Analysis of Wal-Mart Organization - Essay Example

?Section I Wal-Mart Stores is a multinational corporation that operates in fifteen different countries with approximately 8,500 stores. Currently, itis the world’s largest public corporation as measured by revenue. In 2010, the company made $421 billion from its warehouse retailers. These numbers were hardly predictable from Wal-Mart’s humble beginnings in 1962, when it was founded by entrepreneur Sam Walton. Walton opened a store called the Wal-Mart Discount City in Rogers, Arkansas (Frank, 2006). However, within five years, the company opened up an additional 23 stores throughout the state of Arkansas. By 1968, the stores had moved out of state to Missouri and Oklahoma. From there, Walton incorporated his business as Wal-Mart Stores, which still serves as the company’s namesake, and in 1970, the company went public (Frank, 2006). Despite Wal-Mart’s tremendous growth since its inception in Rogers, Arkansas, the company maintains that it is committed to the same values and purpose that Sam Walton believed in when he opened his first location. Wal-Mart claims to abide by Walton’s credo, which is, “If we work together, we’ll lower the cost of living for everyone… we’ll give the world an opportunity to see what it’s like to save and have a better life” (Walmart). This focus on lowering the cost of living for all people, with equal economic access to the company’s products as a means to improving the quality of life represents a significant part of the company’s mission. “Saving people money to help them live better was the goal that Sam Walton envisioned when he opened the doors to the first Walmart” (Walmart). However, the exact relationship between this mission and how Wal-Mart must actually go about achieving its goals is a matter of the strengths, weaknesses, opportunities, and threats that the organization faces as the world’s largest corporation. Section II The primary strength of Wal-Mart stores is that the company is the cost leader in the retail industry. This allows the company the freedom to set prices at any particular level and to provide goods to its customers at the lowest possible prices (Clark, 2011). Because it can provide these products at a cost lower than its competitors, it can actually force other organizations to go out of business, which has led to criticisms of Wal-Mart’s market strategies (Hwang, 2003). Food prices are nearly 14% lower in markets where Wal-Mart competes, which means that it is employing its cost leadership in a way that is detrimental to other food suppliers who cannot meet the price offerings of Wal-Mart. Because Wal-Mart is special in its ability to use its large buying power to negotiate deals and acquire cheaply-produced goods from foreign countries, its cost leadership is a core competency. Wal-Mart owns a sizable 30% of the consumer staples market in the United States (Hwang, 2003). Another core competency of Wal-Mart is its use of information technology in support of its international logistics system (Marketing Teacher, 2011). Wal-Mart is special because, for the most part, it is the only multinational retailer based out of the United States. In order to manage the efficient allocation of resources within the organization, Wal-Mart recognizes the need to supply its leaders with the right information in order to make competent decisions. By leveraging information technology, it can measure how individual products perform in different countries with a single glance. This technology also adds value to the process of procurement, which is the process of obtaining goods and services from preparation and processing of a requisition through to receipt and approval of the invoice for payment. In terms of weaknesses, Wal-Mart is a very broad company with a wide variety of interests throughout a vast number of small community markets. Within those stores, Wal-Mart offers a wide range of products, which includes groceries, car services, sports equipment, and so on. Despite providing convenience to its customers, this broadness holds back the company from excelling in any one area of service (Clark, 2011). Combined with its sourcing from foreign countries, this has led to Wal-Mart’s notoriety for providing cheap products that do not measure up to standards created by more specialized stores. Wal-Mart could be better served by narrowing its span of control and implementing more stringent quality control mechanisms in order to ensure its products exceed the standards set by specialized firms. Similarly, because of Wal-Mart’s sales in products from a wide range of sectors (for example, food, clothing, sports, etc.) it lacks the flexibility that specialized stores have (Marketing Teacher, 2011). If, for instance, demand for a certain brand of children’s sports equipment suddenly plummets due to a choking incident, Wal-Mart has a larger exposure to risk if they have invested more resources in stocking their shelves with that product. This principle also applies to more gradual changes in demand. Thus, if Wal-Mart has a large contract with a television-producer in China and a revolutionary new technology is introduced in more specialized television stores, Wal-Mart faces the problem of having to liquidate all of that merchandise before it can begin to invest heavily in the new technology. Wal-Mart can limit its exposure to this risk by strengthening its contingency planning, which specifies a course of action if certain events should occur. Section III Although Wal-Mart is the world’s largest corporation, it is present in relatively few countries worldwide and while the corporation far exceeds the global presence of its retailer competitors, it has an opportunity to enter into several large markets, such as continental Europe and Asia. Its business in fifteen countries (relative to the fact that there are 195 countries in the world) leaves much room open for the retailer. It might be wise to devote the company’s attention to putting stores into these markets and to see how consumers respond. In the coming years, Wal-Mart’s global expansion will likely make headlines in the United States and will probably come about through acquisition the company makes of retailers overseas. In fact, Wal-Mart representatives have openly stated their desire to enter new markets by means of acquiring foreign companies (Duke, 2010). Another opportunity Wal-Mart ought to take advantage of exists within the markets the company already operates within. In the United States, Wal-Mart is typically identified with huge, undiversified super-center locations that sell a wide variety of products. Wal-Mart could benefit by opening locations that are different in terms of the store type that Wal-Mart has traditionally opened. A mall-based site that sells only clothes, for instance, could offer mall-going customers a different experience of the Wal-Mart brand and give the company access to the high-end consumer discretionary market. If it were to seize such an opportunity, Wal-Mart could again utilize its pricing power in order to gain traction in that market. A focus on high-end clothing is being demonstrated by Wal-Mart’s competitor, Target, which has specialized clothing lines with celebrity endorsements. Wal-Mart might be served well by investing resources into this retail avenue. Wal-Mart faces threats both from within and from the outside. From within, the company is constantly under the threat of unionization. Throughout its history, it has fiercely opposed employee unionization in order to keep labor costs low, which contributes strongly to how the company maintains its pricing power over its competitors (Levine, 2008). With a unionized workforce, Wal-Mart could lose its most strategic advantage, which is its ability to price its products lower than any other supplier within its market. For its opposition to unionization, Wal-Mart has received its fair share of criticism, as well as attention from the federal government. It remains to be seen whether Wal-Mart employees will achieve unionization and how this unionization (or lack of it) will affect Wal-Mart’s place within the global retailing market. From outside, Wal-Mart faces the threat of other companies, particularly those companies who serve a more focused market (Clark, 2011). Despite providing the convenience of having all a shopper’s need in one location, Wal-Mart faces competition from other discount businesses in more specialized roles. For instance, its Sam’s Club locations are feeling the pressure exerted from Costco, which is expanding its operations throughout the United States. In order to address this threat, Walmart could begin to differentiate its locations based on what products are carried within that location. That is, rather than integrating grocery stores and clothing outlets into a single location, the stores could focus on a singular range of products as a means of improving quality control. Alternatively, Wal-Mart could continue to achieve the lowest price footprint and the highest pricing power to drive more specialized retailers out of business as a means of avoiding competition. Section IV Wal-Mart is the world’s largest corporation, but like any business its future depends on its abilities to capitalize on its strengths, limit its exposure to its weaknesses, pursue valid opportunities, and avoid the effects of threats. Given the company’s domination over the consumer staples and discretionary markets both within the United States and globally, the reign of Wal-Mart shows no signs of falling anytime soon. However, it should always be vigilant of both the opportunities and threats that lie in waiting in the future. Wal-Mart can capitalize on opportunities within the general environment by identifying open markets domestically and abroad; likewise, the company can avoid threats opportunities by having contingency plans and maintaining its pricing power over its competitors. References Clark, W. (2011, February 14). The Competitive Analysis of Walmart. Retrieved May 15, 2011, from eHow: http://www.ehow.com/info_7936094_competitive-analysis-walmart.html Duke, M. (2010). Annual Report. Bentonville, AK: Walmart. Frank, T. (2006, April 1). A Brief History of Wal-Mart. Washington Monthly. Hwang, J. (2003, September 29). A Wal-Mart Monopoly? Retrieved May 15, 2011, from Motley Fool: http://www.fool.com/investing/general/2003/09/29/a-walmart-monopoly.aspx Levine, A. (2008, August 7). Wal-Mart's anti-union threats lead to backlash, call for federal probe. Retrieved May 15, 2011, from The Huffington Post: http://www.huffingtonpost.com/art-levine/wal-marts-anti-union-thre_b_117409.html Marketing Teacher. (2011). SWOT Analysis Wal-Mart. Retrieved May 15, 2011, from Marketing Teacher: http://www.marketingteacher.com/swot/walmart-swot.html Walmart. (n.d.). Our Purpose. Retrieved May 15, 2011, from Walmart Corporate: http://walmartstores.com/AboutUs/9538.aspx Read More