Value Chain of Wal-Mart
Growth rate has fallen. In 2006, the US division of Wal-Mart has made a gain of just 1. 9% over the previous year in sales, whereas its competitors such as Kroger, Target, Costco, Safeway and so on are all growing two to five times faster than Wal-Mart. Wal-Mart’s leviathan size is a drawback in itself, defying improvements in store and inventory management, creativity in product selection and provision of ambience. It operates about 2000 super-stores.
It controls 20% of dry grocery, 29% of nonfood grocery, 30% of health and beauty aids, and 45% of general merchandise sales, according to ACNielsen ( Qtd. in Biaco, 2007, p. 46). According to Dr. Connelly, inertia, prior strategic commitments and Icarus paradox are the reasons why companies fail. Inertia refers to the inability to move and Icarus paradox refers to the problems that come with growth and success. Commitment beyond the flexibility to rise to new opportunities and challenges is the other weakness. Wal-Mart is affected by all these three failure factors.
Threats Competition is intensifying and cutting into the business of Wal-Mart. Competitors are successfully coming closer to the prices of Wal-Mart. For example, according to a survey of Bank of America( Bianco, 2007, p. 46), Kroger has brought down the prices so low that they are just 7. 5% more than the Walt-Mart’s as compared with 20% to 25 five years ago. The point here is that low- price offerings are imitable and hence no more a core competency of Wal-Mart. Consumers are unhappy about the way Wal-Mart is run.
According the recent consumer survey of Wal-Mart- Watch held in October, 2007, 23% of regular Wal-Mart shopper have developed a negative opinion about it while in the case of Target, another retailer, it is just 10%. Treatment of employees (as reflected in the whopping number of lawsuits against it) and impact of Wal-Mart’s policies on community are given as major reasons for avoiding shopping at Wal-Mart as revealed in the opinion poll. Opportunities The newly growing economies such as China and India offer enormous opportunities to expand and increase shareholder value.
It can target at income segments too to grow organically in US. It can also diversify into other businesses- hotels, banking and so on. The value chain analysis is a way of examining internal activities with reference to the total sum of the ultimate, overall consumer benefits, i. e. low price, ease in ordering and procuring, longer durability and so on. (Qtd. Botten & McManns, 1999, p. 132).