Organizational culture of Wal-Mart and Costco Corporation
Introduction
From the organizational point of view, Hofstede (1999) analyzes the mental models linked to organizational culture. This manifests itself through symbols, heroes and rituals, such as practices and values at different levels of depth, which cannot be observed with the naked eye.
The retail industry is one of the protagonist lines in the United States economy. Generates almost $ 966 billion a year, which contribute approximately 5.7% of the nation’s GDP. Annually employ 5 million people. In addition, since retail trade offers a way for products to reach consumers, it is also compatible with wholesale industry in which it represents $ 1.08 billion dollars in the United States.
According to Euro Monitor (2017), Wal-Mart Inc. and Costco Wholesaler Corporation are multinational retail companies that operate nationally and internationally. Through this descriptive research, we intend to analyze both companies in terms of their organizational and structural design. Our general objective is to evaluate how both companies manage their organizational-cultural and strategic-business structure to achieve a competitive advantage. The specific objective is to compare both organizational cultures and opt for the best.
Background
WAL-MART-DESCRIPTION OF THE COMPANY COSTCO-SUMMARY OF THE COMPANY
According to the company’s annual report (2017), Wal-Mart Stores Inc. He joined in 1969 in the United States as a small discount store with the idea of "selling more for less", which became the world’s largest retailer in the last 50 years. Appears on the list of 1 of the 500 companies with the largest fortunes in 2016. In addition, Wal-Mart expanded internationally and serves 260 million customers in 116, 95 stores under 63 different flags in 28 countries with 16 electronic commerce websites in 11 countries. In fiscal year 2017, the company reported income of 485.9 billion, with approximately 2.3 million employees worldwide, 1.5 million alone in the USA. UU. The main competitors of Wal-Mart in the market are Costco Wholesale Corporation and Target Corporation. Wal-Mart’s business consists of three reportable segments: Wal-Mart U.S., Wal-Mart International and Sam’s Club.
Wal-Mart EE. UU. He is the largest retailer with three main store formats, as well as the digital retailer with the greatest gross benefit as a percentage of net sales. In addition, historically, it also contributed largely to net sales and operating income of the company.
Wal-Mart International, the second largest segment operates outside the USA. UU., Including retail businesses, wholesalers and others. These companies also consist of supermarkets, super-centers, hypermarkets and warehouse clubs that include Sam’s Club, Cash & Carry, household improvements, electronics, pharmacies, clothing stores, convenience stores and digital retail stores. The general gross gain of international businesses was reported lower compared to US operations. UU. Due to its combination of goods.
Sam’s Club consists of a digital retail club and a warehouse only for members. The company that obtains membership income, which is an important component of the operational income of the segment; However, this segment operates with lower gross profits as a percentage of net sales than other segments.
According to the company’s annual report (2016), Costco Wholesale Corporation began operating in 1983 in Seattle, Washington, USA. UU. In October 1993, Costco merged with a pioneering company "The Price", which had the concept of warehouse membership in 1976 and later established Price / Costco Inc., Delaware Corporation. In 1999, the company joined Delaware to Washington and changed its name at Costco Wholesaler Corporation. The company offers merchandise, that is, food, diverse items, hard lines, fresh food, soft lines and others. Wal-Mart, inc. and Target Corporation are its main competitors in the market. The company reported annual sales of $ 250 million in the 2016 fiscal year generated by every 715 stores and net income also remained solid, that is, $ 2.3 billion or $ 5.33 per action.
The company operates in a 723 store chain in 44 states until December 2016, Washington D.C and Puerto Rico (506), Canadian provinces (94), Mexico (36), United Kingdom (28), Japan (25), Korea (12) and Taiwan (12), Australia (8), Spain (2). In addition, the company’s retail business website operates in the United States, Canada, Mexico, Korea and Taiwan. The company is also announcing 31 new openings in fiscal year 2020 and expanding its business worldwide in two more regions, that is, Iceland and France, which in total represent 750 stores worldwide.
Importance and estimates of the global and American retail industry
The retail, wholesale and distribution industry is gaining significant growth in the market and is continuously transforming. Similarly, according to the National Retail Federation (2016), the growth of net sales reported being 3.1% in 2016, which is higher than the average in 10 years of 2.7%, respectively. However, as illustrated by Euromonitor (2017), growth in the global retail industry is expected to be 15% from 2016, mainly driven by Asia Pacific, which contributes to 40% of the increase in the next five years (until 2021). Therefore, the growing performance and growth of the retail industry pushed many retail companies to find efficient ways to minimize costs, increase profitability and market share and expand growth.
Similarly, according to the US Census Office. UU., Approximately two thirds of the Gross Domestic Product (GDP) of the US. UU. are derived from retail consumption and, therefore, the annual retail sales of the US. UU. They have increased an average of 4.5% between 1993 and 2016. The Retail Industry of the EE. UU. will inform total sales of just over $ 3.2 billion in 2020. As the EE retail industry. UU. It operates in a competitive environment with giant rivals such as Wal-Mart and Costco Corporation, companies must anticipate uncertainties when evaluating potential risk and threats along with opportunities to design the general business strategy (Euromonitor, 2017).
Wal-Mart and Costco Corporation are the main Retailers of the USA. UU. With annual sales of more than $ 100 billion and are competitors in search of ways to acquire resources for themselves. Therefore, now, evolution focuses on the consumer and companies evolve to meet the needs of the client together with advanced technology, intense competition, innovation and consumer mentality that require companies to adopt and change to manage uncertainties in the internal and external environment (World Economic Forum, 2017)
Therefore, finding the correct strategy that can effectively respond to the changes that cover the environment, such as the changing needs of the clients and paying close attention to the actions of the competition, is considered a complex problem facing managers. Therefore, the members of the organization must develop their basic competences, value creation skills and skills to manage the interrelations of the strategy at all levels, organizational design, structure and culture to maximize, expand and protect their commercial domains for Create value to satisfy all interested parties (Jones, 2013).
Organizational structure
As explained by (Katsikea et al., 2011), the organizational structure is a control mechanism used by the organization to control and direct the members of the organization that affect the work results of the employees, ensuring that the required tasks are carried out effectively and efficiently, which which Help achieve the objectives of the company. As Jones (2013) argued later, "the organizational structure is the formal task relationship system and authority that controls how people coordinate their actions and use resources to achieve organizational objectives". The definitions imply that the organizational structure is used to achieve organizational terminal values (such as maximized profits, innovation and sustainability) through instrumental values, that is (empowerment, coordination, motivation, collaborative culture). Notably, as organizations grow, expand and differ, they are likely to find motivation and coordination problems, therefore, for an organization.
The appropriate structure relieves those problems. In addition, the organizational structure evolves during the life cycle of organizations and can be administered effectively through the design and organizational change process (Dessler 2011, Jones 2013). In the following section we started the analysis of the organizational structure of Wal-Mart Inc. and of Costco Corporation in order to understand the impact of the organizational structure on the performance of both companies.
Organizational Structure of Wal-Mart and Costco Corporation
Division structure: multi-device structures
According to the Manual (Wal-Mart leadership, 2017) and the Annual Costco (2016) report, the operation of the merchandise business of both companies is divided into different divisions. For example, Wal-Mart US, Wal-Mart International, Sam’s Club and Wal-Mart E-Commerce, and in the similar way, Costco has local divisions in the USA. UU. That is, South, North, East and West of the USA. UU., In places like Canada, Taiwan, Australia, France, etc.. Obviously, both companies operate in different divisions creating a multi-device structure: geographically dispersed units that work according to the specific demands of products, customers and markets built from standard megatiendas, super-centers, express shops, supermarkets, supermarkets, hypermarkets, warehouses and many other members. The units are added even more in larger geographical groups, such as districts, regions and other divisions. In addition, each division independently has its own support functions to control value creation activities, such as marketing and human resources (autonomous divisions). Multi-device companies, for example, Wal-Mart and Costco, consist of a corporate center or headquarters in the USA. UU., Responsible for the general management of the organization, the number of semi -autonomous divisions in the nation, as well as worldwide. Subsidiaries or business units, each responsible for its own region, industry or product and market combination. Therefore, the multi-device organization resembles a collection of single business companies that operate under corporate administration (Chandler, 1991).
Similarly, organizations such as Wal-Mart and Costco that sell different types of products to different groups of clients in different regions of the world require an organizational structure that:
- Increase the control of the manager in different individual divisions so that the divisions satisfy them better have a high division of labor that requires a high level of integration. Managers of all levels specialize, which allows the members of the organization to develop their individual skills and knowledge which eventually becomes the basic competences of the companies. In addition, as organizations become large and complex, such as Wal-Mart and Costco with millions of employees, communication and coordination often become a tedious barrier. Therefore, the corporate headquarters will be composed of corporate managers who perform integrative functions to supervise each division inside and outside. UU., improving vertical differentiation and creating report relationships in terms of authority that each function has a call hierarchy (Kantar retail, 2017). Similarly, corporate headquarters are functionally organized, coordinates activities of different divisions and promotes information exchange and increases flexibility.
Similarly, the roles and tasks of the organization are divided into subunits, such as functions within divisions, which creates a more specialized workforce, such as marketing, sales and human resources and produces horizontal differentiation. However, the integration mechanism of one division to another may differ according to the organization’s business level strategy, especially in the multiple division. Therefore, the integration mechanism depends largely on the corporate strategy pursued by the company.
This mechanism not only affects the integrative mechanism but also the type of incentive and control. Ultimately, due to the quickly changing environment and customer demand, there is a need for communication between highly specialized subunits and division division, creating roles and link tasks as in the case of retail companies (Wal-Mart and Costco). The units work together to establish deep relationships and this interaction reduces (Investopedia, 2017). Ultimately, Wal-Mart is replicating Costco’s commercial strategy and generating concern about the ethical dimension to be more productive and obtain a Costco client base.
The Human Welfare Department in Wal-Mart seems to be lagging behind, as well as paying low salaries, offering poor medical care and an insecure environment to its employees, discriminating against disabled and elderly employees, paying less to women for the same work and benefiting of child labor in foreign countries. However, Wal-Mart is taking initiatives to combat some of its problems, such as salary increase at $ 13.50 The time compared to the previous $ 9 dollars. Wal-Mart also implemented new short-term disability programs and simplified paid free time (company website, 2019). Costco, on the other hand, can even exceed Wal-Mart prices while paying workers more than $ 11-$ 22 per hour and provides generous benefits (Payscale, 2017). Costco is a more attractive employer to attract labor which will have an adverse impact on Wal-Mart.
When the culture of a company is well established, there is flexibility to manage the changes while clinging to the roots that have produced success. In short, our research supports that the organizational culture of Costco is superior to that of Wal-Mart in each of the analyzed lines.
References
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