Strategic Management of Wal-Mart Stores - Essay Example

?Strategic Management of Wal-Mart Stores Table of Contents Introduction 3 About Wal-Mart 3 Wal-Mart’s Low Cost Strategy 4 Wal-Mart Expansion Strategy4 Competition at Wal-Mart 5 Recommendations and Conclusion 7 References 8 Introduction Strategic management can be explained as the process whereby the evaluation of the performance of the corporation along with the context in which it operates for the purpose of achieving long-term objectives of the organization is identified. The long-term objectives are generally related to the adaptation as well as adjustment to the organizations’ environment by manipulating the opportunities and thus reducing the threats (Alkhafaji, 2003). It is to mention that the company that has been chosen for the study is Wal-Mart. The purpose of the study is to recognize the Wal-Mart’s strategy and further create an argument to verify if the strategy that has been adopted by the company is appropriate or not. About Wal-Mart Wal-Mart Stores, Inc is a company that is in America and belongs to the category of public corporation. It operates numerous chains of the discount department based stores and also warehouse stores. The company outperformed in the year 2010 and was successful at becoming the biggest corporation in the world in terms of revenue as per the Forbes Global 2000 for that particular year. It was incorporated in the year 1969. It is worthy of stating that because of the strategic actions taken by the company, it has been successful at expanding its operations in 15 countries with 8500 stores and 55 numerous names (Scribd, 2011). Wal-Mart’s Low Cost Strategy The Wal-Mart’s stores are present in almost every ‘nook and corner’ of the world. The obvious question that arises in the mind relates to the reason behind the successful operation of the company. The reason behind is the low prices that the company maintains for the purpose of attracting the customers. However, the other question that crops up in the mind relates to understanding of the term ‘sweatshop’. Sweatshops are the shops or the factories where the workers are suppose to work for longer period at quite low wages and tend to work under deprived working conditions. The Wal-Mart purchases the product from such factories or shops where the rights of the workers are not taken into consideration in the way it should be. The main objective of the store is to maintain low prices so that the customers are happy with Wal-Mart. However, these corporations don’t take into concern the happiness of the workers in 48 different countries (Bauer, 2005). It can be argued that the company’s strategic move towards the maintenance of low price seems to be immoral and immaterial. Although by maintaining low prices, it can attract its customers and keep them happy and satisfied but it seems to be negligible towards the society. Wal-Mart Expansion Strategy It is apparent that the company has been successful at expanding its operation in various countries of the world for the purpose of rejuvenating the sales growth. It tried to expand its operation in Germany, however it was not successful at maintaining long term survival in that particular country where Wal-Mart tried to make the store profitable for many years. The reason behind the malfunction had been the company’s inconsideration towards the German competitors, shoppers as well as the rules, cultural differences and labor unions whose strength impeded the success of the company in Germany. The same strategy has been quite successful in the United States. At this instance, it is important to assess the cause behind the disappointment of the company’s strategy of expansion in Germany. It is to be stated that different countries have dissimilar cultures and different perceptions regarding the purchase of a product. The companies need to adopt the strategies accordingly. A particular strategy that helped the organization to outperform its operation in one country may take the business to failure in another country (DePamphilis, 2009). Competition at Wal-Mart After having analyzed the company’s low price and expansion strategy, it is important to have an understanding on the Wal-Mart’s competitive position. It can be stated that the company possesses unique competitive environment. Whilst the company’s main competitors are the general merchandise retailers, it also faces ferocious competition from the warehouse clubs as well as the supermarket retailers. Wal-Mart is in direct competition with the large supermarket retailers. It poses a threat for most of the supermarket retailers. Its competitors such as Kroger, Alberftson and Safeway find it quite difficult to compete with the low prices of Wal-Mart (Zenith Management Consulting, 2005). It is to be noted that the supply chain management of the company is quite cost effective. The other strategies that assisted the company to adapt to the low prices are its operation and distribution strategies. Since the stores of the Wal-Mart are in proximity to each other it brings down the distribution cost. By clustering its stores in smaller areas the company is able to lower its cost of advertisement. It believes at providing the superior services to the customers (Zenith Management Consulting, 2005). It is to be identified that suppliers selling the goods to Wal-Mart are trapped in a ‘self-reinforcing loop’ making other suppliers as well to sell their goods to the Wal-Mart. The company is so flourishing because it has created an insight among the stakeholders that it is serving them in a better manner. The competitors of the Wal-Mart feel that they are not able to compete with Wal-Mart and accept the results that have been dictated by Wal-Mart. It is to state that the reason behind the Wal-Mart’s success is not the low price that is maintained by the company. The reason is that it tries to maneuver the insights of the consumers. It tries to make the customers believe that its prices are quite lesser in comparison to that of its competitors. Once, the customers gets convinced to this strategy of lesser prices of the Wal-Mart, they are trapped in a self-reinforcing sphere that makes the customers keep purchasing at Wal-Mart. The company also influences the insight of its suppliers. The vendors’ inner desire to turn into suppliers of Wal-Mart can bring off-putting consequences to the suppliers. As, they feel that they can be benefited considerably, they are manipulated by the company (Zenith Management Consulting, 2005). Recommendations and Conclusion It can be stated that the strategies adopted by the company appear to be quite ambiguous. The reason behind this is that the strategy that the Wal-Mart adopts has helped them to be the leader in the retail sector. However, when human values and ethics are taken into account, it seems that the company doesn’t emphasize on any of the mentioned factors (Zenith Management Consulting, 2005). The company needs to provide better service to its customers rather than misleading or manipulating the customers. The strategy of low cost is feasible, if and only if, the customers are not misled and the workers’ working conditions are taken into account. Not only the company, but the customers also need to understand the actual strategy that the company is adopting to lure the customers. Wal-Mart needs to focus upon the quality of the service that is being served to the customers. The political structure of the organization plays a vital role in the overall success of any organization. It is to suggest that Wal-Mart needs to focus upon the political structure and try to improve the working condition of the employees so that it can come out of the limitations and allegations that have been made by its stakeholders and the shareholders regarding the manipulations. If any organization is ethically sound then success is sure to follow the company and its longevity also tends to be guaranteed. References Alkhafaji, A. F., (2003). Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. Routledge. Bauer, M., (2005). Always Low Prices, Rarely Human Rights: Wal-Mart and Child Slave Labor. Home. Retrieved Online on June 11, 2011 from http://ihscslnews.org/view_article.php?id=68 DePamphilis, D. M., (2009). Case Study: Wal-Mart Stumbles in its Global Expansion Strategy. Mergers, Acquisitions, and Other Restructuring Activities. Retrieved Online on June 11, 2011 from http://knol.google.com/k/case-study-wal-mart-stumbles-in-its-global-expansion-strategy# Scribd, (2011). Introduction to Wal-Mart. Doc. Retrieved Online on June 11, 2011 from http://www.scribd.com/doc/41970993/Introduction-to-Walmart Zenith Management Consulting, (2005). How To Exploit Wal-Mart Weakness. Wal-Mart Strategy. Retrieved Online on June 11, 2011 from http://www.zenith-consulting.com/research/walMart/Wal-Mart-Strategy.pdf Read More