Applying the Kantian inquiring system philosophy, Wal-Mart should continue to scan its environment for input and use this knowledge to create new organizational knowledge in running its operations so that it becomes more profitable.
An internal input, suggestions from associates and local store managers could be further captured in other media, richer than the one used in Retail Link. Dennis and Kinney (1998) suggest that performance is enhanced when richer types of media are used to accomplish a task. Their study involved computer-mediated and video communication. Wal-Mart could utilize video-conferencing technology so that richer information exchange takes place among its stores.
An external input, census data indicate an interesting demographic trend. The number of births in the U.S. in the nineties averaged 4.1 million a year, up from an average of 3.7 million annually in the preceding decade (Bureau of Statistics, 2000). This creates an opportunity to extend more lines into infants’ and children’s clothing, which are part of softgoods, one of three product categories constituting the majority of Wal-Mart’s sales, as shown in Table 8 and Figure 2. This move would potentially generate increased sales revenue. In addition, Wal-Mart can take advantage of this change in demographics and create a more pleasant shopping experience by building temporary daycare centers
inside the stores. This is especially important since (representing more than half the workforce) females and especially mothers are time pressured and would like to reduce their distractions and, hence, time shopping, knowing their children are well-taken care of in the meantime.
In addition, external input shows great opportunities in private and licensed brand name labels and cobranding. Wal-Mart sells merchandise under its private store brands, such as Equate in health and beauty care, Ol’Roy in dog food, and Sam’s American Choice and Great Value in many items including beverages and packaged food items. Other private brands include One Source, Puritan, No Boundaries, George, and Athletic Works. Sam’s Choice is considered Wal-Mart’s premium-quality line and offers an average of 26% price savings over comparable branded products. This strategy creates even greater avenues to venture further and offer more items with private labels in other product categories beyond what is currently offered, including toys, hardware, and so forth, especially when Wal-Mart is America’s biggest toy seller.
Wal-Mart can also combine its marketing efforts in licensed products and with celebri- ties, in hardgoods (hardware) and softgoods (apparel), since they constitute a major portion of its sales, as shown in Table 8 and Figure 2. For example, the Kathie Lee Gifford clothing line was a successful venture in terms of sales and lead time. It took Wal-Mart one year to develop the line, while it took Kmart ten years to develop the Jaclyn Smith line. Wal-Mart could also look for a celebrity endorsement in gardening, hardware, and so forth, similar to Martha Stewart’s presence in Kmart. Wal-Mart has already seen success in licensing products, such Faded Glory, General Electric, White Stag, Catalina, Starter, and Mary-Kate and Ashley. Another recommendation for Wal-Mart is to continue to capitalize on its cobranding ventures. It already has a cobranded credit card with Chase Manhattan. Other ventures could include cell phone plans or even apparel lines that are normally sold in department stores only. However, a strategic issue facing Wal-Mart here is how much it should invest in the brand label business, especially apparel lines, and what strategies it needs to implement. The basic items currently sold in the stores are relatively unchanging in both style and demand. Because basic lines are not subject to the whims of the latest hot fashion trends and are part of everyday use, their demand remains steady. However, for brand label apparel, individual fashions go in and out of style, and hence, demand is more cyclical and possibly less predictable. This cyclical demand may create greater market and financial risk. Also, designing a nonbasic line requires longer lead times and much more investment. Wal-Mart would have to weigh the costs and benefits and come up with the best fitting model of how to proceed with its new ventures and strategies in apparel lines.
Knowledge
From/To Tacit Explicit Tacit Socialization Externalization Explicit Internalization Combination
Figure 1. Modes of Knowledge Conversion (Nonaka & Takeuchi, 1995)
Table 8. Wal-Mart Sales by Product Category (Wal-Mart Form 10-K, 2003)
Category Percentage
of Sales Industry Average Grocery, candy, and tobacco 22 (%) 27
Hardgoods 21 20
Softgoods/domestics 18 22
Pharmaceuticals 9 2
Electronics and records 9 9 Sporting goods and toys 7 7 Health and beauty aids 7 7
Stationery 3 2
One hour photo 2 2
Shoes 1 1
Jewelry 1 1
Softgoods 18%
Pharmaceut.
9%
Electronics
9% Grocery
22%
Hardgoods 21%
Figure 2. Wal-Mart Sales by Major Product Categories ( Wal-Mart Form 10-K, 2003)
Furthermore, based on external input from census data, it is estimated that senior citizens will constitute the bulk of the U.S. population by the year 2030. Home delivery is expected to grow as the population of senior citizens continues to grow; which creates an opportunity for Wal-Mart. In order to cater to these demographic trends and expand into them further, new merchandise and a home delivery service, backed up by an appropriate advertising campaign, would need to be created. The inquiring system would select the best fitting model and create separate ad campaigns for infants and elderly. In addition, the retailing environment is increasingly becoming more online, which portends a change in the buying habits of customers. Even though Wal-Mart has a Web presence, another recommendation would be to expand further in electronic commerce and establish a
bigger presence on the Internet to match its status as the world’s largest retailer. Wal- Mart can also offer international shipping which is not currently offered. Greater varieties of existing products, along with offering new specialty products that are normally sold through competitor’s mail order catalogs, can be advertised and offered on Wal-Mart’s site.
Furthermore, external input indicates the global nature of business today. Senge and Sterman (1994) advise that the organization of the future act locally and think globally.
Besides the stores Wal-Mart has in Argentina, China, Mexico, Brazil, Germany, Puerto Rico, Canada, Korea, and the United Kingdom, a recommendation would be to open more stores overseas in the European Union or in nations that are slowly adopting open and free markets, such as China and the former Soviet Union, or purchase existing retailers in those countries. In these emerging markets, Wal-Mart would need to deal with several challenging factors as shown in Table 9: entry strategy, cost/tax factors, demand factors, strategic factors, regulatory/economic factors, and sociopolitical factors (Luo, 2002).
Hence, the Kantian inquiring system once again will have to select the best fitting model to combat such challenges and capitalize on the opportunities in those new emerging markets.
In addition, in terms of this global expansion, more expenditure on technology and especially intranets would be needed so that managers can share information (internal input) worldwide. In addition, an extranet could be established so that Wal-Mart can better communicate with suppliers globally, such as Proctor & Gamble. This way, the fact nets of the inquiring system’s output would be updated with new information, and better models would be built and selected, such as those models used to set prices and determine product offerings in the stores.
External input from the environment shows that certain communities perceive Wal- Mart’s expansion as a threat. When Wal-Mart opens stores nearby, several communities lose their downtown small businesses, such as drug, hardware, clothing, sporting goods, and fabric stores. This affects the small-town feel and atmosphere of many such communities. In recent news for example, union voters in California stopped Wal-Mart from opening a Supercenter in Inglewood in 2003. In 2004, the state of Vermont was named one of America’s Most Endangered Historic Places to combat the arrival of Wal-Mart.
On the other hand, Wal-Mart creates many jobs for the local community and results in increased business in major appliance and furniture, restaurants, and gasoline stations, due to increased traffic. To counterattack this negative sentiment, Wal-Mart needs to increase its social and environmental programs and engage in an advertising campaign to enhance its positive image. The Kantian inquiring system would select the best fitting strategy and campaign to promote Wal-Mart in a positive light. This strategy includes an increase in sponsorship of nonprofit organizations and financial donations to social causes, as well as the establishment of programs where employees can volunteer several hours a month to help the local community. In response to the environmental concerns, Wal-Mart can ask its manufacturers to improve their products by eliminating excessive packaging, converting to more recycled materials, and eliminating toxic inks and dyes.
Wal-Mart can also establish more environmentally-friendly programs, similar to its Green Coordinator, which helps stores become more environmentally responsible and responsive.
Summary
In summary, given a space-time framework and theories, the Kantian inquiring system scans the environment for input, both internally and externally. It builds models, interprets the data, and then selects the best fitting model to achieve its goal. It must continue to scan for new information to be added and compared to existing knowledge.
The system produces output in the form of fact nets. The system may fail if there is no fit between the data and the model. Wal-Mart is used an example of a retail organization to demonstrate several key aspects of the Kantian inquiring system. Wal-Mart is the world’s largest retailer and continues to be very successful, implementing and illustrat- ing several characteristics of the Kantian inquiring system.
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