Walmart Strategic Plan and SWOT Analysis - Essay Example

? Wal-Mart Strategic Plan and SWOT Analysis Table of Contents History of Wal-Mart Corporation 3 Wal-Mart Current Strategies 3 Strategic Plan 4 SWOT Analysis of the Organization 4 Strengths 4 High Market Share 4 Efficient Information Systems 5 Variety of Products 5 Weaknesses 6 High Employee Turnover 6 Low Differentiation of Products 6 Poor Company Reputation 6 Opportunities 7 New Locations 7 Health Awareness 7 Online Shopping 7 Threats 8 Competition 8 Threats from Labor Unions 8 Increase in price of Raw Materials 8 Critical Factors that Determine the Success of the Strategic Plan 9 New Locations 9 Health Awareness 9 Low Product Differentiation 10 Online Shopping 10 Measurement of the Success of the Plan 11 Conclusion 11 Wal-Mart Strategic Plan and SWOT Analysis History of Wal-Mart Corporation Wal-Mart is a multinational company that operates retail outlets in twenty seven countries in the world. The company sells various lines of products that include foodstuffs, electronics, home furnishings, toys, and cosmetics among others. The head offices of the company are located in the United States where the company began its operations in 1962. Sam Walton, the founder of the multinational opened the first store in Arkansas (Wal-Mart, 2013). The organization began operating globally in 1991 when it opened a store in Mexico, and since then, the firm has expanded its operations to twenty four more countries. The founder of the store Sam Walton established the retail outlet with an aim of helping consumers to save funds. This aim led the manager to lower the price that the company charged for all its products below that of competitors. The organization maintains this strategy until today, and this has been the major source of the high growth rates of the firm. The strategy of charging prices below the market level makes Wal-Mart unique in the retail industry. Wal-Mart Current Strategies The company still aims at providing low-priced commodities to consumers all over the world. Other strategies of the firm include giving back to the community. Wal-Mart appreciates the community that purchases its products by contributing funds to empower women, end hunger, create employment opportunities, and sustain the environment (Wal-Mart, 2013). The company also aims at serving customers more efficiently every day by installing electronic-commerce in its stores. The electronic-commerce is a system that employees use to serve customers faster than a manual system. The firm aims at ensuring the electronic system works efficiently so that it can retain its market share. Strategic Plan A strategic plan is an objective that an organization expects to achieve at the end of a certain period, usually more than one year (Abraham, 2012). Having determined the values of Wal-Mart, the firm may aim at increasing sales by twenty percent annually, in the next three years. The techniques that the organization may use to achieve this strategy would be opening new retail outlets and advertising products. Advertising increases the awareness of the firm’s products to consumers. New retail outlets will enable the organization to reach more consumers. The efficient utilization of the techniques will lead to an increase in sales by twenty percent or more. A SWOT analysis will enable the firm to determine the factors to rely on more while struggling to achieve the twenty percent sales target. SWOT Analysis of the Organization Strengths High Market Share Wal-Mart operates ten thousand nine hundred stores in the world with fifty of the outlets located in the United States. The numerous stores indicate that the company serves a large market in the world. The organization utilizes the market share to bargain for low prices with suppliers. Suppliers also provide the firm with quantity discounts because Wal-Mart purchases products in large quantities (Faarup, 2012). The power of the firm to purchase low-priced goods enhances the firm to charge consumers the lowest cost in the market. This enables the organization to reap higher profits than competitors such as Target Corporation. Efficient Information Systems The firm has installed efficient information systems that track orders, movement of inventory, and sales. The system helps the managers to save time that they would spend moving from one store to the other to ensure operations are efficient (Roberts, & Berg, 2012). This is because the system enables company executives to check the operations of all its stores instantly. The information system also saves time that would be spent calculating ordering levels, travelling to suppliers to purchase stock, and replying to customers using messengers. The time that is saved helps the company executives to spend time of planning strategies that help the firm to increase profits. The information system also helps managers to determine the movement of stock in every store. Products that move slowly in some stores are moved to the outlets where customers purchase them more often (Faarup, 2012). This ensures that the retail firm does not keep dormant stock, which consumes space and increases holding costs. This strategy helps the multinational to reduce cost of maintaining stock, which then leads to the success of the low-price strategy of the company. Variety of Products Wal-Mart deals in a range of products, which include electronics, home furnishings, foodstuffs, cosmetics, clothing, and groceries among others (Wal-Mart, 2013). These products increase the sales base of the firm, which then lead to high profits. Weaknesses High Employee Turnover The organization suffers a high cost of training employees due to the high turnover rate. The high rate is associated with the firm’s low wages and poor working environment (Roberts, & Berg, 2012). The high cost of training employees affects the firm’s profits negatively. The high turnover of workers also leaves the company with no expertise to operate the information system. This leads to poor services, which discourage customers. Low Differentiation of Products The multinational deals with lowly differentiated products compared to competitors such as McDonald's. The firm, therefore, relies on the low-price strategy to make high profits. This means that the organization may collapse if the low-price plan fails (Faarup, 2012). Poor Company Reputation The public criticizes the company for paying its employees wages below the minimum level. Employees who leave the company also spread negative rumors about the firm. This often discourages workers from finding employment in the store. The company wastes time advertising jobs and training new workers periodically. This reduces the time spent on creativity and innovation in the firm. The firm forces existing employees to work under pressure when the vacant positions are numerous. The working environment becomes worse, and employees leave the organization at a higher rate (Roberts, & Berg, 2012). Opportunities New Locations The organization has an opportunity to expand its operations in China, India, Australia, and Africa. These are emerging markets that the organization should penetrate to increase its sales base. Penetration of these markets would guarantee the firm high growth rates in the future (Faarup, 2012). Health Awareness Wal-Mart pursues a strategy that encourages the public to eat healthy foods, and it sells these products at its groceries. The spread of diseases such as cholera around the world triggers the public to protect themselves from the ailments by eating healthy foods. The organization may utilize this opportunity to increase its healthy eating campaigns. The firm would increase its grocery outlets as it conducts these campaigns. This would increase the sales and profits of the company. The firm would also increase its market share leading to high competitive advantage. Online Shopping The executives of the organization may take advantage of the increasing use of the Internet for shopping by expanding its on-line shops. Opening of on-line shops that operate in the ten thousand stores would increase the sales of the company. The use of the Internet also offers the firm a chance to expand its products. The organization may expand products purchased by the youths because these are the major users of the Internet. This would save time for consumers, and it would increase the competitive advantage of the retail organization (Faarup, 2012). Threats Competition Wal-Mart faces high competition from firms such as Target, which aim at reducing price differentials in the market. Target has an objective of reducing its prices to match those of Wal-Mart. The success of the competitor’s strategy may throw Wal-Mart out of the market because the organization relies on the low-price strategy to thrive in the market. Threats from Labor Unions The corporation faces closure threats from labor unions because of low wages and poor working environment. The unions threaten the firm to increase wages and improve working conditions or close down its operations. The organization may be closed if the lawsuits against the company favor labor unions. The firm may also spend high costs in the future if more labor unions file more lawsuits against the institution (Roberts, & Berg, 2012). Increase in price of Raw Materials The rise of international oil prices may lead to high cost of raw materials. This would in turn increase the prices that suppliers charge for their products. The organization would incur higher costs than it does and the low-price strategy would collapse. This is because the company would have to increase its prices to recover the high cost of purchasing stock. The competitive advantage of Wal-Mart would then decrease (Roberts, & Berg, 2012). Strengths Weaknesses High market share High employee turnover Efficient information systems Low product differentiation Variety of products Poor company reputation Opportunities Threats New locations High competition Health awareness Threats from labor unions Online shopping Increase in prices of raw materials Table 1: SWOT Matrix Critical Factors that Determine the Success of the Strategic Plan New Locations This factor is essential in the plan because it involves expanding the business to new regions, and this leads to increased sales. The organization should utilize this opportunity to reap the benefits of penetrating new markets. This technique is based on the competition-based theory. This is because the organization ventures into new regions and some firms may have established in these places. Wal-Mart will compete against multinational and local companies in the new markets (Abraham, 2012). Since the firm offers the lowest prices in the market, consumers will be attracted to purchase products from the company. This will enable the consumers to save while the company earns high sales and profits. Health Awareness Health awareness is essential in the sales increment plan for the organization because it affects all the company’s markets. The effect on all markets results from the fact that human beings are interested in living healthy lives. The factor is also important because the organization sells healthy foods, and it may conduct health campaigns through advertisements. Wal-Mart should take advantage of the fact that the firm can produce healthy foods and conduct campaigns to motivate people to purchase the firm’s products. The campaigns may be more intensive in the new regions to attract customers. This factor may be explained using the resource-based theory, which argues that a firm should utilize its resources to gain maximum benefits (Abraham, 2012). The resources in this case refer to the ability of the retail company to produce healthy foods. Low Product Differentiation This factor is critical to the achievement of the sales target because the corporation may perform poorly if it does not take product differentiation into account. Differentiation is critical to the success of Wal-Mart because the analysis above shows that the technique is underutilized. Competitors of the company such as Target and McDonald's differentiate their products. Wal-Mart should imitate the competitors ensuring that the future of the corporation is guaranteed (Faarup, 2012). This is according to the survival-based theory, which argues that a company should emulate competitors so that it can survive in the market. Differentiation offers customers variety, and it creates consumer loyalty towards certain goods. An example of differentiation would be selling soft drinks produced by different manufacturers. Wal-Mart may introduce Coca-cola and Pepsi-cola soft drinks beside the brand that the firm produces. Online Shopping Online shopping is essential to the business because it is responsible for increasing sales and profits directly. The factor is critical because it is a technology that the organization should utilize to ensure that the firm change with the changing needs of consumers. Online shopping is also a consumer preference, which the organization needs to utilize to maintain customers (Faarup, 2012). The factor is based on the theories of competition and survival. The theory of survival is applicable because technology determines the continued existence of a firm in the market. Wal-Mart needs to expand online shopping outlets in order to reap sales from this market. The mobile phone is an example of a product that the firm should introduce online. Measurement of the Success of the Plan The first step in determining the level of achievement of the plan is measuring the organization’s sales level of the last two years. The percentage change in turnover between these periods is then calculated. The next step is calculating the change in sales for the next three years. Although the overall change is determined annually, the executives of the company monitor the change in turnover periodically during the year. Monitoring ensures that the organization move towards the desired direction (Abraham, 2012). The management of the firm should investigate the reasons for lack of achievement of the target in case the results achieved are undesirable. The problem should be established in the year that it will be observed to ensure that it does not turn into a disaster, in the subsequent periods. The firm should formulate techniques of dealing with the problem once the cause of the drawback is determined. Conclusion Wal-Mart is a multinational retail firm that sells various product lines. The company operates ten thousand nine hundred stores, which enable the firm to maintain the largest market share in the retail industry. The firm aims at charging customers the lowest prices, and this strategy is the major source of competitive advantage for the corporation. The company’s SWOT analysis indicates that the firm has strengths and opportunities such as large market share, efficient information systems, and ability to expand physical and online outlets. The organization may embark on the strengths and utilize the opportunities to achieve a twenty percent annual increase in sales level. The firm should, however, take care of the threats and weaknesses to ensure that they do not affect performance adversely. These factors are undesirable; the managers of the institution should formulate techniques to eliminate these risks. This ensures that the risks do not turn into disasters, which lead to poor performance of the company. References Abraham, S. (2012). Strategic management for organizations. Burdeaux: Lachina publishing services. Faarup, P. K. (2010). The marketing framework. Aarhus: Academica. Roberts, B. R., & Berg, N. (2012). Walmart: Key insights and practical lessons from the world's largest retailer. London: Philadelphia. Wal-Mart. (2013). Our story: our business. Walmart. Retrieved from http://corporate.walmart.com/our-story/our-business Read More