Strategy formulation

Strategic Management Plan: Wal-Mart

Celestino Alvarado Jr

University of Phoenix

MGT/498

Professor H. Brown

1/8/2019

Strategic Management Plan: Wal-Mart

Introduction

Companies develop strategic management plans in order to facilitate implementation of business and corporate strategies. More significantly, conducting analysis of a company’s internal and external environments based on the industry in which it operates is essential in devising and revising strategies aimed at enhancing its competitive advantage (Gereffi & Christian, 2009). Sustainability of a company’s competitive advantage in a given industry is established through metrics that are aligned to its values chain. This paper is based on factors mentioned above in relation to Wal-Mart Company. Wal-Mart Stores is an American company that operates several outlets of discount stores globally.

Analysis of Wal-Mart’s internal environment using SWOT

Wal-Mart is a global leader in the retail industry and it offers the highest discounts in food items and other products that it specializes in. Although its position in the retail market is sustainable, a scan into its internal environments points out at certain areas in which it needs to improve on as well as advantages that it can exploit in order to retain its leading position in the retail industry (Pahl & Richter, 2007). To achieve this, the company’s strengths, weaknesses, opportunities and threats are analyzed with the aim of identifying areas that need review and adjustment.

Strengths

Wal-Mart prides itself in a globally recognized brand name associated with affordability and reliability. As such, it has a huge market share, which undoubtedly contributed to its immense capital potential. Wal-Mart also enjoys economy of scale hence it has the advantage of negotiating lower prices with suppliers. In effect, it charges the lowest prices on its goods making it a preferred physical and online destination for many shoppers across the globe.

Weaknesses

An internal scan into Wal-Mart’s internal operations shows that it is not spared industry-related shortcomings that may affect sustainability of its competitive advantage. One of the weaknesses is that the company’s compensation strategy is poor leading to frequent complaints from the public. This has significantly dented its brand image while the reputation of its competitors remains favorable. Another effect of low rewards to its employees is high employee turnover. The company also struggles to establish effective customer services; an area in which its competitors like Target has managed to thrive in for a long time.

Opportunities

Due to its economy of scale, Wal-Mart has the potential to establish more outlets in developing nations and offer western products in such countries without threatening its operations in developed nations in terms of price and quality (Gereffi & Christian, 2009). In addition, Wal-Mart can enhance its grocery departments with regard to marketing and layout so that it can compete with grocery formats of established supper markets with the aim of raising its bottom-line. Wal-Mart also needs to establish its own cafes that serve healthy drinks and snacks to visiting customers as a diversification strategy.

Threats

The company faces threats from competitors like Tesco and Amazon. Its competitors also offer value for money while at the same time providing superior customer experience. This challenge exists as an area that Wal-Mart needs to come up with initiatives to overcome before its profitability is affected. Moreover, the company has not been able to operate without hiccups during recession since it normally records low sales volume in such periods.

PESTEL analysis

PESTEL is an effective tool for conducting scan on external environment of companies. For Wal-Mart, PESTEL analysis helps in establishing how external factor can influence its global operations in the discount retail industry (Sarbah & Otu-Nyarko, 2014). This takes into account political, economic, social, technological, environmental, and legal factors that would determine sustainability of Wal-Mart’s competitive advantage, and they are discussed as follows.

Political factors

Political environment affects Wal-Mart’s macro-environment, especially, in connection with government policies and influence of politically motivated interest groups like trade unions. Political environment has the ability to affect the company’s operations either positively or negatively. Wal-Mart success is attributed to politically stability in the countries where it operates. In order for the company to continue to realize prosperity as it expands to more countries, having the knowledge of local political environments is imperative. Again, labor unions present a serious challenge to the company. In fact, undying widespread questioning of the company’s wage structure is stems from activities of labor unions and intervention of the media with political inclinations. This means that Wal-Mart needs to determine political factors that may derail its functionality in the future and devise appropriate mitigation measures.

Economic factors

Changes in the economic environment directly affect the company’s return on investment. For instance, recession always causes a drop in annual returns. In addition, Wal-Mart can benefit from increased rate of job creation in the United States. Rise of disposable income in developing country present makes it possible for the company to expand successfully into such countries.

Social factors

Social factors relate to trends that influence consumer perceptions towards the company. In the case of Wal-Mart, it is important that in its bid to expand into new regions, determining products that appeal to consumers based on culture and brand reputations of countries is essential. Stocking local products and products from countries with huge brand presence in that particular country is an ideal entry strategy (Gereffi & Christian, 2009). Globally, campaigns for healthy food is intensifying by the day and the company needs to prepare for possible market shifts in favor of healthy food products.

Technology

In the retail sector, technology enhances relationship with customers, quality of online content and online operations in general. In this regard, Wal-Mart should stay abreast with technological trends that can enhance its online department while helping to improve customers’ relations and marketing campaign. Overall, it needs to exploit opportunities presented by existing and emerging technology to strengthen its operations.

Environmental factors

Environmental issues such as protection of the environment and climate change do not affect the global retail sector. However, in order to gain appeal among environmentally sensitive segment, it can contribute to protection of environment by adopting the use of green energy vehicle in its distribution activities.

Legal factors

As a global force, Wal-Mart is obliged to adhere to local regulations regarding food safety and with various laws like tax and labor laws. This would increase efficiency with which it operates in various countries across the globe despite legal dynamics.

Wal-Mart’s competitive advantage

Agreeably, Wal-Mart is the most valuable retain brand in the world. It is present in 28 countries globally and operates nearly 12, 000 throughout the world. A part from recording the highest sales among departmental stores, it enjoys the highest annual sales. This shows that Wal-Mart is above its rivals with respect to brand awareness, annual returns, job creation and market share (Gereffi & Christian, 2009). The sources of its competitive advantage include its ability to offer products at low prices while guaranteeing the expected quality. This is why its customers are always satisfied. Another source of Wal-Mart’s competitive advantage is huge capital base, which enables it to carryout global expansion initiatives without constraints.

How the company creates value and gain competitive advantage

Wal-Mart enjoys unmatched bargaining power and as such, it buys products of high quality at lower prices compared to other players in the discounting store sector. Moreover, the company has fewer links in the supply chain in addition to sourcing supplies that can offer quality in line with its corporate strategy. This enables it to sell products to customers at lower prices. The main essence of its business approach is that it enables consumers to save on their income thus, making it a clear favorite in the realm of retail.

The measurement guidelines Wal-Mart uses to verify its strategic effectiveness

The company has adopted the sustainability index as a tool to raise the quality of commodities preferred by its customers. Based on metrics, sustainability is aligned with value creation in supply chain processes, quality ascertainment mechanisms and productivity mechanisms (Epstein, 2018). The company has been able to achieve this through its partnership with Sustainability Consortium, which facilitates establishment of benchmarks and impact indicators.

Evaluate the effectiveness of the measurement guidelines your selected company uses

The company’s sustainability measurement guidelines form the foundation of all its operations. With unwavering focus on measurement guidelines, all products contain information regarding contents, manufacturers and the safety of methods used in making them. through measurements, transparency is achieved owing to the fact that customers make informed decisions to buy products.

References

Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.

Gereffi, G., & Christian, M. (2009). The impacts of Wal-Mart: The rise and consequences of the world's dominant retailer. Annual Review of Sociology, 35.

Pahl, N., & Richter, A. (2007). SWOT Analysis. Idea, Methodology And A Practical Approach.

Sarbah, A., & Otu-Nyarko, D. (2014). An Overview of the Design School of Strategic Management (Strategy Formulation as a Process of Conception). Open Journal of Business and Management, 2(03), 231.