Tuesday, June 4, 2013

INTERNAL ANALYSIS: WAL-MART

Background: Wal-Mart has been greatly involved in the offering of a large variety of products to the consumers through their large stores which are found in the various locations in the US. The firm has been operating under the strategy of low pricing which has embossed sit in the hearts of the consumers. The firm has realized the need to operate in more countries if it is to become a global leader in the retail industry. The firm therefore needs to diversify its operations to capture the new markets. Critical issues affecting the firm: There has been no better time for the firm to expand than now especially considering the threat that faces the firms operations in US. The firm needs to make an increased use of the technological interfaces so that it can tap into the growth in the Internet/ online shopping euphoria. The firm desires to be the number 1 global retailer, a feat which can only be possible if the firm does not lose sight of its competitive advantages even in the new markets where the firm wishes to enter. Also, the firm must be able to deal with the rise in the global competition from Tesco and Carrefour, two main firms that dominate the world’s retail industry.more information about Warl Mart Recommendations: A variety of recommendations have been given after a careful analysis of the conditions that the firm operates in. the firm should engage in activities that are aimed at reducing the negative perception of the firm amongst some consumers, employees and the firm. This is done through reducing environmental effects and also increasing the minimum wage rate. Secondly, the firm should also engage in entry into new markets as well as increasing its marketing activities in both the new and existing markets. Finally, there are considerations about possible personalization of the online platforms to give better experience for the consumers. Closing: The different recommendations are based on the internal analysis. Specific focus has been on the threats and opportunities that the firm is faced with. The internet platform is a very good consideration that must be worked with if the firm is to achieve the global status that it is pursuing. Thanks for your time and I really look forward to further discussing the issues contained in this paper with you in our next meeting. Executive Summary The paper is an in-depth internal analysis of the various resources and capabilities of Wal-Mart. The analysis makes use of a variety of strategic management tools in the analysis. The tools include SWOT analysis, core competence map, strategy mix and finally a VRIO Framework. The SWOT analysis gives a clear picture of the strengths, weaknesses, opportunities and threats that the firm faces. It forms the background of the analysis as all the other elements including the strategic recommendation are intricately tied to them. A core competence map was then developed followed by a core competence strategy mix. This is then followed by the VRIO framework which contains a variety of elements and was used to map the various resources which were part of the core competence of the firms. From the analysis it has been determined that the firm is still dodged with issues of low brand various parts of the world and also increase environmental activism. The firm therefore has to expand into more markets as well as increase its commitment to the environment. SWOT Analysis Strengths: • The largest employer in the United States. • Offering of a large number of goods and products under-one roof. • The high brand recognition of the firm with operations in different parts of the world. • The firm greatly uses the Internet especially in making price comparison with the competitors. • The low pricing strategy that has been pursued by the firm has been very important in generating the high sales levels. • The large store areas which encourage shopping as they are attractive to the consumers. • The strategic locations of the stores. • The treatment of the employees as partners rather than employees. • High sales levels; the firm boasts of being the second largest in the world in terms of sales. • The firm has an aggressive sales strategy and adds many new stores each year. • The global presence of the firm has also been important for the firm; the firm has 1,359 discount stores, 550 Sam’s Club in the US, neighborhood markets and super centers. • The firm also enjoys a highly functional logistics system; thus the firm is able to distribute its products in the most cost effective and efficient way. • The upscale appearance of the stores so that they can attract the customers; both from low income, middle as well as high. • Friendly service to the customers as well as a high understanding of what customers need • The firm’s high consideration of the issues related to the environment i.e. through offering environmental friendly products, renewable energy use and waste reduction etc. • The firms push for higher minimum wage rates in the industry . Weaknesses: • The poor consumer image brought about by the monopoly power of Wal-Mart over the small retailers. • Insensitivity to the environment in some instances for instance in the design of the buildings. • Poor remuneration of the employees as well as poor health care benefits. • Discrimination against the women employees of the firm. • The firm has sometimes acted in violation of child labor laws. • Disadvantage in the location of the stores for instance in Europe where the stores are put too close together in UK, with a noted absence in the other countries. • Price deflation which greatly affects the discount stores. • Lowering profit levels due to the low pricing as consumers will buy a certain volume regardless of the prices. • Overstocking of the stores. • Constant volatility in the prices of the stock and equity of the firm due to unachievable earnings’ forecasts. • Little flexibility due to the provision of a larger product line as compared to its competitors. • The information technology has also not been used exhaustively. • There are limitations on the number of people who can join Sam’s Club. Opportunities: • The firm can grow its business throughout the world with specific opportunities in the emerging economies as well as the rest of Europe; this is an opportunity for Wal-Mart to become the world’s largest retailer. • The opportunity to make the superstores larger and more efficient. • Changing the consumers’ perception of the firm so that it could increase the sales levels. • Take advantage of the Internet to increase its online shopping. • Increase its products offerings to include such products such as musical instruments. • The firm could focus on particular markets through the introduction of new store concepts. • Introduce health care plans to increase benefits to the employees. • Pay attention to the overseas supplier operations so that they can curb the use of child labor • Closer work on the environment; especially with regards to solutions to the environmental issues. • The firm can enter into alliances and joint ventures in its expansion ventures. • Improved management of the supply chain i.e. through use of RFID. Threats: • The low pricing strategy might be affected by future increases in the costs of production. • Emergence of new competitors who are using innovations which are superior to those of the firm. • The firm may also experience employee and union problems. • Threat to the image of the firm as it’s noted that the wages of all the countries that the firm has entered into record a reduction of wage rates by up to 5 per cent. • Downward plunge of profits due to increased competition in terms of low pricing. • Some store locations did not have enough customers to support the projected sales levels. • The economic uncertainty brought about by the economic crisis. • Threat to brand as the firm lacks direct sales agents. • Firms lack of competitive advantage especially in the new markets. • The use of RFID may hurt the firm’s relationship with the suppliers. • Vulnerability to political trouble in the countries where the firm operates . Wal-Mart’s Core Competence Map Explanation The core competence strategy map is made up of four (4) levels of boxes which are aligned from left to right. The top row of boxes denotes the various end products that are offered by the firm, wal-Mart. The second row of boxes represents the various business units of the firm for instance the retail merchandise, high end products, seller services and finally collectibles. The third row of boxes is made up of the different core services that the firm offers. The forth row of boxes show the different competences of the firm. Core Competency Strategy CORE COMPETENCE Existing core competence Efficiency: • The firm has a very good and efficient supply chain management system which will ensure that the products of the firm are able to be at the stores when they are required by the consumers. • Superior customer value through excellence in operations, intimacy with the customers, and product leadership. • Effective communication between Wal-Mart and its suppliers. • High rate of use of technology in the firm has also been a point of traditional core competence of the firm. • High corporate values which includes passion, commitment and passion of both the employees and the management of the firm . Development of markets: • Increase the level of the brand awareness of the firm from the current two main markets; US and United Kingdom, so that it can include other countries where the level of the brand recognition is very low. • The marketing campaigns of the firm should make use of different forms of media that are bale to reach the diverse markets that the firm is seeking to capture. Towards this endeavor, the firm can make use of media that are customers friendly and have a universal appeal. • The firm should increase its knowledge of different international statutes and laws. Due to the increasing level of legal consumerism claims against the firm, especially regarding the child labor laws, it needs to embrace the laws . New core competence Extension: • Online sales especially through the integration of back end fulfillment systems. • The firm should also improve its safety and health policies especially regarding the different buildings that the firm uses. This is an important area has there have been concerns about the environmental effects of the buildings (stores). • The firm through the high revenue levels can further introduce not just stores but products into the markets; this should bee pursued in line with the aspirations of the customers. Recombination: • Entry into partnership with other firms especially those that enjoy high brand recognition in the markets that the firm wishes to enter into for instance in Asia, Latin America and Parts of the Middle East. The alliances will allow quick entry into the markets at reasonable costs. • The firm can also go on with its low pricing strategies into the Middle Eastern market; which is mostly characterized by premium pricing. • The firm can also further build on the online shopping capability of the firm to offer personalized customer interfaces thus increasing the efficiency of the firm . MARKET Existing Market New Market VRIO framework Resource capability Valuable Rare Costly to imitate Exploited Multiple markets Core competence Economic performance Strength or weakness Hub and spoke distribution channel Y Y Y Y Y Y High price Strength High number of goods and services Y N Y Y Y N High price Strength Customer value Y Y Y Y Y Y High price Strength Legal system N Y Y N Y N High price Strength Strategic alliances N Y Y N Y N High price Strength Corporate values y y Y Y Y Y Low costs Strength Low pricing strategy. Y N Y Y Y N High cost Strength Operations in international markets N Y N N Y N High cost Weakness Supporting technological interface Y Y Y Y Y Y High costs Strength Strong product leadership Y Y Y Y Y Y Higher costs Strength Marketing N Y N N Y N Lost cost Weakness Stocking of the stores Y N Y Y Y N High costs weakness Strategic Recommendations Wal-Mart has been extremely successful in the past and the future of the firm also looks very bright. However, Wall-Mart must deal with the concerns that have been raised especially concerning its effects on the small retailers who have been driven out of business because of the massive operations and the low pricing strategy of the firm. Wal-Mart has increasingly been a target of many firms because of its massive resources. People get scared at the fact that Wal-Mart has the ability and resources to be such a major competitor in the retail industry in the United States. In order to improve its image in the eyes of the people who have issues with the firm, Wal-Mart is advised so that it can engage in the correction of the above issues. The firm has already made strides regarding how it can decrease the level of the negative effects that the firm had on the environment as well as reviewing the various terms of service of the various employees with the view of increasing the benefits of the employees of the firm. The above to have already been initiated and are tow major milestones that the firm has achieved in the last couple of years. The firm can even engage in different strategies to help the small retail traders that dot the width and breadth of the American society especially by partnering with the small retailers in the society who sell products that do not compete directly with the products of the firm. The partnership can take the form of promotion, marketing and advertisement campaigns. The second strategy that the firm can pursue is to increase its level of brand awareness from the traditional two markets where majority of the revenues of the firm are derived. This is in recognition of the fact that the firm lies at number two in terms of the global sales in the retail industry after the UK based, Tesco which has operations in most parts of the world. This recommendation is also arrived at due to the fact that the revenues that were forecast for the new markets in Asia were not achieved as the consumers were not aware of the brand. To achieve this, the firm will role out massive marketing campaigns which will include the use of different forms of media to take into consideration the differences in the customers who are targeted by the firm. This will establish the firm as customer friendly and thus the firm and its products will enjoy a universal appeal amongst the consumers in the world. Further, the firm will improve its online shopping avenue so that the various consumers of the firm, especially those who use the online medium, will be offered a personalized shopping interface. These will greatly wok towards increasing the value of the product offerings to the consumers mainly resulting from the high rates of efficiency that the firm will record. The other issue of great concern is the different international laws and statutes and how they affect the firm. In the past, the firm has been painted in bad light especially concerning the issue of underage or child labor which has led to boycotts of the firm’s products. The knowledge of the international labor laws will be important for the firm to ensure that the different Service Level Agreements and contracts that it has with its supplies completely outlaw the use of child labor. Finally, the firm can explore the avenue of forming strategic partnership with firms that have high brand recognition in the countries that the firm wishes to start operations. The partnership whether taken through international joint venture, exporting, franchising or any other international anew market entry strategy will ensure that the products of the firm get exposed to the new market at a faster rate as compared to if the firm was to go the process all alone. Even under the partnership, the firm can carry on with its low pricing strategy as already there is the consumer will created by the high brand recognition of the strategic partner. References Bradley, Stephen & Ghemawat, Pankaj, "Wal-Mart stores, Inc.", Harvard Business School, p. 1-22, November 6, 2002 Forbes [online] Retrieved on February 01, 2012 Yoffie, David & Kim, Renee, "Wal-Mart Update", Harvard Business School, p. 1-10, 2011 Appendix 1: Human resources staffing at Wal-Mart Name: Michael T. Duke Title: Director, President and Chief Executive Officer Duke was appointed in 2009. Prior to this appointment, he held other positions with Walmart since joining in July 1995, including Vice Chairman with responsibility for Walmart International beginning in September 2005 and Executive Vice President and President and CEO of Walmart US beginning in April 2003. Mr. Duke serves on the board of directors of The Consumer Goods Forum, the executive committee of the Business Roundtable, and the executive board of Conservation International's Center for Environmental Leadership in Business. He also serves on the board of advisors for the University of Arkansas and the advisory board of the Tsinghua University School of Economics and Management in Beijing, China. Mr. Duke has been a member of the Board since November 2008 . Name: Robson Walton Title: Chairman Wal-Mart Chairman S. Robson Walton has served as the head of the giant retailer's board since 1992. His father, Sam Walton (d. 1992), a former clerk, founded a Bentonville store with his brother James in 1962. Today, Wal-Mart has sales of $405 billion and employs more than 2.1 million people across 28 countries. The company's stock was up 3% in the last year. Walton received over $300 million in dividend payouts. Before joining Wal-Mart, he was a partner with the law firm of Conner & Winters in Tulsa, Oklahoma . Name: Eduardo Castro-Wright Title: Vice Chairman; President and Chief Executive Officer of Global.com and Global Sourcing Prior to this appointment, Mr. Castro-Wright served as vice chairman of the company, with primary responsibility for Walmart U.S. and the company's global procurement operation since November 2008. Previously, Mr. Castro-Wright served as executive vice president, president and chief executive officer of Walmart U.S. from September 2005 to November 2008. From February 2005 to September 2005, he served as executive vice president and chief operating officer, Walmart U.S. Prior to joining Walmart U.S., Mr. Castro-Wright served as president and chief executive officer of Wal-Mart de Mexico beginning in December 2002 .