Wal-Mart Strategy Management
Category : Strategic Management Essay Samples
Wal-Mart Strategy Management
Wal-Mart, an American discount store which is founded by Sam Walton in Des Moines, Iowa in the year 1940, it is the largest retailer in the world and operates internationally with stores in Mexico, United Kingdom, Japan, Argentina, Brazil, Canada and Puerto Rico. Wal-Mart is now known as one of the success stories in the retail industry. The management strategies that the organization has employed became one of the most popular strategies in the retail industry today, a considerable number of retail stores have emerged in different parts of the world following the retail format of Wal-Mart. From a small store to the largest retailer in the world, it is one of the most noticeable success stories in the business world.
This paper answers five questions regarding the management strategy of Wal-Mart. It also discusses the objectives and perspective of the organization.
1. What strategic resources did it bring to the market place? What are its competitive advantages? And what was the value added?
Sam Walton established the current biggest retail store in the world in 1940. After the World War II, discount stores became evident in the large towns of the United States because back then people believed that in order to have a discount store a minimum population of 100,000 is required. However, Sam Walton sensed that discount stores can also be applicable in smaller communities; he believes that “if the prices were right, the stores would attract customers from a wide area.” That is the reason why the strategy of Wal-Mart was to build big discount stores in small towns, which opposed its rivals like Kmart. In addition, its marketing strategy focused on having low prices on its products than depend on advertised sales. (2002) And during the 80s Sam Walton tried alternative formats of retail such as Sam’s Club, Helen’s Arts and Crafts, Dot Deep Discount Drugstores and Supercenters and Hypermarts. However, Helen’s Arts and Crafts, Deep Discount Drugstores and Hypermarts were not successful and was sold-off; on the other hand, Sam’s Club and Super Centers grew quickly and became one of the most important aspects in the company. And by the early 90s Wal-Mart started to expand internationally starting from having a joint venture with Mexico’s largest retailer, Cifra, and thereafter the progress on the international market is still ongoing. However, the results on different Wal-Mart;s overseas are mixed, some was a success others have lead to collapsed and lawsuits.
The competitive advantages of Wal-Mart from other discount stores are its marketing strategy, wherein the company sells undercut prices of products than other stores, and its management system wherein the employees must give the best service to its consumers and in return incentives are given to its employees.
2. What was Wal-Mart stores strategic purpose? What were its vision, mission and objectives and over what time scale?
The strategic purpose of Wal-Mart stores is to establish discount stores in areas that have less than 100,000 populations. The main purpose and strategy of the stores is to sell products everyday at a lower price. Moreover, the main priorities of Sam Walton are his employees or associates, customers and operational details.
Years after Sam Walton died the founder of Wal-Mart his belief, mission and objectives are still used by the company. Sam Walton has only three basic beliefs, and those are: Respect the individual, Service to our customers and
Strive for excellence.
Wal-Mart’s mission statement is “to give ordinary folk the chance to buy the same thing as rich people.” The mission of Sam Walton is to sell cheaper products than its competitor. In which up until now is still the mission of the company.
The long-term objectives of Wal-Mart are growth and continual adaptation. The Chief Executive Officer of Wal-Mart, Lee Scott had a huge contribution to the two goals, he emphasized growth overseas and ventured into new retail plan, which is the creation of Supercenters. These objectives are in a long-term scale and continue to grow adding more stores, acquiring businesses overseas and having a joint venture with other corporations.
3. What strategic options were available to WAL-MART stores to achieve its objectives? From a prescriptive and an emergent perspective? You might want to look at prescriptive options And also emergent options . And for emergent options, you might like to explore particularly the Learning-based strategic route forward.
In order to achieve the objectives of the company, which are growth overseas and new formats of retail, the following are the options that Wal-Mart used:
Purchasing and Vendor Relationship. In order to get the cheapest and greatest deals, the purchasing of the company is centralized and all the transactions took place at the headquarters of Wal-Mart. The transactions are directly between the manufacturers and Wal-Mart, and from the year 1992 the company refused to negotiate with the representatives of the manufacturers. And to avoid the dependence on a manufacturer the company only allowed supplying more than 2.5%. Moreover, Wal-Mart had established closer cooperative transactions with its biggest suppliers such as the Proctor & Gamble. And as a result there is faster refilling of products and goods that agrees with the needs of the consumers, plus a lower cost for inventory.
Warehousing and Distribution. A big part of distribution of the suppliers products are handled by Wal-Mart and 80 percent of the purchases are directly shipped in the Warehouse. And still the Wal-Mart is continuously upgrading its distribution system wherein the products that arrive via the inbound trucks were loaded and unloaded on outbound trucks without sitting first in the inventory of the warehouse.
In- Store Operations. The management of the retail stores of Wal-Mart has the fundamental purpose of creating customer satisfaction through low prices, wider scope of excellent products and pleasing shopping experience. The management of Wal-Mart identified the three important characteristics which are; Merchadising, Decentralization of Store Management and Customer service.
Marketing Strategy. The core of the company’s marketing strategy is its slogan stating “Everyday Low Prices” in which the undercutting of prices is the basic principle of Wal-Mart’s business. And because of this marketing strategy consumers started to flock Wal-Mart stores upon word-of-mouth which made advertising of the stores easier and least expensive.
Information Technology. Wal-Mart was the primary organization that utilized information and communications technology in order to aid in the decision-making and advanced the effectiveness on the response to consumers.
Human Resource Management. The policy of the human resource is based on the ideas of Sam Walton regarding the relationship of its employees to the organization and vice versa. All of the employees of Wal-Mart from the executive down to the clerks are called “Associates.” The relationship of Wal-Mart and its employees is based upon respect, high expectations, close communication and efficient incentives. The associates of the company receives a tremendous degree of autonomy and received continuous communication regarding their performance within the company and about the operations of the stores.
Organization and Management Styles. The management of Wal-Mart has been based upon the values and principles of the founder. The executives must always keep in touch with their customers as well as the operations on the retail stores, in which lead to an effective communication between each stores and the company’s headquarters. Wal-Mart placed a great amount of stress on the development of its management.
4. What choice did WAL-MART stores make from a prescriptive perspective? And what is the strategic reasoning behind such a choice?
From a prescriptive perspective, Wal-Mart have chosen to employ is its marketing strategy wherein, the company sells products that are lower in prices than their competitors, the model made it easier for the management to attract consumers. It is a simple perspective that is very effective especially to consumers who are putting a great emphasis on low prices and value.
The strategic reason behind the use of that marketing strategy is that consumers prefer buying products that are in low prices at the same time of great value and by applying that policy not just in particular products but the whole business it can attract more consumers at the same time reducing its competition. Having a low price strategy has made the corporation expand in the whole of America as well as in different parts of the world.
5. What was the evidence of an emergent strategic process here? What experimentation and dynamic happened in the market place?
The evidence of an emergent strategic process in Wal-Mart is it continued to rise and become one of the top corporations not just in the United States but in the whole world. Moreover, some of the competitors of Wal-Mart have already adopted a number of its effective practices such as Target and Cotsco.
The experimentation and powerful thing that happened in the market place because of Wal-Mart is that it is possible to have low prices on all products that can only be bought during advertised sales, plus the creation of Super Centers that carries everything including supermarkets, pet shop and pharmacy. The company’s management and marketing styles has been the pioneer in the retail industry.