Walmart and Age UK - Strategic Management Analysis - Essay Example

? Running head: Walmart and Age Uk: Strategic Management Analysis Executive Summary This paper presents a strategic analysis of Wal-Mart, a leading retail stores that primarily serves the business-to-business (B2B) markets as a direct reseller of goods from manufacturers, and Age UK, a major UK-based social enterprise (Marketing Teacher 2013). A detailed comparative analysis of the two organizations’ strategic management based on their current policies, management processes and the logic behind the organization’s strategic choices is also examined in the paper. Wal-Mart has strategically positioned itself globally based on its strategic management model that presents an authentic data comprehensive analysis of its business to business marketing (Chopra, Dougan & Taylor 2001). Apart from being the most successful retail stores globally, it has been a model among many top-level companies. Walmart has consolidated a significant part of the market share, and has a wide business that offers a significant extent of business to suppliers and manufacturers giving the company an edge over suppliers (Vance & Roy 1994). The retail store has overcome turbulent periods beating the competitive chain-store market since its inception by sticking to its mission, vision, objectives and goals (See Appendix: Figure 6). Nevertheless, its competitiveness is has been threatened by the emerging e-commerce resellers such as Amazon (Wohlsen 2013) On the other hand, Age UK operates in a conspicuously competitive market namely financial, retail markets and conventional fundraising. The current uncertain economic climate in the UK has affected the company’s financial position due to decreased funding from the government (See Appendix: Figure 6). This has prompted it to focus more on the high donations that is attributable to the increasingly high pressure on the aging population and the local partners (Bowman & Faulkner 1997). The paper concludes that even as Wal-Mart and Age UK are both enterprises with almost similar strategies, they are confronted by different challenges that have prompted them to diversify their strategies to maintain their market share, extend geographical frontier through acquisitions and organic growths (Age UK 2011). Faced by the imminent threat from online retail stores, Wal-Mart, which is unceasingly in pursuit of horizontal, vertical and geographical expansion by pushing for technology applications as an integral part of its strategy. The company has trampled on its competitors through its supremacy in inventory management and supply-chain logistics. Age UK on the other hand hopes to expand geographically through venturing further to cover disasters. Additionally, even as Age UK has launched a new radio station and increased financial services offerings to its customers, Wal-Mart anticipates its online strategy to contribute further to the bottom line (Wohlsen 2013). This paper recommends that if Wal-Mart has to keep up with the viciously competitive reselling industry, it must pay its workers well to avert the prevalent strikes to restore its public image, it should also leverage on its financial background to increase global presence. It should also branch out to new sectors including pharmacies, warehousing, automotive repair and grocery sale. Additionally, it should take an innovative approach in reselling and venture further into online retailing. Conversely, Age UK should invest in expanding its direct and financial services to support retain fundraising. It should also improve its information dissemination from its partners into their CRM system (Age UK 2011). Walmart’s Strategic Positioning Strategic positioning includes showing an organisation’s current positions in the marketplace. This helps understand the approaches both organisations have adopted (Hitt et al 2007). Walmart is the world’s largest retailer, one of the biggest corporations as well as the largest employer. The company has unique business models that are accustomed to the delivery of the its ambitious growth strategy leading to it domination of the retail market. Its successful strategy has relied on four aspects, which have been key contributors in its successful business, namely its competitive strategy, good executive leadership and its strengths and weaknesses assessment (See Appendix: Figure 4). Walmart’s strategy ensures that the company functions in congruence with the external environment. Its dynamism is evident across its strategies. The company has been making strategic expansions geographically, while keeping up with technological advancements. For instance, it operates retail stores in over 150 countries across the world (Quinn 2000). In addition, it has promoted ethical culture in top level management and customer service. For example, its wide customer base is accredited to fair treatment the company offers to its customers, shareholders and employees (Wal-Mart 2011). The idea of the company’s vision on ethical culture has been a key factor in managing to open stores worldwide. (Fran 2010) Walmart’s mission statement is tied to three basic beliefs including Respect for the Individual, and Strive for Excellence and Customer Service (Fran 2010). Based on these beliefs, Wal-Mart undertakes the mission to provide excellent customer services and discount prices to its customers worldwide. Wal-Mart’s success story is credited to the top-level management’s steadfast willingness to implement strategies that are consistent with the company’s three basic beliefs. Wall-Mart has clear and distinct objectives accentuated by four parts of the company’s corporate strategy (Wal-Mart 2011). The four parts include dominating the retail market, expanding inside US and worldwide, global recognition and customer satisfaction as well as branching out into new sectors. The retail store’s strategic objective is to branch out to new sectors including pharmacies, warehousing, automotive repair and grocery sale. Wall-Mart has succeeded in this objective. For instance, as of 2011, Wall-Mart operated 475 Sam’s Club warehouses that specialize in bulk sale of electronics and food (Worstall 2011) Age UK’s strategic Positioning Age UK’s strategic position follows a diversified domestic strategy, as its most of operations and support services are based within the UK (Age UK 2011). Its capabilities and internal resources are in harmony with their strategy of helping humanity (eGov Monitor 2012). The organisation possesses unique resources and capabilities that complement with its strategy. An example include the size and quality of its staff that has excellent competences and varied experience working with the elderly, donors and volunteers (Bowman & Faulkner 1997). The strategies of the two organisations are also congruent with the external environment although to some considerable extent (See Appendix: Figure 5). Age UK’s external environment is rather turbulent given the ongoing social reforms and the uncertain economic climate (Charity direction 2010). In this case, Age UK’s strategy have faced a lot of challenges even as the government funding has significantly reduced forcing it to focus more on donor funds (Ainsworth 2011). Another major setback is its poor communication strategy to its partners. In addition, Age UK had proved to be very dynamic as it has started dynamic initiatives including Connect with IT program, to deviate from focusing on less practical external needs of the elderly. The strategies employed by AgeUK have proved successful. For instance, it displays a number of unique capabilities and resources, which are unmatchable given then an edge over their competitors (Johnson, Scholes & Whittington 2011). It numerous retail outlets have also offered the organization the basis from which to launch an aggressive cross-border expansion. The strategic recommendations as suggested in the executive summary show that Age UK shouldapply practical strategies that optimise its core capabilities and dynamism (Howard & Horton 2010). Situational Analysis Pestle Analysis This section seeks to examine the strategic positioning of Walmart and Age UK through examination of internal and external factors affecting their operations. Pestle analysis is applied to establish the underlying factors, including economic, social, political and technological, that contribute to an enterprise’s overall existence (Goode 2009). Many socio-political issues confront Walmart, including a number of political and action law suits. In September 2012, the corporation was sued for gender discrimination. In addition, Walmart’s wide distribution chain has given it an edge in delivering much-needed goods much faster than any other agency in the United States, including during hurricanes and other disasters. Walmart has also largely been criticized for its antiunion policies and the perception that it pays law wages to workers (See Appendix: Figure 1). Concerning the economic side, Walmart’s operations in the United States are set to get a major setback as the US government is in the process of moderating the rise in the number of supercentres to leverage capital assets via a scheme that is intended to increase returns and sales in the nation’s stores (Duke 2011). The free trade zone has also been significant to its expansion geographically, for instance, whenever the US government enters into new free trade agreements with foreign countries, Walmart always finds an opportunity to expand its chainstore. Walmart is also confronted by a host of legal, cultural and political challenges, due to ambitious its expansion policy across the globe. In this case, the company faces obstacles in complying with diverse regulations and unfamiliar taxes in foreign countries. Even as Europe’s uncertain economy has affected the company, its vibrant global presence and management has safeguarded the cash flow and as a result cushioned the company from possible financial crisis. Concerning Age UK, uncertainty of the economic climate has today limited government funding of the social enterprises, which has in essence affected Age UK. Consequently, this has a significant direct effect on pensioner households as a part of the net household income. However, public donations appear to be rising from depression attributable to the rising number of crises the world over (Howard and Horton 2010). An immediate concern for UK is the ageing population, meaning there exists considerable efforts by the society towards assisting the aged. This is indicated by the imminent social reform (Triggle, 2012). Additionally, the rising older generation of voters indicates Age UK is favoured by its close relationship with UK members of parliament. Advances in technology has also led to a gap between the youth and the elderly. An additional significant aspect is the environmental regulations that have advocated for “green revolution,’ meaning the charities have to go “green.” This has raised operational costs for Age UK, affecting its net income (Charity direction, 2010). From reviewing the adapted PESTLE (see appendix Figure 3), it is evident that although both companies are confronted with broad external factors, including global and continental economic crisis, their individual services they offer provide them with explicit externalities that they are under obligation to address. It is worth noting that the external environment substantially affects the operations of Walmart and Age UK, specifically in the socio-political and economic areas (Age UK 2011). Table 1: Asnoff Matrix. Walmart’s and Age UK’s internal and external environments and the risks associated with moving the companies forward are both reviewed in the Asnoff matrices. Based on the interpretation of the Ansoff matrix, Walmart should consider seeking more innovative and diversified supply-chain logistics if it has to maintain its growth momentum globally, even as more online sales continue to be reported. It should also rebuild its lost reputation after having been accused severally of having antiunion policies and pay low wages to workers. As part of corporate strategy, diversification seeks to increase an organisation’s profitability via greater volumes of sales stimulated by the range of product line and the new markets from new geographical expansions. By expanding its product line in response to the prevailing social conditions, Age UK’s value is maximised. However, the organization should emphasize in improving the quality of its services even as it enjoys a near monopoly market situation, as there is limited competition. Table 2: 5 Forces radar network Porter’s 5 forces analysis (adapted from Johnson et. al. 2011) has been drawn on radar diagram to depict the environmental nature of Walmart and Age UK. Consequently, the green section represents Age UK’s framework while blue one Walmart’s framework Walmart faces potential competitors from grocers who show the potential to venture into the retail industry, which could affect Walmart’s market share. Nevertheless, an analysis of the entry barriers shows they are comparatively high as Walmart has set up reputable brand name, strong distribution chains and has a strong financial background. This shows the company has an upper hand over competitors. Porter (1980) advises a company must identify its strengths in competitiveness and concentrate on them. On the issues of bargaining power, Walmart has established itself across the globe, which denies the individual buyer much bargaining power over Walmart (Walmart 2002). The retail store has also been criticized for its poor worker policies which would make consumers to shop at alternative stores (Quinn 2000). Walmart has consolidated a significant part of the market share, and has a wide business that offers a significant extent of business to suppliers and manufacturers giving the company an edge over suppliers. Concerning divergent products, Walmart has developed online retail that allows customers to gain price advantage as the non-existence of physical stores enables the company to pass savings to customers (Porter, 2000). On the part of Age UK, since the review of the Charity Commission Act 26 has allowed for the merger of charities, for instance allowing Age UK and Help the Aged to merge, which mean a threat of entry has been reduced to a reasonable degree (Charity Commission, 2011). The suppliers have significant influence over Age UK since they are the partners. The partners offer additional services that other would be hesitant to venture into following high competitions and risks. Age UK enjoys limited directed competition, though indirect competitors emanate elsewhere among its broad service offering, meaning the risk of substitution id limited (Grundy 2006). Further Strategic Analysis Age UK and Walmart’s Threats, Opportunities, Weaknesses and Strengths Both Walmart and Age UK have unique features that present them with a competitive advantage in respective markets (See Appendix; Figure 5 and 6). To a significant extent, the two companies have similar core competitive advantage, which include the strength of vibrant brand and organisational management. In particular, organisational management is important for Walmart since it links in a direct way to the quality of its offering. Great organizational management also determines the fundamentals of relationships within Age UK externally. In addition, the two organisations have vibrant and reputable brands. Walmart is a world-renowned chainstore even as there is massive retail industry potential growth, a major opportunity it should exploit. It s reputation is based on the quality of services and established brand image that has been quite a challenge for competitors to contend. Hence, it has a sustained competitive advantage. Into the bargain, Walmart has strong distribution chains, skilled leadership team, strong sales force, technology advances such as online shopping and a remarkable logistics system (See Appendix: Figure 6). Age UK on the other hand, though established in 2009 and hence not by any chance as mature as Walmart, has gained a fast repute in the UK and is currently a popular brand. In addition, Age UK has a multifaceted product mix that ranges from retail enterprises to charity. It also enjoys a close relationship with the UK parliament thus enjoys opportunities of possible grant. Further opportunities include the high ageing population presents incremental market size, consumers in UK also tend to focus on charity, potential international partnerships and lastly, there is potential pool of fundraisers from corporations given their positive orientated brand. However, a number of challenges and weaknesses confront both organizations. For instance, Walmart currently has weak presence in emerging markets even as it is established in the US, UK and China. Other threats include uncertainty of economies in its new frontiers, unfair labor laws in foreign countries and threats from warehouse retailers such as Costco. Conversely, Age UK’s presence and dominance is threatened by its inability to monitor consumer since it has no CRM information system. Secondly, UK’s age structure is fragmented. There are also chances that increased income disparity may influence donors to shift focus to small charities. Like Walmart, the global and national economic market forces also threaten its dominance (See Appendix: Figure 5). References Age UK 2011. Report of Trustees and Annual Accounts, 2009–2010. [Online]. Available at: [20 March 2013]. Bowman, C & Faulkner, D 1997. Competitive and Corporate Strategy, Irwin, London. Chopra, S. Dougan, D & Taylor, G 2007. B2B e-Commerce Opportunities. Northwestern University, Chicago. Duke, M 2011. Fortune 500 Compare Tool. CNNMoney. [Online]. 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Appendices Figure 1: How resellers pay their workers Figure 2: PESTLE line graph Red represents Walmart Blue represents Age UK Figure 3: Age UK’s VRIN Matrix Valuable Rare Inimitable Non-substitutable Sustainable source? Information system ? ? ? ? ? Staff Quality ? ? ? ? ? Product/service mix ? ? ? ? ? Financial service ? ? ? ? ? Relationship with parliament ? ? ? ? ? Brand ? ? ? ? ? Figure 4: Walmart’s VRIN Matrix Valuable Rare Inimitable Non-substitutable Sustainable source Global presence ? ? ? ? ? Staff quality ? ? ? ? ? Product mix ? ? ? ? ? Annual symposia events e.g B2b symposiums ? ? ? ? ? Brand ? ? ? ? ? Subscription based model ? ? ? ? ? Corporate social responsibility ? ? ? ? ? Figure 5: TOWS Matrix Age UK Figure 6: Walmart TOWS Matrix External opportunities Large untapped market (especially in strategic markets such as in Africa). Massive technology industry potential growth. Global expansion Internal Strengths Strong global presence (1,350 Wal-Mart Discount Stores, 85 Neighborhood Markets 1,700 SuperCenters, and 550 Sam’s Clubs). Strong distribution chains Skilled leadership team Reputable brand Strong sales force. Reputable brand Technology advances Remarkable logistics system. Internal Weaknesses Low wages to workers compared to other chainstores (see Appendix: Figure 1) Business units are encouraged to compete. Current weak presence in emerging markets compared to the US, UK and China. External threats Current economy Tariff taxes Warehouse retailers like Costco Products from foreign countries with unfair labour laws SO Use free cash flow to make strategic acquisitions in emerging markets to consolidate global presence. Use large financial background to invest in new sales heads to increase productivity in new emerging markets. Consider placing their stores closely together. WO Reduce U.S centricity through strategic acquisitions in emerging markets. Highly automate distribution centres cut the costs of shipping and delivery time Increase co-ordination within retail chains to add more value to large corporation accounts. Make use of low pricing to full take advantage of emerging markets. Advocate for tax breaks and incentives from foreign governments ST Use acquisitions to create localised retail service to compete with small local firms. WT Increase presence in emerging markets to decrease U.S centricity and avoid threats from other major consultancies. Encourage localised events in regions to create networks. Improve local communities perception Read More