External Analysis, Business Level and Corporate Level Strategy of Walmart - Case Study Example

Business Strategy of Walmart Company Background Wal-Mart store was first opened in Rogers, AR back in 1962 by Sam Walton and Bud Walton. 2 years later, the company had 24 stores with 12 Million dollars in sale. In 1969, the store shifted outside Arkansas with retail stores in OK, MO, Claremore, and Sikeston. Since its establishment, the company is guided by customer satisfaction steered by Sam Walton and Every Day Low Prices. In 1970, Wal-Mart Stores opened a corporate headquarter and a distribution center in Bentonville. Increasingly, the company sold some of its shares to the public. 13 years later, the company opened the first warehouse. In 1988, the company opened a Supercenter that featured the company’s store with a supermarket from the inside. During the new millennium, the company entered the new year dedicated in providing their clients a superb shopping experience, whether in store, online or through mobile devices. During the same year, the company employed more than one million associated in 3900 stores and clubs in the world. In 2002, the company topped the ranking of Fortune 500 as one of the largest companies in America (Walton and John, 110). In 2005, Wal-Mart took leadership responsibility in disaster relief. In 2006, the company introduced prescription program dealing with generic drug. In 2011, Wal-Mart said it would not pay their new workers one dollar per hour for working during the weekends. Until recently, the company Doug McMillion took over the position of CEO from Mike Duke. Additionally, the company has employed more than 2 million associated in the world and has retail serving more than 200Million client does every week in more than 11000 branches in 27 countries. Wal-Mart mission is “Saving people money so they can live better”. The company’s goal is to become an international brand. The company vision is “If we work together, we’ll lower the cost of living for everyone. We will give the world an opportunity to see what it is like to save and have a better life. Consequently, the advertising slogan for the company is to save money and make the lives of their clients better. Wal-Mart believes and values respect for people. These people can either be customers, employees, suppliers, community members irrespective of their ethnic background, sexual preference, or gender. The company also values the services they offer to their client surpassing the customer’s expectation. Increasingly, the company strives for perfection and excellence. The company focuses in selection innovation and promotion of services and products. External Analysis Based on the external environment of the company. Wal-Mart has a low bargaining power of their clients. This is attributed to the fact that their clients normally make very small purchases. Consequently, the bargaining power for their supplies is medium to low. This is because; the company purchases huge product quantities from their suppliers. In addition, it incurs a low shifting cost from one supplier to the other. Additionally, their products have many substitutes and not almost all their products are that crucial for the company. In terms of barrier to entry and potential entrants, the company record is medium to high. This is attributed to economies of scale, high requirement for capital, and clients mainly look for products that are of standard quality and low priced. Barrier to entry is also attributed to fact that their low shifting cost among firms for their client and them also requires a perfect distribution system. Wal-Mart has high power of substitutes (Chiron, 65). This is because the quality and prices of their products are so competitive. Their substitute product performance are the same, in addition, their client switching cost is also very low. Subsequently, the potential rivalry and competitors for the company is high. The high accounts for a quarter of the United States supermarket industry. High rivalry is also due to the small size of competitors. Additionally, the growth of the industry is very low with high exit barriers and a higher production capacity (Chiron, 12). The company’s main competitors include the Target and K-Mart in the retailer industry and Dollar General and Lowe’s Food for supermarket industry. Target offers similar products as Wal-Mart with their mission of making their products to be a preferred shopping point in all the channels. In supermarket industry, Dollar General is the main competitor, steering for low prices. The company has a good position and location in smaller communities as one of the main competence advantage. The strategy for this supermarket is to save money and save time, with their mission of serving their clients by keeping it simple and real for them. The company has gained an advantage of their competitors combined due to their economies of scale. Internal Analysis Based on the firm’s infrastructure of Wal-Mart, the company has more than 2485 stores in the world. This entails the supercenters, Sam’s Clubs, and Neighborhood Markets and International Units. There are 103500 associates and the company is ranked as the largest private employer in America. The company runs its operation from the national headquarter. The office takes care of the orders that the company receives and every domestic store reports to the company’s headquarters. The domestic store is responsible to satisfy the domestic clients. Each associate is required to lower the cost of conducting the business ranging from using fewer papers to make recommendation that can help the company in solving millions of cash. Based on Human resources management, more than 60 per cent of the company’s managers once worked as associates. This means that the company offers their employees the chance to advance in their careers. The workers are encouraged to share information, come up with new ideas, take risks, and compete for excellence. Additionally, the workers get comprehensive benefits and competitive wages that include the full time and part time workers. Some of the benefits that the company issues to its employees include stock purchase program, holiday pay, private counseling, and dental coverage. During the company’s recruitment, the company starts a comprehensive program for recruitment for the community where the branch identifies with the candidates. The recruitment process is transparent and well publicized offering an opportunity for applicants and the firm to start getting cognizant. In terms of technology development, the company uses technology that is computer based. The bar code of the produced is swiped at the checkout point, and information is set to the data warehouse of the company. The data warehouse will project when the product need replenishment and then place the order to the distribution center of the company. Other technological elements that the company uses are E-business and Electronic Data Interchange. When ordering, the headquarter applied goods for each store. The bar codes of the products are sent to the main computer found in the main office. The computer then collect orders from the various stores and then sends them to suppliers (Foley and Stephen, 127) Business Level and corporate level strategy There are three business strategies that a company of Wal-Mart caliber. The three strategies include the differentiation strategy, cost leadership, and focus strategy. The focus strategy is based on the focusing to offer services and products to a given market segment within a given product line. The differentiation strategy offers services or products that are taken to be unique in the place of market. I would recommend the company to use cost leadership strategy. Where the company offers their clients, a greater services and product service at a cheaper price than their competitors do. Generally, the company offers similar quality of goods and services at cheaper prices. Achieving this objective, the company relies on the Supply Chain Management, which makes sure that the products are made available to the client when they need it. In real sense, the company combines both the differentiation strategies and cost leadership strategies because it enable to company to attain a large scale and an effective supply chain. In addition, the company has an independent low cost brand for instance the great value. The company also combines the two strategies because of a cheaper cost structure that enables the company to come up with the lowest price and attain a competitive advantage; this is based on the price combination and best value (Francine et al., 85). The strategies fit the values and goals of the firm where Wal-Mart believes and values respect for people. These people can either be customers, employees, suppliers, community members irrespective of their ethnic background, sexual preference, or gender. The company also values the services they offer to their client surpassing the customer’s expectation. Increasingly, the company strives for perfection and excellence. The company focuses in selection innovation and promotion of services and products. The company also suits the combination for the strategies because it is present in various industries and markets with perfect channels of distribution. Additionally, the company combines both the differentiation strategy and cost-leadership strategy because it is not easy to imitate by providing a wider quantity of products at cheaper prices (Hill and Gareth, 12) Recommendation The company needs to focus on in-stocks. In stocks is defined as the measure of how merchandize is available for the customers to buy. This is because over the last years, the company has focused in keeping their shelves full. Lacking the merchandise has resulted to the client of the company to shift to their main competitors such as Amazon and Target, during the period when the earning of the company is lower compared to other quarters. The problem is connected to the tendency of the company to employ insufficient workers and hence those working at the chains are stretched and overworked. For instance, the employees at the headquarters and Sam’s club warehouse dropped by 20000 in 2008 and 2009, within the same period the company added chain stores bringing it to 4200. The rising number of location and the decreasing number of workers may cost the picture of the company. Therefore, the company needs to change the gap. Walmart need add more labor and labor hours as one of the efforts in sustaining the execution of in-store. This might up result to billion opportunities for the company, if it increases their labor force successfully (Francine et al., 75). Increasing the number of labor hours will help the ability of staff to transfer their inventory from their stockroom and get the goods in the right location on the floor of the store. The company also needs to implement the focus strategy where the company will focus in to offering services and products to a given market segment within a given product line. Reference Chiron, Patrick. Wal Mart. [Éd.] 2000. ed. Paris: Eurostaf, 2001. Print. Foley, Sharon, and Stephen P. Bradley.Wal*Mart Stores, Inc. Boston, Mass.: Harvard Business School Pub., 2002. Print. Francine, Barley, David Bragg, Misty Dawson, Hammad Shah, Brian Sillanpaa, and Nathan Sleeper. "Wal-Mart Stores, Inc." in Michael A. Hitt, R. Duane Ireland and Robert E. Hoskisson, Strategic Management: Concepts and Cases. Mason, OH: Southwestern Cengage Learning, 2009. Print. Hill, Charles W.L, and Gareth R. Jones.Essentials of Strategic Management. Mason OH: Southwestern, 2012. Print. Walton, Sam, and John Huey. Sam Walton made in America: my story. New York: Doubleday, 1992. Print. Read More