Wal-Mart Stores’ Strategic Management

Abstract

Wal-Mart is one of the leading supermarket chain stores in the North-American region. The company is the market leader in the industry and is known for applying strategic management in dealing with the issue of competition. Currently, the firm is ahead of others in terms of profits because it applies the latest technology in marketing and selling of its products. In this article, the mission statements, objectives, and values of the supermarket store are analysed. The paper further looks at the financial position of the company with the aim of suggesting some of the best strategic management practices.

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Mission

Vision and Mission Objectives and Values

Vision: what the company wants to be To be the best retailer in the world in the hearts and minds of consumers and employees: This means the company has the interests of customers and its employees at heart, as it is focused on giving them the best. For instance, it ensures only highly qualified, and talented workers are recruited since they have the capacity to offer the best services to clients.
Mission: why the business exists Saving people money so they can live better: The company is concerned with improving the living standards of its customers by offering high-quality products at reduced prices.
Objectives and strategies: profitability of the firm Wal-Mart is one of the multinational companies committed to making profits with the aim of satisfying the stakeholders. In this regard, the management has put in place several objectives and strategies to facilitate profitability. Based on the 2011 annual report, the following objectives and strategies outline the commitment of the company:
  1. Expanding multi-channel initiatives, which means the company has been trying to diversify its marketing strategies with the aim of capturing an important market segment. Through this, several strategies are in place, including the following:
  1. Developing and implementing a worldwide online marketing strategy through the use of modern techniques, such as social media
  2. Speeding up global online channel expansion
  3. Availing stores and shopping centres in order to satisfy the increasing number of customers

The company further realises that meeting the above strategies is not an easy task and has put in place tactics to facilitate goal realization. For instance, it has established a department that engages in customer research to establish their wishes, expectations and desires using new formats in introducing products in new markets, especially in rural areas. It also ensures transactions are completed in time to avoid inconveniencing clients.

  1. The company is focused on growth in new markets, including parts of the United States and the entire North American region. This implies the company is aware of its potentials in the region and has moved on to introduce branches in the US. One of the strategies includes improving the performance of Sam’s club. Additionally, the company has consistently maintained top customer service, as well as introducing productivity strategies.
Values: what drives the company efforts The company has three key values that guide it as it continues to offer top service to clients. They include:
  1. Respect for the individual, irrespective of whether it is the company worker, clients, suppliers, or any other stakeholder including the community and owners of the business. In other words, it does not treat people based on their ethnicity, gender, or sexual orientation. Members of minority groups, such as the blacks in the US, homosexuals, and physically challenged, have an equal chance of being employed, as well as being given the top service. Many companies in the world rarely give minorities an opportunity of developing their careers since they are discriminated against (Thompson, Strickland, & Gamble, 2005).
  2. Service to customers whereby customers are given what they want in the sense that their expectations are surpassed. This is meant to develop customer loyalty with the aim of strengthening the market share.
  3. Striving for excellence implying the company tries its best to be innovative, especially when it comes to selecting and promoting products and services.

Financial Condition

Wal-Mart Stores Inc., Consolidated Income Statement

USD $ in millions

12 months ended Jan 31, 2014 Jan 31, 2013 Jan 31, 2012 Jan 31, 2011 Jan 31, 2010 Jan 31, 2009
Net sales 473,076 466,114 443,854 418,952 405,046 401,244
Cost of sales (358,069) (352,488) (335,127) (315,287) (304,657) (306,158)
Gross profit 115,007 113,626 108,727 103,665 100,389 95,086
Membership and other income 3,218 3,048 3,096 2,897 3,168 4,363
Operating, selling, general and administrative expenses (91,353) (88,873) (85,265) (81,020) (79,607) (76,651)
Operating income 26,872 27,801 26,558 25,542 23,950 22,798
Interest expense, debt and capital leases (2,335) (2,251) (2,322) (2,205) (2,065) (2,184)
Interest income 119 187 162 201 181 284
Interest, net (2,216) (2,064) (2,160) (2,004) (1,884) (1,900)
Income from continuing operations before income taxes 24,656 25,737 24,398 23,538 22,066 20,898
Provision for income taxes (8,105) (7,981) (7,944) (7,579) (7,139) (7,145)
Income from continuing operations 16,551 17,756 16,454 15,959 14,927 13,753
Income (loss) 144 (67) 1,034 (79) 146
net income 16,695 17,756 16,387 16,993 14,848 13,899
net income (673) (757) (688) (604) (513) (499)
net income attributable to Wal-Mart 16,022 16,999 15,699 16,389 14,335 13

Wal-Mart Stores Inc., short-term (operating) activity ratios

Jan 31, 2014 Jan 31, 2013 Jan 31, 2012 Jan 31, 2011 Jan 31, 2010 Jan 31, 2009
Turnover Ratios
Inventory turnover 7.98 8.05 8.23 8.68 9.19 8.87
Receivables turnover 70.85 68.87 74.76 82.33 97.74 102.75
Payables turnover 9.57 9.26 9.15 9.40 10.00 10.61
Working capital turnover
Average No. of Days
Average inventory processing period 46 45 44 42 40 41
Add: Average receivable collection period 5 5 5 4 4 4
Operating cycle 51 50 49 46 44 45
Less: Average payables payment period 38 39 40 39 36 34
Cash conversion cycle 13 11 9 7 8

Analysis

An evaluation of the company income statement shows that it has always generated profits, which is attributed to various factors, one of them being undertaking the best strategy in marketing and sales. Most of the revenues are generated through the sale of products, the offering of services, issuance of insurance premiums, as well as other activities. The net sales of the company went up from the year 2012 to 2013, as well as from the year 2013 to 2014.

Opportunities and threats

SWOT Analysis

Opportunities Threats
Many people appreciate and embrace online shopping, something that is likely to boost the performance of the company. Goods and services advertised through social media are most likely bought online. The management has been quick to set up an online payment method that allows clients to obtain products without necessarily visiting the shop. Even though the company is doing well in online marketing and selling, it faces stiff competition from brick and mortar sellers since a number of individuals are reluctant to appreciate online buying.
Customers in the North American region, especially the United States, are concerned with the foods they consume. A number of them are embracing healthy eating tips, which is boosting the company in the sense that it promotes healthy living by offering low cholesterol products in the market (Harrison, 2005). Many local communities are resistant to change whereby they protest the idea of bringing experts to work in their localities. They often claim that they must benefit from the company as far as job opportunities are concerned, yet they lack sufficient skills to propel the firm to the greater heights.
Customers visiting the company’s shops are interested in the products with the supermarket’s label meaning it is likely to dispose of more products as compared to the competitors. The company faces a challenge of sustaining prices because of the global financial crisis. The cost of fuel is ever-increasing, which affects the prices of many local products. In many cases, the management is forced to increase prices of basic products without informing customers.
Finally, the current trend shows an increase in the sales of the company products in the new markets, particularly in the US, which is an opportunity for the company to excel.

Strengths and weaknesses

SWOT Analysis

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Strengths Weaknesses
Wal-Mart is one of the largest retailers in the world, meaning it enjoys the scale of economies. The company has over ten thousand stores globally, with over $400 billion in revenues. This makes it the market leader given the fact no company can offer substantive competition to it. Unfortunately, labour-related legal suits are one of the weaknesses of Wal-Mart. The company is accused of mistreating its employees, leading to losses owing to court fines. For instance, several employees accuse the company of failing to provide better working conditions. Again, the only company offers low wages with no overtime compensation. In one of the cases, the company was accused of discriminating employees based on their gender and race.
The company is a well-structured information system that is competent, which allows it to save on the costs. Orders from customers are easily traced, inventory levels are well managed, and sales are managed easily through the systems. Due to the continuous legal tussles, the company is suffering from high rates of employee turnover, which has increased the costs of operations significantly.
In terms of offering products, no competitor can challenge Wal-Mart because customers are given an option of buying grocery, entertainment equipment, health products, and other home-related goods. This helps it in attracting customers (Hill, & Jones, 2012). Unlike its competitors, Wal-Mart does not employ differentiation strategy as far as prices are concerned.
Wal-Mart is the only supermarket chain store that applies cost leadership strategy making it a low-cost market leader in the industry. The company is losing public trust because of the poor management of human resources.

Analysis

The company’s mission and objectives should not be altered because they are some of the best, but the corporate and business strategies must be improved to ensure the desired goals and aims are realised.

Corporate strategies Business Strategies
Assessment or review of the current strategies whereby the management must consider the turnover or growth of the firm, product differentiation, human resources, capital resources, and the nature of the market, especially competition (David, 2009). Generic strategies focus on growth, whereby the company is encouraged to acquire or develop new products. Again, the business unit can go global by opening new branches in other countries to boost the customer base. Under the general strategy, the organization could embark on a retrenchment exercise to prevent wastages of resources.
Planning or revision of the current strategies: In this case, the company has established whether the physical appearance of the supermarkets is appropriate, sizes of the shops, the location of the premises, existing methods of distribution, and the staff. Competitive advantage strategy, including selling products at a fair price and product differentiation is an additional strategy.
Action or refining of the strategies whereby change programs have to be introduced to improve the image or publicity of the firm.

Implementation of strategies

Long-term Objectives

Strategies Objectives

Marketing Intensify online marketing through Facebook and Twitter Capture the youths
Human resources Design the best reward system Retaining the most qualified and talented workers
Finance Improved financial reporting Attract investors
Operations Go global Outsmart competitors
Information systems Employ current technologies Reduce the costs of operations

Annual Objectives

Objectives Policies

Marketing Attract customers in new areas Focus on online, as well as conventional advertising tactics
Human resources Retain the best workers Change the existing policy
Finance Strengthen the financial position Adopt better practices in financial reporting
Operations To be a global company Focus on overseas markets
Information systems To be the best online company as far as sales and marketing is concerned Develop an ICT department

Results

The performance of the company would be improved through the application of various long-term and short-term strategies. For instance, the projected pro forma statements for the next five years would resemble the following.

Pro Forma Income Statements – Years 1 through 5

Total Y1 Y2 Y3 Y4 Y5
Licenses $152,500 $150,000 $200,000 $250,000 $250,000
Maintenance 376,875 1,500,000 2,550,000 3,900,000 5,400,000
Sales 529,375 1,650,000 2,750,000 4,150,000 5,650,000
Cost of Goods Sold 15,250 15,000 20,000 25,000 25,000
Gross Profit 514,125 1,635,000 2,730,000 4,125,000 5,625,000

Recommendations

Strategy Review and Evaluation

Consistency This means the strategy has to be in line with the major goals, as well as the policies of the company.
Consonance The management must revaluate various trends in the market, including the behaviour of individuals.
Feasibility The company should never engage in overtaxing of resources or create problems that cannot be resolved
Advantage The firm has to ensure the competitive advantage is maintained

References

David, F. R. (2009). Strategic management: Concepts and cases (12th ed.). Upper Saddle River, NJ: Prentice Hall.

Harrison, J. S. (2005). Foundations of strategic management (3rd ed.). Mason, OH: Thomson/South-Western.

Hill, C. W. L., & Jones, G. R. (2012). Strategic Management. New York: Cengage Learning.

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Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2005). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases (14th ed.). Boston, MA: McGraw-Hill.

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