Financial Opportunities Comparison
Strategic alternatives results into large number of alternatives through which an organization relates itself to the environment. Fig 1 summarises the success model of performance adopted. On the study of environmental analysis, Walmart chose four grand basic strategic alternatives to garner the market share: 1. Expansion: This is adopted when environment demands increase in pace of activity. Company broadens its customer groups, customer functions and the technology. This kind of a strategy had a substantial impact on internal functioning of the organization.
2. Modernization: Digital technology was used as the strategic tool to increase production and reduce costs in long run. Through modernization, the company aimed to gain competitive and strategic strength. 3. Integration: The company started producing new products and services of its own by investing in R&D centres across the U. S. Through forward integration it gained ownership over distribution and retailers, thus moving towards customers while Walmart remained focused on key functional areas. (Strategic Planning: Formulation Of Corporate Strategy 1999)
4. Diversification: Diversification through the horizontal route involved change in business definition in terms of customer functions, customer groups or alternative technology. It was done to minimize the risk by spreading over several businesses (printers, printer cartridges, handy cams, industrial and professional cameras) to capitalize organization strength and minimize weaknesses, to minimize threats, to avoid current instability in profit & sales and to facilitate higher utilization of resources.
It sold the health group business to Onex Healthcare Holdings, for $2. 55 billion in 2007. Diversification strategies applied to the spreading of market risks: adding products to the existing lines of business and is viewed as analogous to an investor to “spread the risks. ” The figure below explains the logic of the competitive advantage. (Competitive Strategy: Techniques for analyzing industries and competitors1980) Fig: 2 Molecular Modelling Of Long Term Approach Rational for Diversification
Enhanced Market Power- Increased Not always market share does not necessarily translate to higher profits – greater value for owners unless the merger substantially reduces the inter-firm rivalry in the industry. The below balloon diagram analyses how Walmart missed the opportunity bus by just focussing on developed markets and concentrating niche markets Fig: 3 Financial Opportunities Comparison of Walmart Profit Stability: New business reduced the variations in corporate profits by expanding the company’s lines of business.
This occurred as the core business was dependent on sales that were seasonal or cyclical. Diversification strategy was followed to avoid instability in sales and profits. (Collaborate with your Competitors and Win, 1989) Improve Financial Performance: To exploit diversification opportunities because of liquid resources far in excess of the total expansion needs or the intention of tiding over its financial problems. (Strategic Management: Competitiveness and globalization, 2001).