Evaluate the general environment of Wal-Mart using the framework in Chapter 2. What are the key opportunities and threats facing Wal-Mart? (This is the “OT” of a SWOT analysis)Wal-Mart’s builds its stores in towns with a population size of 5000-25,000 people. Wal-Mart has recently started to tap into the more populated city suburbs by building smaller less obtrusive stores in those regions. Wal-Mart targets every age group from infants to senior citizens. Wal-Mart’s geographically places it’s stores in rural less populated areas with very few employment opportunities. Wal-Mart tries to attract all income levels by selling brand name items along with generic brand items. Wal-Mart approaches its global market by evaluating market potential based on economic and political risk, growth potential, and availability of real estate for development. In countries that had became saturated Wal-Mart used acquisitions to acquire ownership.
In markets that were not saturated and land was easily accessible Wal-Mart used organic growth. The technology that Wal-Mart uses to run their business is unmatched. They have a network of satellites that can track a person purchase and automatically refurbish those items from suppliers without any human intervention. Wal-Mart maximizes efficiency by using effective technology to gain a competitive advantage. Wal-Mart has grown into a global empire and has become the world largest private employer and the number one retailer in the world. Despite all of this success Wal-Mart still has a huge opportunity to grow.
Wal-Mart continues to adapt to the ever-changing economy by remodeling their store and by placing the customer as their number one priority. Wal-Mart took advantage of its rural locations early on and gained a significant competitive advantage, now Wal-Mart is taking on the urban environment by placing stores in the outskirts of major metropolitan areas. At first local residents rejected the idea of having a Wal-Mart in their neighborhood for fear it would drive down property value and unwanted individuals to their suburbanite neighborhood. Wal-Mart quickly resolved this problem by changing the format and size of their stores located in these regions. The only threats to Wal-Mart faces are mostly from within (eg..) lawsuits employee disputes and the threat to become unionized.
Use Porter’s Five Forces Model to analyze the global retailing industry. Given this analysis, is the industry attractive or unattractive? Support your decision.
Wal-Mart is a huge threat to new entrants. Wal-Mart has created huge barriers to new entries by offering one stop shopping. Wal-Mart’s Super Centers offer everything from prepared meals to sports gear. Grocery chains have taken a huge hit because of this, even Kmart is feeling the heat, there stock hit rock bottom in 2004. The discount clothing and apparels have also taken a bite from this retail giant. Wal-Mart has produced a very proficient economy of scale from incremental improvements that they have acquired since becoming so large. Manufactures scramble to try and keep up with the huge demand that Wal-Mart places on its suppliers, this further reduces the prices of goods and services for their customers. Small-scale entries are nearly impossible in a region where Wal-Mart is located. Large-scale entries face the retaliation factor when trying to tap into Wal-Mart’s market because suppliers are forced to do things the Wal-Mart way.
Wal-Mart has successfully customized many of their products and forced manufactures have been forced to produce the Wal-Mart brand. Wal-Mart has taken total control of the bargaining power of suppliers. Wal-Mart has a small group of buyers based in Bentonville Arkansas that’s in charge of managing the purchasing of all retail stores. Wal-Mart is responsible for selling 35% of all pet food, 24% of all toothpaste, the largest volume of jewelry, groceries, DVDs, CDs, toys, guns, diapers, sporting goods, bedding, and numerous other things. This has put the retail giant in a very favorable negotiating position with suppliers.
Wal-Mart has generated a huge market of loyal buyers by supplying them with the lowest possible prices for quality products. With Wal-Mart having such a huge share of the market and good prices there is no need for buyers to seek deals elsewhere. Wal-Mart has proven to be a huge threat of substitute products in several industries for example the jewelry industry, Wal-Mart has become one of the leading jewelry dealers in the North America. Wal-Mart has also created its own brand name for several of its items that have been so successful that manufactures are forced to produce products bearing the Wal-Mart brand. Wal-Mart competitors have to be very calculated with their responses because Wal-Mart is so large it can really drive a business under ground (Kmart).
What is Wal-Mart’s business-level strategy? Is the strategy appropriate to offset the forces in the industry? Do you recommend any changes? If not, support your decision why you would not recommend any changes.
Wal-Mart uses Integrated Lost Leadership/Differentiation Strategy. Wal-Mart has offset the forces in the industry by creating the most efficient supply chain in the industry. Efficient production has allowed Wal-Mart to keep cost low and pass own saving to its customers. Wal-Mart has successfully used Integrated Cost Leadership/Differentiation Strategy by setting the pace in new technology and adapting quickly to new technologies in their external environment.
Concentration on the needs of its core customers (discount retailers), Wal-Mart has created a friendly family environment that’s economically smart and beneficial to its patrons. Flexibility is one of Wal-Mart’s strongest assets, which allows them to complete primary and support activities in ways that allow them to produce somewhat differentiated products at a low cost. I would not personally recommend any changes to this strategy because it has made Wal-Mart the worlds largest retailer.
What is your evaluation of the leadership at Wal-Mart?Wal-Mart has become the most successful business in the world through its un-yielding leadership. Mr. Walton has laid the foundation for success for years to come. The leaders at Wal-Mart focus on providing the customer with the highest possible quality at the lowest possible cost. They have redefined the retail industry with their cutting edge technology and flexibility that is un-matched by any competitor. The fact that upper management travel in economy class shows a lot about the character within the organization. The leadership at Wal-Mart has made the world we live in much smaller through economic availability and convenience. The leaders at Wal-Mart are a true example of profit through customer satisfaction.
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