organization comes up with to enhance
improvements in services through the aid of research and development activities (Rasheed, 2012,
p.22). Such aspects as coming up with new management or production procedures entail the
elements of an innovation strategy. White & Bruton (2011, p.34) says that the innovation
strategy elaborates the role of innovation and gives direction for innovation execution. An
innovation strategy should be able to inspire and describe a desirable future state for the
company. The strategy of Wal-Mart to enhance communication between the company and its
employees at various levels of operations led to the company coming up with measures to
achieve this innovation. In 1987, the company installed the largest private satellite
communication system in the United States. The change achieved the milestone of linking Wal-
Mart’s operations through voice, data, and video communication.
An innovation strategy needs to provide a clear basis through which an organization can
break away from competition, beat competition and be the pacesetter in the industry. Wal-Mart is
more successful in its business operations mainly because of the focus of its innovation
strategies. The strategies aim at being different and the best in the said industry as compared to
INNOVATION STRATEGIES-WAL-MART STORES 10
the competitors. As early as 1980, Wal-Mart had replaced cash registers with computerized
point-of-sale systems to enhance fast transactions and accurate checkout. The move put the
company above its competitors because unlike the competitors; Wal-Mart was now able to
quicken its cash transactions in a manner that led to customer satisfaction too. The cash
management system also led to accuracy in checkout and thus Wal-Mart achieved the goal of
being ahead of its competitors.
An innovation strategy must be specific to the time in which it is developed. Wal-Mart
had an innovative strategy to come up with a way of ensuring communication to the customers
about their new products and services, and allow the customers the ability to make purchases
online. To achieve the specification of this strategy, in the year 2000, the company found a
website, Walmart.com, which enabled the customers in U.S to shop online. In 2007, it launched
site to store service, making it possible for customers to make purchases online and go for the
merchandise in the stores. It made shopping time shorter to customers as they would only come
to pick what they had already purchased. An innovation strategy entails specific key elements
that determine its development as discussed below.
Idea Generation
In the process coming up with an innovation strategy, idea generation is very critical. The
ideas generated will determine the need for a specific innovative strategy. Even though
discussing the intangible service products can be hard, ideas on a new innovative strategy can be
generated through various ways. Wal-Mart for example, got ideas for new products and services
through the customers, the various database in the company, the front, and back offices. In the
idea generation stage, there is too little customer involvement. In creating concepts for new
INNOVATION STRATEGIES-WAL-MART STORES 11
service offerings, customer contact, and the tangibles offer a great opportunity for innovation.
There is no limit to the number of ideas to be generated, the more the better.
Prioritization
According to (Rasheed, 2012, p.43), prioritization refers to the evaluation of different
ideas, and ranking them in order of importance or urgency. The ideas generated can be all
relevant and important but the ideas have to be categorized to filter out the most important ones
first. The intangible nature of services makes it difficult to decide between different available
alternatives, because it is not easy making cross-project comparisons. Wal-Mart found it easy to
prioritize its alternative ideas because, in services, the bottleneck resource is information
technology and therefore must be considered. It is for this reason that most of the innovations
made by Wal-Mart were technology related.
Implementation
Implementation involves putting into force and functionality of the prioritized ideas.
Implementation leads to the development of a new service. New service development requires a
formal process to link and coordinate departments effectively. New Service Development needs
to take into consideration of the multifaceted nature of service quality. In this stage of coming up
with an innovation strategy, customer involvement is highly needed. The reason for the need of
customer involvement is the fact that the implementation of the idea will be affecting the
customer and if they find it unsatisfying, the whole process that an organization has undertaken
may be a waste of resources.
People and Organization
INNOVATION STRATEGIES-WAL-MART STORES 12
An organization generally entails an association and interaction of people. In any service
offered by an organization, there is a high customer contact among the staff and the customers.
The high contact, therefore, would make it necessary staff are trained to make them competent,
and re-training is often necessary to support service innovations. Innovations in service
provisions require that all staff understand the nature of service products and augmentations. The
interaction of people in the organization leads to a development of culture. A culture of
innovation in a service organization can be hard to achieve, but it is even harder for competitors
to copy. This would, therefore, leave the organization in a strong financial position.
Technology
Wal-Mart is a massive technology innovation center. The company has emerged to be
among the high technology institutions in the global market. Utilization of mobiles, social and e-
commerce equipment have made the retailing company to increase its market operations. For
instance, Wal-Mart Exchange (WMX) is a dais that has been availed to the brands that sell
products to the firm. Agencies that are responsible for buying ads for Wal-Mart use this tool to
serve in the online ads in real time depending on the shopper data and level of measurement for
the marketers. The firm’s media agency also has access to the Wal-Mart exchange, which
enables in managing the digital media buys on behalf of the enterprise (Iacovone, Javorcik,
Keller, & Tybout, 2009). Still in the field of technology, an internal search engine was developed
to assist the client in checking details about products of interest by just typing in the questions on
the corporation’s website. This innovation drove about a 20% increase in the online conversions
of the business unit, and the main advantage of using the online platform is that it enabled the
firm to realize a wider market both nationally and probably in the export sector. This implies
that, the Wal-Mart invest more in the upgrade of the technology.
INNOVATION STRATEGIES-WAL-MART STORES 13
Sustainability
Wal-Mart has launched innovation strategies to drive to operations of the firm in a
sustainable manner towards achieving the goals. This has been strategized to take the course
through ensuring there is zero generation f waste, 100% use of renewable energy resources and
lastly, selling of items that are compatible with the environment. The ideology of green initiative
came after a realization that being green is an advantage since it provides a boost to the baseline.
Almost all the firms’ high efficiency leading stores feature the massive roof-mounted
refrigeration services.
Individual vs. group creativity
According to (Keithsawyer, 2010) great creativity is usually based on the collaboration of
creative individuals, conversation, and social networking with such people. Groups typically
generate half as many ideologies as the pooled ideas of the solitary individuals. According to
various researchers, in the real world, a group is asked to tackle tasks that are complex and need
some more input from the various stakeholders. Thus, involving knowledge of conceptual
systems, groups can perform better than individuals are. A study was done to compare the
effectiveness of solitary worker compared to groups of two, three, four, or five to test their
ability tin solving simple tasks. The performance of the groups was statistically identical to two
people working lonely; implying that there is needed for at least three individuals to obtain the
benefits of group dynamics through the addition of more people does not result in an additional
benefit.
Knowledge management
INNOVATION STRATEGIES-WAL-MART STORES 14
Knowledge management refers to the practices and strategies that a firm utilizes in the
course of trying to develop strategic insights based on the kind of knowledge available.
Successful individuals have heavy companies need heavy investments towards internal
knowledge management procedures (HubPages, 2011). For proper functioning of a firm,
knowledge must be organized and managed differently depending on the level of importance.
This is because; creation of any kind of knowledge is brought about via recognition and analysis
of the existence of gaps that provide a room for researching and keeping of information.
The need for sound knowledge management systems the key driving strategy behind the
success that has been experienced by the Wal-Mart over time. The enterprise maintains and acts
upon awareness in a varying scope and due to that, the progress of most investment projects has
been a compelling determinant of the best strategy to adopt. In connection to that, Wal-Mart
frequently considers establishing ad assessing the coverage of its knowledge management
indulgences. This has caused the corporation to display an important concept in that failure to
keep track of the changes in knowledge management can eventually result in negative elicitation
force that may lead into the direction that does not aim at achieving the goals of the business
(Valmohammadi, 2010). Despite leading on the global scale if the retailing industry, the
corporation has to consider adopting more recent knowledge management techniques to maintain
the position or else it will be outcompeted from the market.
Despite the fact, management activities are in all aspects of the Wal-Mart store; about
technological development, the corporation has the potential of reaping more benefits from
proper implementation of loans. The recent researches done on the subject matter regarding the
company reveal that, now the company will enjoy because of the leading position in the global
market.
INNOVATION STRATEGIES-WAL-MART STORES 15
Risk management during implementation
Risk management refers to the process of identifying, analyzing and undertaking any
other step necessary to eliminate the exposures to loss in case of an occurrence of a peril. This
practice utilizes a handful of tools and techniques that also include consideration go insurance to
determine the extent of accounting for an effect if it comes. This process involves several steps
that range from the identification of the risks tom provision of solutions.
Business enterprises have several alternatives for the management of occurrence of such
steps which extent to include means of avoidance, assumption, reduction or even transfer of
risks. In the contemporary world, management of financial losses is a major consideration to
guarantee the future as a business grows and develops new market suggestions. The major focus
of enterprise risk management is to develop a culture of peril management throughout any
particular companies that may handle the risks adequately.
For an enterprise to effectively benefit from the handling of risks the course of
implementing the management provisions should be adequate and the possible resources
assigned since this contributes to the success of the businesses. Now, this requires contacting a
huge amount of sources to go effectively about the process. Implementation of the risk
management strategy for every corporation is of great importance as part of the management
plan. Any business is it huge or small should always put into consideration the risks that be
associated with the firm always to remain prepared on how to handle the problem in the case of
occurrence of a peril.
INNOVATION STRATEGIES-WAL-MART STORES 16
Recommendations
Any business unit is put up to generate profit o the owner. This means that, all the
activities must be coordinated with the aim of earning more returns. From analyzes of this article
recommends that the management of a business should:
• Determining the Objectives of the Business
A Proper understanding of the corporate goals and objectives acts as the guidelines
towards the development of a successful innovative strategy and forms the baseline for
predicting possible risks that may face the business.
• Identification of the extent of exposure
The analysis should be conducted thoroughly to identify the potential risks that may face
the corporation. Based on the gathered information, the potential risk that may affect the
corporation are identified and listed down.
• Measuring of the exposure to potential risk
After identification of the risks, adequate analysis of the identified peril should be carried
out to determine the extent of exposure thus enabling selection of the possible methodologies to
manage it
• Selection of alternatives that is possible
INNOVATION STRATEGIES-WAL-MART STORES 17
Having identified the possible risks and analyzed the extent of exposure, this steps involves the
activities aimed at suggesting and selecting the best alternative to combat and manage the
problem
• Implementation of the solution and then motoring
The selected alternatives are implemented and evaluated over time to determine its
progress and enable identification of the areas that may need amendments. Monitoring enables in
keeping track of the conditions of the implementation process.
Conclusion
In an organizational context, innovation may be linked to the various changes that accrue
in a corporation such efficiency, the level of productivity, quality and the market service among
others. All these are significantly influenced by innovative strategies. All business enterprises
can innovate and among them is the Wal-Mart, which has captured the market with its
environmentally friendly inventions in technology and sustainability in the last decades. This has
substantially contributed to the corporation being ranked number in the global retail market.
INNOVATION STRATEGIES-WAL-MART STORES 18
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INNOVATION STRATEGIES-WAL-MART STORES 19
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