Wal-Mart business strategy Essay
Sam Walton is the founder of Wal-Mart Company. The company started its operations in 1962 when the first retail store was opened in Rogers, Arkansas. Over four thousand stores have been opened in the United States. More than 2,800 stores have been opened outside the U.S. According to (Pahl & Richter, 2009, pg. 19) “the facilities of Wal-Mart Stores, Inc. include Wal-Mart Supercenters, discount stores, Neighborhood Markets and SAM’S Club warehouses.”
According to Fortune magazine, Wal-Mart is the largest retail company in the global market. It has been ranked one of the Global 500 companies. It employs a large number of people since more than 1.9 million people world wide work for the company. In the United States, the company has employed over 1.3 million people. It is for this reason that the company is ranked as the largest employer in the world labor market (Pahl & Richter, 2009).
Business strategy adopted by Wal-Mart Inc
The company has experienced stiff competition in the global markets due to entrance of many companies in the industry leading to price wars. Wal-Mart has adopted the strategy of reducing its prices to increase profits due to the increasing competition in the global markets. The corporate strategy of Wal-Mart is to “dominate the retail industry by being a company that is offering the lowest price possible to the customers.
To expand in the US and internationally which currently have reached 4058 in US and 2898 in other 14 countries” (Johnsen, 2008, Pg. 4). In addition, the company carries out the strategy of refining its image by conducting sustainable activities, improving corporate social responsibility and creating freedom to employees to establish labor unions (Johnsen, 2008).
The company has used the philosophy of “Save money, Live better” and to achieve this, the company has offered low prices for most of its products. A higher number of customers have been recorded by the company after adopting this strategy. In 2007, the company recorded sales worth US$ 345 billion. The company has adopted the strategy of providing low wages to its employees as a low cist measure to increase profits. There is low healthcare coverage to employees and a few workers are covered by healthcare programmes of the company.
The company intends to open more stores in many countries. However, this strategy has been affected by cultural differences of various people in the global markets. For example, the company was forced to close its stores in Germany due to increase in competition and cultural misunderstanding between the management of the company and its employees in the foreign country (Dyck & Neubert, 2008).
SWOT analysis for Wal-Mart Inc.
The company has opened many stores and it enjoys economies of scale since expenses are distributed. This provides the company a competitive advantage over its competitors. It is the largest retail company in the world and has been able to control markets in many countries. It has many suppliers who provide goods and this enables the company to regulate the prices offered by the suppliers. The company has diversified in its products and offers a wide variety of products. This has increased demand for the products since customers can purchase in one roof. The company has value for money to its customers. The corporate philosophy of the company states that “save money, live better”. The low cost strategy adopted by the company has enabled provision of low prices in most markets (Pahl & Richter, 2009).
The brand reputation of the company has declined “due to some public affairs like the Spygate scandal and Public disasters like the conviction of T.M. Coughlin No. 2 executive” (Pahl & Richter, 2009, pg. 21). The company has been criticized for over dominance in the markets. More than 2000 Supercenters have been opened in the United States. The stores have been too close to each other leading to competition between stores of the same company. The company is not flexible in its marketing strategies. It has followed the strategy of attracting low income people for a long period without adjusting to other strategies. Wal-Mart has been criticized for its practices to prevent employees from forming labor union. The management has been forced to allow employees unionize after a long struggle (Pahl & Richter, 2009).
The company has not yet exploited the global markets since it operates in only 13 countries. There are more opportunities in other countries. The company can establish strategic alliances with global retailers to improve the market of the company in the global scene. As technology improves, the company can use modern marketing strategies such as online retail operations to improve its market share. The labor market is expanding after globalization of the labor market. Many people are seeking employment and the company can promote its strategies by capturing low-cost labor from other countries (Johnsen, 2008).
Many companies are penetrating the industry and stiff competition is expected in the near future. Price competition is a possible threat to the company since the strategy adopted of reducing prices will cause other companies to follow suit. Competitors in the industry may penetrate some global markets leading to high competition in the international market. Global economies have experienced a decline especially after the global recession.
This may have a long term effect on the company since many industries may respond slowly to recovery measures. Labor strikes experienced by the company may affect the image of the company in the global markets leading to low demand of the company. The company is known to mistreat its employees and this image will reduce customer loyalty and negatively affect profits (Johnsen, 2008).
Strategies to meet objectives of the company
The company has adopted differentiation strategies by liaising with different suppliers in the market for the provision of different products. The company has adopted the strategy of market to a niche of customers which relates to low income earning individuals. This strategy has improved the sales of the company since most of the people are low and middle income earners. The capital base of the company is large enough to carry out globalization strategy. The company should expand its operations in many countries since it has the capacity to do so (Conklin, 2006).
Possible risks in the objectives of the company
The low cost strategy is not good since the management has reduced the wages provided to employees. This will affect the morale of the employees leading to reduced performance. Customers are satisfied when employees are motivated to deliver services to them. The management has also failed in adopting better cultural strategies in the foreign markets. The culture of the organization has caused conflicts in several foreign countries leading to failure of multicultural operations. The management should study the cultural practices of the people it works with and try to integrate the culture with the activities of the company (Conklin, 2006).
The strategy to offer low prices is not good since this will force competitors in the market to adopt price-war strategies to overcome competition. The company should improve employee wages and healthcare services. Employees are dissatisfied by the poor working conditions and remuneration provided by the company. To improve customer satisfaction, employees should be motivated to deliver their services to customers without force. The company should allow employees establish their own labor unions. Elections in the labor unions should not be interfered with by the management of the company.
Wal-Mart is a multinational company which has been very successful in operating retail stores. The management of the company has adopted the strategy of opening more stores in many countries to increase its market share. Globalization strategies have been created to promote the image of the company in the market. Cultural conflicts have been experienced by the company since the employees and customers have not been satisfied by the strategies adopted by the company in the multicultural scene.
The company has encountered a lot of challenges in the management of resources and global strategies. It is important that the management learn the culture of its employees as well as the customers in order to have good relationship with all stakeholders. The employees should be paid better wages to improve their morale. The strategies adopted by the company should consider the welfare of all stakeholders.
Conklin, David W. (2006). Cases in the environment of business: international perspectives. ISBN 1412914361, SAGE.
Dyck, B. & Neubert, M. (2008). Management: Current Practices and New Directions. ISBN 0618832041, Cengage Learning.
Johnsen (2008). Wal-Mart Case Study – China Operation. ISBN 3640204204, GRIN Verlag.
Pahl, N. & Richter, A. (2009). SWOT Analysis – Idea, Methodology And A Practical Approach
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