1. Based on the company’s external and internal environmental analyses (using SWOT analysis), outline the primary factors impacting Wal-Mart’s strategy. Organize these factors by Stakeholder Group to prioritize expectations and identify conflicting pressures on the organization. INTERNAL ENVIRONMENTAL ANALYSIS STRENGTHS Capital Market Stakeholders: ? Has grown substantially over recent years and has experienced global expansion. According to exhibit 3 in the case, Wal-Mart’s revenue has consistently increased.
In 1997, they had revenues of $99,627 billion and by 2007 their revenue increased 250% to $348,650 billion. This growth had an impact on Wal-Mart’s net income, showing that they were able to control their expenses while continuing to grow and expand their operations. In 1997 their net income was $3,042 billion, by 2007 it had tripled to $11,709 billion. The strength of Wal-Mart is shown in their financial ratios. Compared with an average operating profit margin of 5. 1 percent in the prior three-year period, Wal-Mart has averaged 6. percent in the past three years. They are consistent in providing shareholder equity, measuring 22 percent in 2007 which is close to their 10-year average. International revenue has been a constant source of sales growth for Wal-Mart, outpacing the revenue contribution from the Sam’s Club segment since 2001. Product Market Stakeholders: ? Established name brand that is identified with reasonable to cheap pricing and bargain pricing. Wal-Mart is a store that most individuals can shop at when they are on a low budget and still buy what they set out to buy.
Wal-Mart is able to buy in bulk and gain large bulk discounts that are not available to other organizations, enabling them to pass on the discounts and pricing benefits to the customers thus furthering their reputation as a bargain store. A main focus of Wal-Mart’s marketing is in its Every Day Low Price campaign. This is what Wal-Mart is known for and what makes them successful. Another major campaign Wal-Mart employs is the Rollback prices. This occurs when Wal-Mart lowers the already lowered Every Day Low Prices. This has been advantageous for Wal-Mart causing an increase in their customer base.
Wal-Mart already offers low prices, after rolling back prices, they are able to out-price most of their competition. ? Has multiple business segments enabling them to provide products and services to several different niches in society. Wal-Mart has three business segments: Wal-Mart Stores, Sam’s Club, and Wal-Mart International. The Wal-Mart Stores segment includes walmart. com, Super centers, Discount Stores, and Neighborhood Markets. ? A powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.
Maybe the single most important marketing aspect of Wal-Mart is that they create the ideal one-stop shopping experience. Through the separate divisions, Wal-Mart offers thousands of products, allowing the typical consumer to go into any Wal-Mart and walk out without having to stop at another store for anything that might need. ? Has a core competence involving its use of information technology to support its international logistics system, enabling them to see how individual products are performing country-wide, store-by-store at a glance.
Wal-Mart has a very strong, well defined system in its access to distribution networks which enables them to take advantage of economies of scale in regards to inventory and shipping. Their logistics system gives Wal-Mart the ability to increase the speed of deliveries, a faster response to market demands, and a low inventory, allowing Wal-Mart to decrease its sales cost by 2 to 3 percent over the industry. This system is maintained through employees and facilitated with a proprietary satellite-based communication system that enables managers and point-of-sale systems real-time information on the needs of each store.
Wal-Mart offers a safe, secure and complete website where consumers can purchase all of the same products found in the store. The website is strength for Wal-Mart because it is not only a means for purchasing products, but is also a very thorough informational site. Consumers have access to company information such as financial searches, finding employment, emailing the company about problems, learning of any recalls of products sold, etc. WEAKNESSES Capital Market Stakeholders: ? Are global, but have a presence in only 14 countries worldwide.
Some international business environments make it difficult to obtain the scale and results desired by Wal-Mart. They seek markets where there is a potential for that market to become a top three retailer. This opportunity did not exist in certain international markets, causing Wal-Mart to divest its operations. Product Market Stakeholders: ? Regardless of being the world’s largest grocery retailer and despite IT advantages, this could leave it weak in some areas due to the huge span of control. Since Wal-Mart sells products across many sectors, it may not have the flexibility of some of its more focused competitors. Has earned much negative publicity for strong arming tactics and squeezing suppliers of profit margins by threatening to take its business elsewhere. Opposition has been mounting against Wal-Mart and it is increasingly challenging for the company to expand at its current rate, both in the United States and abroad. This is due to opposition to Wal-Mart’s practices in regards to relationship issues with employees, communities, and governments. In the last few years Wal-Mart has faced much litigation from employees accusing the company of unfair employment activities – this has given the organization a bad reputation as an employer.
Wal-Mart has faced multiple accusations, charges, and lawsuits, many resulting in fines, including environmental violations, child labor law violations, use of illegal immigrants, etc. Side effects of these issues include communities rejecting expansion of stores in their communities. A large source of marketing weakness stems from Wal-Mart lobbying to expand into new markets. There are thousands of towns across the United States that have tried to block the introduction of Wal-Mart because of the economic impact that it has on small-town stores and shops.
Wal-Mart has a damaged reputation because when they move into a location they end up “forcing” these types of businesses out of business. EXTERNAL ENVIRONMENTAL ANALYSIS OPPORTUNITIES Capital Market Stakeholders: ? To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets. The stores are currently only trading in a relatively small number of countries, leaving tremendous opportunities for future business in expanding consumer markets. Additionally, some markets are virtually untapped by the retail world.
This provides a huge opportunity for Wal-Mart to expand, opening the door for unlimited potential for growth and profits. The globalization trend provides opportunities to Wal-Mart to expand into more of the international market as the trade barriers continue to come down around the world. Technological advances also provides the opportunity to enable greater access to information to retailers such as tracking inventory, store shelving status, en-route packages and so on. The unabated growth of electronic commerce is another technological development that provides great opportunities to Wal-Mart.
As consumers at various socioeconomic levels come to rely more on the web for information and shopping, Wal-Mart has the opportunity to increase their online presence, ultimately maximizing their potential for increased online sales. Product Market Stakeholders: ? The current economic crisis has decreased the disposable income of many, causing individuals and households to lower their expectations and to shop for bargains. Wal-Mart stands to gain in such a situation by being able to provide customers with increased bargains.
Many retail organizations are going out of business due to the reduction in disposable incomes. This can help Wal-Mart by increasing its customer base due to the bargains that it can provide. ? Opportunities exist for Wal-Mart to continue with its current strategy of large, super centers. Due to the cheap rate that Wal-Mart is able to buy its products from suppliers, they are able to provide customers with even bigger bargains to encourage them to shop at Wal-Mart. THREATS Capital Market Stakeholders: ? Is an intense rivalry market.
Companies such as Wal-Mart, Target, and Kmart must sell more products to cover all of their fixed costs, which increases market competition. Each of these companies sells products that are relatively the same, which results in very competitive based pricing. ? The target of competition, locally and globally. Wal-Mart faces strong sales competition from other discount department, drug, variety and specialty stores and supermarkets, many of which are national or international chains as well as internet-based retailers.
Market competitors pose a constant threat to Wal-Mart. For example, Target is an upscale discounter that provides high-quality merchandise at attractive prices in clean, spacious and guest friendly stores. Target has had rising profits and a growth of about 12. 5 percent annually. Costco Wholesale Corporation is another potential threat for the Sam’s Warehouse segment of Wal-Mart. Costco offers a limited number of products sold in high volumes, high inventory turnover, low costs via purchasing discounts and a no-frills approach, and favorable real estate locations. Economy is very slow right now. This impacts all businesses and causes profit margins to be reduced as price-cutting ensues to attract more consumers. The reduction in disposable income of customers and the looming recession and fears of job losses have caused individuals to curtail their shopping, this is a huge threat to Wal-Mart, which relies on consumer spending. Product Market Stakeholders: ? Large number of competitors in both specialty and general discount stores. Substitutes depend on whether or not a customer is looking for one stop shopping.
If the customer is looking to buy one specific item then Wal-Mart would not only have to worry about stores such as Target, Kmart, and Fred Meyer, but also specialty stores that might carry that item. ? Personal values of consumers typically dictate where their shopping will be done. Although many people enjoy Wal-Mart for their low prices and one stop shopping, some look at Wal-Mart as a company that is destroying the economy with below average labor practices, pitiful philanthropic spending, and its manufacturing of goods overseas. Buyers are a constant threat to Wal-Mart because there are so many competitors. The purchasing decisions of a consumer are usually based off of price, convenience, quality of product, the type of shopping, and personal values. If each brand of a product is similar to all the others, then the buyer will base the purchase decision mainly on price. Not many competitors can beat the prices of Wal-Mart, however there are competitors that offer better quality products and some consumers may want to pay extra to receive better quality goods. Reputation threatened by multiple class-action lawsuits with claims of discrimination amongst women, employees, pay, benefits, etc. Wal-Mart’s recent struggles with bad press and lawsuits have created urgency to find a way to protect its market share from potential entrants or substitutes. 2. Review Wal-Mart’s business-level and international strategies and evaluate their potential for success, given the strategic inputs outlined above. Determine their strategic fit with the environment. Wal-Mart capitalizes on opportunities by using their strengths such as size, financial power and immense resources to dominate retail.
Wal-Mart’s primary business-level strategy is to dominate the retail market wherever they have a presence. It measures success in terms of sales and dominance over competitors. Wal-Mart competes against other stores in its customer base until they gain dominance over local competitors. The strategy of dominating a market is effective by using its size and volume buying power. Another strategy of Wal-Mart is aiming for growth by expansion in the U. S. and internationally by selling goods at low prices and outselling competitors, one it has done very effectively.
Currently the corporation employs over 1. 8 million employees and owns over 6,700 stores worldwide. The company serves more than 175 million customers weekly, pulling in an average of $6. 6 billion in weekly sales. Wal-Mart utilizes their strengths of size and financial power to create widespread name recognition and customer satisfaction as well as offering the best prices. Aiming to create a positive impression of customer satisfaction with the Wal-Mart brand, their goal is to have the customer associate the retailer with the reputation of offering the best prices. . Based on your complete assessment, present your recommendations for an integrated and coordinated set of commitments and actions which will exploit the company’s core competencies, stimulate and sustain growth, strengthen competitive advantage, establish direction for the company, and maximize the value of the firm. One of the major goals that Wal-Mart wants to try and achieve is the key strategy of Wal-Mart wanting to dominate retail markets everywhere. By using its size and volume buying power, the company effectively implements this strategy.
This strategy impacts functional areas of the company, primarily the marketing and financing department. Management will also have a large role in this strategy because of the increase in customers. Production and operations will be involved because of the increased amount of goods that will be needed as the volume of customer’s increases. Additionally, as Wal-Mart continues to grow and expand, they should continue looking into new product markets. The next opportunity that Wal-Mart could seek to incorporate into their stores is the sale of musical instruments, specifically the sale of guitars and other band equipment.
This product market is a viable area for Wal-Mart to consider because they have already involved themselves in the music industry. They can bring a completely new aspect of music to their consumers by selling quality musical instruments. In addition to adding products to its stores such as musical instruments, Wal-Mart should carefully plan further expansion. While most of the U. S. market is already saturated with regular and super Wal-Mart’s, there is still room to expand. However, they need to be careful not to overextend themselves. Additionally, Wal-Mart should expand further into international markets.
Once again using caution since not many countries operate like the United States, causing Wal-Mart to have a steep learning curve. Wal-Mart should consider possibly pairing up with existing companies. Doing this, they will receive built-in experience and an existing structure. Additionally, only a couple stores in a new country should be built until their staff has learned enough about the idiosyncrasies of the country they are entering into. Once they learn about that new country, they will be able to leverage their strengths to deliver low prices everyday.
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