International Business Information Management - Wall-Mart - Case Study Example

International Business Information Management: Wallmart [Name] [Professor Name] [Course] [Date] Abstract: This paper discusses Wall-Mart’s strategic positioning internationally, the company’s background information, its competitors, goals and objectives as well as provides an analytical analysis as to whether they align with the needs and wishes of major the company. A detailed analysis of the 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. Part I Background of Wal-Mart Founded in 1950 in Bentoville Arkansas, Walmart Stores is one of the largest retail stores across the globe. The company was ranked the number one largest retail company on the Fortune 500 Index by Fortune Magazine in 2011 with excess of $421,849. It is the largest retail chain in the world operating in over 4,150 retail facilities globally (Duke, 2011). Walmart is also the dominant retail store in Canada, Mexico, and the United Kingdom (Barbara, 2001). The first store with the Wal-Mart brand was opened in 1962 (Vance and Scott, 1994). As of 2011, the company had grown to be the largest in the world operating over 4,150 retail facilities in the United States and globally. In 2011, it was named as the number 1 largest retail company on the Fortune 500 Index by the Fortune Magazine with an excess of $421,849 (Duke, 2011). Additionally, Walmart owns over 4000 stores globally with the United States, it boasts of over 3,000 units and about 80 distribution centers. Wal-Mart offers weekly service to over 100 million customers in the whole of United States. Wal-Mart owns about 1,471 Supercenters, 1,478 Discount Stores, 538 Sam’s Club and 64 Neighborhood Markets in the US alones, as of January 31, 2004 (www.walmartstores.com, Fact Sheet - Wal-Mart at a Glance, 2011). It is a leading retail stores that primarily serves the business-to-business (B2B) markets as a direct reseller of goods from manufacturers (Marketing Teacher 2013). According to Fortune 500 index of the world’s wealthiest and most powerful corporations, Wal-Mart takes the number one position in terms of total annual sales. It is also ranked as the second most admired company in the world (Duke, 2011). Strategic positioning Wal-Mart has strategically positioned itself internationally based on its enviable strategic management model that presents data for 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. Nevertheless, its competitiveness has been threatened by the emerging e-commerce resellers such as Amazon (Wohlsen 2013). Domination of the Retail Market Wal-Mart’s key strategy is to lead the retail business anywhere the retail store has a branch. The retail store is predominantly a discount retailer selling their merchandise at the lowest possible prices. By making offers at low process, the retail store cuts the prices on items, thus lowering the mark up and earning profit on the increased volume sales (Wal-Mart pricing philosophy document, www.walmart.com). An additional subset of this particular strategy is to enhance competition at every unit. Each store competes against the rest of the stores in Wal-Mart’s customer base until the company dominates over its local competitors (Quinn, 2001). Growth by Expansion outside and Within US Wal-Mart’s strategic goal is to expand both inside and outside US. The retail store has succeeded in this strategic goal, becoming the largest retail store in the world and employing an estimated 1.3 million employees; 1 million in the United States alone. Additionally, Wal-Mart owns over 4000 stores globally with an estimated 1,200 units operating internationally. In the United States, it’s the largest retailer boasting of over 3,000 units and about 80 distribution centers. Wal-Mart offers weekly service to over 100 million customers in the whole of United States. Wal-Mart owns about 1,471 Supercenters, 1,478 Discount Stores, 538 Sam’s Club and 64 Neighborhood Markets in the US alones, as of January 31, 2004 (www.walmartstores.com, Fact Sheet - Wal-Mart at a Glance, 2011). Expansion beyond Retail Trade Wal-Mart’s strategic objective includes establishing branches in new sectors including automotive repair, pharmacies and grocery sales. Wal-Mart has demonstrated definite will to expand beyond retail trade. For instance Wal-Mart operates 475 Sam's Club warehouses of the more than 3000 Wal-Mart units in the US. The Warehouses specialize in bulk sales ranging from electronics to food (Worstall, 2011). Walmart’s Competitors Walmart’s chainstore business faces stiff competitors from other retail stores globally. The company’s major competitors are however based in North America, where departmental stores such as Meijer, ShopKo, Target and Kmart thrive. Giant Tiger, a Canadian superstore is also a major competitor. Others include Mexico’s Soriana and Comercial Mexicana. Walmat also operates Sam’s Club division, which faces competition from Costco. Walmart’s decision to venture into grocery business in the 1990s also set it up against competitors from major superstores across the United States and in Canada. A number of small retailers such as Dollar General, Family Dollar have targeted establishing a smaller niche market to gain headway against Walmart, specifically in consolidating their consumer sales. However, Walmart has responded to such possible competitions using its strategic positing. In 2004, it established its own dollar store concept, which is a subset of stores dubbed “Pennies-n-Cents.” It further faced a fierce competition from some foreign markets. For instance, it only managed to capture Germany’s food market by an estimated 2 percent after it established footprint in the market in 1997. However, Walmart was able to remain a secondary player with a 19 percent share, behind Aldi. The stiff competition prompted Walmart to withdraw from Germany in 2006. Consequently, it sold its stores to Metro, a German company. Walmart continues to thrive in the UK, with its Asda subsidiary, the second largest behind Tesco. After its 1998 entry in the South Korean market, the company pulled out and sold of its 16 South Korean outlets to South Korean local retailer called Shinsegae. The outlets were later rebranded E-mart stores. Walmart made efforts to rebrand its brand in other markets overseas even as it firmly attempted to replicate its models. Walmart’s strategy in foreign is hoped to be successful through adapting to foreign cultures and operating its business in the way that is preferable in respective countries of operation. In China, the company has employed such a strategy to stay in the market, after it found the consumers in China tend to prefer self-selection of live seafood or fish. Thus its stores started to display uncovered meat and to install fish tanks. This led to higher sales. Products and Services Wall-Mart sells general merchandise including health and beauty aids, hardware, household needs, electronics, jewelry, shoes and apparel, crafts and toys among other several goods and services. In addition, it runs a photo processing centre, pharmacy department and tire and lube express (Vance and Scott, 1994). Its growth outside of the United States and within has been met by competition from other retail stores who offer similar merchandise. This reflects on the company’s strategic goal, which is to enhance expansion internationally aside from inside the US. The retail store has realized the outcome of this goal particularly in alignment with its stakeholders including investors, customers and employees. For instance, the company has attracted major world investors and shareholders, and currently invests in over 150 countries in 4000 stores globally. In addition, it offers lucrative career options for individuals employing an estimated an estimated 1.3 million workers; 1 million in the US alone. To the customers, it serves over 100 million customers a week (Wal-Mart Stores, 2011). Expansion beyond Retail Trade: 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). Wal-Mart’s Measures for Success and Selling point 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).  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). Wal-Mart’s competitive strategy is to dominate all business sectors of interest. It measures its successes in terms of dominance over competitors. The strategy is enabled by its competitive strategy which includes selling merchandise at low prices, outselling competitors and dominating over competitors. A typical Wal-Mart is to build more stores, enlarge existing stores and expand in other sectors where it as well will strive to dominate (Quinn, 2001). The company has unique business models that are accustomed to the delivery of 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. 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). 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) Part II Wall-Mart has clearly outlined objectives accentuated by the company’s corporate strategy that comprises four parts. The objectives include dominance in the retail market, expansion in the U.S. and worldwide, creation of prevalent Wal-Mart label recognition and customer satisfaction, establish branches in new sectors including automotive repair, pharmacies and grocery sales (Troy, 2001). To be successful in these, Walmart uses unique leadership styles and management techniques, product development and organizational structure. Management techniques Walmart Store Inc.’s strategic management is based on its vision, mission and strategic objectives and goals. It analyzes the how Wall-Mart has effectively incorporated them in undertaking to create and sustain competitive advantages. In addition, it examines how the company’s vision, mission, goals and objectives are aligned to the needs and wished of both the internal (employees) and external (customers) stakeholders. i) Vision Statement Hitt et al. (2007) argue that a vision statement comprises a statement that defines what an organization is and points out to what the organization intends to become in future. It can be echoed from this argument that a Wall-Mart’s vision of global expansion of operation and "promotion of ownership of ethical culture paved the way to the success of the company. Wal-Mart continues to realize this vision. For instance, it operates retail stores in over 150 countries across the world. 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). Hence, Wall-Mart’s vision has been in line with its stakeholders. The idea of the company’s vision on ethical culture has been a key factor in managing to open stores worldwide. (Fran, 2010). ii) Mission Statement Wal-Mart’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 (Thau, 2001). iii) Goals and Objectives Walmart has clear and distinct objectives accentuated by four parts of the company’s corporate strategy. They include dominating the retail market, expanding inside US and worldwide, global recognition and customer satisfaction as well as branching out into new sectors (Troy, 2001). 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. 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. 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. Leadership Skills Walmart has strong distribution chains, skilled leadership team, strong sales force, technology advances such as online shopping and a remarkable logistics system. Based on these forces, 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 (Bowman and Faulkner 1997). Walmart is however 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. Organizational Structure In turn, Walmart’s team that has great leadership skills jointly ensure effective corporate governance. Hitt et al. (2007, 302) defines corporate governance as a clear-cut process essential in managing relationship among stakeholders, to ensure and control an organization’s strategic direction and performance. Corporate governance thus ensures efficient strategies are adopted that integrate the needs of the organization and those of the stakeholders. Major Wall-Mart stakeholders include the customers, the employees, shareholders and investors (Wal-Mart, 2011). Overall, Wall-Mart has tried to successfully fulfill the needs of its stakeholders using its mission, vision and objectives. For instance, the company’s stock price has been fairly attractive to middle income earners enticing them to invest in the company stocks as shareholders. Wal-Mart has also offered customers excellent services and discounted process that has won the good will of customers globally. Wall-Mart has ensured gender balance in hiring employees as to the wishes of its workers. Initially, top level executive was only retained for men (Quinn, 2000). Product Development Walmart’s product development entails promotion of its sales items. Each of Walmart’s employee is expected to act and think like a retail merchant. In each of the company’s department, such as accounting, ICT or human resources, every personnel is required to conceive on better customer service. The focus on ensuring that employees or its vendors think like merchants has been instrumental in having the right products and good customer service. To this effect, this has been pivotal in establishing customer loyalty. Walmart’s customer-oriented focus has led to incredible financial results due to higher sells. Since Walmart has so many stores across the globe, it has tremendous leverage in negotiating for lower prices with its suppliers and manufacturers. It is essential for competitors to appreciate that given its buying power, it can retail products for less than price at which most retail competitors can purchase similar products from their respective wholesalers. Walmart’s key item promotion has additionally given it competitive advantage over its competitors; for instance, other retailers can purchase commodities at Walmart for resale. The retail store has also been criticized for its poor worker policies which would make consumers to shop at alternative stores (Quinn 2000). Overall, 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. Part III Recommendations and Actions Central Issue that facing Walmart management includes sustenance of the store’s extraordinary growth. As the market’s domestic market attains level of saturation, a strategy for maintaining domestic and global expansion will be necessary (Worstall, 2011). In addition, Wal-Mart enjoys dominance in the market. However, the company has not applied its strategies fully in the most suitable way. Other retail stores have met their aggressiveness in the corporate strategy with antagonism. Many retailers view Wal-Mart as corporate tyrant and bully that destroys comminutes and tramples on worker’s rights (Longo, 2007). Wal-Mart should adopt alternative strategies including striving for a friendlier corporate attitude and reaching an understanding with organized labor required. They have to ease their path to international markets instead of forcing in and buying companies. Wal-Mart also needs to adopt the role of an active participant. The public perception is that Wal-Mart destroys communities. Wal-Mart is notorious for throwing money at charities and proclaiming it does community work. They need to additionally establish sustainable communal projects and build relationship with communities to shade off the perception (Quinn, 2001). 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. Walmart should further 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 (Goode 2009). Walmart should further its product and services offering to cut across all market niches. As part of corporate strategy, diversification of offering will increase its 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, Walmart’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. Walmart should also use its numerous retail outlets to launch an aggressive cross-border expansion. Conclusion In conclusion, this paper seeks to examine the strategic positioning of Walmart through examination of internal and external factors affecting their operations and the underlying factors, including economic, social, political and technological, that contribute to an its overall performance internationally References 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, Michael. 2011. Fortune 500 Compare Tool. CNNMoney. Retrieved from http://cgi.money.cnn.com/tools/fortune/compare_2011.jsp?id=2255 Goode, A. 2009. Wal-Mart: a case study in innovation and change. Consortium Journal of Hospitality & Tourism. 13 (2) 49-60. Grundy, T. 2006. Rethinking and reinventing Michael Porter’s five forces model. Strategic change, 15 (5), 213-229. Available at: http://onlinelibrary.wiley.com/doi/10.1002/jsc.764/pdf [20 March 2013]. 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