The success and rapid growth of Wal-Mart can in part be attributed to the management control system implemented in this corporation. Close attention should be paid to the structure of this system and the main processes that are involved in it. To a great extent, the models adopted by the managers of this organization ensure its cost-efficiency, excellent operational performance and profitability.
First of all, one should speak about the structure of their control system. One of its components is the investment center. It should be noted that every store of Wal-Mart is evaluated in terms of its profitability as well as inventory investments (Anthony and Govindarajan 32). In this case, the goal of business administrators is to determine which inventory investment best meets the needs of the company (Anthony and Govindarajan 32). Additionally, the management of this organization pays close attention to cost-reduction initiatives. This is why this organization has developed a sophisticated supply chain as well as information systems that enable the company to reduce the costs of procuring, transporting, or storing goods (Anthony and Govindarajan 32). Apart from that, this corporation attaches importance to the role of profit centers. For example, this company tracks the financial performance of their stores and compares sales records with the data from previous years. In particular, it is necessary to understand what kind of factors might have led to the increase or decrease in revenues. Therefore, it is possible to argue that the management control system in Wal-Mart has a well-developed structure that contributes to the success of this organization.
Apart from that, one should speak about the processes that are fostered by the management of the company. They are an inherent part of the company’s control system. For instance, the managers of Wal-Mart stores are given an opportunity to take independent initiatives; however, at the same time, there are held accountable for their business decisions (Anthony and Govindarajan 33). Furthermore, the corporate executives in this organization encourage the managers of stores to adopt the best practices implemented at other stores (Anthony and Govindarajan 33). One should also consider the way in which employees of the company interact with clients. For instance, according to the 10-foot policy, workers are obliged to greet a customer if they come near him or her (Anthony and Govindarajan 33). This policy helps them gain the loyalty of clients.
Another process that should not be overlooked is the appraisal of an employee’s performance and compensation. According to the corporate policies of Wal-Mart, workers should be compensated for their recommendations and initiatives. One should also remember the presence of an open-door policy in the company (Anthony and Govindarajan 33). This means that every employee of this corporation should have an opportunity to talk to senior executives (Anthony and Govindarajan 33). The processes that have been described are repetitive, and they are important for the sustainability of Wal-Mart.
These examples show that Wal-Mart has a well-development management control system and it enables the corporation to improve its cost-efficiency, profitability, and investment strategies. Moreover, this organization encourages the initiatives and their accountability. Apart from that, the management control system ensures that the best practices or business models are adopted in different stores of Wal-Mart. To a great extent, they are critical for the long-term development of Wal-Mart.
Reference
Anthony, Robert, and V. Govindarajan. Management control systems, New York: McGraw-Hill/Irwin, 2004. Print.