The Business Strategy of Walmart - Admission/Application Essay Example

Wal-Mart: Background of the Company: Wal-Mart is a consumer retailing organization created bySam Walton in the year 1962. The business organization first began by selling its products cheaply, when compared to majority of its competitors. Wal-Mart opened its first store on the 2nd of July 1962, in a place called Rogers Ark. Wal-Mart achieved incorporation in the year 1969, and it was officially known as Wal-Mart stores Inc (Copeland and Christine, 28). Mr. Walton embarked on an expansion strategy, in the year 1969, opening branches in various cities and states within America. By 1970, Wal-Mart managed to list its shares in the New York stock exchange, raising considerable capital to facilitate its expansionist strategies (Parnell, 32). Mr. Walton also allowed his employees to own a substantial amount of shares in his company. This is by allowing them to purchase the stocks of the company through their salaries. Wal-Mart is also the first company to reach a sales record of 1.2 billion dollars, and this occurred in a period of 17 years (Copeland and Christine, 18). Furthermore, for purposes of improving its business operations, Wal-Mart was able to build a computer center. This was for purposes of improving communication between its employees, and the management of the company. Computerization of its system enabled the company to increase the sale of its profits, and this is through efficiency in the production of its services (Hill and Gareth, 58). The company began an aggressive expansion strategy in the periods of the 1980s. This is by opening a series of branches, including the establishment of the Wal-Mart Supercenter. One of the mission and goals of the company is to increase the level of shopping by selling products of good quality, at affordable prices (Hill and Gareth, 60). Wal-Mart is one of the retailing stores that sales its products at very affordable and realistic prices. The mission of the company is to be a leading retail organization in United States, and the world. The company values honesty, integrity, and good ethical practice, while carrying out its business affairs. Environment Analysis: It is possible to analyze the external environment of this organization through the use of the Porters Five Force analysis system (Rudrabasavaraj, 33). These are threats of new entrants, powers of the organization suppliers, threats of existing substitute products, and rivalry that exists amongst its competitors. Threat of new entrants is very high in this case of Wal-Mart (Hill and Gareth, 58). This is because the retailing industry normally attracts a lot of investors. It is because of the high returns experienced by companies operating in this sector. In the 1960s, when Mr. Walton opened his grocery store, threats of new entrants were very high (Hill and Gareth, 66). This is because it was very affordable to open a grocery store. However, currently, Wal-Mart has an advantage over any threats of new entries. This is because the company is a big chain of super markets, and it requires a huge amount of capital to invest in its areas of operations (Hill and Gareth, 58). High capital is therefore a barrier to any new business organization willing to enter the market. Furthermore, the distribution system of Wal-Mart is highly advanced, and it is difficult for new entrants to penetrate the market (Copeland and Christine, 33). Furthermore, Wal-Mart has a strong brand name; hence it has an advantage over new companies entering the market. Regarding the power of suppliers, organizations such as Proctor and Gamble are its major suppliers. These organizations have a strong bargaining power in comparison to small suppliers (Hill and Gareth, 72). This is because they supply large quantities of products, and at a cheaper price. Small time suppliers do not have a strong bargaining power in comparison to the large suppliers. It is because they do not have enough capital to supply large quantities of products. Furthermore, these suppliers depend on Wal-Mart for accessing its markets (Copeland and Christine, 36). The strong influence that Wal-Mart has over its suppliers manages to make the organization to dictate the price in which it will buy their products (Lichtenstein, 44). Buyers have a strong influence on the policies of the company. This is because there are numerous retailing organizations, and hence the competition is high. A company has to develop policies that only serve the needs of its customers. The company faces low threats emanating from substitute products. This is because of its low pricing strategy, when compared to that of the products of its competitors. This is because it enjoys the benefits of economies of scale. The main competitors of the company are Sears, Target, K-Mart, etc (Copeland and Christine, 29). Target offers stiff competition to the company, because of its low pricing strategy. This has enabled Target to experience considerable growth in their operations. Internal Environment: Wal-Mart has a variety of strengths and weaknesses. An important strength of Wal-Mart is its advanced retail link that has the capability of strengthening relationships between suppliers and the company. This system has the capability of providing important information such as the shopping habits of consumers, and their tastes and preferences (Hill and Gareth, 33). Using the internet for purposes of communication gives the company a global appeal. The use of the internet enables the company to compete effectively against its external and internal competitors. The company has a heavy presence in the social media, and it uses social media technologies such as web 2.0 to develop its website (Parnell, 37). The website of the company is interactive in nature, and it enables the company to interact with its customers, identifying their needs. This situation has led to the development of online stores, where people can shop for products through the internet (Hill and Gareth, 37). The capability of allowing its customers to shop through the internet is a major strength of the company. Another strength that the company has, is its capability to encourage its employees to acquire shares of the company. Allowing employees to own part of the company is beneficial because it acts as a motivating factor. This improves the efficiency of the company, in the production of its services. Business level and corporate level strategy: There are two different business strategies that Wal-Mart has used to penetrate the retailing market (Rudrabasavaraj, 31). One strategy is the cost reduction strategy. Wal-Mart used this strategy with the intention of targeting the middle class people, and people with low income. The products of the company are very cheap, and hence it appeals to a wide range of people (Hill and Gareth, 39). However, cost reduction comes with a price. The retailing giant has been forced to streamline its costs of administration (Parnell, 33). This is by reducing its costs of operations. The employees of the company are poorly paid, and this is to the disadvantage of the company. It is disadvantageous because the labor turnover of Wal-Mart is very high. Over 50% of the companies employees normally leave the organization within a period of two years (Hill and Gareth, 33). This is in search for better opportunities and well paying work. Most companies normally seek to retain their employees (Rudrabasavaraj, 31). This is because they have experience in the matters pertaining to the company, and its customers (Hill and Gareth, 44). Furthermore, the kind of employees a company has, determines whether the company will succeed in its initiatives or not. Furthermore, in the long run, the high labor turn over has an effect of increasing the operational costs of the company. This is because the company will have to recruit new employees, and this involves the use of money (Parnell, 28). Despite these challenges in the implementation of the low pricing strategy, Wal-Mart still manages to be a leading retail store in the United States. This is in terms of the number of visitors it receives annually, and profits that the company makes. Recommendations: A company such as Wal-Mart should focus on value addition of their products. In as much as this has an effect of increasing the prices of Wal-Marts products, it is beneficial in the long run. An improved product will also attract another group of customers that is the upper middle class, and the most affluent within the society (Hill and Gareth, 49). However, the company should ensure that even if its products are improved, its initial target market is able to afford them. This is by controlling the prices of their products. The company should establish a professional and good PR team. The PR team should have the responsibility of promoting the image of the company (Lichtenstein, 41). For example, Wal-Mart is accused of underpaying its employees. The PR team should have the responsibility of building the image of the company, despite such negative perceptions. A good public relations team can help the company to improve on its brand image, and hence increase the level of profits it makes (Lichtenstein, 41). To retain its labor, Wal-Mart has to develop other incentives, aimed at ensuring its work force does not leave the company. This includes higher training, chances of promotion and development, and reasonable wages. Research indicates that money is not the only incentive that motivates employees. However, it can also be the major factor that de-motivates the employees of a company. The company has to conduct a research on the best practices that motivates employees, and apply them within the company. This will increase the rates in which the company manages to hold onto their work force. Works Cited: Copeland, Nick, and Christine Labuski. Walmart and the American Dream. Hoboken: Taylor and Francis, 2013. Print. Hill, Charles, and Gareth Jones. Essentials of Strategic Management. New York: Pearson Longman, 2012. Print. Lichtenstein, Nelson. The retail revolution: how Wal-Mart created a brave new world of business. New York: Picador, 2010. Print. Parnell, John A.. Strategic management: theory and practice. 4th ed. Los Angeles: SAGE, 2014. Print. Rudrabasavaraj, M. N.. Dynamic Global Retailing Management. New Delhi: Himalaya Pub. House, 2010. Print. Slee, Tom. No one makes you shop at Wal-Mart the surprising deceptions of individual choice. Toronto [Ont.: Between the Lines, 2006. Print. Read More