wal-mart stores inc. swot analysis

Case Study Analysis | 1

Final Examination Case Study

Wal-Mart Stores, Inc. (WST) Analysis

Christopher A. Osuoha

BUAD 5312

Strategic Management

Instructor

Dr. David J. Rambow

Associate Professor of Management

Wayland Baptist University


Wal-Mart Stores, Inc. (WST) Analysis

Wal-Mart Stores Inc. is the largest retail company in the United States and the world at

large having being consistently ranked number one on the Fortune 500 index by Fortune

Magazine (Barley, Bragg, Dawson, Shah, Sillanpaa, & Sleeper, 2007, p.356). According to

Barley et al., (2007), Wal-Mart Stores Inc. was founded by Sam Walton in 1962 with its first

store opened in Rogers Arkansas the same year its rivals Kmart and Target were founded

(p.356). As of February 8, 2007 Wal-Mart operated 6,782 stores in 14 countries with annual

record sales of $345 billion and employee base of 1.8 million (Barley et al., 2007, p.353 & 356).

Wal-Mart growth has soared recently with the company adding a new outlet almost every day

with significant presence in international markets. This expansion did not come so cheaply but

with antecedent controversies that range from multiple accusations and charges to law suits,

many resulting in fines, including environmental violations, child labor law violations, use of

illegal immigrants by subcontractors and poor working conditions for associates (Barley et al.,

2007, p.356).

Wal-Mart provides general merchandise and retail services that offer family apparels,

health & beauty products, household needs, electronics, toys, fabrics, craft, lawn & garden,

jewelry and shoes (Barley et al., 2007, p.356). Also, Wal-Mart runs a pharmacy department, tire

& lube express, photo processing and banking services as well to broaden its offerings to its

customers. The company grouped its businesses into three segments: Wal-Mart Stores, Sam’s

Club and Wal-Mart International (Barley et al., 2007, p.356). The Wal-Mart Store segment

operates Wal-Mart.com and three store formats in the U.S. domestic market including 2,257

supercenters, 1,074 discount stores and 112 Neighborhood Markets (Barley et al., 2007, p.356).


Sam’s Club operates as a membership-based retail warehouse and online at samsclub.com.

Barley et al.,(2007), pointed out that “the segments 579 clubs average 132,000 square feet, and

provides exceptional value on brand-name merchandise at ‘members only price’ for both

business and personal uses” (p. 356). Wal-Mart International operates 2,760 stores outside the

United States in various formats, under different brand names in 14 countries and territories as at

2007(Barley et al., 2007, p.353 &357). Wal-Mart International includes wholly owned

operations in Argentina, Brazil, Canada, Porto Rico, and the United Kingdom; and the operation

of a joint venture in China; and operations of majority owned subsidiaries in Central America,

Japan and Mexico (Barley et al., 2007, p.357).

Wal-Mart has been able to maintain its global leadership role in retail business by

carefully analyzing its internal and external environment; optimized its strength, weakness,

opportunities and threats; and carefully integrate its core competencies, resources and

capabilities by applying appropriate generic business-level strategy to develop competitive

advantage it has sustained over a reasonable time frame.

This case study analysis will analyze the internal and external environments that Wal-

Mart operates and develop a comprehensive list of the strength, weakness, opportunities and

threats. Wal-Marts generic business-level strategy will be identified and the primary factors

influencing the generic business-level strategy will be outlined in a matrix format according to

stakeholders groups. However, Wal-Mart’s potential for success will be evaluated in terms of the

strategic inputs from stakeholders’ group analysis. Three strategic issues of Wal-Mart U.S.

business-level strategy will be discussed and finally two recommendations to strengthen Wal-

Mart’s competitive advantage will be offered.


Requirement 1: Wal-Mart’s External and Internal Environment Analysis

Like every other business organization, Wal-Mart’s goal to realize strategic

competitiveness and earn above –average return is significantly influenced by the internal and

external environmental factors. Hitt, Ireland & Hoskisson (2011), pointed out that “the

understanding about the conditions in its external environment that the firm gains by analyzing

that environment is matched with knowledge about its internal organization to provide the

foundation for forming the firm’s visions, developing its mission, identifying and implementing

its strategic actions (P.36).

External Environment

An organization’s external environment is categorized into three broad classifications

including the general, industry and competitors’ environments (Hitt et al., 2011).

General environment is composed of dimensions in the broader society that influence

an industry and the firms within it (Hitt et al., 2011). The general environment is grouped into

seven environmental segments which include economic, physical, demographic, political/legal,

sociocultural, technological and global environmental forces (Hitt et al., 2011). These forces

cannot be directly controlled by firms hence they are referred to as “non-controllable” to which

Wal-Mart has to monitor and respond to. This is because no organization has control over

external environmental forces and the best any firm could do is to cope with the changes through

the business strategies. This was the basic reason the founder Sam Walton built the

organization’s vision on change and embedded it in the leadership as the corporate culture of

Wal-Mart to continue to ensure the sustenance of its core competency of “everyday low price”.


Rob Walton reemphasized the importance of low price core competence when he pointed out

that “we lead when we embrace my dad’s vision to improve the lives of everyday people by

making everyday things more affordable” (Barley et al., 2007, p.359). The general environment

influenced Wal-Mart and its competitors in several ways as a result of higher cost of goods,

consumer debt level and buying patterns, stock price fluctuation, harsh economic conditions,

high interest rate, customer preference, unemployment, cost of labor, inflation, currency

exchange fluctuation, fuel prices, weather patterns, catastrophic event and high insurance cost

(Barley et al., 2007, p.364). These environment forces posed a big threat to Wal-Mart and other

competitors in the industry. The influence of the general environmental forces compelled Wal-

Mart to tap into its repertoire of core competencies, resources and capabilities, integrating them

with effective generic business-level strategies to gain competitive advantage. So, Wal-Mart

converted these threats to opportunities by strategically optimizing its resources, core

competencies and capabilities. Wal-Mart divested its businesses in Germany and Korea due to

harsh business environment that hampered it from realizing the scale and desired result and

applied its resources in markets where the growth potentials are high(Barley et al., 2007, p.357).

The Wal-Mart International cashed in on the international sales that is growing annually at

33.6% to expand its operations in Canada, South America, United Kingdom, Mexico, Porto

Rico, Japan, China, India and other countries where sales growth has been quite impressive

(Barley et al., 2007,p.358). Wal-Mart applied product/service diversification strategy to provide

more products and services to customers at low prices. Barley et al., (2007) pointed out that this

strategy reflects Sam Walton idea of “a wide assortment of good quality merchandise, lowest

possible prices, guaranteed customer satisfaction, friendly knowledgeable service, convenient

hours, free parking and a pleasant shopping experience” (p. 358). The general environment also


compelled Wal-Mart to provide banking services to 20% of its customers that were characterized

as “unbanked”. So the general environment forces created threats which Wal-Mart converted

into opportunities and tapped into them to develop competitive advantage.

Industry environment, according to Hitt et al., (2011), “is the set of factors that directly

influences a firm and its competitive actions and responses: the threat of new entrants, the power

of suppliers, the power of buyers, the threats of product substitutes and the intensity of rivalry

among competitors” (p.38). Wal-Mart has always managed over the years to build capacity to

favorably influence its industry environment or successfully defend against the five factors that

influence the industry environment. Wal-Mart focused the analysis of its industry environment

on the factors and conditions that influence profitability potentials and develop strategies that

will harness such factors. When Wal-Mart realized the challenges arising from loss of sale to

substitute products, slow market growth and entry of new competitors, it allowed each of the

segments to determine the appropriate product offering for each location. The forces of the

industry environment created threat to Wal-Mart and compelled the company to develop

product/service diversification strategies that continue to build on the discount store concept

(Barley et al., 2007, p.358). According to Barley et al., (2007), Wal-Mart realized the strategic

importance of supplier power and set up a 1,600-member Global procurement service team based

in 23 countries that buy products from suppliers in over 70 countries including 61,000 suppliers

in the United States (p.367). As a matter of fact Wal-Mart developed strong supplier power due

to its large purchase of merchandise and plays significant role in determining delivery and stock

level. Barley et al.,(2007) pointed out that “Wal-Mart not only determine delivery schedule and

inventory level but also heavily influence product specification”(p.367). The influence Wal-Mart


has over the industry environment served as a leverage to develop economies of scope and scale

which are embedded in the company’s capabilities. With effective business-level strategy Wal-

Mart has developed a value chain that offers cost/product differentiation that allows consumers

greater degree of preference and lowers the company’s cost of switching to other suppliers to

maintain its goal of everyday low price vision.

Competitor’s environment involves companies against which a firm competes directly

against (Hitt et al., 2011). Wal-Mart has always emphasized on the need to understand and

acquire knowledge about its competitor’s strategies, objectives, assumptions, and capabilities.

The CEO of Wal-Mart reiterated this in the 2007 Wal-Mart annual report that the company faces

strong sale competition from other discount, department, drug, variety and specialty stores and

supermarkets, many of which are regional, national and international chains as well as internet-

based retailers and catalog businesses (Barley et al., 2007,p.364). From the case study it is

apparent that the major competitors include – Target, Costco and Kroger. Target Corporation

with annual revenue of $59 billion and annual growth rate of 12.5% in 2006 operates 1,318

general merchandise stores and 182 supertarget stores in 47 States in addition to its online stores

is the next big thing that Wal-Mart has to face domestic market (Barley et al., 2007, p. 366).

Costco Wholesale Corporation runs 510 warehouses averaging 140,000 square feet in 38 States

and six foreign countries including; Mexico, Canada, UK, Taiwan, Korea and Japan , and also in

Porto Rico (Barley et al., 2007, p. 366). Costco core competitive advantage lies on limited

number of products sold in high volume, high inventory turnover, low price via purchasing

discount and favorable store locations (Barley et al., 2007, p. 366). Kroger operates 2,468 outlets

competes against Wal-Mart on the supermarket and multidepartment store category and poses a


challenge in terms of assortment of alternative products(Barley et al., 2007, p. 366). Target,

Costco and Kroger constitute the strategic group that emphasize similar dimensions and use

strategy similar to that of Wal-Mart. Other competitors outside the strategic group include

general discount competitors and niche market competitors (Barley et al., 2007, p. 367).

According to Barley et al.,(2007),”Sears Holding(Kmart & Sear) offer additional U.S.

competition in general merchandise, while Tesco of Britain and Carrefour of France compete

with Wal-Mart International(p. 366). Carrefour being the second largest retail chain in the world

is the closest international competitor to Wal-Mart International from strategic perspective and in

terms of market format (Barley et al., 2007, p. 367). Tesco emphasizes convenience and

competes against Asada, a subsidiary of Wal-Mart UK. However, Amazon.com is another firm

that poses a big threat to Wal-Mart in online retail. At the niche market segment Best Buy,

Safeway, Circuit City, Home Depot, Lowes, Kohl’s and others compete against Wal-Mart at

departmental level (Barley et al., 2007, p. 367). The bottom-line in terms of the competition is

that even though these competitors offer the same products as Wal-Mart, it is difficult for any of

them to replicate the convenience, price and diversity of products found in Wal-Mart.

Internal Environment

Internal environment encompasses forces and factors that influence a firm’s portfolio of

resources, bundles of heterogeneous resources, capabilities and core competencies that managers

have created to leverage competitive advantage (Hitt et al., 2011). Wal-Mart developed its

internal organization on a broad perspective of global mind-set with a unique generic business-

level strategy that competitors are unable to apply their resources and capabilities to replicate.

The internal environmental forces can be controlled by managers and that was the main reason


Wal-Mart discovered what it can do by integrating its unique resources, competences and

capabilities to create competitive advantage and sustained it.

Resources are the sources of a firm’s capabilities that stretch across a spectrum of

individual, social and organizational phenomena that do not yield competitive advantage by

themselves but only when discovered and integrated effectively (Hitt et al., 2011). Wal-Mart

realized the opportunities that exist in big cities, small towns and international markets and

responded by tapping into these opportunities through the establishment of supercenters &

discount stores, neighborhood markets and expansion into 14 countries outside the United States

through Wal-Mart International. The company’s Neighborhood Market locations provided an

average of 29,000 items per store, its Discount Store offer 120,000 items in each store and its

supercenter stock more than 142,000 different items (Barley et al., 2007, p. 358). Wal-Mart

resources are made up of two broad categories the tangible and intangible resources. According

to Hitt et al., (2011) “tangible resources can be seen and quantified” and further classified

tangible resources into financial, physical, organizational and technological resources (p.78).

Wal-Mart’s net income of $11.709 billion in 2007; its store segments, the integrated data

management system and e-commerce technology coupled with its 2,275 supercenters, 1,074

discount center, and 112 neighborhood markets in 2007 represent huge financial, organizational,

technological and physical resources respectively. In the other hand, intangible resources are

assets that are rooted deeply in the firm’s history and have accumulated over (Hitt et al., 2011).

Hitt et al., (2011) classified intangible resources into human, innovation and reputational

resources (p.79). Wal-Mart’s 1.8 million employees, its IT capabilities and strong brand name

represent its intangible resources.


According to Hitt et al., (2011) “Capabilities exist when resources have been purposely

integrated to achieve a specific task or set of tasks” (p.80). These tasks range from human

resource selection to product marketing and research & development activities (Hitt et al., 2011).

Capabilities represent the capacity to deploy resources that have been integrated to achieve a

desired end state which emerged over time through complex interaction among resources. Wal-

Mart has maximized shareholders wealth by taking appropriate business-level strategies to

improve the stock performance and earn above average returns which trickles down to

shareholders as dividend. The foundation of Wal-Mart’s capabilities lays in the unique skills and

knowledge of its 1.8 million employees especially its bunch of talented managers and strategic

leaders. With appropriate corporate-level cooperative strategy Wal-Mart has successfully

transferred knowledge and learning among the various units of its business segments. The

strategic managers have developed winning strategies through sharing and transfer of unique

knowledge among various units. Wal-Mart has used effective distribution system to build

capabilities based on effective use of logistic management techniques. The use of Radio

Frequency Identification (RFID) enabled Wal-Mart to track inventory locations, store shelving

status, packages, en-route to and fro suppliers, warehouses, shelves, and even shoplifting (Barley

et al., 2007, p. 371). The combination of these capabilities empowered Wal-Mart to leverage

competitive advantage it has sustained for a longer period of time.

Core competencies are the resources and capabilities that are the source of a firm’s

competitive advantage (Hitt et al., 2011). Technically speaking the ability of a firm to compete

effectively and develop advantages depends on how well the firm influences its internal

environment by harnessing the opportunities through the deployment of its core competences,


resources and capabilities. This is what distinguished Wal-Mart from its rival and reflects its true

personality as the global market leader. Hitt et al., (2011) pointed out that “core competencies

emerge over time through an organizational process of accumulating and learning how to deploy

different resources and capabilities” (p. 81). This has been the secret behind Wal-Mart’s success

in developing competitive advantage. Wal-Mart built its core competencies on the concepts it

performs exceptionally well compared to its competitors and activities through which it add

unique values to its activities over a long period of time. These concepts and activities include:

a. product differentiation – large assortment of goods and services

b. cost leadership- everyday low price by making products and services affordable

c. convenience parking – pleasant shopping experience

d. segmentation- meets customers’ expectations by offering particular goods and service at

unique locations

e. innovation – introduction of new products to meet the expectation of customers

f. customer focus – localizing selections based on store neighborhood demographics (Barley et

al., 2007, p. 370 – 374).

However these competences meet the four criteria that Hitt et al., (2011) set forth which include

valuable, rare, costly to imitate and nonsubstitutable (p.82).

The combination of the resources, core competences and capabilities constitute the

internal environment. Wal-Mart has been quite impressive in its ability to purposefully integrate

these essential elements to develop competitive advantages that are non-substitutable. This case


study analysis presents a comprehensive list of opportunities, threats, strengths and weaknesses

below in a chart from the analysis of the external and internal environment above.

External Opportunities External Threats

Growing international sales resulting from new market opportunities that exist in foreign markets including Canada, Mexico, Japan, UK, Taiwan, Korea and Porto Rico.

Harsh economic conditions such as recession, high interest rate, customer preference, cost of labor, inflation, currency exchange fluctuation, and fuel prices.

Rising customer’s diverse needs for products and services.

Slow market growth rate in the domestic economy.

Needs in new market segment such as banking.

Fierce market competition from Costco, Kroger, Target and other niche market competitors.

Strong power over suppliers due to large volume of purchases.

Growing bargaining powers of suppliers.

Economies of scale and scope arising from effective supply chain system.

Growing bargaining powers of customers due to alternative products offered by competitors.

Good competitor’s intelligence. Loss of sale to substitute products and online stores

Everyday low price. Entry of new competitors in the niche market

Acquisition of competitive firms e.g. Asada in UK.

Strategic alliance by competitors

Internal Strength Internal Weakness

Strong brand name built on low price and large assortment of products and services.

Overly complex strategy with a unified corporate strategy that do not allow units flexibility to customize operations to their locality.


Wide geographic coverage with 6,782 stores in 14 countries and United States.

High turnover rate of inventory

Economy of scale & scope. Dwindling reputation due to competitive pressure from the strategic group and competitors in the niche market.

Pricing advantage over rivals. Behind rivals in the use of e-commerce

Good customer service and pleasant shopping experience with free parking.

Does not survey customers and has no research and development program.

Strong financial and IT resources. Huge financial resources commitment in expansion

Good supply chain management.

Requirement 2- Wal-Mart’s Generic Business-Level Strategy.

Business-level strategy is defined according to Hitt et al., (2011) as “an integrated and

coordinated set of commitments and actions the firm uses to gain a competitive advantage by

exploiting core competencies in specific product markets” (p. 100). The implication of this

concept is that businesses make choices on how they intend to compete in individual markets and

gain competitive advantage. Every successful business-level strategy revolves around the

customer and that is the reason why Wal-Mart focused its business-level strategy on customers’

satisfaction not only through cost leadership but also through differentiation of products and

services. Michael Potter classified business-level strategy into five groups which include cost

leadership, differentiation, focused cost leadership, focused differentiation and integrated cost

leadership /differentiation (Hit et al., 2011). These business-level strategies are generic which

implies that the can be applied by any firm in any industry. The basic concept underlying generic

business-level strategy is that it allows a firm to distinguish itself from the rest of the competitors

(Hitt et al., 2011).


Wal-Mart’s generic business-level strategy is integrated cost leadership/differentiation

strategy. According to Hitt et al., (2011), integrated cost leadership/differentiation strategy

“involves engaging in primary and support activities that allow a firm to simultaneously pursue

low cost and differentiation” (p. 120). Initially Wal-Mart’s business-level strategy was basically

cost leadership through everyday low price but with Costco and Target’s differentiation strategy

positioning the companies against Wal-Mart competitively, the most proactive competitive

action Wal-Mart had to take was to replicate the differentiation strategy and integrate it into is

cost leadership strategy. This move propelled Wal-Mart to the forefront of the competition.

This was the main reason why Wal-Mart Stores recently realigned its merchandising around five

key power categories – entertainment, grocery, health and wellness, apparel and home products

(Barley et al., 2007, p. 373). Wal-Mart through its Global Procurement program established a

group of technical experts- specialists that focused on the many important dynamics of particular

category purchase aimed at driving its three customer-focused strategies (Barley et al., 2007, p.

374). The three customer focused strategies stipulated by Barley et al., (2007) include mimicking

Target’s upscale fashion-forward appeal, localizing selection based on store neighborhood

demographics and appealing to the universal low price seeking customers (p.374). The primary

competitive activity of Wal-Mart is everyday price while its support competitive activity is

provision of differentiated products and services at its store locations. Mimicking Target by

providing upscale fashion-forward appeal flopped because Wal-Mart did not replicate Targets

core competencies and capabilities in providing upscale fashion-forward appeal products.

Localizing selection based on neighborhood demographics was a successful customer-focused

strategy that allowed Wal-Mart to expand and empower regional marketing teams moving away


many executives from the headquarters into the regions to understand the company’s wide

customer base (Barley et al., 2007, p. 374). The customer-focused strategy to appeal to the

universal low price customers (i.e. brand aspirationals, price sensitive affluent, and value price

shoppers) succeeded and allowed Wal-Mart Store segments to develop unique, innovative

products and provide distinguished brands to better appeal to its core customers as a low price

leader in well-known brands (Barley et al., 2007, p. 374).

Through effective sustainability and localized charitable giving strategy Wal-Mart has

portrayed itself as a socially responsible corporate citizen and a good neighbor (Barley et al.,

2007, p. 372). Wal-Mart demonstrated this by selling over 100 million environmentally friendly

florescent bulbs since the commencement of its global environmentally sustainable program in

2004, set a goal to reduce package by 5% by 2013 and has as well given over $415 million in

cash and kind to over 100,000 charities worldwide(Barley et al., 2007, p. 372).

To confront changes and address its external reputational challenges Wal-Mart rolled

out a new strategy to redefine its operations and how it will compete. The new strategy just like

Scout(2007) described, “the corporate plan encompasses previous change initiatives as well as

new ones, rest on five pillars: broadening our appeals to our customers , making Wal-Mart even

a better place to work, improving operations and efficiency, driving global growth and

contributing to our communities((Barley et al., 2007, p. 372).

Requirement 3 – Primary Factors influencing Wal-Mart’s Generic Business-Level Strategy

Based on the analysis of Wal-Mart’s internal and external environment, they factors that

influence the company’s generic business-level strategy are outlined in the chart below.


These factors are analyzed according to their influence to various stockholders’ groups.

Product Market Stakeholders

Strength Weakness Opportunities Threats

The everyday low price allows customers affordability of the product and services.

The low price increase customers switching cost to competitors’ products.

Customers are empowered to choose from large assortment of products and services.

The low price diminishes customers bargaining power.

Neighborhood stores give customers easy access to shopping round the clock.

Discount stores are usually overcrowded during festive period

Customers have easy access to store, convenience parking and pleasant shopping experience.

Customers do not get the product education and personal attention needed for decisions.

The IT capability helps suppliers to interchange data, monitor stock level, ordering and manage delivery timely.

Wal-Mart’s Data interchange system compromises its suppliers’ privacy.

Cost of transmitting data is reduced and real-time information exchange is made possible.

Unauthorized access to classified corporate information.

The privilege to chose from the differentiate products, services and stores.

Differentiation changes customers’ preferences from quality to low price.

Expectations are met through innovation and product development which are the driving force for differentiation.

Differentiation shifts the focus from the customer to the products.

Capabilities and core competence to harness opportunities to create value for customers, suppliers, unions and host communities

Wal-Mart’s undue negotiation powers allow it to dictate the product design and specification – i.e. doing it Wal-Mart’s way.

Customer’s, expectations are reflected from the purchases trend.

Often,Wal-Mart limits its value creation to itself and customers cutting off unions and communities.

Capital Market Stakeholders


Stock price appreciation reflects good performance and increases investor’s confidence.

Stock price fluctuation gives an indication that capital market stakeholders may not be

Appreciation in stock prices increase the value of shareholder investment

Demoralizes shareholders and could lead to divesting their investments.


met.

Appropriate business-level strategy responds to challenging external environmental forces and help to gain above average return on investment.

Failure of business-level strategy leads to divestiture, loss in revenue and decrease in investment returns.

Share holders wealth is maximized through returns and bonus stock.

This could lead to dissatisfaction which can generate conflict.

Low interest rates keep the cost of borrowing low and make repayment easier to the lender.

High interest rate increases the risk of lending and repayment.

Higher returns are expected of high risk investments.

The risk of default is high when the interest rates are high.

High risk associated with higher interest compels a firm to reduce its risk through purchase of insurance policies.

The redistribution of risks increases the cost of insurance which may likely affect investment returns.

This offers shareholders the opportunity to minimize their investment risk.

Investment returns may be uncertain.

Wal-Mart’s sustained growth preserves and enhances the funding from lenders.

Dissatisfied lenders may impose stricter conditions for future borrowing.

When strategies succeed the performance of a business is significantly improved allowing it to fulfill its obligations. Implying that the lender maximizes his investment.

Failure of strategies leads to failure in fulfilling obligations which is capable of cutting off future source of capital. This may hamper the lender’s operation due to high cost and risk of lending.

Organizational Stakeholders


Provision of good work environment.

Expectation to exceed performance.

Skill development and rewarding work environment.

There may be undue pressure to perform or be relieved.

Encouragement of organizational learning.

It may be an expensive strategy in terms of resource commitment.

It will offer avenue to introduce change management.

New methods and procedures may be hard to be transitioned.

Improve efficiency Overall organizational efficiency may not be realized.

Employees will be motivated to higher productivity.

Resentment can lead to reorganization and massive job loss.

Introduction of new corporate culture.

The needs of the employees may not even be met.

Employee’s potentials can be fully utilized creating opportunity for

This could lead to dissatisfaction for those who could not embrace the


growth. new corporate culture.

To develop human capital capability.

Proper application of the new knowledge and culture may prove problematic

This could lead to development of critical skills that is critical to the success of competitive capability

Some employees may be slow to developing these critical skills and that could lead to a dysfunctional organizational structure.

Requirement 4- Evaluation of Wal-Mart’s potential of Success using the Strategic Input

from the Stakeholders Group Analysis

The business-level strategy Wal-Mart applied defined its competitive methodology and

has allowed it to develop competitive advantage by leveraging its resources, core competencies

and capabilities. From the analysis of Wal-Mart’s business-level strategy above it is quite evident

that Wal-Mart used its generic business-level strategy of integrated cost

leadership/differentiation to make choices of how it competes and address strategic issues. The

business-level strategy has been expanded to incorporate the entire stakeholders within the value

chain. Wal-Mart galvanized its business-level strategy to redefine its operations and respond to

strategic challenges to position itself well ahead of its competitors. This strategy modification

which Barley et al., (2007) described as encompassing previous change initiatives as well as new

ones, rest on five pillars focusing on broadening appeals to customers , creating a better work

environment, improving operations and efficiency, driving global growth and contributing to

host communities (p. 372). These modifications have improved the potency of effective strategy.

Wal-Mart has a very powerful strategy but it is also one that is hardly measurable or easy to

communicate.


Wal-Mart has an effective business-level strategy that focused on empowering the

stakeholders and building an effective value chain that will continue to be the flagship of retail

business. As regards to the product market stakeholders which include the customers, suppliers,

host communities and unions, Wal-Mart has empowered them by creating higher value services

and opportunities that will benefit them and reduce the threats that may be a clog on the wheel of

their individual or corporate progress. The low price core competency of Wal-Mart which is an

indispensible strength affords customers the opportunity to choose from large assortment of

differentiated products at low prices. This strategy creates value for customers and serves as a

link that keep bringing them back to shop at Wal-Mart stores. The customer-focused strategy to

appeal to the universal low price customers succeeded and allowed Wal-Mart Store segments to

develop unique, innovative products and provide distinguished brands to better appeal to its core

customers as a low price leader in well-known brands (Barley et al., 2007, p. 374). So this

strategy provides low price and also meets customers expectations the implication is that the

loyalty of these customer will still be unalloyed to Wal-Mart.

The neighborhood store locations give customers easy access to shopping with

convenience parking and pleasant shopping experience. This is what an average customer looks

out for; satisfaction of customer’s need is the key to winning their loyalty. Even with large

assortment of goods Costco could not replicate this competitive advantage and this is the reason

why Wal-Mart attracts about 175 million each week to its stores (Barley et al., 2007, p. 368).

The IT capabilities of Wal-Mart create huge opportunities that empower suppliers and

allowed them to participate in the Retail Link, a computerized network system that allow them to

plan, execute and analyze their business (Barley et al., 2007, p. 373). Along with electronic data


interchange suppliers receive purchase order information and supply invoices electronically,

thereby lowering cost, increase the speed of data transmission and improve productivity (Barley

et al., 2007, p. 373).This capability create and effective supply chain management that reduces

the cost of logistics and create a mutual partnership between suppliers and Wal-Mart.

The Wal-Mart’s Technological supply-chain sophistication provides “value for

customers, associates and shareholders” (Barley et al., 2007, p. 3743). This system depends on

Wal-Mart’s 1.8 million employees to provide the final link in the value chain to customers. The

improved working conditions and increase in hourly pay rate associates are provided the

opportunity to develop their skills while working in good job environment. This opens the door

for career growth for associates and motivates them to higher productivity.

With appropriate business-level strategy to respond to challenging external

environmental forces and help to gain above average return on investment Wal-Mart has

continually maximized its shareholders wealth. The 312,423 shareholders have been enjoying

regular average annual equity returns of 22% on their investment and with strong corporate

governance the equity returns will even get better. So a careful evaluation of the growth

potentials of from its business-level strategy and its antecedent modification above shows that

Wal-Mart has not fully maximized its growth and success potential. The field is still large

enough for Wal-Mart to realize its full potential with careful integration of its resources, core

competencies and capabilities; Wal-Mart’s success potential is very huge.

Requirement 5- Strategic Issues & Recommendations


Due to the complexity that characterized the internal and external business environment,

Wal-Mart has strategic issues to address to maintain its market leadership position. However,

any business that competes globally like Wal-Mart will continually appraise its performance to

seek for the effectiveness of it business-level strategy and take corrective actions to remain

competitive.

The first strategic issue that is most challenging to Wal-Mart is public resentment. There

has been wide spread resent from unions, communities, press, government and regulatory

agencies against Wal-Mart’s market dominance. Some argue that Wal-Mart has run off a lot of

retail businesses using its unique core competencies, capabilities and resources which many

competitors cannot replicate. According to Barley et al., (2007), ‘the same products can be

purchased from different types of retail stores but it is difficult to replicate the convenience, price

and diversity of merchandise found at Wal-Mart” (p.368). Some communities are even seeking

legal ways to keep Wal-Mart away from establishing in their communities. However, negative

press has been another factor responsible for Wal-Mart’s battered public image. Governments

and regulatory authorities have not helped matters either accusing Wal-Mart of gross violation of

labor laws, environmental laws and trade regulations. Barley et al.,(2007) pointed out that “Wal-

Mart has become a poster company on political issues related to trade, health care , the

environment, discrimination, worker pay and general anti corporate sentiment” ( p. 386). This

accumulated resentment against Wal-Mart resulted from reluctance and lack of effective strategy

to positively position its image before the American consumers as socially responsible corporate

body. Wal-Mart also needs to relax its anti-unionization policy and afford its employees to free

elect to organize themselves into unions.


The second strategic issue is a pending federal law suit instituted against Wal-Mart by a

group of employees alleging gender discrimination against female workers. It is very clear that in

the past Wal-Mart was fined heavily to the tune of $198 million in the case of Savaglio vs. Wal-

Mart Stores (Barley et al., 2007, p.371). I believe Wal-Mart has good strategies but it should be

more proactive and thorough in developing its compensation and incentive policies. The issue of

discrimination should be addressed and “the equal pay for equal work” Federal Law should be

respected. However a peaceful resolution and out of court settlement will be ideal for Wal-Mart

to save its image from be further dragged to the gutters by the press.

The third strategic issue is that Wal-Mart is recording declining domestic revenue and

increasing revenue from overseas markets. This calls for an articulate strategy to harness the

opportunities where they potentials seem to be optimum. Wal-Mart International’s strategy is to

prioritize “where the greatest growth and great returns exist” (Barley et al., 2007, p.375). Wal-

Mart should articulate effective business-level strategy to focus on the right challenges for their

long-term and short-term success in the global market place. Wal-Mart should allow Wal-Mart

International some degree of flexibility to localize its strategies to reflect the taste, preferences

and consumers’ expectations in their host countries. Just like Barley et al., (2007) pointed out

that “Wal-Mart should be looking abroad for future sales growth and struggle against the urge to

centralize operations and eliminate decision making from frontline where manager have face-to-

face contact with customers” (p.375).

From the above analysis and strategic issues I will offer two recommendations that will

strengthen Wal-Mart’s competitive advantage.


As the global leader in retail business Wal-Mart has been quite impressive but it need

to launder its battered public image and reposition itself as a socially responsible corporate

organization. Wal-Mart should deepen its efforts in encouraging environmental safety , respect

for labor regulations and engage more communities in discharging its corporate social

responsibilities to show that it cares for it business environment just like it cares to maximize

profit. It will be a proactive move to resolve the pending law suit and settle out of court to save

the company from further damage to its already questionable public image.

Finally, Wal-Mart should take advantage of the global growth opportunities to expand

its international operations but it must learn from the experience of local retailers to make the

right strategic moves. Wal-Mart must be willing to be their uniformity in operation and

centralization of decision making to allow its overseas operations acculturate to the local

business culture. It should modify its strategy in entering the Japanese market through a Japanese

retailer; Seiyu to avoiding divesting like it did in Germany and Korea due to inability to compete

effectively in those markets.

Reference


Hitt, M. A., Ireland, R.D, & Hoskisson, R.E. (2011). Strategic Management: Competitiveness &

Globalization. (9th Ed.)pp. 20-22,36-61,72 -88,100-123, 352-366. Mason: South-Western

Cengage Learning.

Barley, F., Bragg, D., Dawson, M., Shah, H., Sillanpaa, B., & Sleeper, N. (2007). Wal-Mart

stores, Inc. (WMT) In Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2009). Strategic

management: Competitiveness & globalization: Concept and cases (8th ed.) pp. 353-379.

Mason, OH: South-Western Cengage Learning.

wal-mart stores inc. swot analysis

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