What would be the limits to the growth?
. Growth is essential for survival but only the fittest survive. The survival of the fittest theory applies here at the retail business as well. Growth will have certain limitations attached with it and Wal-Mart must overcome these in order to succeed in its endeavors. The limitations existing are both internal and external which indirectly or directly affect the company. These weaknesses that are breeding within the organization have to be eliminated and worked upon.
Moreover, the threats posed by competition and other economic and environmental factors should also be battled against in order to minimize the loss for the company. The company needs to improve upon its infrastructure, technology, provide additional services that deliver its value proposition, offer the best prices to customers; this does not come without a high cost attached and not every company can afford it. Given the fact that Wal-Mart has had to close many stores in the past it is not surprising that investment in such activities would call for wisdom.
Internally, the company also has a weak online e-commerce system which is limiting its growth, only 6% sales are obtained through this source; a figure that can increase almost to 20% if e-commerce is promoted and carried out effectively. Given the boom in information technology and e-commerce around the world, Wal-Mart must take further action to improve its e-commerce infrastructure and services. The fact that company is non-unionized; this is a major source of concern given that the company does not have a good reputation in terms of employee relations.
The employees are low-paid as compared to competitors, have inadequate benefit packages and there is heavy reliance on part-time employees. The company needs to have more full-time employees and invest thoroughly in employee relations. It needs to constantly motivate employees so that their performance levels rise. Retail suppliers also limit the company’s operations where the company has to undertake long and time consuming price and quality negotiations which leave little margin for profits. Given the fact that Wal-Mart already operates with a very thin profit margin, debate with suppliers based on prices is a headache.
Lastly, the company has a weak evaluation procedure, although worker safety and laws against child labor are outlined clearly there is little the company is doing to monitor whether suppliers are complying with these standards. Moreover, organizational change, which is a driving force towards growth, can be met with several challenges. Organizational change usually carries along diverse strategies and also team-based activities. The employees at Wal-Mart, as are know are low-paid, might resist change and their performance might be affected.
Wal-Mart needs to create awareness and motivate these employees. Moreover, since the workers are non-unionized, this reflects the lack of cooperation amongst them therefore team-based activities could result in conflicts amongst employees. These two factors may well reduce worker performance that would unavoidably result as limitations towards growth. Externally, on the other hand, the company faces more limitations. The company has neglected to adapt to local markets like Mexico for e. g. where its low-wage approach was criticized by local unions and labor organizations.
The company needs to adapt to the national cultures, values and beliefs of countries it operates within. The lack of understanding of the markets it operates in can result in huge losses in terms of revenue and profits. Furthermore, growth limit activists have been on the company’s case to limit its expansion efforts in many American states such as Michigan. Through this, the company is banned from further expansion. This is usually a competitor move through the involvement of legal authorities to curtail competition in a specific region.
Domestically the company has to a certain extent saturated its market with capturing every sector it possibly could thus limiting further expansion in the United States, this called for globalization and expansion into South American, European and Asian markets. Increased competition at both domestic and international levels is also limiting expansion efforts. The rat race for market share is getting more vigorous by the day with direct competitors like Target, Costco at a national and Makro, Metro at international levels providing intensive competition.
More emerging specialty superstores such as Home Depot for home furnishing and Circuit City for electronics are further driving away consumers. Therefore, given the conditions stated above, Wal-Mart faces many challenges and limitations that inhibit its expansion efforts. As described in the first answer it should take steps towards better customer services in terms of diversification, store locations and atmospheres, better IT infrastructure and attract a new customer base in order to survive in this cutthroat industry.