Strategy Practice in Wal-Mart - Case Study Example

Strategy Practice in Wal-Mart Contents Contents 2 Introduction 4 Evaluation of the organization at the Business level 5 Evaluation of the organization at the corporate level 7 Domination In the retail market 7 Challenges 8 Growth in the US and International market 8 Challenges 9 Recognition and Brand 9 Challenges 10 Diversification to New Sectors 10 Challenges 11 Outline of the strategies to meet different challenges 11 Strategies to meet market dominance related challenges 11 Strategies to meet growth and expansion related challenges 12 Strategies to meet marketing and branding related challenges 13 Strategies to meet new products diversification related challenges 14 Conclusion 15 References 16 Introduction Wal-Mart is a part of the retail industry and is an American multinational corporation that operates through a wide chain of large discount warehouse and department stores. In 2014 the Fortune Global 500 list stated the company as one of the largest public corporation in the world. Wal-Mart is even considered to be the biggest retail chain around the world along with being the largest private employer and has an employee base of two million. The company is controlled by the Walton family as it is a family owned business where the family has 50% stake in the company. In 1962 the company was founded by Sam Walton. In the present scenario the company is also considered in the United States as one of the largest grocery retailer. The company has adopted the global expansion strategy in which it has plans to set up its stores in every corner of the world and to offer a wide range of products to its customers at the least possible cost. The company presently operates under 55 different brand names across 27 countries with 11000 stores. The company has moved from a regional to a national giant and n US it is one of the largest profitable retailer obtaining high margins of revenues. The operations of Wal-Mart are split into three different sections that are Wal-Mart stores US, Wal-Mart International, and Sam’s Club. The company has adopted nine different formats of retail business to carry on its operations such as food and drugs, supercentres, small markets or bodegas, general merchandise stores, apparel stores, cash and carry stores, restaurants, membership warehouse clubs, and soft discount stores. The retail departmental store format has now shifted into more supercenter format where the grocery items are sold more in comparison to the non grocery items. The Sam’s club which was an initiative of the company offered grocery and other merchandises in large quantities and it created its own niche market where it could supply its products to some small businesses. The company has gained its competitive advantage through its low pricing strategy and achieved a sustainable position in the competitive retail industry. Evaluation of the organization at the Business level Wal-Mart has been able to secure the position of a world leader by providing to its customers all sorts of products as per the consumer demand. The specialty of Wal-Mart is that it offers the products at the lowest price possible. The company has adopted the strategic framework of a low cost leader which has facilitated the growth of the company from its inception to the present state. There were a range of competitors who tried to adopt the same strategy but could not overpower Wal-Mart on its lower prices (Sadler, 2003, pp. 76-77). The company not only focuses on offering lower prices for its products but has also delivers the best quality products. The Business Level Strategy of the company states that it is providing its customers at the lowest price for its wide range of products. It incorporates in its operations the low cost strategy and is considered to be the low cost leader in the market place. The company in the initial phase of its operations was the only player in the market that offered all kinds of products under the same roof. The main aim of the business operations of Wal-Mart is to provide high quality products to its customers at low cost (Peng, 2009, pp. 107-108). The organization has been able to satisfy its customers over the years and it has taken into consideration the most important factor of the customers that is the affordability factor. Its economic prices has helped the organization to acquire new customers as well retain the existing ones. The two important element of its business level strategy is that of economical prices and world class quality which has facilitated the company to achieve its market leader position. The products that Wal-Mart sells are all standardized and it has been able to attract many world class organizations and other multinationals to sell their products through Wal-Mart. The strategy even extended towards the value chain practice where the company ensures to deliver the best of value through its entire process (Aaker, 2001, pp. 113-114). The company has even opted for measures to increase the efficiency level of its value chain activities which has even enabled the company to reduce the cost to a great extent. The company has entered into some untapped markets and explored the available opportunities in those markets. Wal-Mart has not only improved on its operations in the national context but also expanded its operations globally (Spulber, 2007, pp. 96-97). The company to be at pace with other organizations has even incorporated the latest technological innovations in the system. The company along with improving on physical shopping has also incorporated the concept of e-business in its system. The e-commerce platform has increased the satisfaction level of the customers where they no need to go physically to the Wal-Mart stores and can shop sitting in their home at their convenience. There are three generic strategies that are used by the company the focus strategy, overall cost leadership, and differentiation strategy (Ulwick, 2005, pp. 123-124). The focus strategy encompasses of offering products to specific market segment or geographical market or a buyer group. The overall cost leadership is offering high quality products at such an affordable price that cannot be easily copied by its competitors. The differentiation strategy encompasses of offering a product line that is perceived to be unique by the customers. The company has incorporated IT system in its supply chain so as to facilitate the inventory tracking, replenishing the stock, production, and distribution. Wal-Mart ensures that electronic product codes are maintained by its suppliers so that the customers get their orders in the required time frame (Steers, 2006, pp 151-152). The company has been able to achieve the competitive advantage on the basis of its business level strategies which has made it adopt low cost strategies that proved to be very beneficial in terms of revenue for the company. The bottom line strategy for the company comprise decreasing transportation cost, manufacturing costs optimization, minimizing errors of the overall business process, and reducing the cost linked with human resources. Evaluation of the organization at the corporate level In this section of the study organizational evaluation at the corporate level will be done. Domination In the retail market The main strategy of the organization is to dominate the retail market. Wal-Mart is basically a discount offering retailer because they sell their products at the lowest possible prices. Selling at a lowest possible price gives an essence of successful discount retailing to cut the price of a product to its lowest possible rate (Vance and Roy, 1994, pp. 78-81). It would increase the volume of sales. Increased volume will make up the slashed price of each product. Wal-Mart controls its cost drivers very well and achieves a cost advantage by that mean. With the help of Efficient supply chain of the company making it easier in the corporate level. To increase competitiveness, organization collaborates with vendors having prominent brand image. Vendors are very equipped with full product lines. Innovation and creativity are very important for those vendors. Company spends lots of energy and time with their vendors. Company’s main objective is to be a leader in the retail industry by offering lowest possible cost to its customers. Wal-Mart is currently worlds number one retail brand globally. It believes in fierce competition from its each and every outlet. Company implements its strategies very well. Wal-Mart believes in building more stores, to expand into other sectors of retail and make existing stores bigger. Company measures its success in terms of sales. Company is constantly keeping eye on its competitors and assessing its dominance in the market. Company is very ruthless in case of market domination. Wal-Mart is very aggressive in nature to dominate the global retail market. It always wants to be market leader in this industry. Company is so aggressive in nature, even competes with local players in different global markets. Challenges Wal-Mart faces different challenges in case of retail market dominance. Economy is not always same. Slowing economy is challenge for retail sales. Every time offering lowest prizes available in the market can hamper profitability of Wal-Mart. There are lots of players in the retail market competition is very high. Proper selection of vendor is very challenging. Growth in the US and International market The goal of Wal-Mart is to expand vigorously. The company is very successful in this endeavor. Company is having large present in both US and international market. The company has over 4000 stores around the world. Huge presence of the organization in national and international market is one of the main reasons of good growth. More than 1,200 stores are there internationally. The organization has very powerful and aggressive expansion strategy. Company takes over different national players internationally and converts their names into Wal-Mart (Shapiro and Glicksman, 2004, pp. 128-130). This is a very well thought strategy of Wal-Mart. With this step company can reduce the threat of that local player and can establish its brand in that place. Once the customers of that place is familiar with the brand and the acquired outlet is doing good business company go for more expansion by opening a new store in the nearby places. In this way organization is expanding in very fast pace. This expansion is resulting into continuous growth for the company. Corporate acquisition strategies are more suitable for entering into new markets. It saves lots of time for the company for expanding in a new market. This strategy also helps the company to reduce its competition in the market. Business expansion is very much important for achieving desired growths. Wal-Mart follows this rule very aggressively. Market share of a stipulated market is limited. Growth would also be limited. Organization like Wal-Mart has recognized this thing and that is why going for more and more global expansions. Wal-Mart is increasing its global presence very well. Challenges Understanding local culture is a real big issue. Marinating large diverse workforce around the world is also very challenging. Opening a new business into a new market calls for huge investments. Calculation of revenue earning out of that investment is also very challenging. Acquiring local players can result in cultural clashes among the workforce. Recognition and Brand The company’s main objective is creation of positive image of the brand in the mind of customers. Customer satisfaction is very deeply related with Wal-Mart brand. The best area of company recognition is offering best possible prize (OaShaughnessy, 1995, pp. 79-86). The company does this with the help of television advertising campaigns and newspaper advertisements. Wal-Mart believe in original advertisement campaigning. Most of the cases company uses its real stores and original employees for the advertisement purposes. Company highlights its point of strength “Always Low Prize” very well in their advertisements. Organization also uses the strategy of partnership and co-branding. Mc Donald is a very reputed food brand with whom Wal-Mart has done co-branding. Company also uses different celebrities from the Hollywood as their brand promoters. Company’s original advertisements are very effective for recognizing the brands. Customers get very clear and real image about the brand. This creates a sense of attachment in the mind of the customers with the Wal-Mart Brand. Apart from this company is innovating different ideas for the promotion and branding of their products. Company is going online and using different social, networking sites for its brand and recognition. Company does lots of innovation in terms of store layout, store colors and product display. With all this strategies Wal-Mart has able to promote its brands very well. Wal-Mart also follows green marketing for attracting more and more customers. It provides the organization an eco friendly image. Company is involved with different CSR activities which would create philanthropic image about the organization and attracts many customers (Jenster, Hayes and Smith, 2005, pp. 98-101). Wal-Mart is keeping no stone untouched to promote its products and services. Challenges Technology of promotion is always changing. Keeping pace with changes is very challenging. Rising cost of marketing and branding is a critical issue. Complex promotions can confuse customers. Diversification to New Sectors The company is diversifying into new sectors. Wal-Mart has entered into its business of grocery sales, automobile repair and pharmacy. Company follows a very simple but effective diversification strategy. First they expand physically in terms of growing the number of out lets in the market, and then diversify in terms of products to sales. Company very intelligently increases their products line by diversifying into new products. Company has very clear cut idea about their goal. It wants to dominant every sectors of retail business. Diversification into the new areas of business is a very well calculated strategy of Wal-Mart. These kinds of strategies are very effective in corporate level. It is not very easy for the others players in the market to follow this strategies. It gives organization lots of options and reduces the dependency of the organization upon certain products. Customers would get almost everything with a single window system. Wal-Mart is showing its clear intention of new products and services diversification. Challenges Diversification into a total new sector can be very risky. Getting suitable supplier in the new domain is very critical. Diversification can have negative effects on the quality of existing products and services of the Wal-Mart. Diversification can hamper the existing products of the company. Recognition is less. Outline of the strategies to meet different challenges Strategies to meet market dominance related challenges In this section different strategies would be discussed to meet different challenges the company may face. Economic state of any market is not always same (Fitzroy and Herbert, 2007, pp. 35-38). Wal-Mart must analyze the economy of the market very well. It must monitor all the developments in the economy. According to the economic situation company should invest and set its goals. Economy analysis would be very helpful for decision making. Wal-Mart should do its pricing strategy very well. Company’s USP is lower pricing model. For achieving this company must be very efficient and must reduce overhead costs. It can go economy of scale by selling higher volume of products. It must design its pricing model after lots of research. Company can monitor the pricing strategy of other players. Company can close down nonprofit centers for reducing the cost. Company can go for lean management. Choice of efficient proper vendor for supplying raw material at lowest possible price is also very important. Company can maintain a vendor’s profile which would help to measure the performance of a particular vendor. In this way company can easily identify those vendors who are performing well and those vendors who are not performing well. With that Measurement Company can continue or discard with different vendors. Company must do its vendor analysis periodically or after regular interval. Competition can be handled by providing more and more new innovative products in lowest possible price in the market (Coleman, 1988, pp. 203-205). Sticking to the highest level of quality and services is a main strategy for killing competition. Providing customer satisfaction by customization of services can be very effective for handling competition. Maintaining relationship with the customers is also a good and effective strategy for Wal-Mart. Diverse product line provides huge competitive edge to the company, as customer would get different products under single window. Strategies to meet growth and expansion related challenges Wal-Mart must think from a local mindset of a foreign country. Every country has its local culture and needs. Wal-Mart must understand that local need very well and market its product according to that (Quinn, 2000, pp. 79-83). Company must understand the buying behavior of the local customers where the company is going to start its new business. Wal-Mart must be very flexible in terms of their strategies related to global market. Company must create a sense of attachment among its diverse global workforce. It may provide some orientation program to its employee around the world to allow them to fit into suitable work culture. Company must consider different aspects like language known and nationalities of the employee before choosing any personnel for its new business in new market. Profitability analyses are very important for any expansion may be global or local. Company can take help from financial experts, would guide the company about this aspect. Company can do trend analysis from its expansion as well as competitor’s expansion. Company can conduct an elaborate market research about its expansion. Acquisitions must be done in mutually beneficial way. Company must not undermine the work culture of the local player and should design a balanced work culture. Wal-Mart must give desired recognition to acquired local player. With this organization can maintain a smooth cross culture balance. Strategies to meet marketing and branding related challenges Wal-Mart should keep innovating in terms of promotion of their products. It must track all the modern methods of promotions. Company must evaluate each and every promotional method very closely. Close evaluation of promotional techniques would help the organization to continue with performing strategies and can discard all non performing strategies. Company should go with those techniques which would attract maximum number of customers in exchange of minimum money (Mitchell, 1996, pp. 67-71). Wal-Mart must maintain the simplicity of its promotions. Simple and clear promotions are very effective for customer’s attraction. Wal-Mart must follow those strategies to ease out different challenges related with promotions. Branding is very important. Wal-Mart must promote its products in a very intelligent manner. It must notice that no brand should be cannibalized. In one word Wal-Mart should be very crisp and simple about its promotions. Strategies to meet new products diversification related challenges Diversification into new products needs lots of calculated steps. Wal-Mart must analyze the situation of the market. It must understand whether the demand of the new products in the market is temporary or permanent. If the demand is permanent then company should go for that diversification (Coade, 1997, pp. 223-226). Organization must invest into new products after lots of calculations. Wal-Mart must analyze whether the product would earn desired revenue from the market. If all the calculations and research are showing positive result then only the company should go for new products diversification. Company must select its new suppliers for new product very properly. Company must do extensive background check of those vendors. Company must select very experienced and sincere vendors for its new products. Organization must not have too much of dependence on a single supplier. Company must enhance tally of suppliers for reduction in dependency. Company must focus very hard in terms of its existing products. There is no place of complacency in terms of the products. Company must updating and maintaining the quality and services for its existing products as well as diversification. Company should take its existing services and products into certain level where challenges are very limited. Wal-Mart must promote its new products and services very wisely. Company may allocate a huge and attractive self space for its new products. Customer would feel attracted with new products. Company may offer lucrative discounts for new products. Once the product is well recognized in the market then return back to the normal marketing strategy. Conclusion Wal-Mart is a big global retail giant with aggressive nature of market dominance. The company is increasing its global presence in a very first pace. Organization has a clear cut idea to remain market leader in global retail industry. Company has a basic idea of offering lowest possible prize to its customers. Organization is diversifying with lots of risk. Wal-Mart must understand that modern business world is ever-changing. Change is the only constant thing in this world. Wal-Mart must understand all the changes very well. Company must be very proactive in nature. Management of the organization must monitor each and every development related the business world. Good quality products and satisfied customers are the difference makers for any organization. Wal-Mart must remember these basic but most important factors. Different country has different cultures. Global players like Wal-Mart understand the local culture of every foreign industry and must design its business according to those local sentiments. There is no place for relaxation for the company as other players in the industry are competing very hard. Wal-Mart must follow all the legalities, norms, regulations related with the industry and must be very transparent in nature. References Aaker, D.A. 2001. Developing Business Strategies. UK: Wiley. Coade, N. 1997. Managing International Business: UK: Cengage Learning EMEA. Coleman, W. D. 1988. Business and Politics: A Study of Collective Action: Canada: McGill-Queens Press. Fitzroy, P. and Herbert, J. M. 2007. Strategic Management: Creating Value in a Turbulent World. USA: John Wiley & Sons. Jenster, P. V., Hayes, H. M. and Smith, D. E. 2005. Managing Business Marketing & Sales: An International Perspective: Denmark. Copenhagen Business School Press DK. Mitchell, J. K. 1996. Long Road to Recovery; Community Responses to Industrial Disaster: Tokyo: United Nations University Press. OaShaughnessy, J. 1995. Competitive Marketing: A Strategic Approach: New York: Routledge. Peng, M. 2009. Global Strategy. USA: Cengage Learning. Quinn, B. 2000. How Wal-Mart is Destroying America and the World: Berkeley CA: Ten Speed Press. Sadler, P. 2003. Strategic Management. Great Britain: Kogan Page Publishers. Shapiro, S. A. and Glicksman, R. L. 2004. Risk Regulation At Risk: Restoring A Pragmatic Approach. USA: Stanford University Press. Spulber, 2007. Global Competitive Strategy. USA: Cambridge University Press. Steers, R. M. 2006. Managing in the Global Economy. Canada: M.E. Sharpe. Ulwick, A. W. 2005. Business Strategy Formulation: Theory, Process and the Intellectual Revolution. USA: IAP. Vance, Sandra S. and Roy V. Scott. 1994. Wal-Mart. A History of Sam Waltons Retail Phenomenon: New York: Twayne Publishing. Read More