Wal-Mart has been expanding its construction of super centers, which include major food sections encompassing general grocery items, health and beauty aids, perishable produce, meat, seafood, frozen food, and deli items. The company is nonunion with labor costs at about 7.5 percent of sales versus its organized competitors’ 13 percent. This, in part, allows Wal-Mart to offer prices anywhere from 6 to 10 percent below its supermarket competitors. Price sensitivity in the business is important and an overall price difference above 2 percent will cause loss of market share. You work for one of the organized companies and your CEO has directed you to begin an initiative to reduce your wage and benefit costs to be in line with Wal-Mart’s levels. You know that negotiating lower wages and benefits with your unions will be a difficult task. While you have not abandoned that idea, you have decided to take a broader approach to reducing overall costs and enabling your company to offer prices that meet Wal-Mart’s.
a. Describe a range of possible solutions that does not necessarily involve reducing the level of benefits and wages, but might serve to reduce the ratio of labor costs to sales and would be consistent with the overall business strategy of building sales and profits through top service, competitive prices, and great product variety.
b. What analytical steps, metrics, and assessments would you apply to each?
c. Are there possible total reward solutions that might help to attain your objective? Briefly identify them and explain.
d. How would you measure and evaluate each?
e. Select a comprehensive plan that you believe will enable your company to be price competitive without changing the level of benefits and wages.
f. Describe how you would measure and evaluate your plan.