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Organizational Behavior evaluation 
 
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Organizational Behavior Evaluation – Wal-Mart Stores, Inc.
The open systems theory and resource dependence theory state that organizations maintain fluid and changing relationships with organizations in their environment (Scott, 2003). A complex environment could substantially affect the functioning and potential survival of the organization. Managers must address all conflict and uncertainty in which should come as no surprise that complexity is also a defining feature of life in organization.
The first part of this paper introduces the background information about Wal-Mart Stores. The following section includes an evaluation of the organizational behavior, design, and structure of Wal-Mart Stores. The next part includes the assessment of Wal-Mart design strategy and the anticipated impact of environmental internal and external changes. This study also identifies the manifested theories in the organization as well as the impact of omitting other theories. The final part consolidates the indicators of success and failures in the organization, and provides recommendations for future business potentials. Several parts of this document were inspired by the work of Grace S. Thompson (2007).
Wal-Mart Stores Background
In 1962, Sam Walton opened the first Wal-Mart store in Rogers, Arkansas. Walton introduced a “good concept” that involved large stores selling to consumers a wide selection of products at discount prices. This concept was also part of Wal-Mart’s “everyday low prices” strategy. Wal-Mart was able to generate profits while maintaining low prices by using sales volume and unique marketing strategy (MarketLine, 2009). To stimulate business expansion, Walton implemented a warehouse distribution strategy by building warehouses to store large volume of merchandise (Wood, 2008). Walton built stores in close distance to the distribution points. This strategic business practice has reduced Wal-Mart’s distribution costs, increased control over operations, and restocked merchandise as quickly restocked as it sold (Wood, 2008). Bulk-buying discounts have allowed Wal-Mart to pass along substantial savings to its customers.
In 1970, Wal-Mart went public, and in 1972, Wal-Mart was listed on the New York Stock Exchange (MarketLine, 2009). In the mid-1970s, Wal-Mart set off a new strategic approach to accelerate the company’s expansion efforts by making major acquisitions. By 1979, Wal-Mart has already owned 276 stores in 11 states, and sales has grown from $44 million in 1970 to $1.2 billion in 1979 (Hoovers, 2009). Wal-Mart stores in United State have the largest division that includes Wal-Mart stores U.S., Sam’s Club, and Wal-Mart International (Marketline, 2009). Additionally, the company also operates stores worldwide in various retail formats.
Behavior Evaluation of the Business Organizational Behavior Strategy
A comprehensive understanding of organizational behavior is becoming necessary because businesses uncertainty continues to increase from internal and external sources. Managing for organization develops habitual patterns of decision-making, policy formation, and procedures implementation that form character of organizational culture (Petrick & Furr, 1995). Specifically, character of culture refers to the specific values, beliefs, and activities that compose a culture. Focusing on character differences helps match particular cultural characteristics to specific business needs, aids the understanding of cultural clashes, and directs activities in change efforts (Deetz, Tracy, & Simpson, 2000).
Lukasova (2004) conducted a study of relationship between organizational character and behavior using a behavior factor analysis that identifies five behavioral factors of organization and aspects of an organizational culture. Cameron and Quinn (2006) developed six content dimensions that assess the organizational culture values on the level of strategic aspects of perceiving and behavior: dominant characteristics of the company, leadership approach, employees’ management, organizational cohesiveness, strategic emphasis, and success criteria. This model is illustrated in Table 1 as part of the evaluation of Wal-Mart organizational behavior.
Evaluation of the Organizational Culture and Behavior
The assessment of Wal-Mart organizational culture indicates that three dimensions seem to be aligned with Factor 3 and three seem to be aligned with Factor 5. Wal-Mart’s strategic vision is to be “the best retailer in the world.” Coherent with this vision, the assessment of Wal-Mart characteristics is aligned with Factor 3, which indicates that the company is oriented toward strengthening its competitive positioning and long-term growth strategy (Wal-Mart, 2009).
Strategic leadership models propose that strategic leaders use clearly defined criteria to reflect a careful analysis of the environment and organizational strengths, weaknesses, opportunities, and threats (as cited in Gill, 2006). The strategic directive leadership at Wal-Mart seems oriented toward Factor 5, which is congruent with Wal-Mart’s corporate mission to save money and meet the customers’ needs.
In regards to human resources, Wal-Mart offers many employment opportunities with the chance to buy stock and accumulate wealth. However, Wal-Mart has come under constant attach from critics for it employment practices and its impact on communities have been called into question. Wal-Mart has been accused of underpaying its employees, not giving them benefits that they desire, and discriminating against women (Harrop, 2004). In some cases, Wal-Mart has been severely criticized for locking employees inside a store and poor treatment toward illegal immigrants (Harrop, 2004). Such allegations seem aligned with Factor 5 that clearly suggests Wal-Mart manages its employees by means of orders and checks.
Generally, cohesion in a business organization represents the pulling together of the employees. Wal-Mart has developed a cohesive service concept with a common goal through the company’s strong obligation to the store “team” and reference to the term “associate” to denote equality and partnership (Brunn, 2006). Such practice infers that Wal-Mart has developed company cohesion concept by motivating team members to be the best, which is aligned with factor 3.
For retail operation such as Wal-Mart, there is a clear emphasis upon communication due to the complexity and volatility of the stores merchandise. Wal-Mart Stores uses technology and information as key components to track sales and coordinate replenishment along the entire supply pipeline (Lowson, 2002). However, technology alone was not adequate.
A central’s feature of Wal-Mart’s strategy is the logistic technique of ‘cross-docking’ (Dess, Lumpkin, & Taylor, 2004). Merchandises are delivered continuously to the company’s warehouses, where they are selected, repacked, and distributed to stores, often without placement in inventory. Instead of wasting valuable time in warehouses, products moves quickly across one loading dock to another. Such method allows Wal-Mart to avoid inventory and handling costs, which consequently reduces the costs of sales by 2 to 3% (Dess, Lumpkin, & Taylor, 2004). This is consistent with Factor 5 strategic orientation, in which the company has a specific direction to achieve its goals.
Criterion of success defines the desired future state in terms of the business outcomes to be achieved (Galbraith, Downey, & Kates, 2002). Every company has different criteria of success and companies find it necessary to determine if they meet these criteria and the degree to which these criteria should be met for success (Jacobs, 2006). Wal-Mart developed two criteria used to gauge market success: market share in supermarket sales, and market share per store. Hence, the criteria for Wal-Mart’s success are oriented toward Factor 3 item, which is increase in market share.














Table 1
Relationship between Behavioral Factors and Organizational Culture - A model by Lukasova (2004)
Five Behavioral Factors of Organization




Content dimensions: Assessment of organizational culture Factor 1
Orientation to Survival Factor 2
Orientation to the company’s employees as the source of success Factor 3
Orientation to results and victory over competitors
Factor 4
Orientation to Prosperity and stability Factor 5
Orientation to tradition and formal procedures
1. Dominant Characteristics





2. Leadership Strategy





3. Employees’ Management







4. Attainment of Cohesion
Overcomes difficulties





Absence of effective leadership.




Directions correspond to negative characteristic.





Needs to survive. Employees Development





Promotes employees creativity.




Provides full information, displays trusts, and gives appropriate level of autonomy.

Maintains good relation. Competitive thinking and in pursuit of continuous growth, and expansion.

Ambitious and agressive





Demands best results, rewards success, and punishes failures.



Shares common goal to be the best. Sustains market stability and customers’ satisfaction.

Fosters sales, improves product quality and reliability.

Organizes work, assigns tasks, and sets targets.




Focuses on quality and employees’ satisfaction. Emphasizes the history and tradition of the company.


Directive management style combined with formal procedures.

Manages employees through orders and checks.




Takes pride in brand and conviction about product quality.


Five Behavioral Factors of Organization




Content dimensions: Assessment of organizational culture Factor 1
Orientation to Survival Factor 2
Orientation to the company’s employees as the source of success Factor 3
Orientation to results and victory over competitors
Factor 4
Orientation to Prosperity and stability Factor 5
Orientation to tradition and formal procedures
5. Strategic Emphasis







6. Success Criteria Fragile, vulnerable, passive, inflexible, and under pressure.



Lack of specific success criteria. Positive, optimistic, open, friendly, and cooperative.




Employees and customers satisfactions. Dynamic, competitive, and risk taker.






Gain significant market share.
Responsibility for performance.






Sustains financial stability, products quality, and employee satisfaction. Implements information technology, reduces costs, and offers a wide range of products.

Obtains audits, certificates, and financial stability.

Note. Adapted from “Organizational Culture: Relationship between organizational character and behavior” by R. Lukasova, 2004, Organizaciju Vadyba, 32, p. 98-100.
Evaluation of the Overall Organizational Design Approach
An effective organizational design can contribute to efficient communications and promote adaptive behavior in response to changing environment. Overholt (1997) investigates the archetypes of an organization needed to survive severe conditions of environmental change and competition. The organizational archetypes developed by Overholt (1997), as illustrated in Figure 1, include three major concepts ranging from highly centralized (archetype 1) to moderately centralized (archetype 5), and to highly decentralized (archetype 10) . Each archetype has seven characteristics of an organization that together form the organizations archetype (Overholt, 1997). These characteristics include genetic core; philosophy; formal organization; information, technology, and work processes; behavior; informal organization; and culture.
Figure 1







Note. Adapted from “Flexible Organizations: Using Organizational Design as a Competitive Advantage” by M. Overholt, 1997, Human Resource Planning, 20(1), p. 26.
Overholt (1997) emphasizes the importance of an organizational design to be aligned with market needs, the nature of competitors, and the industry. From this empirical point of view, the following section will focus on the characteristics of Wal-Mart organization to determine if Wal-Mart organizational design is capable of sustaining growth and competitive advantage.
Genetic Core
Wal-Mart’s success factors have been attributed to an associate-focused organizational culture, an efficient logistics systems, and extensive internal communication. Wal-Mart’s communication strategy is clearly linked to its corporate mission and identity of serving customers and the communities in which the company operates (Cornelissen, 2004). Wal-Mart has created a centralized organization by employing modern business process based on information technology. The genetic core of Wal-Mart seems to be leaning toward archetype 5 in which communication permeate across all level in the organization but data management is tightly controlled.
Philosophy
Wal-Mart established its operations strategy to underline sources of competitive advantages such as quick restock of products, short lead-time from suppliers, vendor-managed inventory, broad variety of products and services, the ability to customize individual stores and product ranges, and the ability to modify and develop new products quickly (Lowson, 2002). Based on this coordinated operated system, Wal-Mart’s philosophy appears to emphasize adhering to certain rules and procedures as well as using supervisors’ judgment. Therefore, Wal-Mart’s operating philosophy appears to point toward archetype level 5.
Formal organization
Wal-Mart hierarchy levels were formed into a three product divisional structure that includes Wal-Mart Stores (United States), Sam’s Club (United States), and International stores (Marketline, 2009). In this design, each division has autonomy that is relatively limited, and division managers are responsible for what happens to their products and services (Robin & Coulter, 2005). However, the parent corporation typically acts as an external overseer to coordinate and control various divisions. Therefore, the hierarchical structure and control system at Wal-Mart are oriented toward level 1 archetype.
Information and Technology and Work Process
Information sharing are helping retailers and suppliers to have better inventory control and thus helping the business to respond more efficiently to consumer demands (Uhlfelder, 2001). Wal-Mart invest heavily in technology and information systems design that allows the giant retailer to achieve economies of scale and more efficient procurement systems, which in turn helps to reduce warehousing and transaction costs (Brunn, 2006). The work process at Wal-Mart is designed to emphasize employees’ commitment to deliver the best value to customers in terms of quality, price, and service, that turn will provide the most benefits to the group. Although Wal-Mart has established a highly centralized technology decision-making, the information sharing and work-processes are more inclined toward moderately centralized that is level 5 hierarchy.
Behavior
Wal-Mart managers can make important decisions at the local level that directly affect sales and profitability. Wal-Mart builds workforce loyalty and motivation by giving employees responsibility, trusting them, but also continually monitoring their performance. Nevertheless, most management and hourly workers at Wal-Mart are affected by the company’s policies and practices (Brunn, 2006). Based on such alleged poor management practices, Wal-Mart’s organizational behavior appears to point toward level 1 archetype.
Informal Organization
Wal-Mart was reportedly has placed tight limits on employees actions during working hours. Wal-Mart employees are prohibited from using cell phones and the “company limits Internet access, blocking social-networking, and video sites” (as cited in MSN Money, 2007, para. 10). Wal-Mart has also been alleged for infiltrating employees’ e-mail from private accounts whenever the employees use Wal-Mart computer network. Such surveillance activities clearly indicate that informal component of Wal-Mart is oriented toward level 1 archetype.
Culture
The Wal-Mart organization promotes the idea that managers and supervisors are always ready to guide and support associates (Brunn, 2006). From that standpoint, Wal-Mart’s culture emphasizes the greater good of the group over the good of an individual, while retaining respect for the individual as one of the company’s primary values (Brunn, 2006). The culture component for Wal-Mart thus seems to be at level 5 archetype.
Assessment of the Short and Long-Term Effectiveness of the Design Strategy
The assessment of the Wal-Mart organizational design is to provide insights that would allow the company to develop strategic capabilities and sustain competitive advantage. Table 2 illustrates the current archetype of Wal-Mart internal components and the suggested archetypes. At this stage, the assessment concentrates on design effectiveness but continues to provide short and long-term solutions.
Table 2

Assessment of Organizational Archetypes for Wal-Mart Stores, Inc.
Internal Components Wal-Mart Archetype Suggested Archetype
1. Genetic Core Highly and Moderately centralized Moderately centralized
2. Philosophy Moderately centralized Moderately centralized
3. Formal Organization Highly centralized Moderately centralized
4. Information, Technology
Work Processes Highly and Moderately centralized Moderately centralized

Internal Components Wal-Mart Archetype Suggested Archetype
5. Behavior Highly Centralized Moderately Centralized
6. Informal Organization Highly Centralized Moderately Centralized
7. Culture Moderately Centralized Moderately Centralized
Source: Thomson, G (2007). Organizational Design Strategy-NSC case.
The assessment suggests that Wal-Mart devolves decision-making to the point that store managers have the flexibility to try out new ideas in their stores, in which new ideas that works would transform into global best practice. On the opposite note, the assessment indicates that Wal-Mart has become so big and bureaucratic. A highly centralized structure might entail aggressive business practices and poor employee relations, which will eventually destroy the company’s brand (Deming, 2007).
Anticipated Internal and External Changes
Anticipated with considerable changes in socio-economic trends and technology revolution, the retail environment has also undergone radical change. The retail industry is highly competitive, in which consumer income is limited, although some sectors can attain growth more efficiently by capturing changing consumer preferences. The following will evaluate the negative and positive impact of environmental, political, sociological, psychological, and fiscal changes on Wal-Mart global business.
Environmental
Hannan and Freeman (1977) stated that adaptation to environmental change happens primarily at the level of industry populations rather than individual firms, which tend to be relatively inert (as cited in Leavy, 1996). Wal-Mart Stores has developed early patterns of organizing and core capabilities that include the internal hub-and-spoke and cross-docking logistics system. This unique source of competitive advantage has become an integral part of Wal-Mart’s strategic position, and thus it will be unlikely for the company to consider other strategic actions.
Political
From a political perspective, different groups or coalitions in an organization compete with one another for scarce resources and influence. As Wal-Mart continues to pursue aggressive growth plans, consequently, the significant organizational changes are likely to accompany by political conflicts and struggles. On the positive side, Wal-Mart can seek methods to manage the internal political dynamic of organizational change such as influencing employees to support the changes. On the negative side, addressing the external political factors might not be that simple because Wal-Mart operates in a global market, which might affect the organization and Wal-Mart has no control over.
Sociological
Practical sociology regard to how the social world works and how their actions fit together (Johnson, 2008). On a positive note, the presence of Wal-Mart discount chain in a local town may generate increased traffic and provide a nearby profitable niche for gas stations, local restaurants, or other local establishments. The sociological conception by a sociologists Harrison White (2004) focuses on the relations among the product producers and how they negotiate a tradeoff between the quality of goods produces and the prices for those goods in comparison to similar other firms. The downside of this is that Wal-Mart may seek to offer low prices by selling low-quality products. This insight has deep implications for market failures, prices, and control (White, 2004).
Psychological
The psychological characteristics in market segmentations help to describe how its members think and how they feel. Schiffman and Kanuk (2004) explain that psychological characteristics refer to the intrinsic qualities of the individual consumer. Consumer segmentation strategies are often based on specific psychological variables that influence consumption behavior (Schiffman & Kanuk, 2004). The negative side of psychological variables is that low prices are usually associated with poor quality products that might hurt the customer’s ego and Wal-Mart’s reputation.
Fiscal Changes
Despite the slow-down in global economy, Wal-Mart Stores reported strong sales of $401 billion in fiscal year 2009 (“Wal-Mart CEO Focused on Growth,” 2009). Wal-Mart owned much if its success and expectation for future growth to its sophisticated supply chain management system and advanced information technology. One of the potential obstacles is that Wal-Mart relies on products directly imported from China. The weakening value of dollar compared to Yuan could make the company vulnerable (Weiner, 2007).
Anticipated Impact of Change on the Organizational Behavior and Structure
Wal-Mart is a global company that competes on performance and cost pressures, which have a ripple effect on people and their behavior at work. Jones (2007) emphasizes that designing an effective organizational structure is crucial for increasing “company’s ability to deal with contingencies, achieve a competitive advantage, and effectively manage diversity, and increase its efficiency and ability to innovate” (p. 11). Coherent to that view, many emphasize that current organizational design needs to be built around practices that encourage change and not hinder it (Lawler, Worley, & Porras, 2006).
Organizational Behavior Theories Manifested in the Organization
The assumption of behavior theories manifested in Wal-Mart is based on the assessment of Lukasova behavioral model illustrated in table 1. The goal-setting theory by Locke and Latham shows when specific goals are properly conceived can trigger a motivational process that improves performance. This model is in congruent with Wal-Mart’s cohesion factor 3 orientation. Wal-Mart has developed a cohesive concept with a common goal through its culture of building commitment within its team members. However, conflicts can potentially emerge between this effective organizational culture and the day-to-day practices at the store level. Therefore, Brunn (2006) suggests constantly monitoring and addressing any unpleasant encounters between store associates and consumers.
Another theory that seems to be manifested in Wal-Mart organization is the job design approach. The job design approach “is based on the idea that the nature of the work itself is a factor that affects motivation and performance” (Tosi, Mero, & Rizzo, 2000, p. 134). Wal-Mart’s directive management factor 5 validates the importance of the job design theory. At Wal-Mart, retail managers are adapted to the directive leadership: to give instructions and clarify the tasks so that employees know how to accomplish the tasks and receive rewards (Brunn, 2006).
Omitted Theories of Organizational Behavior that Could Lead to an Optimized Outcome
Wal-Mart is a large company that provides complex interactions among employees, consumers, and suppliers. In addition, Wal-Mart operates in a dynamic environment that consists of the business and legal environment, community reaction, competitors, and global markets. Therefore, Wal-Mart should not ignore behavioral theories that outcomes might help Wal-Mart maximize the shareholders values and consumers satisfactions.
The theory of cultural diversity is one the most important theories that Wal-Mart has omitted. Wal-Mart struggles with diversity has led to the biggest-ever class-action lawsuit charging Wal-Mart with sex discrimination in 2004 (as cited in Certo, 2006). The Culture Diversity model developed by Cox (1993) outlines the “differences in the group identities of workers combine to create potent effects on their career experiences” and that diversity has direct effects on certain performance measures (as cited in Cox & Beale, 1997, p. 31). Specifically, Cox argues that when diversity is properly leveraged, will add value to problem solving, creativity, and innovation in work groups (as cited in Cox & Beale, 1997).
The theory of geoeconomic is another modal that Wal-Mart seems to overlook. Schlevogt defined geoeconomics as “the study of geographic influences on economics and management” (2001, p. 524). Wal-Mart was one of the first corporations to invest in China, forgoing a successful combination of the company’s logistical and distribution knowledge with China’s tax-free zones and cheap labor (as cited in Kirk, 2009). Wal-Mart could use the model to analyze the future direction of China under the pressure of geoeconomic forces such as economic power and national power.
Indicators of Successes and Failures in the organization
The performance indicators are compared against operational target and collected results will be evaluated further to determine the best course of actions thereafter. The following includes Wal-Mart’s key financial and non-financial indicators.
Sales Growth
Wal-Mart continues to show strong financial performance even during current recessionary period. Wal-Mart’s third quarter report of 2009 indicates an increase in net sales by 1.1%, from $97.6 billion in the third quarter last year to $98.667 billion this year (“Walmart Third Quarter,” 2009). Customers continue to flock to Wal-Mart because they seek out low prices when their personal financial condition worsens.
Earnings per share
Wal-Mart reported its earnings per share (EPS) has increased to $0.84 for the third quarter of 2009, from $0.77 per share in the third quarter of last year (“Walmart Third Quarter,” 2009). EPS has similar objectives to the sales growth, which measures have the highest historical correlation with long-term increases in shareholder value (as cited in Peterson & Fabozzi, 1999). The pressure to meet specific EPS growth targets by linking to executive compensation may encourage effective management of earnings and expenses.
Market Share
Wal-Mart also reported gains in market share, especially in countries that have been affected significantly by the poor economy such as the United States, the United Kingdom, and Mexico (“Walmart Third Quarter,” 2009). Analysts report that Wal-Mart seems to perform well during recessionary and inflationary periods (as cited in Peterson & Fabozzi, 1999). Such trend could be linked to the poor economy, which may have influenced consumers to become more price-conscious.
Recommendations for a Future Business of this Nature
Wal-Mart faces many implications from doing business globally and in the United States. Wal-Mart has to seek solutions that could help the company adapt easily in a rapidly changing environment. Griffin and Moorhead (2009) suggests a conceptual framework that examines five common environmental forces for change faced by organizations: (a) globalization, (b) diversity, (c) technology, (e) ethics and corporate governments, and (d) new employment relationships. The goal of understanding these forces is to determine if the organization needs to redesign to match closely the internal components of the organization, such as behavior, structure, and culture, with the external environment (Griffin & Moorhead, 2009).
Conclusion
Wal-Mart continues to perform wonders for consumers and shareholders even during economic downturn. However, focusing specifically on financial aspect is not adequate to guarantee future success. This case study extensively evaluated the organizational behavior and structure of Wal-Mart using a model by Lukasova (2004) and organizational archetype by Overholt (1997). Wal-Mart faces major challenges with the context of rapid environmental change. More importantly, Wal-Mart has come under pressure and heavy criticisms regarding the way the company leads in the retail industry. One recommendation is that Wal-Mart continues to address the critical issues that are affecting the functions of the organization, while focusing on the company’s goals to increase shareholders and stakeholders value.

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