Analytical Academic Report of Wal-Mart Stores Inc - Case Study Example

You are Required to Prepare a Well-Structured, Well-Referenced Analytical Academic Report on the Case Study: Wal-Mart Stores Inc (WMT) Table of Contents 1.0.Introduction 3 2.0.Critical Discussion 4 2.1. Wal-Mart’s External Environment Analysis 4 2.2. Wal-Mart’s Capabilities, Resources and Competences Capabilities of Wal-Mart 5 2.3. Strategic Challenges Faced by Wal-Mart during the Year 2007 7 3.0.Critical Evaluation of Wal-Mart’s Strategies 8 3.1.Cost Leadership or Price-Based Strategy 8 3.2.Differentiation 10 3.3.System Lock-In Strategy 10 3.4.Resource Development Options 11 4.0.Critically Discussing Wal-Mart’s Major Weaknesses and Leadership’s Strategies 12 6.0.Recommendations 14 7.0.Conclusion 15 References 16 Bibliography 20 1.0. Introduction Wal-Mart Stores, Inc. (Wal-Mart) can be regarded as one of the famous and oldest retail chains in the current worldwide scenario. Sam Walton founded the first Wal-Mart store in Rogers Ark in the year 1962. The retail company was later incorporated as Wal-Mart in the year of 1969. Notably, the growth of the company took pace since 1970s with the opening of its first Wal-Mart distribution centre. Currently, Wal-Mart operates in more than 10,130 retail units located throughout 27 countries employing more than 2.2 million staffs globally. As a consequence of remarkable initial growth, the retail chain segment enabled it to be listed in the New York stock Exchange in the year 1972 (Wal-Mart Stores, 2012.). With due consideration to the continuous business development in the retail chain segment and greater level of expansion strategy followed by Wal-Mart, the report in intends to critically discuss the external environment of the organisation along with its major capabilities, resources as well as competencies in the global retail industry. The report will also focus on identifying the key strategic challenges faced by Wal-Mart during the year 2007. Moreover, it will evaluate its business strategies through which the organisation has achieved competitive advantages to sustain its leadership position in the global retail industry. In addition, the report will further encompass an identification of effective leadership strategies which may facilitate the organisation to mitigate its major weaknesses highlighting major issues concerning ethics and corporate social responsibility. 2.0. Critical Discussion 2.1. Wal-Mart’s External Environment Analysis Political Factors In relation to the political environment of Wal-Mart, strong influences of the key elements can be observed on the company’s strategies. For instance, during the beginning of the 21st century, the global retail industry trends were observed to expand rapidly taking a new shape being facilitated by the flexible governmental policies concerning Foreign Direct Investments (FDIs). However, not all the nations were then observed to welcome foreign companies within their national peripheries which further created a constraint upon the company’s operations. On the contrary, various governmental policies allowed Wal-Mart to purchase or rather take over national companies, thereby expanding its operations more effectively in the global context (Camerius, n.d.). Economic Factors In context of the economic factors, the business strategies of Wal-Mart can be observed to have become considerably more sensitive and highly focused on selling high volume of products in a lower profit margin, especially during 2007. For instance, during the early 21st century, it was observed that the majority of world population comprised low income group people and was severely affected with growing inflationary rates and rapidly increasing competition (Camerius, n.d.). Social Factors Analysing the social influence on the global operations of Wal-Mart, it can be observed that the organisation was highly benefited with the rapid development witnessed within the rural communities of the world population. Developments were observed in terms of better educational prospects and increasing income level among the lower income group populaces. Furthermore, the cultural factors in the global context were also observed to become more diversified and open towards foreign companies which also facilitated Wal-Mart during the 21st century (Camerius, n.d.). Technological Factors During the early 21st century, technological growth was apparent in the global context which facilitated better flow of information, innovation and infrastructural improvements within the retail industry segment. This particular aspect can further be observed to create significant influence of Wal-Mart whereby the organisation became more inclined towards adopting technologically advanced business processes (Camerius, n.d.). 2.2. Wal-Mart’s Capabilities, Resources and Competences Capabilities of Wal-Mart Wal-Mart’s Capabilities In relation to Wal-Mart during the 21st century, it has been observed that the organisation particularly focused on incorporating effective strategies which further facilitated it to maintain a rapid growth in the global retail industry. Wal-Mart also incorporated an effective practice of cost leadership strategy in order to sustain its leading position in the industry. For instance, Wal-Mart has been focused on marketing its products particularly to the price sensitive customer implementing competitive pricing strategies which enabled the organisation to capture a larger of market share in the global market. Through this strategy, even though, the company had to compromise with its profit margin, it was able to obtain greater benefits in terms of increasing customer satisfaction and subsequent competitive advantages (Camerius, n.d.). One of the significant capabilities of Wal-Mart can be thus identified as its efficiency to obtain the required raw materials at comparatively lower cost and likewise offering products to its target customers applying competitive pricing strategies. The study of the market components in relation to Wal-Mart’s strategies further revealed that the organisation was capable to obtain an in-depth knowledge regarding the industry trends which intern rewarded flexibility to incorporate the changes required for its sustainable growth (Hayden & et. al., 2002). Resources and Competencies The corporate strategies of Wal-Mart can be identified to be based on a low-cost structure which significantly replicates the main purpose or objective of the company in the global market to obtain a leadership position. For instance, in relation to the organisation’s performance, it has been identified that Wal-Mart maintains a unique and an effective administration which involves a direct communication flow among its stores located worldwide (Camerius, n.d.). This benefited the company with the identification of growth requirements in its various regional markets and thereby facilitated proper allocation of its resources. Hence, its efficiency in general administration system rewarded the company with greater competency. Additionally, the human resources of Wal-Mart played a vital role in enhancing its interaction process between the associate members (i.e. the global stakeholders of Wal-Mart) and the company (Camerius, n.d.). This can further enhance the social performance of the company generating greater competitive advantages through customer as well as employee satisfaction. The organisation has always intended to perform an effective relationship with its supply chain participants belonging to different nations. This facilitated Wal-Mart to achieve competitive advantages in the global retail industry in terms of cost efficiency throughout its procurement process (Wal-Mart Stores, Inc., 2012). The other resources and competencies of the organisation can be identified in relation to its technological advancements and incorporation of competitive strategies to render flexibility within the organisational structure. It has been with the benefits of the aforementioned resources and competencies that the organisation was capable of adopting necessary changes and likewise restructuring its global operations (Camerius, n.d.). 2.3. Strategic Challenges Faced by Wal-Mart during the Year 2007 Wal-Mart had also faced different challenging conditions in its global retail operations during the 21st century. For instance, it can be observed that the organisation offers a large assortment of products as well as services, which tends to create different challenges in the overseas markets, especially from its competitors. With regard to the global retail revolution, the business performance of Wal-Mart had been facing competitive pressure in order to sustain its leading position. To be specific, during the year 2007, the retail giant had to face major challenges in terms of an unexpected decline of sales in the global retail market due to the emergence of new entrants. This enhanced the bargaining power of customers with the availability of better substitute products (Yoffie & Slind, 2007). The organisation can also be observed to face severe criticisms in relation to its global operations concerning quality aspects which again influenced restructuring of the organisation in 2007 (Camerius, n.d.). 3.0. Critical Evaluation of Wal-Mart’s Strategies 3.1. Cost Leadership or Price-Based Strategy Wal-Mart efficiently applies its cost leadership strategy which in turn has been facilitating the organisation to achieve a larger customer base. For instance, the organisation has been applying the concept of ‘every day low price’ in order to offer its products following a competitive pricing strategy. In this regard, the company has been focused on targeting the growing number of middle income population who were further acknowledged to be price sensitive. In doing so, Wal-Mart successfully executed its long-term relationship with its suppliers in the global environment which developed the procurement process to be highly cost effective. This particular strategy in turn facilitated the organisation to obtain competitive advantages with enhanced ability in delivering its products at comparatively lower price ranges in the global market. Furthermore, the organisation aimed at sourcing its products from various low-wage overseas markets which also facilitated Wal-Mart to offer its products at a lower price than that charged by its competitors and consequently obtained larger market share (Smith, 2013). 3.2. Differentiation Wal-Mart has also been applying differentiation strategies extensively in its business processes so as to satisfy a larger and more diversified group of customers obtaining sustainable competitive advantages. As can be observed with concern to its business strategies, Wal-Mart has been highly focused towards vertical differentiation as well as horizontal differentiation. For instance, Wal-Mart has been observed to execute differentiation strategies incorporating lower price, additional product features, as well as other promotional activities which proved to be beneficial in obtaining greater customer satisfaction. Moreover, Wal-Mart also focused on rendering additional services such as banking and rental services through hypermarkets. These strategies accumulatively rendered with added advantages to the company in capturing larger volume of the global market share and simultaneously preserve sustainable growth through customer as well as employee satisfaction (Camerius, n.d.).. 3.3. System Lock-In Strategy The system lock-in strategy of an organisation involves examining the experiences of the customers concerning their demands and accordingly satisfying them by conducting affiliation programmes with the complementary factors and through end-to-end product lining process. Contextually, these strategies are often utilised as vital tools to obtain a dominating position in the industrial context of modern day organisations (Springer, 2010). In this regard, it can be observed that Wal-Mart was highly focused on obtaining adequate information regarding the industrial trends and its competitors’ business strategies. This further facilitated Wal-Mart to implement strategies which were competitive enough to restrict the growth of its competitors and simultaneously locking-in valuable customers. The marketing strategies of Wal-Mart were also highly focused on customer needs and demands which in turn assisted the company to obtain greater customer satisfaction (Camerius, n.d.). 3.4. Resource Development Options In order to sustain in the global retail industry, Wal-Mart should highly emphasize on improving value and quality of its wide ranging product line along with upholding its low price strategy. For instance, in Japan, the Sieyu retail chain of Wal-Mart stores failed to perform due to certain quality concerns in relation to the products offered by the organisation. This particular incident made it apparent that even though the organisation was quite competitive in majority of its global markets, it lacked in preserving equal consideration to the divergent factors persisting within the national dimensions. Therefore, the organisation should highly focus on complying with the market demands with regard to the aspect of quality assurance. Employing highly skilled labour force and taking into concern cultural variances of the global market can also be regarded as to vital options for Wal-Mart when concerning its resource development (Li, 2011). 4.0. Critically Discussing Wal-Mart’s Major Weaknesses and Leadership’s Strategies Wal-Mart, in its internal decision-making process can be observed to follow a rigid hierarchical formation which often gives rise to conflicts between the members. Moreover, lack of unconventional thinking, failure in terms of developing genuine harmony along with the incapability to develop adequate consensus regarding decision making among the executives can be considered as the other constituent of the organisational structure in Wal-Mart (Zenith Management Consulting, 2005). From a critical perspective, it can be observed that the organisation has been focused towards incorporating technology advancements in its decision-making processes, but has certainly been ineffective in addressing the cultural as well as globalisation and modernisation effects on its working environment. Additionally, the business model of Wal-Mart is highly focused on the aspect of global expansion. In the similar context, the organisation also considers continuous expansion of its products and services which is also a major weakness for Wal-Mart to effectively perform its business practices. For instance, the continuous and frequent expansion plan regarding its geographic locations as well as its range of products and services has also been affecting the organisation’s overall control on its widely diversified business functions which may further result in losing its capability to sustain its leading position (Zenith Management Consulting, 2005). 5.0. Critically Discussing the Ethics And Corporate Social Responsibility Issues Distribution of minimum wage as well as discrimination in providing incentives and other facilities have caused a higher rate of employee attrition in different Wal-Mart stores across the world. The leadership strategies of the organisation have also been criticised to prohibit its workforce in forming labour unions creating legal conflicts within its working environment (Hicks, 2007). Wal-Mart has been further accused of employee discrimination, especially regarding women in its workplace. It has been observed from various studies that the women employees of the organisation at times have been deprived from adequate training facilities as well as other promotional opportunities as compared to the male workers. Consequently, Wal-Mart had to face numerous court cases for failing to provide equal employment opportunity to women in its workplace (Friedrichs, 2009). Additionally, in the context of its CSR practices, it has been observed that the continuous expansion as well as locating business units in sub-urban areas by Wal-Mart has been significantly impacting the business performances of the small and medium enterprises (SMEs). For instance, the strategy of selling products in a lower price in comparison to the local market players have been restricting the growth of various local and national markets creating ethical concerns for the organisation (Carroll & Buchholtz, 2011). 6.0. Recommendations The business strategy of Wal-Mart is quite successful in terms of providing products at a comparatively lower price range to the global consumers. In order to sustain in the competitive retail industry, it can be recommended that the organisation should further focus on maintaining similar strategies rendering greater consideration towards its ethical performances. Moreover, Wal-Mart should also aim to capitalise on the organisation’s present growth which would facilitate in minimising difficulties for the company in the future global retail industry. In addition, it can be further recommended that the business strategies of Wal-Mart should highly focus on the quality and value of its wide-ranging products. It can also intend to carry out market development strategy by capturing new consumers in different global markets which can aid it to generate greater sales. With this concern, it is quite necessary for the organisation to develop a better working environment and simultaneously working in alliance with the community interests concerning growth which can reduce its ethical concerns and facilitate better sustainable growth. 7.0. Conclusion In the conclusive part of this report it needs to be mentioned that Wal-Mart is one of the world’s most trusted and value format retail companies which is serving more than 27 countries under 69 banners in the world. Since the establishment of the retail giant, it had to deal with challenging environmental elements throughout the world along with the providing goods in lower prices as compared to other retail companies. It is recognised that the company has over the years rigidly followed its competitive low price strategy which has significantly benefited the consumers to derive profitability. However, it has faced certain ethical and CSR challenges that have hindered its growth and sustainability to a certain extent. Therefore, in future, it is required to take cautious decisions in relation to internal organisational strategies so that the reputation of the company remains intact. References Camerius, J. W., No Date. Wal-Mart Stores, Inc.: Strategies for Dominance in the new Millennium. The External Environment. Carroll, A. B. & Buchholtz, A. K., 2011. Business & Society: Ethics, Sustainability, and Stakeholder Management. Cengage Learning. Friedrichs, D. O., 2009. Trusted Criminals: White Collar Crime in Contemporary Society. Cengage Learning. Hayden, P. & et. al., 2002. Wal-Mart: Staying on Top of the Fortune 500 A Case Study on Wal-Mart Stores Inc. Background. 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