Strategy Management A case study of Wal-Mart Introduction Porter (2002) states that root of the problem lies
in the lack of distinguishing between operation effectiveness and strategy. The expedition for productivity, quality and speed has resulted in management tools and techniques, total quality management benchmarking, time based competition, outsourcing, partnering, reengineering, change management. In any organization, strategy management is the key to its success. There are many theories based on this assumption that without a proper strategy and planning, it is difficult for any industry to survive irrespective of its size. It is necessary to understand here that all the major corporate organizations have established themselves, thanks to superior strategic planning and implementation. The retail industry is making news everywhere with not only the traditional industries increasing their outlets but some major corporate industries also intruding into this industry like Fresh @ Reliance of Reliance Industries, More of Aditya Birla Group in India. Wal-Mart, a US based retail industry, which is known as the giant in the retail industry has survived and is still the huge enterprise in the world which deals with almost all the F&B products, apparels, etc. It is not only the largest company in world but also the largest company in the history of world.(Fishman, 2006) The present paper is divided into four sections to understand and answer as what makes Wal-Mart the best in the industry, 1) retailing industry at the time of WalMart's innings, 2) Wal-Mart's Competitive advantage and key components, 3) Wal-Mart's Strategy and 4) Sustainable growth of Wal-Mart.
I. Retail Industry ± Wal-Mart says Hello! Strategic decisions are ones that are aimed at differentiating an organization from its competitors in a way that is sustainable in the future. (Porter, 2002) Porter strongly advocates that decisions in business can be classified as strategic if they involve some innovation and difference that results in sustainable advantage. According to Patrick Hayden et al (2002) the retailing industry adopted the style of discounting on its merchandise after the Second World War. It is learnt that discount retailing was not the strategy at the time Kmart, Target and Wal-Mart first started operating their business. Frank (2006) states that when Sam Walton was franchising for Ben Franklin's variety store, invented an idea of passing on the savings to his customers and earning his profits through volume. Prior to Wal-Mart's entry into the market, Sidney and Hebert from Harrison founded Two Guys discount store in the year 1946 which dealt in hardware, automotive parts and later on groceries. Two Guys was the forerunner as compared to today's retailers like Super Target, Wal-Mart which succumbed to the economic recession. Another discount store set up by Eugene as E.J. Korvette, which is often cited as first discount store which did not raise from 5 & 10 cents roots and eventually declared bankruptcy due to inability to compete with the new entrants. Porter (2002) states that combination of operational effectiveness and strategy is essential for superior performance which is the primary goal of any organization. He also says that a company can perform its rivals only if it can operate in different ways which are not in practice. Much emphasis had been laid on strategic positioning like variety based positioning, needs ± based positioning and access based positioning.
All the above factors combined together form the key components of Wal-Mart which not only increase the margin of profits through bulk sales but also boost the confidence of the customers with services like point of sale information system and everyday low prices. 2004) Porters five forces model explains what strategic decisions should be made and on what basis. create widespread name recognition and customer satisfaction in relation to brand name Wal-Mart and branching into new sectors of retailing. spent less on advertising and the prices are fixed low and it depends on the store manager to fix the latitude of pricing. Key Components of Wal-Mart Business Model Wal-Mart is the leader in retailing industry with fiscal revenue of $244.2%. Tesco. However. merchandising is tailored from locals. etc. In regard to threats of new entrants. pick to flight. Wal-Mart made strategic attempts in the its formulation to dominate the retail market where it has its presence. human resource is the key to development and Wal-Mart efficiently manages its sources. growth by expansion in the US and Internationally. little space for inventory. store within store. Wal-Mart terms its employees as associates. While franchising of Franklin he always looked for cheaper deals and thought of passing his savings to the customers and earning through the margin on volume of bulk purchases. In relation to marketing and sales. other stores that started operating were Target. shoppers were given the cheapest price as compared to any other store. compensation offered to associates depending on company's profits and also offered some incentives on their performances. etc. The above data explains that strategy of Wal-Mart is extraordinary which manages and operates over 4150 retail facilities globally. Wal-Mart strategy of operation is innovative with big stores in small towns with monopoly in the market at low rental costs. planning packets. Technology plays a vital role in development of the organization and Wal-Mart is well equipped with technological innovations like POS. courtesy Wal-Mart. But nevertheless it has stiff competition from likes of Super Target. Managements take lots of visits and it is learnt there are no rehearsals before any meeting which is usually scheduled on every Saturday.( Michael Bergdahl.
.52 billion in 2003 making it the world's largest corporation. Manager compensation is linked to the profit of store operated by him. satellite system and UPC. partnerships with some vendors. Mike reports that Wal-Mart as of 2002 had 1. Target has been functioning successfully. Woolworth (Woolco) and KMart. II. automated DCs cross docking. The other factors that increase the margin of profit for Wal-Mart are inbound logistics with frequent replenishment. In any organization. merchandising in brand name. concentric expansion. centralized buying. Wal-Mart Strategy Wal-Mart dominates the American retailing industry due to number of factors like its business model which is still a mystery and its effectiveness in not letting the rivals let know about the weaknesses. Wal-Mart procurement measures like hard-nosed negotiations.Along with Wal-Mart. III. which offers cheap prices than its competitors includes firm infrastructure like frugal culture. Through the way of discount stores. etc. no regional offices and pleasant environment to work. helps at large the cause of providing the goods and services on cheap prices.The key components of Wal-Mart (The Value Chain). hub and spoke system. within promotions. real time market research.000 employees growing at 11. private labels. store performance tracking. EDI. local prices.283. The model explains the basic strategies to be considered while starting a business like bargaining power of suppliers. but other two failed in their operations and filed bankruptcy. Wal-Mart has been constantly in the news for acquisition of other small retail shops in view of its expansion. it is the world's biggest retail industry. The workforce at Wal-Mart is not unionized as the company takes all the measures of their benefits and provides them training on related issues.
(2002) operational effectiveness and efficiency are the key elements of success in any organization. In regard to substitutes. Sustainability in Discount Retailing ± Wal-Mart According to Porter.It is learnt that Wal-Mart strives on three generic strategies consisting of Focus Strategy.Thus. Wal-Mart has strong RBV with economically and financially very strong enough to stand still in the time of crisis. (Helfat. reliable performance. The takeover strategy by Wal-Mart keeps the company at forefront when entering into the new market and the number of competitors is also minimized. distinctive and identify key success factors that will drive the customers to buy their products. Wal-Mart's big box phenomenon has changed the retailing industry in the United States which is often considered as discount stores and makes profit through high volume of purchases and low markup on profits. 2002) Wal-Mart has firm infrastructure. 21 Wertkauf stores in Germany and 229 ASDA units in United Kingdom. 2002) The expanded strategy has led the hunger of Wal-Mart to many European Countries. Any organizations thrive hard to be successful for which it needs to have better resources and superior capabilities.(Parnell. The strategies have helped the Wal-Mart to rein in number one position in international countries making it the largest retailer in the world. well equipped in human resource with management professionals and technologically too. Pereira states that dominating the retail market is its key strategy. Wal-Mart has acquired many international stores and merged with some super stores like ASDA in UK. Wal-Mart is expanding seriously and rapidly which is also its strategic goal. In a study. Wal-Mart in order to achieve its aim of customer satisfaction has selling goods under its own legal brand. the Differentiation Strategy and overall cost leadership. 2008)Wal-Mart with its low cost and ever expanding strategy has made a dramatic impact since 1962 when Sam Walton first started his business. Porter defines operational effectiveness as performance of similar activities as its rivals but better than them. 2006)The strategy lies in purchasing the goods at lower prices and selling the goods to customer at much lower prices. Wal-Mart operates on low price strategy which is operated as every day low prices (EDLP) which builds trust among the customers. like Wal-Mart superior logistics. IV. Managers strive hard to make their organizations unique.3 associates.(Brunn. Wal-Mart has now over 4000 stores and outlets in US and other countries through acquisition and mergers. The Resource Based View (RBV) explains competitive heterogeneity based on the premise that close competitors differ in their resources and capabilities in important and durable ways. This ferociously increases the competition in the market and Wal-Mart competes with all its competitors till it is dominant it the market. rivalry from competitors and pricing norms. With this strategy. Wal-Mart employs over 1. (Helfat. it is stated the Wal-Mart is expert in manipulating perceptions. Wal-Mart far flung network of retail outlets has ensured that Wal-Mart interacts with and has impact on virtually every locality within US. It is seen that Wal-Mart has significantly the Porters five force model wherein through proper strategic planning and strategic implementation has led to removal of barrier entry. The company's capability can be found through its functionality. A company can outperform its rivals or competitors in the market only with superior management and efficient control creating a difference from the others which eventually attracts customers. It is learnt that three countries with no Wal-Mart stores became part of corporation's international presence wherein the domestic retail chains were taken over by Wal-Mart including 122 Woolco stores in Canada. It is
. cutting the price as far as possible and increasing the profit by increasing the number of sales. firm specific resources and capabilities are crucial in explaining the firm's performance. owns over 4000 stores out of which 3000 are in US and serves around 100 million customers weekly.
Sustainability at the top place is the most important job that makes its managers strives hard to frame the policies and strategy to compete with its rivals in the market. (Race Cowgill. Substitution offers mixed responses after identifying and understanding the threats. Wal-Mart has good opportunities in markets of Europe and China and focuses on acquiring the market through acquisition of smaller stores and merger with leaders in the specific markets. substation is an especially effective way of attacking dominant rivals in the market. Thus Wal-Mart with such a vast network of stores and alliances in the forms of ASDA. But imitation puts reputation. (James. Wal-Mart is having great network with almost over 7800 stores and Sam's Club locations in 16
markets worldwide. Substitution and Hold-up are some of the threats to any organization in retail industry. suppliers or complementors who have some bargaining leverage which results in tough negotiations. contractual agreements and vertical integration. Target and many other stores is well protected enough to sustain its top position in the retail industry. However. Imitation. The µopening price point' is the lowest price in the store which is kept at high visibility which makes consumer believes that the products in this store are really cheaper. Therefore. Global leader in the industry leaves the organization vulnerable to many socioeconomic and political problems of the country. switching to different options of substitution to be in the market. Wal-Mart with its visionary goal of attaining zero waste status and reaching 100% renewable energy has planned to launch number of sustainability initiatives. relationship at stake. 2008) Imitation increase profits by increasing the supply. It is growing at a brisk pace with expanding its horizon to other parts of world through acquisition and merger. It employs more than 2 million associates and serves more than 100 million customers every year. The threats of substitution can be subtle and unexpected like minimizing expenses through videoconferencing instead of air flights to long distance meetings with its managers of other stores. Wal-Mart is ever expanding its boundaries by way of acquisition and mergers. James Hall reports that Wal-Mart is planning to open convenience stores as Tesco has started and operating in US called Fresh & Easy Neighborhood Markets. Wal-Mart makes the consumer addicted coming to its stores by convincing them the prices are lower than in the other stores by selling itself cheaper by advertising that µwe have lower prices than anyone else' and placing a µopening price point'.
.termed that low price is not the strategy of Wal-Mart but the advertisement manipulates the consumer perceptions by making them think that its prices are lower than its competitors' price using µprice spin'. The organization should fight the threat and merging with them. etc. Holdup diverts the value to customers. Slack. According to Fishman (2006) Americans spend $26 million every hour at WalMart which makes it believable that Wal-Mart is financially very strong and is capable of combating any threat from its rivals in the market. and provides wide range of products. (GreenBiz. value. commitment. 2008) Such tactics will create mixed response among the consumers while degrading the reputation of the leader in market. Wal-Mart is always under threat to sustain its top position in market nationally and internationally. Substitution reduces the demand for what a firm uniquely provides by shifting the demand elsewhere due to changes in technology. reputation for money. 2005) The SWOT analysis of Wal-Mart reveals that it is most powerful retail brand.