Site Loader

 

Part 1

“Celebrate your successes. Find
some humour in your failures.”

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

 

This quote, expressed by the founder of Walmart, contains few words but
a powerful outlook on organisational life. It makes sense of one of the initial
core values of the company – the modesty of failure. This value could soon be
put to the test since Walmart is currently facing a period of creative destruction,
possibly hitting at its very foundation. Amazon’s acquisition of Whole Foods
carries a symbolic value, suggesting it becoming the front-runner of the fusion
of digital and physical experience (Rigby, 2017). Though future thinking
suggests genuine uncertainty and
thus doesn’t ensure digitalisation as an emerging trend within the industry, Walmart
must proactively try to shape the
future of the industry instead of passively reacting to the ripple effects of
the acquisition. In other words, Walmart must recalibrate its sensemaking to encompass learning from the
differing sensemaking stories being presented within the industry.

 

To enable change, a thorough understanding of the
internal and external organisational behaviours is required. Internally, the company has a strong
founding story and thus uses entrepreneurship
as a form of identity and management of meaning. Walmart commenced as an act of
“defying conventional wisdom” (Wells
and Ellsworth, 2016) and the founding father is repeatedly portrayed in a
heroic sense through stories of perseverance, bravery and business
intelligence. The innovative and creative response of the company is further emphasised
through stories of persistent experimentation and myths of all associates having
to identify and generate new business ideas weekly.

         Besides
an entrepreneurial origin, the internal sensemaking of the company also
pinpoints the importance of its American
nationality. Being founded in an economy resembling a Game Park, national
expansion was firstly conducted through a saturation method which prioritised localness.

This American focus remains intact within the organisation, primarily through a
financial dependency on the domestic market, an eagerness to label products as
American-made and a global expansion strategy where local adaptations are kept
to the minimum. Furthermore, appointed CEOs are from the U.S.A. and top
management is located within national borders. The emphasis on employees,
expressed through the belief that “to win
we must run the business well today and change the business for the future”
(Wells and Ellsworth, 2016), is mainly directed toward those working in the
U.S.A. since they were the ones who were offered a raise of the minimum wage.

 

Analysing the two aspects of Walmart’s internal
sensemaking process, one can divine a superstitious
outlook and a discrepancy between the espoused theory and theory-in-use
(Argyris and Schön, 1974). On the note of entrepreneurial spirit, the current
business mainly limits experimentation to incremental
projects and attempts to introduce alternatives to services offered by other companies
and industries. More often than not, Walmart soon returns to focusing on its
core business. This is further exemplified through a comparison with Amazon,
competing with Walmart primarily through its purchase of Whole Foods. Amazon’s
founder is a young entrepreneur with big dreams to develop an organisation
catering to consumers’ every need. This entrepreneurial outlook has unfolding
effects on the internal sensemaking of the entire organisation, primarily displayed
through its purchase of a physical store chain. The acquisition can be regarded
as a strategic move to magnify the competitive advantage of Amazon; being an
innovation engine. Amazon does adaptive innovation and learning in the
increasingly fast-moving market of retailing, while traditional players like
Walmart run behind, doing predictive planning to react to the repercussions.  

         In
regard to Walmart’s American branding, the business environment speaks of
several contradictory stories. Records show mislabelling of American-made
merchandise and discrimination of U.S.

employees in multiple regards, including a sexual harassment lawsuit and
unacceptable working conditions. In contrast, Amazon’s newly-acquired food
retailer focuses on the label of locally-produced rather than American-made. Sustainability
is seen as the underlying reason for Americans buying American food rather than
the value of the U.S. brand. Further, Whole Foods is pursuing a value-driven
strategy in regard to employee commitment. All workers are regarded as equal
and are placed at the centre of the business model, stating that while “…plenty of companies talk the talk of
empowerment, autonomy and teamwork , this company has spent 16 years turning
those (often empty) slogans into a powerful – and highly profitable – business
model” (Fishman, 1996).

 

Concerning external
sensemaking, Walmart is a company delivering customer value through cost leadership. This has its roots in
the belief of the founder, claiming that “no
matter what you pay for an item, if we get a great deal, pass it on to the
customers” (Wells and Ellsworth, 2016). The focus on costs is also noticeable
in the expansion strategy of the firm, where external markets are made sense of
using statistics. The areas experiencing the highest growth in customer
spending are primarily targeted.

         Externally,
Walmart is strongly associated with brick-and-mortar
stores. Through external sensemaking processes, the company believes in the
benefits of instant gratification and the in-store experience of shopping. This
has resulted in a continuous expansion of physical stores, keeping the core
business of Walmart intact. As a response to the digitalisation trend of the
retailing industry, the current CEO firmly states that the company’s widespread
store network and developed customer service culture puts Walmart at the
forefront of the movement. Therefore, technological advancement is not seen as a
threat to the existence of physical stores but rather as a way to build
stronger customer relationships, focusing on tracking buying habits and
offering customised discounts.

 

Regarding the two aspects of external sensemaking at Walmart, the
company seems uninformed about the
societal changes and trends falling outside of its sensemaking. By not altering
the strategy that once made Walmart into “the
world’s largest company by revenue” (Wells
and Ellsworth, 2016), the company is sticking to physical
stores with cheap prices and falling
victim of entropy. Walmart’s business model
takes customer rationality for
granted by assuming that cost-minimisation is the major driver behind purchases
(Madsbjerg and Rasmussen, 2014). This is an over-simplification of human
behaviour, strengthened by the growth and profitability of Whole Foods where
higher prices persist because consumers value nutritious content and
sustainable production (Taylor, 2017). As consumers become more informed about
health and environmental concerns, the sensemaking of companies must convey
more than cost leadership to fully possess a competitive advantage. Besides
benefitting from the value-driven image of Whole Foods, Amazon’s integration
with the physical store chain also provides access to a new valuable source of information;
the face-to-face interaction with consumers. Through such channels,
experimentation with customer prices and preferences is enabled and the company
becomes more reciprocal to changes in consumer trends and demands (Simon,
2017).

The over-simplification of consumer trends is paired
together with a disregard of the power
of digitalisation. Sticking to physical stores and focusing on technology
to improve the in-store experience, Walmart is generally getting the digital
experience wrong. Consumers are not demanding high tech for the sake of it but
value technology that enriches their experience and saves time. Amazon does exactly
this through its convenience, immediacy and one-click ordering. Its expansion
into the retailing industry suggests the emergence of a new trend, where
technological solutions can replace the very existence of physical stores.

Walmart themselves express the offering of a seamless experience as the “future of retail” (Wells and Ellsworth, 2016), but don’t seem to realise that Amazon’s all-round
solution comes a lot closer to achieving this than Walmart’s brick-and-mortar
store chain (Gomes-Casseres, 2017).

 

Given the previously identified trends in society,
changes in consumer behaviour and other disruptions within the retail industry,
the management should reconsider its sensemaking processes through a four-step
process.

         The
company seems to be stuck in a phase of denial.

The assumption of being able to add digital capabilities quicker than Amazon
can add stores is continuously reinforced through a single-loop learning
process, based on functional stupidity. The management of Walmart is refusing
to use intellectual capacities to justify the predominant strategy of the firm,
thus using substantive reasoning to limit sensemaking to what has previously been
studied and reasoned. In this historical context, Walmart’s business model has
resulted in large profits and online platforms like Amazon have never been a
threat. Reflexivity is not adopted and Walmart is operating on a
knowing-mentality. To avoid the risk of destabilising the company and demotivating
its employees, Walmart is focusing on factor markets and thus balancing the
discrepancy found within its internal sensemaking (Alvesson & Spicer,
2012).

         A shift
toward a learning-mentality is needed to terminate the reinforcement of
functional stupidity within Walmart. Focus needs to be placed outwards toward
product markets, engaging with the customers and value-creation. This
symbolises a waking-up stage of the
organisation which is further required for the management of Walmart to be
receptive to learning and changing. This can’t be achieved without interaction
and Walmart must become a member of the community of practice it must to
compete within, namely the industry spanning across digital and physical
retailing. To allow for this double-loop learning to occur, the underlying
assumption of Walmart must be challenged. As an old-timer, Walmart must begin
accepting Amazon as a newcomer, competitor and symbol of disruption within the
industry (Lave, 1991).

         Once Walmart
has accepted the prevailing market conditions, the organisation must take a
defensive role and search for stability in what it is fighting for. This should be its internal sensemaking. Though showing
signs of superstition, there is a sense of certainty conveyed through the clear
vision of the founder – the narratives of Walmart’s entrepreneurial spirit and
American values are credible. They symbolise the essence of the company; Walton
wasn’t afraid of experimenting with Walmart as a brand but his heritage and
experiences were always present. Though the theories-in-action speak of
contradictory behaviours, the core values of Walton still seem to be present within
the company in the form of aspirations or espoused theories. The
entrepreneurial and American values thereby constitute Walmart’s dominant internal story and to reduce
the prevailing superstition of the company’s internal sensemaking, they must be
re-introduced. This should be done in a way that ensures a semantic fit with the initial sensemaking story (Näslund and Pemer,
2011). To re-introduce innovation, Walmart should highlight the importance of
an accepting environment, where failures are regarded as opportunities to
learn. To re-emphasise the American values, Walmart should ensure that all
employees have working conditions in accordance with American law. Further, the
connection between American-made and sustainable local production should be strengthened
to offer consumers advantages beside price leadership.

         To avoid organisational inertia associated with re-introducing
the dominant story of being entrepreneurial and American, Walmart finally needs
to introduce proactivity into its business model to begin fighting against competitors. Walmart is currently unsure about its
external sensemaking and thus needs to make changes to make sense of the
business environment. Firstly, the idea of understanding customer behaviour
through default thinking must be disregarded. Basing the expansion strategy on
statistics of purchasing power in foreign markets neglects the influence of
cultural barriers to entry and thereby says little to nothing about the
acceptance of Walmart’s business model. Further, humans are not rational beings
and other factors than price counter into a purchasing-decision (Madsbjerg and Rasmussen,
2014). Walmart must realise that its
competitive advantage can’t just consist of cheap prices, especially since
emerging online businesses often have lower fixed costs and thereby present a
large threat in beating Walmart in a pricing-war. Secondly, the external
sensemaking of Walmart must be widened to incorporate the effects of
digitalisation and the accompanying new level of competitors entering the
industry. Technology can’t be simplified to the use of high tech products
inside stores but must incorporate the threat of customers preferring the
format of digital platforms, thereby possibly demolishing the very existence of
physical stores.

 

 

Part 2

According to the previous analysis, uncertainty within
the external sensemaking process is the primary reason behind Walmart’s
underperformance. The company has lost touch with its core consumers, unaware
of which value propositions they find important and what preferences they have
regarding technological advancements. To reach a moment of clarity, the Walton
family would benefit from applying the sensemaking approach since it would
allow for the family to go beyond default thinking and what can be captured by
numbers, to understand how consumers truly experience Walmart (Madsbjerg and
Rasmussen, 2014).

 

The first phase of sensemaking involves framing the problem as a phenomenon. The
business model of Walmart assumes that consumers demand both low prices and the
convenience of being able to visit nearby brick-and-mortar stores. With default
thinking as approach, the underperformance of Walmart would therefore either be
explained by a need to cut costs or a previous expansion into regions where the
local customer base isn’t large enough for the retailer to be viable. However,
Walmart needs to understand that something else is being lost beyond just
numbers; the connection with the customers. To use sensemaking as an approach,
the company should therefore reframe the question from “How do we make more
money?” to “How do our consumers experience retail?”

 

The next phase of sensemaking is the collection of data. To enable the
answering of the proposed question, it would be beneficial to hire experts to
do interviews and participatory observations. Interviews could be used to explore
what individuals value when choosing their mode of retail shopping, such as the
importance of brand and image of the retailer. Participatory observations,
including studies of how people react when presented with the opportunity of
doing their grocery shopping online, would allow for human behaviour to be
studied first hand.

 

Third, the data would be analysed to look for patterns. For example, there
could be reoccurring accounts of individuals expressing the importance of their
retailers taking an ethical and moral standpoint regarding
environmentally-friendly solutions. Another possible pattern could be customers
first experiencing a form of reluctance toward online shopping but then
expressing excitement over the simplicity and time-saving aspect of it.

 

The fourth stage of sensemaking involves creating the key insights. In relation
to the first pattern, it could be translated into the development of Walmart
into a value-driven organisation, where higher prices are justified by sustainable
products and fair working conditions. Further, the second pattern could mean a
change of direction for Walmart, reallocating resources from the establishment
of more physical stores to the development of the organisations’ technical
advancement. The online platform could be improved together with a continued
maintenance of some physical stores in order to cater to the different stages
of the customer cycle. The stores could thereby act as showrooms of products or
as reassurance for reluctant customers yet not persuaded by the changing
environment of retail. Further, Walmart could develop the data collection in
their stores. This could create a valuable database for future data trade and
collaborations across sectors.

 

The fifth stage involves building the business impact. 
The key insights generated by the sensemaking process must correspond
aesthetically and ethically to Walmart’s intended business direction. Building
on to the previous examples, developing the business toward a more sustainable and
digitalised model would keep the identity, the internal sensemaking, of the
company intact since it would strengthen the innovative aspect of the company
and build on the localness of the American branding of Walmart.

 

As a conclusion, the internal
sensemaking of Walmart needs to be reinforced into the organisation,
highlighting the importance of entrepreneurship and its American heritage. The
external sensemaking must be reconsidered to capture the changes occurring in
the near surrounding of Walmart. This could be done through the five phases of
sensemaking, building an understanding of customer behaviour and the
experiences customers have of Walmart as a company. When reaching a moment of clarity, Walmart could disrupt
the spiral of functional stupidity present within the organisation and thereby
begin questioning the norms and knowledge claims currently dominating the
customer approach within the organisation (Alvesson & Spicer, 2012).

 

Finally, to incorporate a note of reflexivity
into this investigation, it is important to acknowledge the writer’s
perspective and what influence it may have on the analysis. With roots in
critical realism, there is a prevailing assumption that the external world
makes up a reality but that it still can’t be completely minimised using
numbers. This leads to automatic criticality of Walmart’s positivist approach
to understanding markets using statistical references. This perspective also advocates
sensemaking as an appropriate method of analysis, possibly magnifying the
importance of the reached conclusions. Other results could have been obtained
if different methods were used when defining and examining the problem of
Walmart’s business model.

Furthermore, the analysed case could be influenced by success bias. In a business environment
that relates mistakes to shame, available sources of information are often
skewed toward stories of success. Though the case mentions some operational
failures of Walmart, the possibility of there being even more examples can’t be
disregarded. Some mistakes might not even have been revealed to the public but
kept within the organisational boundaries. This could impact the final remarks
of the analysis, leading to it possibly not capturing the severity of Walmart’s
underperformance.

Following this argumentation, the analysis above could
be regarded as a countermovement to the potential success bias in the
representation of Walmart. It highlights the importance of both internal and
external sensemaking and provides insights of how Walmart should react in order
to develop their business given current trends in society, changing consumer
behaviours and other changes in the retail environment. From the perspective of
Walmart, these insights could be regarded as a representation of the company
previously failing to alter and adapt its business model to ongoing changes. Yet,
in spirit of arguing for the renaissance of Walmart’s entrepreneurial identity,
the company’s lagging reaction should instead be regarded as a failed
experiment that was needed in order to lead the company back to its roots and
perhaps to the next revolutionary innovation within the industry. Or, in the
words of Walmart’s own founder:

 

“Find some humour in your
failures.”

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post Author: admin

x

Hi!
I'm Lewis!

Would you like to get a custom essay? How about receiving a customized one?

Check it out