The Business Strategy of Wal-Mart - Case Study Example

Business Strategy of Wal-Mart Company background Founded in 1962 and opened its first store in rural Rogers, Arkansas, the firm’s 95 % of its initiative relied funding from Sam Walton (Daft 408). Currently, it operates on a mission, similar to its advertising slogan that aims to serving people as well as enhancing their lives (Daft 408). In addition to this, the company also has a purpose which is to work together in order to cut living costs, which is evident in its efforts of offering the world this opportunity by opening worldwide stores and offering low prices for goods (Daft 408). Over decades, Wal-Mart has risen to being the largest retailer not only in US but also globally based on the numerous stores, which it has approximating to over 3500 in US as well as established in varied states. They have managed to succeed through achieving great economies of scale from its pool of customers; hence, it has been able to reduce prices significantly. To add on, it has a company culture whereby staffs ought to embrace irrespective of where they might have come before joining the firm. They have the “open door policy,” which implies that employees can visit seniors whenever one wishes. They have a rule that questions or other queries of important ought to have respective responses on the same day. Hence, instil its three basic beliefs and values that command respect for one another, enhanced customer services as well as striving for excellence. Moreover, it is part of the values of Wal-Mart to ensure grassroots processes, to make eye constant with the customers and help them. These values are out to serve the employees, managers as well as the customers. External Analysis Wal-Mart definitely faces competition from other large retail companies. These companies include Sears, K mart as well as Target. In case Wal-Mart chooses to raise its prices today, some customers will shift to other companies where their prices are a bit lower. It is an industry where they sell also most similar goods. Some are necessities while some are luxurious. It is therefore very competitive and a company has to employee appropriate strategies to sail through. Buyers have a low bargaining power (Oz 53). This is because prices of varied commodities may be high at Wal-Mart but customers will end up buying. This is usually because of the fact that, even if they chose to go to another retail company that sells goods at a more affordable price, they will lose on the convenience factor. Wal-Mart has positioned itself well in US with a number of branches, hence being a convenient joint for most of its customers. Suppliers also have a low bargaining power. This is usually because Wal-Mart buys goods in bulk. In case it threatens to switch to another supplier, the previous one will go into a downfall. In addition, the fact that Wal-Mart my chose to manufacture some of their own products makes the bargaining power of suppliers low as they may lose on sales (Oz 53). Threats of substitutes to alert are low since Wal-Mart ensures quality goods delivered by suppliers. In addition, it practices customer satisfaction in addition to providing a wide range of goods. Since they offer low prices, the cut off possible substitutes since they will not be able to match up the low costs offered by Wal-Mart. The threat posses by new entrants have also been minimised at Wal-Mart. Wal-Mart has managed to create entry barriers as it analyses the demands of its target market. It then works onto ensuring they meet these demands as well. This is important because customers can easily shift to match their needs. Considering its wide macro environment, the performance of Wal-Mart gets challenges. The different nations have different economic cycles as well as law. Other macro environment factors include government policies, infrastructure and technology as well as political stability. Al these factors range in the various outsourced companies. Threats presented to Wal-Mart include the fact that other retailing companies may tend to imitate the strategy employed by Wal-Mart in their services. They may imitate the domestic strategies as well as their outsourcing programs. This way, they will be able to take over the position. Therefore, Wal-Mart should continuously embrace latest technology and keep on improving its services hence be ahead of competitors. Opportunities that Wal-Mart enjoys are a result of its cost advantage compared to other companies (Hill & Jones 100). Even during weak economic periods, Wal-Mart still manages to attract a number of its loyal customers hence enjoy high sales volume. Internal Analysis Wal-Mart has a range of core competencies, which include the use of information technology to manage the operation of individual companies as well as those outside the United States (Werther, William, & Chandler 89). Wal-Mart operates a computerized system, which indicates all items sold as well as, prices as well as providing evidence of payment and keeping records. The technology also enables Wal-Mart know which products are on demand and which ones not purchased. In addition, Wal-Mart has a developed inventory and distribution system (Werther, William, & Chandler 89). Its warehouse is also computerized and goods are cleared the shelves just as they arrive. Wal-Mart has a number of strengths and weaknesses. It has cost advantage hence attracting a lot of customers (Hill & Jones 100). Clients go shopping at Wal-Mart because they know they will get affordable prices. In addition, Wal-Mart has a wide store and distribution network. This is part of its strength since it caters for the wide range of customers. There stores are varied and located in different places. In addition, the expansive network of a number of stores enables Wal-Mart obtains more revenue and profitability. High brand equity is strength of Wal-Mart. It is the leading employer in the United States and has the power to make or break suppliers because of the large purchasing it conducts. It leads in selling a number of commodities ranging from groceries to consumables and toys as well. Weaknesses are also evident at Wal-Mart. Wal-Mart generally has bad public image. It is seen as monopolizing power, which keeps shutting down smaller businesses. In addition, complaints have arisen that the company does not treat its employees well in addition to the fact that it is not environment friendly. The low price model competitors have condemned it this is just an illusion to make people believe the same. Mistreatment cases have also emerged at Wal-Mart. Many especially union groups have accused this great store for failing to offer health benefits to employees as well as discriminating female employees and employing underage children. Wal-Mart has a number of capabilities that enable do well in the industry. They have succeeded in creating differentiated value for the clients. There capabilities such as outsourcing, store design as well as great supply chain management make Wal-Mart rare. They have enables Wal-Mart to continue leading for the past several decades. It has been difficult for companies to imitate their rare capabilities but target is proving to be tough. Wal-Mart has successfully managed to exploit its capabilities leading to decreased costs and increased sales. Business-level and Cooperate –level strategy The business strategy employed by Wal-Mart is the overall cost leadership (Yang, & Linowes, 2009). In addition to offering good quality products, Wal-Mart ensures that its customers enjoy lower prices compared to their competitors. Moreover, Wal-Mart maintains a continuous supply of goods hence making sure it is available for consumers. However, there have been cases stating that Wal-Mart uses low quality materials in order to make the goods cheaply available to consumers. Such a move is not tight since it will make the goods wear and tear ff much quickly. As a result, consumers will visit the store more frequently to re purchase the same goods. As much as this is of benefit to the company, it poses extreme losses to customers. Recommendations Wal-Mart ought to select new strategies in order to do well in foreign markets. They can form joint ventures with foreign companies or use the foreign companies as a means of entering the new markets. Global can be quite beneficial to Wal-Mart since it results to creation of profit hubs in the receiving countries. It should ensure that they acquire more market shares in the developing countries, which have already established operation bases. In addition, Wal-Mart should conduct a study in an international market first before investing in there. They should understand the demographic characteristics of the potential consumers in addition to understanding their tastes and preferences as well as their financial positions. This way, they will be able to identify the type of stores to invest in and they can decide to develop speciality stores. Understanding the culture of the local community is also essential and once Wal-Mart has identified all these, it can successfully position itself in the right track. The number of Green rated Wal-Mart factories has been decreasing over the past years and Wal-Mart blames it the shift on the increasing standard put in place for factories. The policy to increase standards was issued in 2004 and ever since factories have been cautioned to improve their practices. A number of violations were reported over the past years since some workers were not being paid for all the working hours. Wall mart faced accusations of using double books to hide the number of hours worked. This was wrong on management part, the suppliers, and other stakeholders who recognized that they were violating the labour laws well as rights of the workers. Work Cited Daft, Richard. The Leadership Experience. London: Cengage Learning. 2014 Print. Hill, Charles. Jones, Gareth. Essentials of Strategic Management 3rd. London: Cengage Learning, 2012. Print Oz, Effy. Management Information Systems. Boston, Mass: Thomson/Course Technology, 2009. Print. Werther, William B. & David Chandler. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. Los Angeles: SAGE, 2011. Print. Yang, F. & Linowes, R. Strategic Analysis of Wal-Mart. 2009. Web. October 6, 2014 Read More