Pros and Cons of Wal-Mart - Case Study Example

Does Wal-Mart's new neighbourhood store format run counter to the cost-cutting emphasis that is at least partially responsible for the success of its traditional stores? Explain.
I think that the neighbourhood store format is in conflict with the company’s grand strategy of offering its customers the lowest prices in the retail market. The firm has always placed a high emphasis on running an efficient operation without any unnecessary added costs. The concept of the neighbourhood store format goes against Wal-Mart’s strategy of standardizing its stores in the United States. The firm is able to lower its infrastructure costs by using a similar format in all its stores. Economies of scale are achieved at Walmart by purchasing goods in bulk. Economies of scale are a key advantage for a business because it lowers a firm’s cost per unit (Tutor2u, 2012). Wal-Mart has been able to differentiate its product offering by providing its customers with a higher variety of items at lower prices. The neighbourhood store format threatens Wal-Mart’s corporate culture and its long-term success in the retail industry. The retail industry generated revenues in the United States of $4,691 billion in 2011 (Plunkettresearchonline, 2012).

Wal-Mart should expect a variety of challenges in its international expansion efforts. The first challenge the company faces is being able to carry over its US brand value into the international markets. Walmart has gained its brand value through the accumulative efforts of its founder, managers and employees for over 50 years. Once the company started to operate outside the United States company had to start from scratch by building relationships with a whole new set of customers from a different culture. Another major challenge that Wal-Mart faces in its international expansion plans is adapting to the culture of other countries. The firm must learn the labour laws of other governments and fully comply with them and with other governmental regulations. The firm must adapt its logistics to operate in a foreign location. Wal-Mart also has to learn to do business with new suppliers in order to provide its customers with a wide selection of items. Other challenges associated with international expansion include compliance with tax laws, dealing with foreign exchange fluctuations, and learning about the customer’s buying behaviours and preferences