University of Redlands
School of Business
IT systems are the heart of retail operations and hence play a central role in alleviating pressure points in the retail sector. The converse also holds true—retailers who do not manage their IT landscape effectively will find that, in time, the IT systems become part of the problem rather than components of the solution. Wal-Mart, “America’s low price leader”, recognizes this challenge and has decided to be part of the solution. This paper will examine the IT infrastructure within the merchandising retail space while focusing attention on Wal-Mart’s utilization of decision support systems and enterprise applications as it impacts and counteracts Porter’s Five Forces. The paper will also speculate on the future use of IT at Wal-Mart during the next 2-3 years as Wal-Mart continues to strengthen its position in the retail space.
Wal-Mart and its usage of IT
Every once in a generation a person or an entity comes along that has a profound effect on society. In the game of basketball, Michael Jordan changed the game with his unwavering ability to make his teammates better, which led to six NBA championships and numerous Most Valuable Player (MVP) awards. His impact and influence alone defined a generation of people who wanted to be ‘like Mike”. In the game of golf, Tiger Woods too changed the game by his super human play, which also afforded him many tournament championships and opened up the game to a whole new demographic. Like Michael Jordan, Tiger Woods infused energy into the game of golf and elevated it to a place that it had never been before. Resembling a phoenix that rises from the ashes, Wal-Mart has been that game changer in the retail space. By reaching across the aisles and investing in technology, Wal-Mart has put themselves in the best position possible to meet shareholder obligations of increased revenue and market share. Technology has also enabled Wal-Mart to stream line processes and to create efficiencies. Wal-Mart, because of its smart business acumen, its ability to keep its prices low and its adeptness to maximize opportunities and see trends before they happen, has perhaps put them in their own category as the greatest retailer of our generation. They have, as with Michael Jordan and Tiger Woods, differentiated themselves in a crowded marketplace and touched the lives of those who buy their products.
Today, there are many uses of IT in the retail space; however inherent to general merchandising, retailers tend to utilize IT to help them make business decisions. Rao (2010) writes, “The importance of information technology in retail stems from the importance of data. Data is nothing but information that aids decision making. The right data, in the right form to the right set of people at the right time, is one of the greatest tools in the hands of the retailer” (para. 1). This statement is spot on in that data is the starting point that most retailers look too when designing IT systems. Let’s for a second examine efficiencies created in stocking of merchandise, which will be discussed in greater detail later when we talk about Wal-Mart’s just-in-time (JIT) inventory support system. Typically items that are purchased provide information on merchandise sold in a store; this is the basis of sales analysis and decisions on replenishment, re-ordering, and merchandise planning. If this information is passed on to the manufacturer; it can help reduce production time. “This use of technology aids the collection and transmission of information. The trends in sales can be analyzed. This helps avoid situations of stock out helps spot merchandise or products timely markdowns and higher inventory turns” (Rao, 2010, para. 4).
The use of IT can also help in data collection. Data can be collected about consumer behaviors, purchases and frequency of buying. The...