Introduction
Walmart Stores Inc. is a world-renowned retailer that operates different stores across the world. In the U.S. Walmart operates discount stores, supercenters, and other types of retail stores, claiming to be âan epitome of sustainability, corporate philanthropy, and employment opportunityâ (Saxena, 2014, p. 3). The company was established in Rogers Ark in 1962 by Sam Walton and quickly transformed into a corporate organization in 1969.
The main focus of the companyâs management was offering customers an opportunity to save their money when buying the products of necessity. Even today, the company identifies its mission as helping clients save money so that they lives can be improved.
The issue of ethical culture has always been one of the significant aspects of the companyâs vision and global strategy. Additionally, in 2005 the company made a significant effort in committing to implement various environmental measures for reaching a goal of becoming 100 percent sustainable by renewable energy therefore creating zero wastage. Such an attitude towards the environment and the loyalty of customers is what sets the company apart from its rivals on the market.
The report will focus on the strategy and the strategic goals set by Walmart Stores Inc. as well as on the ways the company implements the strategy for achieving the goal. The aspect of challenges faced by the company will also be included into the analysis for understanding what strategic changes can be introduced for eliminating the identified challenges. Additionally, a SWOT analysis will be conducted for assessing the performance of the company on the basis of both internal and external perspectives such as strengths and weaknesses of the company as well as its opportunities and threats.
Strategic Goals
The framework for strategic goals is four-fold. First, Walmart aims to dominate the market of retail in any area where the company has a presence. Second, the company targets its forces at expanding the presence both locally in the United States and on the international level. Third, Walmart aims to create a worldwide recognition of the brand as well as satisfy its customers by offering the lowest prices on the market. Fourth, Walmart is focused on branching its business into new areas that include automotive repair products and pharmaceuticals.
The strategic goal of retail market domination is one of the key targets. Walmart sees a large competitive advantage in selling products at discount prices that customers cannot find anywhere else. Therefore, by cutting the prices and lowering the markup, the company is able to make the profit from the large volume of sales (Hayden, Lee, McMahon, & Pereira, 2002, p. 12). Another component of this strategic goal is achieving competitiveness in the each unit of the company. Each store owned by Walmart is encouraged to compete with any other store in the area to dominate the local retail sphere.
The strategic goal of growth and expansion on both local and international markets is what the company has done successfully. According to the 2015 Walmart Annual Report, the company is now able to provide incremental sales not only in countries like Brazil and China but also sell low-priced products online (Walmart, 2015, p. 1).
The goal of creating a positive recognition of the brand means to have clients associate Walmart as a reliable retailer that offers the most affordable products on the market. The goal is accomplished through advertisement on newspapers and television. It is usual for the PR-management to use Walmartâs employees and stores in the adverts, underlining that the customer experience is the main priority. Furthermore, the key term of âlow prices alwaysâ is used on a regular basis.
Lastly, branching out to new retailing sectors, Walmart ventured into launching a chain of pharmacies, automotive repair shops, and grocery shops. Such a strategy is a clear aspect of success, similar to the idea Sam Walton had when creating the first Walmart shop.
To summarize the section on Walmartâs strategic goals, it is important to mention that the companyâs growth is accomplished through both physical and territorial expansion of the stores. Furthermore, such an expansion is not limited by the United States border nowadays Walmart is a world-renowned retailer of affordable goods. When a new Walmart is opened in an area, the primary aim is becoming the leader of retail in that area. As the store becomes the retail leader in that area, it is then ready to expand its presence by means of diversifying into new retail sectors (Hayden et al., 2002, p. 14).
Competitive Strategy
Walmartâs competitive strategy is associated with leading every sector of business. To follow the competitive strategy, Walmart combines two aspects of differentiation and cost leadership. The company offers a great range of goods and services at the same quality as its competitors at the same time with setting prices that are much lower than the rivals. The companyâs management is set on finding various methods of cost reduction at the same time with maintaining the differentiation levels that are competitively sustainable.
The achieved success in the area of supply chain management is one of the most effective ways of cost leadership strategy implementation and accomplishment. Furthermore, the efficient inbound logistics is achieved through the usage of the just-in-time inventory (Wei, Wang, Zhang, & Ao, 2013, p. 5).
Outbound logistics are created by optimizing the fuel efficiency in the companyâs delivery trucks and the decrease in the empty miles. Additionally, the company has been able to successfully reduce the costs by buying products in large blocks from the suppliers. Technological advances are what also play an important role in Walmartâs supply chain since technology allows the companyâs management to forecast future demand for a particular product, track as well as manage the levels of inventory, and establish trusting relationships with potential and existing customers. To conclude, the success in Walmartâs differentiation and cost leadership strategy leads the company to become a strong competitor in the retail industry.
When it comes to the corporate-level strategy, Walmart is successful due to the management believing in concentrating the companyâs efforts onto one business, meaning that more that ninety percent of the revenue is attained through the retail business. Over more than thirty years, the single-business corporate strategy has been one of the greatest contributors to success. The companyâs levels never saw any point in diversification for sustaining Walmartâs growth and achieving the level of competitive advantage.
Due to the multinational business strategy, Walmart has been able to successfully enter a global market. The multinational strategy means that customers from different countries receive different treatment in accordance with the cultural peculiarities to achieve high levels of profitability and productivity. The âDifferent Stores for Different Folksâ strategy is what allows the company cater to different types of customers around the world (Wei et al., 2013, p. 6).
Strategy Formulation
Strategy formulation is a process of evaluating a companyâs strategy as well as choosing the most efficient strategy for reaching the goals and objectives set by the companyâs leaders. The current strategies Walmart implements include product strategies, service strategy, retail strategy, and marketing communication strategy.
- In terms of the product strategy, Walmart offers its customers a wide range of brand products that include Great Value, Samâs Choice, Mainstays, and others. Such brands interact with many customers and suppliers for quality testing and approval. After the testing, Walmart conducts necessary changes to the quality of the branded product to meet the customer demand; for example, Great Value added new unique flavors to their ice cream range such as cake batter and mocha (Saxena, 2014, p. 8).
- The service strategy implemented by Walmart in its operation relates to training the employees to provide the top quality services for customers. Additionally, now Walmart is able to offer online shopping services so that clients can shop for their groceries without the need for leaving the comfort of their homes. The âScan & Goâ app for phones allows customers to search for product prices, scan product barcodes, and make purchases by themselves. Thus, in terms of service, Walmart offers a range of customer conveniences.
- The retail strategy is implemented by Walmart through the use of the Neighborhood market concept which allows the company to create neighborhood markets and replace the large convenient stores. Neighborhood stores are much smaller compared to the supercenters and they predominantly focus on providing fresh and high quality products (Saxena, 2014, p. 8).
- The market communication strategy is used for lost customer retention. With the introduction of the âSave money, live betterâ ad campaign Walmart focused on the low prices the company provides as well as the gain of the customersâ trust. Additionally, social media have become tools for products advertisement and answering customersâ questions for building brand loyalty.
In addition to the four mentioned strategic approaches, Walmart also uses the emergent and prescriptive approaches. The primary goal for the company is providing customers with cheaper products as well as growing and adapting on a regular basis. Therefore, the strategic reason for the prescriptive approach is the achievement of the long-term goal set by the companyâs management.
The Strategic Challenges: Technology and Globalization
It is common knowledge that the modern society is to a large extent influenced by technological advances as well as globalization. Therefore, the development of new technological networks has to be reflected in Walmartâs strategy.
The technology of networking is no longer limited to specific territorial boundaries; therefore, where stores are located is no longer an issue. Despite the fact that traditional retail is largely influence by location to control the flow of sales, the network technologies go beyond the location limitations. Thus, Walmart is challenged by breaking the territorial boundaries in order to provide customers an opportunity to shop with the use of networking technologies.
With the changes in technologies, the methods of retail have also changed drastically. Shopping at stores turned into shopping from home, so customers are able to save their time through online shopping, which presents a major challenge for Walmart as a retailer. When it comes to technological changes, Walmart is far behind its competitors like Amazon, the leader in the sphere of online retail.
The human resources department is also largely challenged by the quick technological innovations. Some kinds of employee power can be replaced by technology, and the employees that remain working in the company require additional training for integrating technologies into their professional practice. Changing strategies associated with human resources can be one of the complicated challenges for Walmart since employee firing can lead to unemployment and training will require more funds and time.
Lastly, technological advances can greatly lower the companyâs profit margins. For example, networking has made it possible for potential customers to acquire more information online, so the search for the lowest prices is no longer relevant. In addition to lowering the margins, technology can lower the costs offered by the competitors since there is lower costs for communication, labor force payment, purchases, and infrastructure. In this case, the battle for the lowest prices among competitors becomes even more intense, resulting in the reduction of the retail industry profits. With regards to Walmartâs situation, because low prices primary competitive advantage for the company, it will become greatly challenged by networking technologies.
Globalization is another strategic challenge for the company since it affects every aspect of the business process starting from the supply chain and ending with the target customers. As the Fortune 500 corporation, Walmart is also dealing with the threats posed by globalization. Walmartâs suppliers are challenged by it when the corporation expands its presence to other countries since there is a demand for other suppliers due to the specific characteristics of a new market.
The issue of supplier management becomes a great challenge in such a case (Wei, Wang, Zhang, & Ao, 2013, p. 6). The globalization aspects such as the collision of cultures, the issues with language, and pricing differentiation usually influence the companyâs operation. Therefore, Walmart should be ready to handle the problems created by globalization and technologies to sustain its competitive advantage and increase profits.
SWOT Analysis
The Internal Perspective
The internal perspective of Walmartâs SWOT analysis includes the companyâs strengths and weaknesses which it exhibits in its performance. When it comes to the strengths, Walmart is a world-renowned corporation that is one of the leaders of the modern retail market.
Strengths
Walmart is the largest retail corporation that earns more than four hundred billion dollars a year with its ten thousand stores around the globe. Therefore, it is able to exercise significant power in terms of attracting more potential customers and influencing suppliers in reducing their product prices so that they can be sold in the retail store at lower prices compared to the competitors (Marcilla, 2014, p. 48).
Walmart offers customers an extensive range of products that range from grocery to electronics. In addition, the company sells both own label and brand products so that clients have a larger variety of choice. Another remarkable strength is that Walmart is competitive when it comes to technology, for example, the company was the one that developed the bar code, Scan & Go application, and order tracking services.
One of the largest advantages of the company is the cost leadership strategy. Since Walmart puts an emphasis on providing quality products at a low cost, it is very complicated for the rivals to compete with such prices.
Weaknesses
In terms of weaknesses, Walmart has gained a negative reputation of an employer that saves money on the employees. Workers often gave negative feedback on the inadequate working conditions and o payment for overtime, as well as discrimination of female workers (Consumer Affairs, 2016, para. 5). Therefore, the poor treatment of the employees influences high employee turnover and negative publicity.
Another weakness relates to the lack of any differentiation strategy in comparison to the competitors. Sometimes Walmart loses customers that have a higher income since they do not want to buy products just because they are low-priced. In such cases, the cost-leadership strategy does not work effectively so that Walmart has to come up with a new strategy to offer customers more than just low-priced products.
The last weakness of the companyâs strategy and operation relate to the declining margins and prices. Since the modern retail market largely incorporates the import of Chinese products on the American market, the gross margins for Walmart will become lower for specific categories of good because of the decline in their price.
The External Perspective
The external perspective of Walmartâs SWOT analysis includes the companyâs opportunities in the ever-changing retail market as well as the external threats the company faces on a regular basis.
Opportunities
One of the most positive opportunities for Walmart is keeping investing into International operations. The international market offers the company new opportunities and experiences, especially in the emerging markets. In addition, the own-label products have proven to sell very well, so there is an opportunity for increasing the range of own-label items sold at Walmart (Marcilla, 2014, p. 50).
Another opportunity is associated with the higher demand for healthy products. Walmart can increase its range of healthy foods in stores so that clients can have more variety of choice and the company can earn more from this new area of retail.
The last and the most promising opportunity for Walmart relates to improving the online shopping services offered by the company. Due to the growth in the retail sector and expansion of the online market, there is a high demand for retailers that offer the online shopping experience that is very convenient. Despite the fact that Walmart has already ventured into the online area of retail, the services can be improved and expanded.
Lastly, Walmart has a great opportunity for entering the banking industry since it receives a large profit every month through the debit cards, credit cards, and the transfers of electronic checks. By means of creating a Walmart owned bank, the corporation will be able to avoid spending extra funds on the third-party processing of payment.
Threats
There is a conflict of interest associated with the company when it comes to becoming a âgreenâ corporation. Despite the fact that the company has potential growth for improvements, it is much cheaper to produce, for example, pork meat industrially in comparison with the free-range and grass-fed pig that is raised on small and ecologically-friendly farms.
Another possible threat is the increase of the power of the competitors. Walmartâs rivals like Tesco, Amazon, and Target are working hard towards eliminating the price differences with Walmart. Since low prices are what a company considers the largest competitive advantage, Walmart will lose many potential customers with the increased competition as rivals also lower their prices.
The last threat the company faces on a regular basis is associated with the resistance exhibited by the local communities. It is commonly accepted that Walmart has a negative impact on the local businesses since many of them lose customers due selling products that are priced higher than the items in Walmart. Therefore, there is a negative influence on both retailers and local communities (Marcilla, 2014, p. 52).
Recommendations and Conclusions
On the basis of the SWOT analysis as well as the assessment of Walmartâs strategic goals as well as the implemented strategic approaches, a recommendation can be made that the company should prioritize its strategy with the use of the strengths and opportunities in the worldwide market of retail. The weaknesses and threats should become priorities only in the case if the management sees the significant rise in the revenue due to the focus on the opportunities and strengths.
Since the expansion of the global online retail industry is one of the most promising opportunities for Walmart, a major focus should be put on designing an efficient online retail strategy that will be competitive enough to match Amazonâs success.
One of the most profitable Amazonâs strategies relates to providing an opportunity to shop on any technological device ranging from a smartphone to a computer. Walmart should also optimize its online shopping applications to meet the customer requirements. Furthermore, Amazon takes customer service and speedy delivery as priorities (Mochari, n.d., para. 6); thus, similar to Amazon, Walmart should venture into providing online customers with quick delivery services.
Furthermore, Walmart should continue the expansion of the business into the developing markets. Despite the fact that price differences and cultural issues may pose a challenge for the companyâs management, the expansion of the brandâs presence will offer a significant opportunity for growth. Because the companyâs strengths are associated with the large size of the corporation, the ability to penetrate the global supply chain and provide products that are priced very reasonably, the expansion of the foreign markets can be successful.
On the other side, Walmart should look into the improvements in the area of human resources since the company does have a negative reputation when it comes to the employeesâ treatment (Smithson, 2015, para. 12). If there is delayed payment or no payment for overtime served by employees, the reputation of the company as the loyal employer will further be damaged. Furthermore, with the increase in technological advances, employees should be trained in integrating technologies into customer service to guarantee customer satisfaction.
As already mentioned, publicâs perception of the company does not contribute well to its corporate image. Walmart negatively influences the development of local businesses and causes them to shut down before moving to other areas with local businesses, despite the fact that the companyâs claims of providing a comfortable and rewarding place for work. However, the reality is that there is no other place for the local employees to work due to the shutting down of the local stores and markets. In order to eliminate such a negative reputation, Walmart should stop the deceiving strategies when the new facilities are established in new areas.
References
Consumer Affairs. (2016). Complaints from Walmart employees. Web.
Hayden, P., Lee, S., McMahon, K., & Pereira, M. (2002). Wal-Mart: Staying on top of the Fortune 500. Washington, DC: George Washington University.
Marcilla, B. (2014). Business analysis for Walmart, a grocery retail chain, and improvement proposals. Web.
Mochari, I. (n.d.). The simple trick that Amazon, Apple, and Lego know. Web.
Saxena, A. (2014). Strategic analysis of Wal-Mart Inc. Web.
Walmart. (2015). Annual report. Web.
Wei, L., Wang, S., Zhang, J., & Ao, Y. (2013). Strategic analysis for: Walmart. Web.