Business Policy and Strategic Management - Essay Example

Wal Mart Walmart’s grand strategy: Walmart’s business models centers around the everyday low price model, coupled with its supply strategy. Walmarthas been praised for achieving lower prices for customers and its supply chain inefficiencies that have allowed it to gain a strong competitive advantage in the market (Hughes et al, 2006: 4). Since Wal-mart has gained such a degree of dominance in the world marketplace, it is in a position to demand cost cuts from its suppliers which translates into cost efficiency.

Its supply strategy in its home country was to build stores in remote locations where other stores were not available, thereby creating markets and adequate sales volumes to generate economies of scale from them. It is a discount store outlet, focused on marketing brand names for lower prices. Similar stores such as Woolco and Kmart were not as successful as WalMart, because the latter had some unique operating principles which worked to its benefit. After four decades of operation, Woolco outlets have disappeared, while Kmart has moved into bankruptcy, so that WalMart is the top ranking store in the United States.

In international locations, Walmart attracted customers by its Everyday Low Prices. It maintained a relentless cost control system by allowing few perks for its officers and employees. It was also able to negotiate tough deals with its suppliers, using its ability to place bulk orders to also make other demand such as high quality and low prices, which it then passed on to its customers. It maintained several distribution outlets and initiated an electronic data interchange system, allowing suppliers to track sales to deliver new stocks and they were also able to exchange invoices, purchase orders and other documents electronically.

Another important aspect contributing to Walmart’s success is its human resource and motivational policies. Wal-Mart’s pay schemes for its top executive is very generous and a strongly motivational factor in the performance of employees in the top bracket. Its CEO earned 17 million dollars in 2004, which is almost twice the average CEO salary in most US companies.(Anderson, 2005). WalMart’s successful; strategy in the global market is therefore a combination of its model of everyday low prices, coupled with supplier and cost controls, as well as its motivational schemes for top executives that have all contributed to its profitability.

References: * Anderson, Sarah, 2005. “Wal Mart’s Pay Gap” IPS Report [online] available at: http://www.wakeupwalmart.com/facts/Wal-mart-pay-gap.pdf * Hughes, Susan B, Caldwell, Craig B, Paulson-Gjerde, Kathy A, 2006. “Promoting Investments in intangible Organizational assets through aligned incentive Compensaiton Plans.” Management Accounting Quarterly, 7(4) Summer 2006.