Wal-Mart's Control Mechanisms: Price, Communication, Power and Trust
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As "the world's largest retailer and the world's largest company with more than $312 billion (USD) in sales annually," Wal-Mart is a force to be reckoned with in the retail world (Vargas, 2008). Not surprisingly, a company that large and profitable can attribute at least some of its success to strategic control mechanisms such as price, communication, power, and trust (Nevin, 2007, p. 3). Control mechanisms are "strategic variables for managing ongoing channel relationships" and "serve as 'key building blocks' for organizing exchanges between channel members" (Nevin, 2007, p. 4). As such, they are a vital component of Wal-Mart's internal relationships with its employees and its external relationships with its customers, as well as an indicator of the health of its supply chain and organizational culture. Therefore, the effectiveness of these control mechanisms is important, and the positive and negative reactions to the use of these controls are highly relevant. At a fundamental level, control mechanisms even impact the four functions of management. The types of control mechanisms used at Wal-Mart include price, communication, power, and trust. Each of these in itself is a potent force for exerting control within the company, but a comparison and contrast among them shows that they have differing levels of influence and impact. Price is Wal-Mart's primary control mechanism for attracting customers and keeping its competitors at bay. Wal-Mart's "low pr
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nd half of the 1990s could be traced to Wal-Mart alone" (Fishman, 2003, p. 2).
Trust is an effective control mechanism that is often overlooked. According to a study by Chain Store Age and J. Shapiro & Associates, "trust is an influencing factor in determining where people shop" (Carter, 2008). Thus, by building trust with its customers, Wal-Mart is effectively influencing them to shop there. Shopper trust is predicated on such issues as the quality of the merchandise and the reliability of the store in keeping items stocked (Carter, 2008). In addition, the store's policies are an essential component of trust. Customers know that they can always bring back an item to Wal-Mart and get a refund with no hassle, something not guaranteed across the board at other chains, such as Target, where some locations have a reputation for being "returns gestapo." People choose where they shop, but trust is a strong influencer, and Wal-Mart's low price guarantee induces people to shop there trusting that the price will probably be the lowest around, while the products wanted will likely be in stock and any problems will be quickly resolved at the store's friendly customer service desk.
An examination of these four mechanis
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Approximate Word count = 1753
Approximate Pages = 7 (250 words per page)
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