Strategic Management Analysis: Wal-Mart - Case Study Example

Strategic Management Analysis: Wal-Mart Name Instructor’s Name Date Word Count: 3929 Table of Contents Table of Contents 2 Introduction 3 The Wal-Mart organization 3 The environmental factors 4 Rivalry 4 Threats of entry 5 Threat of substitutes 6 The buyer power 6 Supplier power 7 Internal factors 7 Corporate and business strategies 9 Performance of the strategies 10 Recommendations 11 Conclusion 12 References 13 Introduction In this age and time, companies are expected to incorporate strategic measures as they undertake their day-to-day activities to remain competitive in the business world (Willem, 2008). This would mean that the companies have to be adaptive of the different changes and flexible to assimilate these changes. This has especially been so in the era of globalization where the companies have to adapt to the various external factors that affect their operations and the business affairs (Art, 2004). It is in this respect that organizations must undertake various processes and undergo processes of adaptation to gain a competitive advantage over their competing companies (Hightower, 2002). This safeguards the image as well as the affairs of the company and makes the company competent in the market place. This paper will exhibit in detail the strategic analysis of The Wal-Mart organization (Wal-Mart, 2010). It will include the external factors that the organization faces in its operations and how it counters them, it will venture into the internal factors as well as the business and corporate strategies and some few recommendations to the organization in the short, medium and the long run. The Wal-Mart organization The Wal-Mart Corporation is one of the greatest retailers in the world as it has more than 8650 retail outlets, which are spread in 15 countries. The numbers of transactions that are carried out in the organization per week are well over 2 million. This company was founded in 1962 when its first stores were opened in Rogers Ark. It grew over a ten-year period and its shares were then introduced in the New York Stock market this infused capital making the company grow to 276 stores that then spread in 11 states (Malcom & Ian, 2004). The corporation opened its first supercentre in 1988, which had a grocery and 36 departments, by 1999, there were almost 1500 Wal-Mart retail outlets, and as earlier mentioned, it has now grown to 8650 leading retail outlets (Art, 2004). The environmental factors The Wal-Mart organization just like any other organization faces external factors that are beyond its control and to these the corporation must use strategic measures to counter and remain at the top of the ladder (Art, 2004). This requires the company to apply some measures that are planned by the management strategic team and it causes the company to adapt to the external environment (Charles & Gareth, 2009). These factors include among other forces, the forces that are explained in the Porter’s five forces, which include rivalry, which is brought about by competitiveness that exists in the market place, the threats of substitutes, the power of the buyer, the barriers and the threat to entry and finally the supplier power (Willem, 2008). Each of this is explained in detail Rivalry The rivalry of companies is a force that can bring the less than aggressive organizations down. It is normally measured by the Concentration Ratio (CR) or any other concentration ratio. The CR is an indication of the market share that is held by the four largest firms whereby a high CR indicates that the large firms hold a large percentage of the market share (Megan, 2007). The Wal-Mart Company as a leading retail company in the world faces rivalry from its competing firms .This rivalry results from the fact that there are a large number of firms who compete for the same customers and for the same prices. The slow market growth that is experienced in times of inflation also causes the rivalry to further increase as compared to sessions when the economy is doing well (Malcom & Ian, 2004). High fixed costs also increase the rivalry as then it becomes impossible for the companies to lower per unit costs (Megan, 2007). High exit barriers, which make it very difficult for producers to exit a certain industry, also add to the high rivalry, which makes producers to stay in the business even when they realize that the venture is not profitable (Wal-Mart, 2010). Diversity of rivals with different missions and under different dimensions also makes the rivalry even worse. The availability of highly perishable goods among the competitors further increases the rivalry as each supplier attempts to dispose their goods as quickly as possible further intensifying the rivalry (Hightower, 2002). High storage costs and low switching costs Wal-Mart counters the rivalry from the competitors and maintains the market leadership by maintaining a competitive advantage over the rival companies and this is done by several means as indicated (Wal-Mart, 2010). One thing that has remained as the competitive advantage of the Wal-Mart company is the strategy of lowering prices. This has been known as the cost leadership strategy where the lowest prices are offered in the target market. The company has a mission of ensuring that the customers are kept happy and satisfied. They actually make customers believe that their goods are the cheapest and this they do by maintaining a low unit cost while selling many units thus ensuring that their sales volume are also high (Malcom & Ian, 2004). This has made Wal-Mart remain a favourite for its customers in all the countries that it trades in and its profits have thus remained high. Threats of entry Wal-Mart faces competition not only from the rivals who are incumbent but also form the new entries as they also take a share of the market (Malcom & Ian, 2004). The new entrants come with a certain strategy that attracts and diverts the customers especially them that are not so loyal to the products. Barrier to entry also sometimes makes the corporation not to engage in every trade as the government places some restrictions. It could be caused by asset specificity which refers to the extent the assets of a firm can be used. Threat of substitutes This refers, to the existence of substitute products for the products sold by an organization and these products affect the prices of the products, which are already in the market. This is especially so when the substitute products become more and more. The buyer power This refers to the amount of power that the buyers have on a producing industry, which could be weak or strong. The buyer power is strong when there are many producers and one buyer for in such instances the buyers determine the prices of the products (Hightower, 2002). Buyers are also powerful (William, Robert & Jack, 2009). Wal-Mart counters this by ensuring that it does not depend on one clientele and the company does this by making sure that it draws it s clientele from a wide variety of buyers (Wal-Mart, 2010). Other external factors include the social cultural factors such as the economic factors and the cultural differences that arise due to people who the corporation serves being spread all over the globe (Art, 2004). The Wal-Mart organization has undertaken a responsibility over the years to educate the workers on the diverse cultures that are across the nations of the world and as a result, this has helped the workers to understand and appreciate the different cultures that exist across the nations (Megan, 2007). These culture include the languages and the behavioural aspects of the clientele that would otherwise result into culture shock in different contexts if the clientele I s not educated on the integration measures. Supplier power The buyer supplier relationships are important as the buyers always but supplies from these suppliers (Malcom & Ian, 2004). When suppliers are strong, they make their supplies expensive to capture part of the profits in the market (Wal-Mart, 2010). This in turn affects the buyers as in such times a company like Wal-Mart finds it difficult to lower its prices to the expected standards as the prices are tampered with by the suppliers. Internal factors The internal factors that have faced this corporation are also an important aspect for analysis for this has actually been the strength of the organization (Megan, 2007). The Human Resource Management has largely been a crucial department as far as hiring new staff is concerned. The top management lays emphasis on the qualities and the qualifications of the staff as they understand that smart employees result to the boosting the effectiveness of the organization. The hiring of competent employees has thus been a strong point of the Wal-Mart organization (Art, 2004). This has mainly been enabled by the fame of the organization, which has made people with the best qualifications to desire to work with the organization. The company occasionally hires the employees by outsourcing in the different nations where new branches have been set up. This has mainly depended on the strategic management team that has ensured that the most effective method of hiring is used (Malcom & Ian, 2004). The department of HRM has mainly been held responsible for work force planning within the organization and this has mainly involved what defines a particular job and the various things that are needed for the job. This has also involved the selection of workers, performance appraisal and potentiality appraisal of the works within the organization (Charles & Gareth, 2009). Downsizing and outsourcing have been used as strategies for the soaring of the organization higher. The organization has also used the issue of proximity to customers as a strong point as well as a competitive advantage. This has been by opening numerous retail outlets all, over the nations and this as earlier said has reached to almost 9000 outlets in the countries in Europe America and Asia where the organization has opened branches all over the nations (Wal-Mart, 2010). This has referred to the company ensuring that its companies are strategically located to the clients and the management and the overseeing board has ensured that it has opened branches all over and it is still in the process of opening more branches. The quality management of the organization ensures that the strengths of the organization are capitalized on. Further more after the hiring of employees the organization has ensured that it always listens to the needs of the customers The competitive advantage that Wal-Mart organization has used over the years has been cost leadership market segmentation as well as market differentiation (Hightower, 2002). The cost leadership has meant that the company has had a huge asset turnover and has taken advantage of economies of scale. The company has also achieved this by market segmentation whereby a niche market has been identified for the various products that are offered by the organization. After the identification of the niche market, the company has then offered standardized products for this clientele. Corporate and business strategies The number one business strategy that has been used in the Wal-Mart Company ever since its initiation has been customer value and service (Wal-Mart, 2010). This has involved the strategy of always ensuring the customers receive the best satisfaction and this is geared towards creating customer loyalty and in turn this has lead the company to make many sales per year. This is done by ensuring that the prices are favourable and by ensuring quality products are offered to the customers (Charles & Gareth, 2009). The company believes that the customer is always right. The other strategy that the company uses is partnership with the associates, which started back in 1972 when the company started trading its shares in the New York Stock Exchange and form the inflow the company was able to build more retail outlets and spread to the nations (Wal-Mart, 2010). The top management always has a vision to empower the clientele of the company and to ensure that the employees are well trained. The company also gets involved in community development like the new mission of the mission of embracing the earth that they had (Megan, 2007). Since 2006, Wal-Mart had a go green strategy and it wanted to embrace a light bulb to the whole world for less energy consumption. Wal-Mart advocated for the preservation of fisheries, farmlands and forests to slash the consumption of energy. The other business strategies that are used by the Wal-Mart Company are is the company always ensures that it takes to heart all the intricate details especially in merchandising and in other techniques as far as the store is concerned (Hightower, 2002). The company creates a high performance record on duty fulfilment ensuring that the customers receive the goods they need from the company at the appropriate prices (Charles & Gareth, 2009). A cost structure development is also a core strategy that is considered at Wal-Mart to allow for competitive pricing and to maintain a reputation of trustworthiness. Communication and advertisement have also been strength of the organization (Megan, 2007). The promotions have enabled a wide range of people to know about Wal-Mart locations and the products that the organization offers. This has mainly been used in the countries where the company does business and it has been mainly intensified where there are new retail outlets being opened. Performance of the strategies Cost leading that has been embraced by Wal-Mart has resulted into billions of sales in the world making the Wal-Mart company one of the leading and growing companies all over the world (Wal-Mart, 2010). The customers of Wal-Mart believe that the cheapest prices are found at Wal-Mart and they thus keep tripping into the stores in large numbers (Art, 2004). The strategy of the organization always collaborating with the associates and always giving these associates the best treatment has also led to the increase in the loyalty of the associates and they have wanted to see the growth and improvement of the organization (Wal-Mart, 2010). They in turn have aided in the growth of the organization and they have ensured that the organization has increased in status. Due to the fact s that the workers and the Human resource management have been so vigorous in the assignment of duties and roles within the organization there has been tremendous growth and this has led to further capturing of the market as the motivation among the workers has resulted to greater results. The hiring of the best workers has also resulted to major growth as far as the business expansion is concerned (Charles & Gareth, 2009). Outsourcing has, also to a large extent cut, the costs as far as hiring is concerned. Communication has also triggered further growth as the organization has no t depended on the already existing fame but has been on the media reports daily advertising products and services as well as the locations and the new premises (Charles, Joseph & Carl, 2009). This has led to an increased clientele as the awareness program has borne fruit as far as awareness of the organization is embraced. The culture embracement of the organization whereby the organization has embraced and educated the workers on accepting the different cultures across the globe Strategic location of the organization also makes the place of the 4Ps of marketing work well for the organization and thus this increases the sales of the organization (Walter, Michael & Craig, 2010). The strategy of the organization further engaging in community activities has boosted the organization’s place in the society and has led to people who are environmental conscious to associate more with the organization (Charles & Gareth, 2009). This has also been witnessed in other types of ventures that the organization has undertaken in community service has made the community identify with the organization and thus this has increased the clientele of the organization leading to the furtherance of sales and to further increase of the company profits (Wal-Mart, 2010). Recommendations 1. In the short run, the organization should ensure that the quality of services offered to the consumers is further looked into. This is to counter the problem that arises when the workers only concentrate on the quantity of sales made and not on the quality of the services that they offer. This shall in the medium term and in the long run create more customer loyalty and thus boost the activities of the organization. 2. Wal-Mart should venture more into the places hat It is yet to venture into and this shall further the sales volume. It should in the long run venture deeper in the UAE as well as the Sub-Saharan countries and apply the competitive advantage of cost leadership and due tot the economic crises in these areas the organization shall capture a niche market I n these countries. 3. In the end, the organization should also get into production as this will further lower the costs of operation and further increase the profit margins of the organization. This could further lead to increase cost leadership as in the long run after the company has recovered the cost of the machinery used in production then it can lower the prices at which it offers its products. Conclusion Wal-Mart organization has risen from anonymity in 1962 to a leading retail giant in the current world. The organization has ventured to do business in the least ventured places by other organizations and it has maintained a competitive advantage of lowering the prices, which it sells its products. It has also embraced other aspects like being located in competitive locations after the identification of the niche market and this has further boosted the sales that are made by this organization. Other strategies that have been employed are the involvement in community services and HRM strategizing to hire the best and nurture them further to even make them better. The Porter’s five forces are also external factors that the organization faces but it embraces the competitive advantage to win over the rival companies. References Art, W., 2004. Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms. Chicago: Probus Publishing Co. Charles, H., & Gareth, J., 2009. Strategic Management Theory: An Integrated Approach. New York: Cengage Learning. Charles, W., Joseph, F., & Carl, M., 2009. Marketing. New York: Cengage Learning. Hightower, J. (2002). Wal-Mart: the world’s biggest corporation. Available at http://www.corpwatch.org/article.php?id=6848 [Accessed 10 Oct. 2010] Malcom, M., & Ian, D., 2004. Market Segmentation: How to do it, How to benefit from it. Oxford: Elsevier Butterworth-Heinemann. Megan, M., 2007. Taxing Strategies. Always cutting prices, London: McKinsey and Company Wal-Mart. 2010. Home. Available at http://walmartstores.com/AboutUs/297.aspx [Accessed 11 Oct. 2010] Walter, L., Michael, V & Craig, H., 2010. The Price Advantage. London: McKinsey and Company. Willem, B., 2008. Marketing Revealed. Sydney: Palgrave Macmillan. William, M., Robert, J., & Jack, R., 2009. Business. London: Cengage learning. Read More