Strategic Initiative Paper

student

FIN/370 Finance for Business

teacher

May 1, 2012

Introduction Strategic planning is the compass an organization requires to stay on the path toward successfully reaching their goals and objectives. It is paramount that businesses assess all critical areas such as management, sales, marketing, and finances with long-term health in mind. Tactical plans can be devised with the strategic plan as the guiding force. The allocation of resources, or financial planning, is what helps an organization realize its goals and achieve success. Wal-Mart successfully has accomplished this task year over year. In just under 50 years, one store has grown into an economic force. “Wal-Mart was built on the foundation of saving people money so they can live better. This mission has allowed the company to grow to more than 8,400 stores in 15 countries around the world” (Wal-Mart, 2010, p. 2).
Strategic Planning Initiative Strategic planning initiatives for Wal-Mart are numerous for an organization of its size. It has initiatives that include sustainability with a commitment to reduce the greenhouse gas emissions, community involvement as well as global expansion. The organization has a global reach that has spread cost-effective, clean technologies around the world. This allows Wal-Mart to share its best practices in environmental design across all its markets. Wal-Mart’s United States, International organizations, and Sam’s Club exceeded $100 billion in net sales for the first time in company history. One successful strategic planning initiative Wal-Mart has, considering the size of the organization is Sustainability. They strive to create zero waste, be supplied 100% by renewable energy, and sell products that sustain people and the environment. This initiative, which encompasses Wal-Mart associates, a sustainability team, executive network sponsor, and the Chief Executive Officer, focuses on three specific goals in the effort to become a more responsible company.
• Be supplied 100% by renewable energy;
• Create zero waste, and
• Sell products that sustain resources and the environment.
These three goals have guided sustainability efforts for the past four years. In order to know the true impact of our business, we need to look at where products are sourced and manufactured, how they’re shipped and packaged, how they are used and ultimately what happens to the product when it’s disposed. In doing this, we are able to work more closely with our suppliers and, together, bring products to our shelves that our customers want at prices they can afford (Wal-Mart Stores, Inc., 2010, para. 4). The organization has also attempted to streamline its online business, of which has netted over one billion visits in the past year. That is a 15% increase from the previous year, according to Wal-Mart’s 2010 annual report (Wal-Mart, 2010). “We are focused on leveraging both operating expenses and our scale to improve performance and profitability. Sharing our knowledge and best practices helps drive efficiencies and increase sales within the country and across regions. We also recognize that one solution can’t meet the needs of every country, as customers trust their local brands to be relevant to their needs. Adhering to the “productivity loop” – buying for less, operating for less, and selling for less – remains critical to our success” (Wal-Mart, 2010, p. 9).
Financial Planning Wal-Mart’s sustainability initiative will have an effect on costs for this company. Investments are made into programs and processes that will improve the environment, internal and external to Wal-Mart. However, there will be a financial cost for the goal of sustainability. First, the focus will be on Wal-Mart’s sustainability goal, of which is focused on how they reflect on to the world and how they care for their internal structure as a company. Wal-Mart has and will continue to create programs and processes that will help improve our environment. They are working toward total use of re-usable grocery bags, which they have been very successful. One example is allowing customers to purchase re-usable bags for a small fee. Another example is helping consumers recycle their grocery bags. Wal-Mart has also been improving employee retention processes. For example, they are giving financial aid for furthering employee education, especially if that employee will use his or her education to help benefit Wal-Mart. Another example is that they are teaching ethics to all employees and rewarding employees for examples of good ethics. But, now there is the cost of trying to facilitate these programs and processes. Wal-Mart has a view on this subject as these programs are investments for their company and not a large debt. They are trying to look toward the future for their place in the business world and environment. Sustainability will have an effect on Wal-Mart’s sales, but a positive one. Sales will continually improve because consumers are noticing and reading about how Wal-Mart is improving their business practices. Consumers will be relieved to see a company trying to improve the environment and their employees’ lives.
Then consumers will start or continue to buy their products from Wal-Mart, because as a society we are focusing on how to slow down the destruction of our planet. If the consumer witnesses companies trying to help with that goal, he or she will have a tendency to shop at their stores.
Risk and Financial Effects Many definitions of risk exist and in the case of Wal-Mart’s initiative of sustainability the word risk refers to the risk associated with some of the sustainability initiatives such as going green and renewable energy. The Greek poet and statesman Solon, writing in the sixth century B.C., stated:

There is risk in everything that one does, and no one knows where he will make his landfall when his enterprise is at its beginning. One man, trying to act effectively, fails to foresee something and falls into great and grim ruination, but to another man, one who is acting ineffectively, a god gives good fortune in everything and escape from his folly (Keown, Martin, Petty, & Scott. 2005, p. 188).

Wal-Mart’s definition of sustainability includes the use of renewable energy, create zero waste, and sell sustainable products. This definition is in line with company’s mission and vision to save people money so they can live better. With sustainability comes risk, and some of the risk associated with this initiative are tied directly to the organization’s mission. Some risk comes with converting to renewable energy sources, and the costs associated with this transformation. There is risk that lies in the uncertainty of these renewable energy sources. With technology rapidly changing and the need for alternative sources of energy the risk of investing in a source today that will be obsolete tomorrow is a chance taken in today’s evolving ever-changing environment. The commitment to their sustainability strategy by Wal-Mart has already had a positive effect on their finances and is paying significant dividends.

Conclusion “From a business perspective, sustainable development is accomplished by capturing system dynamics, building resilient and adaptive systems, anticipating and managing variability and risk, and earning a profit” (U.S. Environmental Protection Agency, 2010, para. 4). This is what Wal-Mart does so effectively, and it begins with strategic planning followed by well thought out financial planning. Plans to become even more efficient with their supply chain by eliminating all waste will ultimately increase profits as well as pass down additional savings to consumers. Other strategies include promoting environmental consciousness and the betterment of employees through education and ethics. All of these approaches incur risk, which is why planning is so important, and it is evident that Wal-Mart is well aware and fully capable to reach their goals.

References
Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial management: Principles and applications (10th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
U.S. Environmental Protection Agency. (2010). Sustainability. Retrieved from: http://www.epa.gov/sustainability/basicinfo.htm
Wal-Mart. (2010). Wal-Mart 2010 Annual Report. Retrieved from: http://cdn.walmartstores.com/sites/AnnualReport/2010/PDF/WMT_2010AR_FINAL.pdf
Wal-Mart Stores, Inc. (2010). How We Define Sustainability. Retrieved from: http://walmartstores.com/sites/sustainabilityreport/2010/environment_overview.aspx