Wal-Mart is the world’s largest retailer company, which has operated on the market since 1983. Global expansion strategy, followed by Wal-Mart has helped the retailer to maintained high-speed growth through continuous optimization of its products and constant innovations of services. Wal-Mart uses different control mechanisms in order to ensure high quality of products and service delivery.
The four control mechanisms are internal and external control, corrective action control and decentralized control. Internal control is closely connected with auditing. On the one hand, internal audit allows provide an independent examination of, and expression of opinion on, the financial statements of an enterprise. Also, internal audit is closely connected with product and services quality. The positive action is that customer orientation help to ensure application of quality control principles to design/specification activities to formalize the mechanism for ensuring that customer requirements are incorporated. “Wal-Mart’s spin machine is being sorely tested. Just last week, a secret internal memo recommending that the company curb healthcare costs by “dissuad[ing] unhealthy people from coming to work at Wal-Mart” was leaked to the advocacy group” (Featherstone 2005).
External control helps to analyze external influences and market situation in order to be effective and responsive to external environmental influences. For example, if the organization operates within a dynamic environment it requires a structure that is sensitive and readily adaptable to change. The positive action is that this new structure is more likely to respond effectively to new opportunities arc challenges, and risks and limitations presented by the external environment. One way in which the companies dealt with the low quality problem was to centralize their administrative activities and consolidate their supply-chain management. The negative action is lack of objectivity and data.
Corrective action control helps to identify areas of improvements and eliminate possible threats.
Also, this mechanism allows control changes and makes amendments if necessary. Moreover, helpful advice made by the suppliers and customers are often discussed as it fit with the understanding of the product and competition based on experience from other countries. The positive action is that corrective action control supports all management activities and ensures effective management and coordination (Management Control 1994).
Decentralized control emphasizes the actions performed. For examples, sales are often the first functions to be decentralized and finance and human resources the last. Some decisions must be taken locally and management must decide what are vital decisions and keep these, then delegate the rest. The limitation of this control mechanism is that high degree of decentralization is possible if less checking is needed on a decision, especially if few people need be consulted on a decision, or if the greater the number of functions affected by decisions made at lower levels. It helps management to plan and coordinate activities of all departments and stores located in different regions (Medeiros, Barbosa, n.d).
Internal and external controls affect planning and coordination functions of management. Better performance can be achieved if more information and resources are available for the organization. If lower costs and tighter schedules are desired, then performance may have to be compromised and vice versa.
Decentralized control determines the nature of management itself and changes applied to the entire organization. For instance, the manager can control the source of threat and take necessary actions to improve the situation. The positive action can be explained by the fact that inherent in this function are two tasks: to create positions as communication centers, and to select people to fill these positions who will communicate effectively. Either may be changed on occasion to perfect the total communication process by adjusting one to the other.
Corrective action control is one of the most important mechanisms which ensures stable position and effective change management. This requires the assignment of responsibility and the delegation of authority. The organization established to define purpose is an organization that specifies the work to be done. Corrective action control entails developing a business process model of how activities function, analyzing relationships among business units, and implementing changes that would eliminate redundant processes and make business units more effective. It does not have a great impact on planning process but it influences coordination and organizing.
Using this mechanism, Wal-Mart redesigns its processes and activities, focusing on those with the greatest potential payback. Symptoms of inefficient processes include excessive data redundancy and reentering information, too much time spent handling exceptions and special cases, or too much time spent on corrections and rework. Corrective action control identifies what organizational group owns the process, what organizational functions or departments are involved in the process, and what changes are required (Wal-Mart 2007).
Corrective action control emerged as the most favorable approach, wherein the industry closely connected with the intermediary, setting price levels which are acceptable to both parties, giving, receiving and acting on information, and providing adequate support and incentives.
In sum, the use of control mechanisms allows Wal-Mart to capture some of the cost reductions (when service values decrease rapidly over time). Besides results on a log-linear decision rule that optimizes the overall profit of the firm under certain conditions, they also provide methods for assessing the value of coordinating mechanisms between operations and marketing. The customer satisfaction is achieved by changing operations model concerning flexible level of prices and time, resources and service delivery. Control mechanisms influence all functions of management demanding a flexible and competitive plans and effective coordination mechanisms. Control mechanisms force management to use and evaluate new tools, and have the insight into the impact these tools on the future of Wal-Mart.
- Featherstone, L. (2005). Spin Control at Wal-Mart. Retrieved 03 March 2007 from www.thenation.com/doc/20051121/wal-mart_nation
- Management Control (1994). Retrieved 03 March 2007 from www.wsmr.army.mil/workforce/InternalReview/docs/r11_2.pdf –
- Medeiros, J.J., Barbosa, S.C. (n.d.). Coordination and Control in the Implementation of Public Programs. Retrieved 03 March 2007 from www.umac.mo/fsh/pa/2nd_IntPAConference/JanannJoslinMedeiros_SheilaCristinaTolentinoBarbosa.doc
- Wal-Mart. 2007. Retrieved 03 March 2007 from www.walmart.com