Strategic Management - Essay Example

Strategic Management: Internal Analysis - Wal-Mart - Introduction Sam Walton, the owner of Wal-Mart, started his business in retailing back in 1945 when he first acquired a retail store from Ben Franklin in Newport, Arkansas. (Walton and Huey, 1993) After managing the business well, Walton established a total of eleven Walton discount department store outlets. (Frank. 2006) As a result of the business’ success, Walton’s management eventually decided to change the stores’ name as “Wal-Mart.” (Trimble, 1990: p. 102) Upon reading the required articles, a SWOT analysis will be conducted. Eventually, several strategic ways on how Wal-Mart can make use of its strengths in order to take advantage of its opportunities within its external environment will be thoroughly discussed. In the process of discussing some ways wherein the company could experience continuous business growth, recommended ways that could make Wal-Mart strengthen its weaknesses and avoid unnecessary external threats will be provided. For the conclusion, whether or not it is possible on the part of Wal-Mart to strengthen its position in the market will be defended by an argument. Internal Environment Strength As a retailer, Wal-Mart has successfully established a strong brand name over the years. By selling consumer products at relatively low prices, the company managed to have the biggest market shares throughout the retail industry in the United States. (Bianco & Zellner, 2003) With a total of 4,750 discount stores outlets and hypermarket / supercenters (Bianco, 2007; Economist.com, 2004; Bianco & Zellner, 2003), Wal-Mart is able to dominate the entire retail industry in the U.S. Weaknesses Due to the excessively large size of the company, it becomes very difficult on the part of its purchasers to maintain the availability of some of its product within the store outlets. Because of the weak purchasing network that causes insufficient supply of T-shirts in some of Wal-Mart’s retail store outlets during the second half of 2007 (Bianco, 2007), the company experienced a huge business opportunity loss. Aside from having a weak purchasing network, Wal-Mart’s growth strategy was reported to become inefficient since 2005. (Bianco, 2007) Basically, the rapid business growth that the company has achieved over the past few years enabled Wal-Mart to capture as much of its target market. For this reason, it becomes very difficult on the part of the company to use the same growth strategy in the near future. Even though the overhead costs of Wal-Mart significantly increased from 16.4% in 2000 up to 18.6% in 2007 (Bianco, 2007), the company is often being accused of underpaying its employees with low salary of US$8.23 per hour or US$13,861 each year (Bianco & Zellner, 2003). External Environment Opportunities Having the idea of following the retail store structure of European hypermarket or the combination of supermarket and general merchandise discount store outlets into one; serves Wal-Mart as a good strategic way of increasing its domestic and global market shares. (Bianco & Zellner, 2003) By continuously expanding the number of its discount stores and hypermarket / supercenters worldwide (Bianco, 2007; Economist.com, 2004), the company is expected to gain more sales and profit each year. Threats Despite the slow economic growth in U.S., Wal-Mart’s competitors including Best Buy, Costco, CVS, Kroger, Safeway, Walgreen has recently experienced a strong business growth roughly 2 to 5 times better as compared to Wal-Mart. (Bianco, 2007) This is primarily due to the fact that Wal-Mart’s competitors sell similar products at a higher selling price. Even though 2 to 5 times business growth is still far from reaching the size of Wal-Mart, the company should take this matter seriously before it becomes to late on the part of Wal-Mart to look after its business growth. Aside from the top five competitors of Wal-Mart, the continuously increasing number of world-class competitors throughout in the U.S. market (Bianco, 2007) could somehow affect the market shares of the company. Strategic Ways for Wal-Mart to convert its Strengths into Opportunities Since Wal-Mart has a strong brand name and a large number of existing retail store outlets worldwide, the company should take it as an opportunity to be able to capture global suppliers that produces high quality products at competitive prices. Because of the possible bulk purchase orders coming from Wal-Mart, the company has a stronger bargaining power over its suppliers with regards to lowering down the unit cost of its preferred items. For this reason, Wal-Mart could continuously make use of its low-price strategy as a way of capturing the global markets. Given that Wal-Mart has successfully dominated the retail industry in the US, the company should start focusing on expanding its business opportunities in other countries. By doing so, Wal-Mart could effectively prolong the company’s business cycle. Recommended Ways for Wal-Mart on Strengthening its Weaknesses and Avoid Unnecessary External Threats As a way of preventing other retailers from having a better public image in terms of business performance, Wal-Mart should ensure the quality and efficiency of its purchasing network in order to avoid losing its potential business opportunities to Wal-Mart’s competitors. In order to improve the work efficiency of its human resources, the company should consider increasing employees’ basic pay in order to encourage them to work better. Due to the fact that the U.S. retail business is already saturated by several large retailers and other world-class competitors, Wal-Mart should start shifting its growth strategy by shifting its focus on U.S. to International market. By doing so, the company could still enjoy a better business performance despite the tight competition in the U.S. market. Conclusion Conducting a SWOT analysis in the case of Wal-Mart will make it easier on the part of its managers to easily understand the internal and external factors that could significantly affect the profitability and competitive advantages of the company. This study will not only enable Wal-Mart managers to easily develop a useful strategic plan to overcome its weaknesses but also serves as a guide on how the company could further improve its existing business performance. Appendix I – SWOT Analysis of Wal-Mart Strengths Weaknesses Opportunities Threats Wal-Mart has successfully established a strong brand name over the years. Weak purchasing network causing insufficient supply of T-shirts throughout the second half of 2007. (Bianco, 2007) Wal-Mart’s decision to combine supermarket with general merchandise discount serves as a strategic way of increasing its market shares. (Bianco & Zellner, 2003) Wal-Mart’s competitors show business growth between 2 to 5 times better than Wal-Mart. (Bianco, 2007) Wal-Mart is the biggest company in the world with 4,750 store outlets – 1,386 of the store outlets are supercenters. (Bianco & Zellner, 2003) Wal-Mart’s growth strategy becomes ineffective since 2005. (Bianco, 2007) Continuously expanding the number of its discount stores, hypermarket / supercenters worldwide opens new business opportunity for Wal-Mart. (Bianco, 2007; Economist.com, 2004) Increasing number of world-class competitors throughout in the U.S. market. (Bianco, 2007) Wal-Mart successfully dominated the retaining industry in the U.S. Wal-Mart is often accused of underpaying its employees. (Bianco & Zellner, 2003) - - References: Bianco, A. (2007, April 30). BusinessWeek. Retrieved August 11, 2008, from Wal-Marts Midlife Crisis: Declining growth, increasing competition, and not an easy fix in sight: http://www.businessweek.com/magazine/content/07_18/b4032001.htm Bianco, A., & Zellner, W. (2003, October 6). BusinessWeek. Retrieved August 15, 2008, from Is Wal-Mart Too Powerful?: Low prices are great. But Wal-Marts dominance creates problems -- for suppliers, workers, communities, and even American cu: http://www.businessweek.com/magazine/content/03_40/b3852001_mz001.htm Economist.com. (2004, April 15). Retrieved August 15, 2008, from Wal-Mart grows and grows: http://www.economist.com/business/displaystory.cfm?story_id=2593089 Frank, T. (2006, April 1). Washington Monthly. Retrieved August 11, 2008, from A Brief History of Wal-Mart: http://www.corpwatch.org/article.php?id=13796 Trimble, V. H. (1990). Sam Walton: The Inside Story of Americas Richest Man . Dutton Adult. Walton, S., & Huey, J. (1993). Sam Walton: Made in America: My Story. New York: Bantam Books. Read More