Creating Value in the Multi Business Company - Assignment Example

Business Level and Corporate Level strategies Introduction Retail industry has been selected as the industry for discussion. One publicly traded corporation within that industry is Wal-Mart. It is a multinational retail corporation. It has its operation worldwide. The chief executive officer of Wal-Mart is C Douglas McMillan. It was founded by Sam Walton. It has its headquarters at AR, United States of America, and Bentonville. Wal-Mart owns stores of around 11,000 spread over 27 countries across the world. It earns a huge amount of money from its operation. The company started its operation from 1st October 1969. The operations carried out at America, China, and United Kingdom was very successful. It provides online shopping opportunity to its customers. Its main objective is to provide better life to its customers with the help of the donations in kind. Wal-Mart is managed by Walton family as it is a family owned business. It has around 2.2 million employees across the world. Question 1 Business Strategy is a process which involves performing different functions for the growth of the organization. The management should undertake different challenges to attain the desired outcome. Figure 1: Business Strategy Hierarchy Corporate level mainly deals with framing the mission and vision of the organization and planning accordingly to reach the desired goal. It formulates different strategies which are required for attainment of objectives of the company. The Functional level objectives are derived from that of the corporate level. This level develops coordination between the corporate and business unit level. In this complex environment of the business, the strategies are required to be formulated. This strategy is very well defined as in this level the marketing strategy will be further divided between the sales. The strategy in this level helps in the attainment of functional objectives of the organization (Hoskisson, Hitt and Ireland, 2012). Strategic management is required for the growth of the organization. It helps in the formulation of effective business environment. Business strategy is compared and formulated with the five forces that build competition. The strategic position of the company can be determined by the business level strategy. Figure 2 : Competitive Advantage Wal-Mart adopts competitive advantage by delivering unique product to its customers by providing a standardized product at a lowest competitive price. The company can select any one from the given strategies to gain competitive advantage by delivering uniqueness in the product and lowering down the cost. The retail industry focuses on the cost leadership strategy to sustain in the market and narrowing the competitive scope. When the company provides unique product the customers will be willing to pay a premium for the product. Question 2 Corporate level refers to the strategy and the decisions taken by the senior management for achieving the plan of action to gain competitive advantage. The main objective of competitive advantage is increase in differentiation for the product and also lowering the cost. The responsibility of corporate business strategy lies with the Chief executive of the company. Figure 3: Corporate Level Strategy Corporate level strategies mainly deal with concentrating on the single line of operation. Diversification refers to the bifurcation in the same area to build the product in the existing division. Un-diversification refers to the strategy developed to establish the business in new area to reduce the risk and trouble in that industry. Corporate level strategy helps in developing stability in the strategy, to focus on growth strategy, combination strategy and retrenchment strategy. Stability growth helps a company to remain on the safe side ad also undertake growth and expansion in the business. Growth strategy helps the company in addition of new products and services and also improvement in the current business position. The growth strategy helps the company in forecasting the future and take necessary prevention against the unstable environment and spreading the business risk in the market. Retrenchment strategy helps in redefining the business and prioritizing the functional improvement. Defensive strategy prevents a company from being sold or dissolved. Such situation occurs when there is no buyer to purchase the product of the company. It also prevents the company from being captive that is the situation where a firm follows the decision of the other firm for receiving a guarantee from the firm that the products of the firm will be purchased by them. A company undertakes combination strategy when a company adopts more than one strategy to work simultaneously. Combination strategy results from the changes in the environment and redefining the business (Goold, Campbell and Alexander, 1994). The Corporate strategy also deals with number of factors such as geographical condition and market definition. Wal-Mart should adopt the corporate strategy which assists and guides the company in gaining competitive advantage in the market. Question 3 Sustainable competitive advantage is required for realizing the realities of the market. It helps the company in reduction in price and enhancement in service of the company. It provides a value advantage over the products that are being offered. Figure 4 : Competitive Environment The competitive environment creates a barrier for the new entrants in the market place which leads to the economies of scale, identification of brand, government policy. It establishes and creates a threat among the new entrants for entering in the competitive market. Competitive environment also creates bargaining power of the suppliers which help in determining the presence of substitute product in the market, the cost involved in switching the firm or industry by the suppliers. Presence of substitute also creates a threat of substitute in the industry. It involves cost of the buyer to substitute the product.Bargainning power of the buyers also affect the competitive environment as it creates a threat of buyers in entering in the competitive market. It involves the cost of the buyer in switching to a new product, the awareness about the presence of substitute in the market. The competitive rivalry intensity depends on the demand and capacity of the firm in handling the barrier and sustaining in the competitive market environment. Profitability of the industry deals with all the players in the market. The firm should be able to compete strongly with its competitors present in the competitive environment and also the personality of the chief executive officer of the firm who is responsible for formulation of the action plan (Furrer, 2010). Figure 5: Porter five force model Wal-Mart must be aware and keep focus and attention about the threats available in the market which is a barrier towards the entrance of the customers in switching to its product from other product. As competitive environment includes investors, suppliers and consumers, its external environment is affected both by social and political factors. It also includes unions, regulatory bodies, business partners and competitors. Question 4 Fast cycle market is more strained than that of a slow cycle market. The competition of the fast cycle market is much more than that of the slow cycle market. As the fast cycle market mainly deals with innovation and development. Fast cycle market creates problem for the firms to sustain in the competitive environment. Rather than focusing on the protecting and maintaining the slow cycle market is concentrating more on competitive advantage to compete with that of the fast cycle market. Fast cycle market do not emphasize on the competitive advantage because they believe that it will not last for a long period of time. Competitive environment analysis mainly deals with three factors such as: Industry analysis, competitive analysis and competitor analysis. Slow cycle markets are those markets in which the competitive advantage acts as a protection from the long period time limitation. The limitation for the slow cycle market is that it is costly. It builds competitive advantage that develops sustainability. The organizational structure is developed in such a way that it creates and support the strategic effort effectively and efficiently. Fast cycle market helps the company to move fast and ahead of its competitor in the market. It allows the company to think fast which leads to the forecasting, anticipating. It allows taking quick and prompt decision which includes formulation of guiding principles, Getting away from the bureaucracy, reassessing continuously on a constant basis. It develops to move fast towards the market developing a competitive advantage, and also in maintain speed such as financial flexibility, creativity involved in managing the business management process system. The main idea behind creating competitive business environment is that is provided by the new issues which can be explained by the New Business Model, that is aggregation of demand for the product among the buyers in the market, the productivity of the workers towards manufacturing and selling the product in the market and making it available to its end user, the complexity that is involved among the different participants in the market. Innovation of value is creating and developing the value among the different participants in the market and learning continuously from the market. Self leadership and empowerment is required to take quick decision and formulate the plan of action, Light speed and personal customization is also required. The three forces that drive the economy are globalization knowledge and change. Knowledge involves intellectual quality of a individual to design the strategic factor intellectually, changes involves the fast and rapid change to face the uncertainty and the technology, finance, trade, communication resulting in the creation of completion and the interdependency in the market (Williams,1998). Wal-Mart in order to sustain in the competitive environment have to undergo both slow cycle and fast cycle market. The slow cycle and fast cycle market will provide a competitive advantage in the new complex emerging markets. Conclusion Wal-Mart adopts a business strategy model which will help in the implementation and coordination in the plan of action and will provide competitive advantage to the firm. The company also adopts the corporate level strategy to develop new products in the emerging market and gaining competitive cost and cutting down the cost. Resources, capabilities and innovation are some of the inputs required for the generation of economic output in the business model. Fast cycle market mainly deals with taking prompt and quick decision, developing a new product; transform the orders given by the customers in to deliveries more quickly than its competitor. Fast cycle market differs from that of the traditional firm in the perspective that the structure performance of work of fast cycle market differs from that of the traditional market. Porters five forces model provide information to the industry about the barriers towards establishing and introducing a new product in the market. It provides information about the profitability of the company and provides guidance for the entry and exit in the market. The relationship between the firm and the customer grows strongly when the firm delivers superior value to its customers. References Furrer, O. (2010). Corporate level strategy: Theory and applications. Netherland: Taylor & Francis. Goold, M., Campbell, A. and Alexander M. (1994). Corporate-level strategy: Creating value in the multi business company. London: J. Wiley. Hoskisson, R., Hitt, M., Ireland R.D. and Harrison J. (2012). Competing for advantage. USA: Cengage Learning. Williams, J. (1998). Renewable advantage: Crafting strategy through economic time. New York: Simon and Schuster. Read More