Strategic Thinking for Wal-Mart - Essay Example

?Strategic Thinking for Wal-Mart 0 Introduction Today, creating a better future for the organization is the most difficult task of a manager, leader or executive. The future is unforeseeable and planning alone will not guarantee success; thus, organizations need people who have the capacity to deliver an ideal future. Strategic thinkers look not just at day-to-day activities, but also on the bigger picture of tomorrow because their role is to create the organization a practical dream. Thus, the only way to survive in this rapidly changing environment is to create an approach that is useful in the formulation and implementation of competitive strategies. According to Altier (1991, p.21), “to survive in tomorrow’s increasingly competitive world, companies are going to adopt a modus operandi that is coming to be known as strategic thinking.” Wal-Mart Stores Inc. is one of those successful industries that are using strategic thinking to achieve competitive advantage within the retailing industry. According to a retail consultant Patricia Pao, “in successful retailing, it’s usually 10% of a great idea and 90% execution, but at Wal-Mart 90% goes into strategic thinking and just 10% execution at the store level” (cited in Gogoi, n.d.). The main thrust of this paper is to examine and analyze the role and impact of strategic thinking for the competitive options of Wal-Mart. 2.0 Wal-Mart Stores Inc. Wal-Mart is one of the successful retailers in terms of sales volume, revenue, and market share. This 40-year old company was founded by Sam Walton in 1962, and it dominated the local market of the United States and other countries. Wal-Mart began to trade in the New York Stock Exchange under the ticker symbol NYSE: WMT and became one of the most reliable stocks because its investment risk is not alarming. The business is operating globally, and its top competitors include Target Corporation, Costco Wholesale, and Carrefour. Wal-Mart net sales in 2008 ($373.8), 2009 ($401.1) and 2010 ($405.0) are growing at lower rates, and its return on investment (ROI) is not changing nor growing at 19.3% (Walmart 2010 Annual Report, n.d.a). These figures only indicate that Wal-Mart’s performance in the past years is struggling caused by ineffective plans and techniques. Aside from internal defects, the sluggish growth can also be attributed to external elements such as intense competition (local & international) and economic instability caused by recession. As Wal-Mart’s life cycle gets into the maturity stage, the number of powerful competitors has increased because the rate of sales and profits are high; however, the overall growth of the industry is at a very slow-paced manner. Cost at this level is lesser because of expansion and scale economies, but promotional activities need to be uplifted to make customers more knowledgeable about the product and service offerings. In fact, Wal-Mart executives have doubled their advertising expenses this year just to reach a broad group of consumers (Martin, 2011). Furthermore, Wal-Mart has experienced the most intense competition, which in turn has lowered its sales and market share. However, it remained as the world’s largest corporation based on the Global 500 and Fortune 500 annual ranking despite poor sales and market share (DuBois, 2011). In addition, it is also recognized as the most admired company because it produced a wide variety of product and services, highest-quality service to customers, and offered the lowest prices of retail goods. “CEO Bill Simon has freely admitted to Wal-Mart’s missteps in the past, which included prematurely removing profitable products, overly aggressive rollbacks, and poor relationships with merchants” (Sun, 2010). Thus, to regain its market share and high record sales, executives have concentrated on seeking and developing new approaches through strategic thinking. They go back to the basic, but this time they are more observant to their environment and turn into an out-of-the box thinker. They have gathered as much information as possible about their stakeholders’ needs and preferences and have a proactive dialogue with them to strengthen the buyer-seller relationship. In addition, Walmart has expanded its market by utilizing a bricks-and-clicks business model (Maguire, 2002). Through this model, the business would be able to dominate the retailing industry and target the virtual and real communities. However, Wal-Mart believed that an ideal action plan suitable for all business circumstances does not exist because all strategies have different criteria for success and failure. For instance, Wal-Mart has been very successful as a customer-oriented business, which focused on meeting the needs and preferences of their customers and offered product/services at lower prices. In addition, the business reckoned that it is important for them to maintain and stick to this strategic intent because it already becomes their distinctive characteristic in the retailing industry. 3.0 Analytical-Intuitive/ Strategic Planning-Strategic Thinking Dichotomy Daft and Marcic (2011, p.160) defined strategic thinking as a “means to take the long-term view and to see the big picture, including the organization and the competitive environment, and consider how they fit together.” However, strategic planning should be examined first to understand further the role and impact of strategic thinking to the competitive option of Wal-Mart. Strategic thinking and strategic planning have different means, characteristics, and thought processes, but these two strategy-making approaches are important to make a successful organization. Strategic planning is a detailed process where strategic outcomes from new thinking are consolidated as input to make an action plan and allocate resources in a most efficient manner. By contrast, strategic thinking is not specifiable in detail, and it is associated with reinvention and modernization of strategies that are focused on future events out of the past and present information. Wal-Mart would not find difficulty in utilizing strategic thinking because it can be “applied any day at any time and is responsive to the new realities and the accelerated rate of change of today and tomorrow’s world” (Kaufman, Oakley-Browne, Watkins and Leigh, 2003, p.41). However, strategic planning and strategic thinking need each other to generate a superior performance through value creation and value proposition. These two concepts are essential for a sustainable strategic management, and they need to be together in the formulation and implementation of competitive advantage to dismiss failures within the system. Until today, analytical-intuitive or strategic planning-strategic thinking dichotomy is still subject to debate among theorists and practitioners because of inadequate articulation of roles between the two approaches. These different perspectives produced negative impact considering that organizations would not be fully successful if this uncoordinated relationship would not be resolved. On the other hand, strategic thinking is viewed as a component in making strategic planning of strategic management more enhanced and effective. However, strategic thinking and strategic planning are in equal footings, and their union would make a successful organization. Thus, strategic thinking cannot stand alone and cannot give competitive advantage to the organization without strategic planning, and vice versa. According to Heracleous (1998), analytical, convergent, and conventional aspects of strategic planning are not enough because they must be supported with synthetic, divergent and creative aspects of strategic thinking. 4.0 The Elements of Strategic Thinking & the Competitive Options of Wal-Mart “Strategic thinking precedes planning - it generates a unique picture of what the organization should look like in the future and is based on qualitative instead of quantitative variables” (Kinni, 1994, p.43). The five elements of strategic thinking are defined to distinguish its functions from strategic planning, and this include systems perspective, intelligent opportunism, intent focus, thinking in time, and hypothesis-driven (see figure 1). These five systems will be discussed to address the issues about strategic thinking together with Wal-Mart’s competitive options. Source: (Liedtka, 2001, pp.73-75) 4.1 Systems Perspective. This characteristic is crucial to the success and failure of the organization because “it makes all other types of learning work in harmony and points out that a fundamental problem for a business organization is the failure to see problems as elements of systems failures...” (Lawrence, 1999, p.5). Thus, for Wal-Mart executives to formulate unique and innovative strategies, the whole perspective of its operation from the inside and outside context must be examined carefully. A strategic thinker has the capacity to perceive the best for the organization because of mental model, so that errors in the system will not be repeated (Marien, 1986, p.104). Wal-Mart executives have admitted that their previous plans are not giving best results; thus, they are now back to the basic (Martin, 2011). CEO Mike Duke said that they would not repeat these problems within their system by combining “our stores, our systems and our logistics expertise into one continuous channel to drive growth and serve the next generation of customer around the world” (cited in D’innocenzio and Bartels, 2011). Aside from the change of technical system, Wal-Mart is formulating innovative strategies that would enhance its management system by motivating their employees with comprehensive benefit packages. 4.2 Intent Focus. This element contains energies that are important to the success of the organization in the years to come. Wal-Mart strategic intent for the coming decade is to offer lowest prices to its customers, but still attend to the quality of its product/service offering and customer service. This is how the executives wanted to direct the business because they believed that their destiny was to become the ultimate cost-leader in the retailing industry. The business wanted to stick to its purpose that is why it offered more affordable product choices to its current customers, brought upscale items to attract upscale audience, and utilized a multichannel business model. Several negative criticisms have been thrown to Wal-Mart, but the business did not want to be distracted with negative outcomes, and concentrate to its basic campaign that is to assist people save money on necessary commodities. 4.3 Intelligent Opportunism. This characteristic is akin to the empowerment of lower-level management, wherein employees at this level are given the opportunity to share their own alternative strategies in delivering the business to its mission. In most cases, these people are playing great roles for the business to attain an ideal future because their interaction in the decision-making will result in effective strategies. “Strategic thinking gives employees the ability to make decisions and understand how their decisions move the organization forward” (Fowler and Savage, 2011, p.85). For instance, Wal-Mart has always encouraged its people to participate in the formulation and implementation of strategies; this is one way of assessing their understanding on Wal-Mart’s intentions. The Chairman of the Board of Directors, Robson Walton has acknowledged that “Our people really do make the different at Walmart,” and they are the “driving force” behind the success (cited in Walmart 2010 Annual Report, n.d.b). Wal-Mart has created several ideal programs that would inspire its employees to give their most innovative ideas for the betterment of the business operation. Also, employees are trained to speak if new ideas have occurred on their minds, or if they wanted to suggest creative approaches to the management through grass-roots meetings. 4.4 Thinking in Time. This is the fourth element that must be presented in all strategic thinking. Competitive strategies or advantages that are relevant to the future cannot be attained if the organization is only acting on the present and future conditions of the environment. However, it must utilize all available past, present and future resources/data to create reliable and unique strategies that are applicable to all periods of time. Wal-Mart’s obedience to constant change has made them a prime mover in almost all of the standards found in the retailing industry, and they are still on the process of learning new things (Newsome, 2002). For example, the bricks and mortar stores of Wal-Mart that focus on attracting the real community will not suffice to make the business survive in the years to come. Thus, it needs to be innovative and prepared to target the virtual community as the new pattern of customers. Wal-Mart has taken the business online, created web sites, and advertised to online users; this is the result of the reality about technological advancement. However, having offline and online stores have not changed Wal-Mart’s strategic intent, and it is still working to give customers the best shopping experience through affordable prices, wide product/service offering, and quality customer-service. As a strategic thinker, competitive strategies must be formulated based on what the future required from the organization’s past and present realities (Liedtka, 2001, p.75). 4.5 Hypothesis-Driven. This strategic thinking characteristic is critical in today’s information age where information is overflowing, but time should not be wasted in filtering the significant from the insignificant data. Wal-Mart executives have reduced their credibility to become hypothesis-driven individuals because they used an approach that cannot perform the two thinking approaches (analytic-intuitive) at the same time. However, they have already proved that maintaining their trademark (Everyday Low Prices) and at the same time exploring other market opportunities could be introduced to the process simultaneously. Overall, the five attributes are relevant to the market position of Wal-Mart in the retailing industry. In fact, the company is now in the highest hierarchy of the competition because of its loyal customers and high record sales. This event is clear evidence that incorporating the characteristics of strategic thinking to the organization would create greater opportunity to formulate a competitive advantage. The system perspective towards Wal-Mart has obstructed the system failures to reoccur while its strategic intent has given them energies to work for positive outcomes. Furthermore, new and innovative ideas from its associates have increased the company’s adaptability and accountability through intelligent opportunism, and thinking in time has delivered the business on its mission to serve a broad array of customers. Lastly, Wal-Mart could now perform creativity and critical thinking activities at the same time because its new business process is hypothesis-driven; however, formal strategic planning must still accompany strategic thinking for the implementation of ground-breaking strategies. 5.0 The Role and Impact of Strategic Thinking for the Competitive Options of Wal-Mart Nowadays, success is difficult to attain since data volumes are exploding, decision-making is becoming more complicated due to unpredictable trends, and quick reflexes are needed to cope up with the faster pace of change. Even successful companies are experiencing these difficulties; thus, leaders and managers need to act upon these new realities by finding new approaches that are capable of bringing high payoff results. Traditionally, it has been believed that success is attained through careful planning of events by utilizing past, present and future data. However, the future is unpredictable, and the role of strategic planning is to “realize and support strategies developed through the strategic thinking process and to integrate these ideas back into the business” (Graetz, 2002). Thus, strategic planning is not competent to meet the competitive option of the business; instead, it needs the role of strategic thinking that “seek innovation and imagine new and very different futures that may lead the company to redefine its core strategy and even its industry” (Graetz, 2002). In other words, the role of strategic thinking to Wal-Mart’s business environment is to deliver creative and innovative results to be used as input in strategic planning. However, the price tag is the investment of time and resources to gain more information and translate this to a competitive advantage. Strategic management is important to all organizations, and it is up to the strategies involved that success is determined. There are many predetermined programs that an organization can take into account, but there is no single approach that can guarantee success. Thus, Wal-Mart is utilizing enhanced strategies such as strategic thinking and strategic planning. The impact of strategic thinking to the competitive options of Wal-Mart is positive because it delivered sustainable competitive advantage to its business operation, although the industry is struggling due to economic uncertainties and intense competition. This approach has influenced Wal-Mart to formulate effective and inimitable strategies that made it on top of the competition and overcame the negative outcomes of new realities. Wal-Mart simply wanted to be a store where people can save money, but its constant search of ideas on how to meet this goal has made Wal-Mart the number one in the retailing industry. To remain the number one retailer in the world is a competitive option for Wal-Mart, but strategic thinking has delivered the idea to become number one not just in retailing, but also in the distribution business. Another competitive option of Wal-Mart is the creation of new market segment targeting not the real community, but the virtual community. Wal-Mart executives have discovered that by taking the business online they could expand their distribution channels, reach the increasing number of online customers, and make their product/service offering available to global market. Thus, the rate of demand would increase. In summary, they would gain a competitive advantage in terms of pricing, customer value, supply management, distribution channels, information technology, and many more. Maintaining these advantages is very critical to Wal-Mart because there are many powerful competitors that are very determined to displace its position in the market by imitating strategies and creating close external substitutes. “Competitive advantage is the goal of strategic thinking and the primary focus of successful entrepreneurial action” (Walker, 2004, p.17). However, to gain a sustainable competitive advantage, “...executives are encouraged to extend their time horizons beyond the typical five year planning cycle...[and] contemplate the world at least twice as far into the future as the long-range plan” (Harper, 1991, p.2). 6.0 Conclusion Strategic thinking is all about the future and the innovative ideas that could be used as input in the action plan to gain a sustainable competitive advantage. Thus, without this approach, strategic planning would not deliver the organization a superior performance; however, the two approaches need each other’s capabilities to guarantee success. Wal-Mart’s sluggish growth can be attributed to economic issues, unpredictable trends, and intense competition, but the real reasons behind the decline are attributed to its unpreparedness of the future, assumptions that the system can be controlled, and its adoption of reactive instead of proactive behavior. Thus, there is no such thing as perfect strategy because it is up to corporate leaders on how they will envision the future of their organizations and generate innovative strategies. References Altier, W.J., 1991. Strategic thinking for today’s corporate battles. Management Review, 80 (11), pp.20-22. Daft, R.L. and Marcic, D., 2011. Understanding management. 7th ed. USA: South-Western Cengage Learning. DuBois, S., 2011. Wal-Mart stores. CNN Money, [online]. 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