Wal-Mart Stores Inc. SWOT Analysis

Case Study Analysis | 1

Final Examination Case Study

Wal-Mart Stores, Inc. (WST) Analysis

Christopher A. Osuoha

BUAD 5312 Strategic Management

Instructor Dr. David J. Rambow Associate Professor of Management

Wayland Baptist University

Wal-Mart Stores, Inc. (WST) Analysis


Wal-Mart Stores Inc. is the largest retail company in the United States and the world at large having being consistently ranked number one on the Fortune 500 index by Fortune Magazine (Barley, Bragg, Dawson, Shah, Sillanpaa, & Sleeper, 2007, p.356). According to Barley et al., (2007), Wal-Mart Stores Inc. was founded by Sam Walton in 1962 with its first store opened in Rogers Arkansas the same year its rivals Kmart and Target were founded (p.356). As of February 8, 2007 Wal-Mart operated 6,782 stores in 14 countries with annual record sales of $345 billion and employee base of 1.8 million (Barley et al., 2007, p.353 & 356). Wal-Mart growth has soared recently with the company adding a new outlet almost every day with significant presence in international markets. This expansion did not come so cheaply but with antecedent controversies that range from multiple accusations and charges to law suits, many resulting in fines, including environmental violations, child labor law violations, use of illegal immigrants by subcontractors and poor working conditions for associates (Barley et al., 2007, p.356). Wal-Mart provides general merchandise and retail services that offer family apparels, health & beauty products, household needs, electronics, toys, fabrics, craft, lawn & garden, jewelry and shoes (Barley et al., 2007, p.356). Also, Wal-Mart runs a pharmacy department, tire & lube express, photo processing and banking services as well to broaden its offerings to its customers. The company grouped its businesses into three segments: Wal-Mart Stores, Sam’s Club and WalMart International (Barley et al., 2007, p.356). The Wal-Mart Store segment operates WalMart.com and three store formats in the U.S. domestic market including 2,257 supercenters, 1,074 discount stores and 112 Neighborhood Markets (Barley et al., 2007, p.356). Sam’s Club operates as a membership-based retail warehouse and online at samsclub.com. Barley et al.,(2007), pointed out that “the segments 579 clubs average 132,000 square feet, and provides exceptional value on brand-name merchandise at ‘members only price’ for both business and


personal uses” (p. 356). Wal-Mart Wal-Mart Internatio International nal operates operates 2,760 stores stores outside outside the the United States in in various formats, under different brand names in 14 countries and territories as at 2007(Barley et al., 2007, p.353 &357). Wal-Mart International includes wholly owned operations in Argentina, Brazil, Canada, Porto Rico, and the United Kingdom; and the operation of a joint venture in China; and operations of majority owned subsidiaries in Central America, Japan and Mexico (Barley et al., 2007, p.357). Wal-Mart has been able to maintain its global leadership role in retail business by carefully analyzing its internal and external environment; optimized its strength, weakness, opportunities and threats; and carefully integrate its core competencies, resources and capabilities by applying applying appropriate appropriate generic generic business-l business-level evel strategy strategy to develop competit competitive ive advantage advantage it has sustained over a reasonable time frame. This case study analysis will analyze the internal and external environments that WalMart operates and develop a comprehensive list of the strength, weakness, opportunities and threats. Wal-Marts generic business-level strategy will be identified and the primary factors influencing the generic business-level strategy will be outlined in a matrix format according to stakeholders groups. However, Wal-Mart’s potential for success will be evaluated in terms of the strategic inputs from stakeholders’ group analysis. Three strategic issues of Wal-Mart U.S. U.S. business-leve business-levell strategy strategy will be discussed discussed and finally finally two two recommendat recommendations ions to strengt strengthen hen WalMart’s competitive advantage will be offered. Requirement 1: Wal-Mart’s External and Internal Environment Analysis

Like every other business organization, Wal-Mart’s goal to realize strategic competitiveness and earn above –average return is significantly influenced by the internal and


external environmental factors. Hitt, Ireland & Hoskisson (2011), pointed out that “the understanding about the conditions in its external environment that the firm gains by analyzing that environment is matched with knowledge about its internal organization to provide the foundation for forming the firm’s visions, developing its mission, identifying and implementing its strategic actions (P.36). External Environment

An organization’s external environment is categorized into three broad classifications including the general, industry and competitors’ environments (Hitt et al., 2011). General environment is composed of dimensions in the broader society that influence an industry and the firms within it (Hitt et al., 2011). The general environment is grouped into seven environmental segments which include economic, physical, demographic, political/legal, sociocultural, technological and global environmental forces (Hitt et al., 2011). These forces cannot be directly controlled by firms hence they are referred to as “non-controllable” to which Wal-Mart has to monitor and respond to. This is because no organization has control over external environmental forces and the best any firm could do is to cope with the changes through the business business strategies. strategies. This This was the basic reason the the founder founder Sam Walton Walton built built the organizat organization’s ion’s vision on change and embedded it in the leadership as the corporate culture of Wal-Mart to continue to ensure the sustenance of its core competency of “everyday low price”. Rob Walton reemphasized the importance of low price core competence when he pointed out that “we lead when we embrace my dad’s vision to improve the lives of everyday people by making everyday things more affordable” (Barley et al., 2007, p.359). The general environment influenced WalMart and its competitors in several ways as a result of higher cost of goods, consumer debt level


and buying patterns, stock price fluctuation, harsh economic conditions, high interest rate, customer preference, unemployment, cost of labor, inflation, currency exchange fluctuation, fuel prices, prices, weather patterns, patterns, catastrophic catastrophic event event and high insurance insurance cost (Barley (Barley et et al., 2007, 2007, p.364). These environment forces posed a big threat to Wal-Mart and other competitors in the industry. The influence of the general environmental forces compelled Wal-Mart to tap into its repertoire of core competencies, resources and capabilities, integrating them with effective generic businesslevel strategies to gain competitive advantage. So, Wal-Mart converted these threats to opportunities by strategically optimizing its resources, core competencies and capabilities. WalMart divested its businesses in Germany and Korea due to harsh business environment that hampered it from realizing the scale and desired result and applied its resources in markets where the growth potentials are high(Barley et al., 2007, p.357). The Wal-Mart International cashed in on the international sales that is growing annually at 33.6% to expand its operations in Canada, South America, United Kingdom, Mexico, Porto Rico, Japan, China, India and other countries where sales growth has been quite impressive (Barley et al., 2007,p.358). Wal-Mart applied product/servic product/servicee diversificatio diversification n strategy strategy to provide provide more products and services services to custome customers rs at low low prices. prices. Barley et et al., (2007) (2007) pointed pointed out that that this strategy strategy reflects reflects Sam Walton Walton idea of “a wide assortment of good quality merchandise, lowest possible prices, guaranteed customer satisfaction, friendly knowledgeable service, convenient hours, free parking and a pleasant shopping experience” (p. 358). The general environment also compelled Wal-Mart to provide banking services to 20% of its customers that that were characterized as “unbanked”. So the general environment forces created threats which Wal-Mart converted into opportunities and tapped into them to develop competitive advantage.


Industry environment, according to Hitt et al., (2011), “is the set of factors that directly influences a firm and its competitive actions and responses: the threat of new entrants, the power of suppliers, the power of buyers, the threats of product substitutes and the intensity of rivalry among competitors” (p.38). Wal-Mart has always managed over the years to build capacity to favorably influence its industry environment or successfully defend against the five factors that influence the industry environment. Wal-Mart focused the analysis of its industry environment on the factors and conditions that influence profitability potentials and develop strategies that will harness such factors. When Wal-Mart realized the challenges arising from loss of sale to substitute products, products, slow market market growth growth and entry entry of new competitor competitors, s, it allowed allowed each of of the segments segments to to determine the appropriate product offering for each location. The forces of the industry environment created threat to Wal-Mart and compelled the company to develop product/service diversification strategies that continue to build on the discount store concept (Barley et al., 2007, p.358). According According to Barley Barley et al., (2007), (2007), Wal-Mar Wal-Martt realized realized the strategic strategic importa importance nce of supplier supplier power and and set up a 1,600-member 1,600-member Global Global procureme procurement nt service service team based based in 23 countrie countriess that buy products from supplier supplierss in over 70 70 countries countries including including 61,000 61,000 suppliers suppliers in the the United United States (p.367). As a matter of fact Wal-Mart developed strong supplier power due to its large purchase of merchandise and plays significant role in determining delivery and stock level. Barley et al.,(2007) pointed out that “Wal-Ma “Wal-Mart rt not only only determine determine delivery delivery schedule schedule and inventory inventory level but also heavily influence product specification”(p.367). The influence Wal-Mart has over the industry environment served as a leverage to develop economies of scope and scale which are embedded in the company’s capabilities. With effective business-level strategy Wal-Mart has developed a value chain that offers cost/product differentiation that allows consumers greater degree of preference


and lowers the company’s cost of switching to other suppliers to maintain its goal of everyday low price vision. vision. Competitor’s environment involves companies against which a firm competes directly against (Hitt et al., 2011). Wal-Mart has always emphasized on the need to understand and acquire knowledge about its competitor’s strategies, objectives, assumptions, and and capabilities. The CEO of Wal-Mart reiterated this in the 2007 Wal-Mart annual report that the company faces strong sale competition from other discount, department, drug, variety and specialty stores and supermarkets, many of which are regional, national and international chains as well as internet-based retailers and catalog businesses (Barley et al., 2007,p.364). From the case study it is apparent that the major competitors include – Target, Costco and Kroger. Target Corporation with annual revenue of $59 billion billion and annual growth growth rate of 12.5% in 2006 operates operates 1,318 1,318 general merchand merchandise ise stores stores and 182 supertarget stores in 47 States in addition to its online stores is the next big thing that WalMart has to face domestic market (Barley et al., 2007, p. 366). Costco Wholesale Corporation runs 510 warehouses averaging 140,000 square feet in 38 States and six foreign countries including; Mexico, Canada, UK, Taiwan, Korea and Japan , and also in Porto Rico (Barley et al., 2007, p. 366). Costco core competitive advantage lies on limited number of products sold in high volume, high inventory turnover, low price via purchasing discount and favorable store locations (Barley et al., 2007, p. 366). Kroger operates 2,468 outlets competes against Wal-Mart on the supermarket and multidepartment store category and poses a challenge in terms of assortment of alternative products(Barle products(Barley y et al., 2007, 2007, p. 366). 366). Target, Target, Costco and and Kroger Kroger constitute constitute the strate strategic gic group that emphasize similar dimensions and use strategy similar to that of Wal-Mart. Other competitors outside the strategic group include general discount competitors and niche market competitors (Barley et al., 2007, p. 367). According to Barley et al.,(2007),”Sears Holding(Kmart & Sear) offer


additional U.S. competition in general merchandise, while Tesco of Britain and Carrefour of France compete with Wal-Mart International(p. 366). Carrefour being the second largest retail chain in the world is the closest international competitor to Wal-Mart International from strategic perspective perspective and in in terms of market market format format (Barley (Barley et al., al., 2007, p. 367). 367). Tesco Tesco emphasizes emphasizes convenience and competes against Asada, a subsidiary of Wal-Mart UK. However, Amazon.com is another firm that poses a big threat to Wal-Mart in online retail. At the niche market segment Best Buy, Safeway, Circuit City, Home Depot, Lowes, Kohl’s and others compete against Wal-Mart at departmental level (Barley et al., 2007, p. 367). The bottom-line in terms of the competition is that even though these competitors offer the same products as Wal-Mart, it is difficult for any of them to replicate the convenience, price and diversity of products found in Wal-Mart. Internal Environment

Internal environment encompasses forces and factors that influence a firm’s portfolio of resources, bundles of heterogeneous resources, capabilities and core competencies that managers have created to leverage competitive advantage (Hitt et al., 2011). Wal-Mart developed its internal organization on a broad perspective of global mind-set with a unique generic business-level strategy that competitors are unable to apply their resources and capabilities to replicate. The internal environmental forces can be controlled by managers and that was the main reason WalMart discovered what it can do by integrating its unique resources, competences and capabilities to create competitive advantage and sustained it. Resources are the sources of a firm’s capabilities that stretch across a spectrum of individual, social and organizational phenomena that do not yield competitive advantage by themselves but only when discovered and integrated effectively (Hitt et al., 2011). Wal-Mart


realized the opportunities that exist in big cities, small towns and international markets and responded by tapping into these opportunities through the establishment of supercenters & discount stores, neighborhood markets and expansion into 14 countries outside the United States through Wal-Mart International. The company’s Neighborhood Market Market locations provided an average of 29,000 items per store, its Discount Store offer 120,000 items in each store and its supercenter stock more than 142,000 different items (Barley et al., 2007, p. 358). Wal-Mart resources are made up of two broad categories the tangible and intangible resources. According to Hitt et al., (2011) “tangible resources can be seen and quantified” and further classified tangible resources into financial, physical, organizational and technological resources (p.78). Wal-Mart’s net income of $11.709 billion in 2007; its store segments, the integrated data management system and e-commerce technology coupled with its 2,275 supercenters, 1,074 discount center, and 112 neighborhood markets in 2007 represent huge financial, organizational, technological and physical resources respectively. In the other hand, intangible resources are assets that are rooted deeply in the firm’s history and have accumulated over (Hitt et et al., 2011). Hitt et al., (2011) classified intangible resources into human, innovation and reputational resources (p.79). Wal-Mart’s 1.8 million employees, its IT capabilities and strong brand name represent its intangible resources. According to Hitt et al., (2011) “Capabilities exist when resources have been purposely integrated to achieve a specific task or set of tasks” (p.80). These tasks range from human resource selection to product marketing and research & development activities (Hitt et al., 2011). Capabilities represent the capacity to deploy resources that have been integrated to achieve a desired end state which emerged over time through complex interaction among resources. WalMart has maximized shareholders wealth by taking appropriate business-level strategies to improve the stock performance and earn above average returns which trickles down to shareholders as


dividend. The foundation of Wal-Mart’s capabilities lays in the unique skills skills and knowledge of its 1.8 million employees especially its bunch of talented managers and strategic leaders. With appropriate corporate-level cooperative strategy Wal-Mart has successfully transferred knowledge and learning among the various units of its business segments. The strategic managers have developed winning strategies through sharing and transfer of unique knowledge among various units. Wal-Mart has used effective distribution system to build capabilities based on effective use of logistic management techniques. The use of Radio Frequency Identification (RFID) enabled Wal-Mart to track inventory locations, store shelving status, packages, en-route to and fro suppliers, warehouses, shelves, and even shoplifting (Barley et al., 2007, p. 371). The combination of these capabilities empowered Wal-Mart to leverage competitive advantage it has sustained for a longer period of time. Core competencies are the resources and capabilities that are the source of a firm’s competitive advantage (Hitt et al., 2011). Technically speaking the ability of a firm to compete effectively and develop advantages depends on how well the firm influences its internal environment by harnessing the opportunities through the deployment of its core competences, resources and capabilities. This is what distinguished Wal-Mart from its rival and reflects its true personality personality as the the global market leader. leader. Hitt et al., (2011) (2011) pointed pointed out that “core competencie competenciess emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities” (p. 81). This has been the secret behind Wal-Mart’s success in developing competitive advantage. Wal-Mart built its core competencies on the concepts it performs performs exceptionall exceptionally y well compared compared to to its competito competitors rs and activities activities through which it add unique unique values to its activities over a long period of time. These concepts and activities include: a. product differentiation – large assortment of goods and services


b. cost leaders leadershiphip- everyday everyday low price price by making making products products and service servicess affordable affordable c. convenience parking – pleasant shopping experience d. segmentation- meets customers’ expectations by offering particular goods and service at unique locations e. innovation – introduction of new products to meet the expectation of customers f. customer focus – localizing selections based on store neighborhood demographics (Barley et al., 2007, p. 370 – 374). However these competences meet the four criteria that Hitt et al., (2011) set forth which include valuable, rare, costly to imitate and nonsubstitutable (p.82). The combination of the resources, core competences and capabilities constitute the internal environment. Wal-Mart has been quite impressive in its ability to purposefully integrate these essential elements to develop competitive advantages that are non-substitutable. This case study analysis presents a comprehensive list of opportunities, threats, strengths and weaknesses below in a chart from from the analysis of the external external and and internal internal environment environment above. above.

External Opportunities

External Threats

Growing international sales resulting from new market opportunities that exist in foreign markets including Canada, Mexico, Japan, UK, Taiwan, Korea and Porto Rico.

Harsh economic conditions such as recession, high interest rate, customer preference, cost of labor, inflation, currency exchange fluctuation, and fuel prices. prices.

Rising customer’s diverse needs for

Slow market growth rate in the domestic economy.


products products and services. services. Needs in new market market segment segment such as banking.

Fierce market competition from Costco, Kroger, Target and other niche market competitors.

Strong power over suppliers due to large volume of purchases.

Growing bargaining powers of suppliers.

Economies of scale and scope arising from effective supply chain system.

Growing bargaining powers of customers due to alternative products offered by competitors.

Good competitor’s intelligence.

Loss of sale to substitute products and online stores

Everyday low price.

Entry of new competitors in the niche market

Acquisition of competitive firms e.g. Asada in UK.

Strategic alliance by competitors

Internal Strength

Internal Weakness

Strong brand name built on low price and large assortment of products and services.

Overly complex strategy with a unified corporate strategy that do not allow units flexibility to customize operations to their locality.

Wide geographic coverage with 6,782 stores High turnover rate of inventory in 14 countries and United States. Economy of scale & scope.

Dwindling reputation due to competitive pressure from the strategic group and competitors in the niche market.

Pricing advantage over rivals.

Behind rivals in the use of e-commerce

Good customer service and pleasant shopping experience with free parking.

Does not survey customers and has no research and development program.

Strong fi financial an and IT IT re resources.

Huge fi finan nancial re resources co commitment in in ex expansion

Good supply chain management.

Requirement 2- Wal-Mart’s Generic Business-Level Strategy.


Business-level strategy is defined according to Hitt et al., (2011) as “an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets” (p. 100). The implication of this concept is that businesses make choices on how they intend to compete in individual markets and gain competitive advantage. Every successful business-level strategy revolves around the customer and that is the reason why Wal-Mart focused its business-level strategy on customers’ satisfaction not only through cost leadership but also through differentiation of products and services. Michael Potter classified business-level strategy into five groups which include cost leadership, differentiation, focused cost leadership, focused differentiation and integrated cost leadership /differentiation (Hit et al., 2011). These business-level strategies are generic which implies that the can be applied by any firm in any industry. The basic concept underlying generic business-level strategy is that it allows a firm to distinguish itself from the rest of the competitors (Hitt et al., 2011). Wal-Mart’s generic business-level strategy is integrated cost leadership/differentiation strategy. According to Hitt Hitt et al., al., (2011), integrated cost leadership/differentiation strategy “involves engaging in primary and support activities that allow a firm to simultaneously pursue low cost and differentiation” (p. 120). Initially Wal-Mart’s business-level strategy was basically cost leadership through everyday low price but with Costco and Target’s differentiation strategy positioning positioning the companies companies against against Wal-Mart Wal-Mart competit competitively, ively, the most proactive proactive competit competitive ive action action Wal-Mart had to take was to replicate the differentiation strategy and integrate it into is cost leadership strategy. This move propelled Wal-Mart to the forefront of the competition. This was the main reason why Wal-Mart Stores recently realigned its merchandising around five key power categories – entertainment, grocery, health and wellness, apparel and home products


(Barley et al., 2007, p. 373). Wal-Mart through its Global Procurement program established a group of technical experts- specialists that focused on the many important dynamics of particular category purchase aimed at driving its three customer-focused strategies (Barley et al., 2007, p. 374). The three customer focused strategies stipulated by Barley et al., (2007) include mimicking Target’s upscale fashion-forward appeal, localizing selection based on store neighborhood demographics and appealing to the universal low price seeking customers (p.374). The primary competitive activity of Wal-Mart is everyday price while its support competitive activity is provision provision of differenti differentiated ated products products and service servicess at its store locations. locations. Mimicking Mimicking Target Target by providing upscale fashion-forwar fashion-forward d appeal flopped flopped because because Wal-Ma Wal-Mart rt did not replicate replicate Targets Targets core competencies and capabilities in providing upscale fashion-forward appeal products. Localizing selection based on neighborhood demographics was a successful customer-focused strategy that allowed Wal-Mart to expand and empower regional marketing teams moving away many executives from the headquarters into the regions to understand the company’s wide customer base (Barley et al., 2007, p. 374). The customer-focused strategy to appeal to the universal low price customers (i.e. brand aspirationals, price sensitive affluent, and value price shoppers) succeeded and allowed Wal-Mart Store segments to develop unique, innovative products and provide distinguished brands to better appeal to its core customers as a low price leader in well-known brands (Barle (Barley y et al., 2007, 2007, p. 374). Through effective sustainability and localized charitable giving strategy Wal-Mart has portrayed portrayed itself itself as a socially socially responsibl responsiblee corporate corporate citizen citizen and a good good neighbor neighbor (Barley (Barley et al., al., 2007, p. 372). Wal-Ma Wal-Mart rt demonstrate demonstrated d this by selling selling over over 100 million million environme environmentally ntally friendly friendly florescent bulbs since the commencement of its global environmentally sustainable program in


2004, set a goal to reduce package by 5% by 2013 and has as well given over $415 million in cash and kind to over 100,000 charities worldwide(Barley et al., 2007, p. 372). To confront changes and address its external reputational challenges Wal-Mart rolled out a new strategy to redefine its operations and how it will compete. The new strategy just like Scout(2007) described, “the corporate plan encompasses encompasses previous change initiatives as well as new ones, rest on five pillars: broadening our appeals to our customers , making Wal-Mart even a better place place to work, work, improving improving operatio operations ns and efficiency, efficiency, driving global growth growth and and contributing contributing to our communities((Barley et al., 2007, p. 372). Requirement 3 – Primary Factors influencing Wal-Mart’s Generic Business-Level Strategy

Based on the analysis of Wal-Mart’s internal and external environment, they factors that influence the company’s generic business-level strategy are outlined in the chart below. These factors are analyzed according to their influence to various stockholders’ groups.

Product Market

Stakeholders

Strength

Weakness

Opportunities

Threats

The everyday low price allows customers affordability of the product and services. services.

The low price increase customers switching cost to competitors’ products.

Customers are The low price diminishes empowered to choose customers bargaining from large assortment of power. products products and services. services.

Neighborhood Neighborhood stores stores give customers easy access to shopping round the clock.

Discount stores are usually overcrowded during festive period

Customers have easy Customers do not get the access to store, product education education and convenience parking and personal attention attention needed pleasant pleasant shopping for decisions. experience.

The IT capability helps suppliers

Wal-Mart’s Data

Cost of transmitting data

Unauthorized access to


to interchange data, monitor stock level, ordering and manage delivery timely.

interchange system compromises its suppliers’ privacy.

is reduced and real-time information exchange is made possible.

classified corporate information.

The privilege to chose from the differentiate products, services and stores.

Differentiation changes customers’ preferences from quality to low price.

Expectations are met through innovation and product development development which are the driving force for differentiation.

Differentiation shifts the focus from the customer to the products.

Capabilities and core competence to harness opportunities to create value for customers, suppliers, unions and host communities

Wal-Mart’s undue Customer’s, expectations Often,Wal-Mart limits its negotiation powers allow are reflected from the value creation to itself and it to dictate the product purchases purchases trend. trend. customers cutting off design and specification – unions and communities. i.e. doing it Wal-Mart’s way.

Capital Market

Stakeholders

Strength

Weakness

Opportunities

Threats

Stock price appreciation reflects good performance and increases investor’s confidence.

Stock price fluctuation gives an indication that capital market stakeholders may not be met.

Appreciation in stock prices increase increase the the value of shareholder investment

Demoralizes shareholders and could lead to divesting their investments.

Appropriate business-level strategy responds to challenging external environmental forces and help to gain above average return on investment.

Failure of business-level strategy leads to divestiture, loss in revenue and decrease in investment returns.

Share holders wealth is maximized through returns and bonus stock.

This could lead to dissatisfaction which can generate conflict.

Low interest rates keep the cost of borrowing low and make repayment easier to the lender.

High interest rate increases the risk of lending and repayment.

Higher returns are expected of high risk investments.

The risk of default is high when the interest rates are high.

High risk associated with higher interest compels a firm to reduce its risk through purchase of insurance policies.

The redistribution of risks increases the cost of insurance which may likely affect investment returns.

This offers shareholders the opportunity to minimize their investment risk.

Investment returns may be uncertain.

Wal-Mart’s sustained growth preserves preserves and enhances enhances the the funding from lenders.

Dissatisfied lenders may When strategies succeed impose stricter conditions the performance of a for future borrowing. business business is significa significantly ntly improved allowing it to fulfill its obligations.

Failure of strategies leads to failure in fulfilling obligations which is capable of cutting off future source of capital. This may hamper


Organizational

Implying that the lender maximizes his investment.

the lender’s operation due to high cost and risk of lending.

Stakeholders

Strength

Weakness

Opportunities

Threats

Provision of good work environment.

Expectation to exceed performance. performance.

Skill development and rewarding work environment.

There may be undue pressure pressure to perform perform or be relieved.

Encouragement of organizational learning.

It may be an expensive strategy in terms of resource commitment.

It will offer avenue to introduce change management.

New methods methods and procedures procedures may be hard to be transitioned. transitioned.

Improve efficiency

Overall organizational efficiency may not be realized.

Employees will be motivated to higher productivity. productivity.

Resentment can lead to reorganization and massive job loss. loss.

Introduction of new corporate culture.

The needs of the employees may not even be met.

Employee’s potentials can be fully utilized creating opportunity for growth.

This could lead to dissatisfaction for those who could not embrace the new corporate culture.

To develop human capital capability.

Proper application of the new knowledge and culture may prove problematic problematic

This could lead to development of critical skills that is critical to the success of competitive capability

Some employees may be slow to developing these critical skills and that could lead to a dysfunctional organizational structure.

Requirement 4- Evaluation of Wal-Mart’s potential of Success using the Strategic Input from the Stakeholders Group Analysis

The business-level strategy Wal-Mart applied defined its competitive methodology and has allowed it to develop competitive advantage by leveraging its resources, core competencies and capabilities. From the analysis of Wal-Mart’s business-level strategy above it is quite evident that Wal-Mart used its generic business-level strategy of integrated cost leadership/differentiation to make choices of how it competes and address strategic issues. The business-level strategy has


been expanded expanded to incorporat incorporatee the entire entire stakeholders stakeholders within within the the value chain. chain. Wal-Mart Wal-Mart galvanized galvanized its business-level strategy to redefine its operations and respond to strategic challenges to position itself well ahead of its competitors. This strategy modification which Barley et al., (2007) described as encompassing previous change initiatives as well as new ones, rest on five pillars focusing on broadening appeals to customers , creating a better work environment, improving operations and efficiency, driving global growth and contributing to host communities (p. 372). These modifications have improved the potency of effective strategy. Wal-Mart has a very powerful powerful strategy strategy but it it is also also one that that is hardly hardly measurable measurable or easy to communi communicate. cate. Wal-Mart has an effective business-level strategy that focused on empowering the stakeholders and building an effective value chain that will continue to be the flagship of retail business. business. As regards regards to to the product product market market stakeholders stakeholders which which include include the custome customers, rs, suppliers, suppliers, host communities and unions, Wal-Mart has empowered them by creating higher value services and opportunities that will benefit them and reduce the threats that may be a clog on the wheel of their individual or corporate progress. The low price core competency of Wal-Mart which is an indispensible strength affords customers the opportunity to choose from large assortment of differentiated products at low prices. This strategy creates value for customers and serves as a link that keep bringing them back to shop at Wal-Mart stores. The customer-focused strategy to appeal to the universal low price customers succeeded and allowed Wal-Mart Store segments to develop unique, innovative products and provide distinguished brands to better appeal to its core customers as a low price leader in well-known brands (Barley et al., 2007, p. 374). So this strategy provides low price and also meets customers expectations the implication is that the loyalty of these customer will still be unalloyed to Wal-Mart.


The neighborhood store locations give customers easy access to shopping with convenience parking and pleasant shopping experience. This is what an average customer looks out for; satisfaction of customer’s need is the key to winning their loyalty. Even with large assortment of goods Costco could not replicate this competitive advantage and this is the reason why Wal-Mart attracts about 175 million each week to its stores (Barley et al., 2007, p. 368). The IT capabilities of Wal-Mart create huge opportunities that empower suppliers and allowed them to participate in the Retail Link, a computerized network system that allow them to plan, execute execute and analyze analyze their their business business (Barley (Barley et al., al., 2007, p. 373). 373). Along Along with electronic electronic data interchange suppliers receive purchase order information and supply invoices electronically, thereby lowering cost, increase the speed of data transmission and improve productivity (Barley et al., 2007, p. 373).This capability create and effective supply chain management that reduces the cost of logistics and create a mutual partnership between suppliers and Wal-Mart. The Wal-Mart’s Technological supply-chain sophistication provides “value for customers, associates and shareholders” (Barley et al., 2007, p. 3743). This system depends on Wal-Mart’s 1.8 million employees to provide the final link in the value chain to to customers. The improved working conditions and increase in hourly pay rate associates are provided the opportunity to develop their skills while working in good job environment. This opens the door for career growth for associates and motivates them to higher productivity. With appropriate business-level strategy to respond to challenging external environmental forces and help to gain above average return on investment Wal-Mart has continually maximized its shareholders wealth. The 312,423 shareholders have been enjoying regular average annual equity returns of 22% on their investment and with strong corporate governance the equity returns


will even get better. So a careful evaluation of the growth potentials of from its business-level strategy and its antecedent modification above shows that Wal-Mart has not fully maximized its growth and success potential. The field is still large enough for Wal-Mart to realize its full potential potential with careful careful integrat integration ion of its resources, resources, core compete competencies ncies and capabilit capabilities; ies; Wal-Mar Wal-Mart’s t’s success potential is very huge. Requirement 5- Strategic Issues & Recommendations

Due to the complexity that characterized the internal and external business environment, Wal-Mart has strategic issues to address to maintain its market leadership position. However, any business business that competes competes globally globally like Wal-Mart Wal-Mart will will continually continually appraise appraise its performanc performancee to seek seek for the effectiveness of it business-level strategy and take corrective actions to remain competitive. The first strategic issue that is most challenging to Wal-Mart is public resentment. There has been wide spread resent from unions, communities, press, government and regulatory agencies against Wal-Mart’s market dominance. Some argue that Wal-Mart has run off a lot of retail businesses businesses using using its unique unique core competencies, competencies, capabilitie capabilitiess and resources resources which which many competitors competitors cannot replicate. According to Barley et al., (2007), ‘the same products can be purchased from different types of retail stores but it is difficult to replicate the convenience, price and diversity of merchandise found at Wal-Mart” Wal-Mart” (p.368). Some communities are even even seeking legal ways to keep Wal-Mart away from establishing in their communities. However, negative press has been another factor responsible for Wal-Mart’s battered public image. Governments and regulatory authorities have not helped matters either accusing Wal-Mart of gross violation of labor laws, environmental laws and trade regulations. regulations. Barley et al.,(2007) pointed out that “Wal-Mart has become a poster company on political issues related to trade, health care , the environment, discrimination, worker


pay and general anti anti corporate corporate sentiment” sentiment” ( p. 386). This This accumulated accumulated resentment resentment against WalMart resulted from reluctance and lack of effective strategy to positively position its image before the American consumers as socially responsible corporate body. Wal-Mart also needs to relax its anti-unionization policy and afford its employees to free elect to organize themselves into unions. The second strategic issue is a pending federal law suit instituted against Wal-Mart by a group of employees alleging gender discrimination against female workers. It is very clear that in the past Wal-Mart was fined heavily to the tune of $198 million in the case of Savaglio vs. WalMart Stores (Barley et al., 2007, p.371). I believe Wal-Mart has good strategies but it should be more proactive and thorough in developing its compensation and incentive policies. The issue of discrimination should be addressed and “the equal pay for equal work” Federal Law should be respected. However a peaceful resolution and out of court settlement will be ideal for Wal-Mart to save its image from be further dragged to the gutters by the press. The third strategic issue is that Wal-Mart is recording declining domestic revenue and increasing revenue from overseas markets. This calls for an articulate strategy to harness the the opportunities where they potentials seem to be optimum. Wal-Mart International’s strategy is to prioritize prioritize “where “where the greatest greatest growth growth and and great returns returns exist” exist” (Barley (Barley et al., al., 2007, p.375). p.375). Wal-Mar Wal-Martt should articulate effective business-level strategy to focus on the right challenges for their longterm and short-term success in the global market place. Wal-Mart should allow Wal-Mart International some degree of flexibility to localize its strategies to reflect the taste, preferences and consumers’ expectations in their host countries. Just like Barley et al., (2007) pointed out that “Wal-Mart should be looking abroad for future sales growth and struggle against the urge to centralize operations and eliminate decision making from frontline where manager have face-toface contact with customers” (p.375).


From the above analysis and strategic issues I will offer two recommendations that will strengthen Wal-Mart’s competitive advantage. As the global leader in retail business Wal-Mart has been quite impressive but it need to launder its battered public image and reposition itself as a socially responsible corporate organization. Wal-Mart should deepen its efforts in encouraging environmental safety , respect for labor regulations and engage more communities in discharging its corporate social responsibilities to show that it cares for it business environment just like it cares to maximize profit. It will be a proactive proactive move to to resolve resolve the pending pending law suit suit and settle settle out of court court to save the company company from further damage to its already questionable public image. Finally, Wal-Mart should take advantage of the global growth opportunities to expand its international operations but it must learn from the experience of local retailers to make the right strategic moves. Wal-Mart must be willing to be their uniformity in operation and centralization of decision making to allow its overseas operations acculturate to the local business culture. It should modify its strategy in entering the Japanese market through a Japanese retailer; Seiyu to avoiding divesting like it did in Germany and Korea due to inability to compete effectively in those markets.

Reference Reference


Hitt, M. A., Ireland, R.D, & Hoskisson, Hoskisson, R.E. (2011). Strategic Management: Management: Competitivenes Competitivenesss & Globalization. (9th Ed.)pp. 20-22,36-61,72 -88,100-123, 352-366. Mason: South-Western Cengage Learning. Learning. Barley, Barley, F., Bragg, Bragg, D., Dawson, Dawson, M., Shah, Shah, H., Sillanpaa, Sillanpaa, B., B., & Sleeper, Sleeper, N. (2007). (2007). Wal-Mar Wal-Mart t stores, stores, Inc. (WMT) (WMT) In Hitt, M. M. A., Ireland, Ireland, R. D., D., & Hoskisson, Hoskisson, R. R. E. (2009). (2009). Strategic Strategic management: Competitiveness & globalization: Concept and cases (8th ed.) pp. 353-379. Mason, OH: South-Western Cengage Learning.

Wal-Mart Stores Inc. SWOT Analysis

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