Introduction
Business transformations are part of the life cycle. Among them are technological improvements and rising market competition. These factors drive companies to reconsider current approaches and offer new ones.
For instance, e-commerce emerged, which looked to dominate the retail industry from the start of the 2010s, forcing retailers to adopt new methods. This indicates Lewin’s force field theory, which claims that forces can drive or oppose change (Yang et al., 2021, p. 5). In this case, the advancement and incorporation of technology into business have allowed for the introduction of new trading methods.
The rationale for introducing e-commerce as part of Walmart’s business operations was that the retail industry was moving in that direction. This meant that remaining with only physical stores would disadvantage the company. Statistics show that in 2016, Amazon was the biggest online retailer in the United States, selling to over five million customers weekly (Jindal et al., 2021, p. 270). Others, such as eBay, Etsy, and Home Depot, followed closely. Using Lewin’s Force Field analysis, it is clear that the change in how other businesses operated in the industry was the primary force driving the change at Walmart.
Change Process
The management’s first step in implementing the change was to acquire another firm, primarily an e-commerce organization. This would enable them to compete more easily and quickly with other top firms in the sector. Based on Lewin’s change model, the company had to create favorable conditions, establishing the impression that they needed change(Yang et al., 2021, p. 5). After that, the management continued with efforts to move digitally, and when the COVID-19 pandemic started, it became the new norm for business operations.
The move affected shareholders, managers, and employees who had envisioned remaining with the conventional retail approach. According to the Bridges transition model and the human side of change, people undergo three phases when facing change: ending, losing and letting go, neutral zone, and the new beginning (Wilson, 2004, p. 7). Most of them remained at the first two stages, as the change brought discomfort to them, while a few moved quickly to the third stage, embracing a new challenge.
Strategies to Handle Resistance to Change
To overcome the resistance of the stakeholder majority, the management decided to introduce the change in phases. Although it was a priority to operate digitally, they allowed the use of physical stores and gradually reduced the number of them. Additionally, another strategy employed was communicating effectively about the change to them and engaging those who were resistant. This way, every stakeholder was able to understand the importance of the transformation and the implementation process. They were permitted to share their thoughts on how management could make the process easier.
Strategies to Support Organizational Direction and Transformation
Walmart’s leadership employed two key strategies to support the transformation: defining the change, aligning with business objectives, and providing proper training. It was discovered that among the reasons some individuals were resisting the change was due to a lack of technical skills. The management identified that it was essential to offer structured training to impart the knowledge and skills needed for efficient operation.
The second strategy presupposes the enforcement of a support structure (Jindal et al., 2021, p. 272). This is vital to help stakeholders, particularly employees, practically and emotionally adjust to change and build the skills required to achieve the best results. In such a case, an ideal approach might be a mentorship program or an open-door culture.
Success of the Change
It is safe to say that the change has been successful, as the company has gained significantly, even to the extent of rivaling Amazon in total sales in 2021. In his model, Kotter mentions consolidating gains as his seventh step, something the firm has achieved after the change. The acquisition of Jet.com, which ultimately proved a successful move, was completed for $3.3 billion in cash and stock (Jindal et al., 2021, p. 272). Under the terms of the transaction, Walmart paid $3 billion in cash and would part with an additional $3 million worth of shares over time. The price was a record as there had not been any such price for e-commerce startups.
Since its founding in 2015, Jet.com has grown into a marketplace for 1,600 sellers offering 10 million products (Jindal et al., 2021, p. 272). The organization registered one billion dollars in Gross Merchandise Value at the time of acquisition and added 400,000 shoppers monthly (Jindal et al., 2021, p. 273). According to fiscal metrics, it is clear that Walmart paid a lot to acquire Jet.com.
Despite the meteoric growth metrics, Jet.com was still not profitable at the time of the acquisition and had a high cash burn rate. It has been valued at one and a half billion dollars, or less than half the value that Walmart paid about nine months earlier, by a group of existing and new investors. Nevertheless, a bigger motivation for the move was a desire to acquire the management staff (Jindal et al., 2021, p. 273).
Through their experience at Diapers.com and Quidsi, Marc Lore and other executives have demonstrated their ability to grow and scale e-commerce businesses. This proved to be a key piece of information that led to Lore’s hiring as head of the e-commerce department at Walmart (Jindal et al., 2021, p. 274). Although the company management initially planned to establish Jet.com as a separate entity, this did not happen.
The success of a talent acquisition relies on an organization’s capability to retain it. As part of the transaction terms, Walmart provided Lore with three and a half million shares, which will be distributed within five years (Ballestar, Grau-Carles, and Sainz, 2018, p. 409). The limited stock units were part of the $300 million in equity consideration associated with the deal (Ballestar, Grau-Carles, and Sainz, 2018, p. 410).
According to various contract clauses, Lore would need to relinquish a significant portion of his share of the cash payment and forfeit any unvested interests if he left before the end of his five-year period. Walmart organized the $300 million payout over four years. Lore’s three and a half million alternatives vested ten percent at closing, fifteen percent in the first year, twenty percent in the second, twenty-five percent in the third, and thirty percent in the fourth year. Walmart developed a fast-tracking vesting plan to incentivize him to remain for five years.
To set its e-commerce wing for success, the organization discussed organic growth, acquisitions, or joint ventures with third parties. Before acquiring the Jet.com company, Walmart was not highly successful in its approach of organic growth. At $13 billion in revenue, its e-commerce business trailed Amazon in the United States, which recorded $79 billion.
However, the area’s growth rates were poor compared to those of eBay and Amazon. One primary reason is that the company failed to focus on e-commerce for multiple years after initially gaining success (Ballista, Grau-Carles, and Sainz, 2018, p. 410). The management did not consider e-commerce as a core focus area, so rivals surpassed them due to higher investments in the infrastructure for dispersed delivery. Additionally, an organization like Amazon achieved better innovation and established an enhanced digital user experience compared to Walmart’s exhausted virtual feel or look. Considering the lesser importance of online at Walmart, an organic technique was less likely to succeed.
Walmart could have considered a partnership or an alliance. The partner would need to be of a specific scale to provide the needed growth. The business would be an e-commerce-only entity, rather than one with a click-and-mortar model. The biggest e-commerce companies six years ago, when the acquisition happened, included Amazon, QVC, Wayfair, HSN, and Overstock.com.
Both Amazon and Walmart, being great rivals, found it challenging to be partners. On the one hand, other businesses showed potential; on the other hand, they are more successful companies, and there is less chance of scaling them (Prajapati and Nakum, 2019, p. 44). In this situation, Walmart’s choice to acquire offered a better chance of succeeding in e-commerce. This would enable them to select a purpose-built firm, creating a competitive edge in digital business. Buying Jet.com allowed Walmart to position itself as a frontrunner in online shopping.
Despite being behind in social media presence, Walmart’s current distribution in the United States can provide a competitive edge in e-commerce margins. For instance, with ninety percent of people living within 15 minutes of a store, Lore can leverage synergies in the available Walmart cost structure to drive stronger digital sales without affecting margins, unlike Amazon. The latter has launched brick-and-mortar locations after realizing that the channel remains the desired alternative for consumers (Wessel et al., 2021, p. 102).
Whereas Amazon is investing in test-and-learn approaches for its physical space and incurring increased costs for aggressive shipping commitments, Walmart has incorporated the virtual into its physical stores without delay. The move to acquire Jet.com has been a compelling and feasible plan for the firm to gain more market share in the e-commerce market.
Conclusion
Change is beneficial for business, particularly when it drives growth. Walmart management identified the market forces driving them toward starting their e-commerce platform and accepted the challenge. This relates to Lewin’s force field theory, which categorizes external elements into forces that promote change or resist it.
It is noteworthy that even though factors may influence a new way of conducting operations, the current state must be disturbed. It would have been impossible for the organization in discussion to establish its e-commerce line while primarily focusing on physical stores. More resources and effort had to be invested in the novel project, which enabled it to succeed.
The company then had to create favorable conditions that would allow it to move toward its goal. Walmart purchased the e-commerce platform Jet.com for $3.3 billion, using a combination of cash and stock. Additionally, they hired the platform’s founder, who had enough knowledge and insights on scaling the e-commerce business. Despite the successful change and practicing it as the new norm, the event affected the customers and employees who took the time to transition.
Reference List
Ballestar, M.T., Grau-Carles, P. and Sainz, J. (2018) Customer segmentation in e-commerce: Applications to the cashback business model. Journal of Business Research, 88, pp. 407-414.
Jindal, R.P., et al. (2021) Omnichannel battle between Amazon and Walmart: Is the focus on delivery the best strategy? Journal of business research, 122, pp. 270-280.
Prajapati, M. and Nakum, D. (2019) Merger and acquisition in the e-commerce sector. A Global Journal of Interdisciplinary Studies, 2(4), pp. 41-45.
Wessel, L. et al. (2021) Unpacking the difference between digital transformation and IT-enabled organisational transformation. Journal of the Association for Information Systems, 22(1), pp. 102-129.
Wilson, F. (2004) Organisational behaviour at the word: a critical introduction. Oxford University Press, pp. 7.
Yang, Y., et al. (2021) “The influence mechanism of financial shared service mode on the competitive advantage of enterprises from the perspective of organisational complexity: A force field analysis.” International Journal of Accounting Information Systems, 42, p. 5.