Strategic Decision Making :Case Analysis of Wal-Mart Stores, Inc.
Category : Wal-Mart Case Studies, Wal-Mart Corporation
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Crafting and Executing Strategy: Case Analysis of Wal-Mart Stores, Inc.
1.0 Source Problem
Wal-Mart has been able to achieve almost legendary because of its low-priced products. It is said that Wal-Mart aggressively maintains unique distribution systems, lower labor costs, which give the company more edge than their competitors. However, it can be said that this approach of the company has been also the root of the problem facing the company in terms of dealing with their profits and their competitive position in the retail market.
2.0 Secondary Problems
It can be said that retail industries are prone to a higher competition because of the issue of market saturation. In the given case, there is an evidence of both short and long term issues which has been experienced by the company.
2.1 Short-Term Specific Problems
Based on the given case, one of the short term problems facing Wal-mart is in line with their strategy of cutting their prices. This issue is threatening the sales and profits of the company, since they are not able to meet their target profit because of this price cutting. Another problem that can be attached is the inability of the management to sustain their competitive advantage because lowering the price of their products may compromise their competitive advantage in terms of considering as a company that provides quality products. This will have a connotation that customer loyalty in Wal-mart is at large because of the low price but not because of the quality of their products.
Aside from this, other problems may also arise in line with the inability of the management to provide adequate salary or compensation for their labour forces because of their cost strategy or approach.
2.2 Long-Term Specific Problems
For this case study, the long term problems that can be attached with Wal-Mart are in terms of the criticisms of the people internal and external to the company. Because of the strategy of Wal-Mart many business are affected most especially the small business since Wal-Mart are enjoying high competitive entrants. The company's price advantage extends to groceries, particularly in the large footprint format. Dunkley, Helling, and Sawicki (2004) summarized the evidence on scale economies in grocery sales, arguing that larger stores enjoy cost economies, have more room for high-margin items, and may be more attractive to some consumers.
Another long-term problem that can be attributed to Wal-Mart, is in line with their management approach. It is shown that Wal-Mart’s managers are dominated by men; this situation on the other hand, leads to problems like biased promotion decisions (Thompson, Strickland & Gamble, 2007). This issue clearly speaks of unjust employee treatment and work discrimination, particularly among the members of the management. While the company has employed useful promotional policies for the benefit of the employees, the lack of fair implementation makes these policies ineffective; moreover, the lack of appropriate managerial approach on the observance of these policies widens the gap between the management and the lower level employees of the company. Indeed, certain actions should have been done to avoid this matter from happening.
Based on the given case, in spite of the awareness of Wal-Mart in the consequences of their business strategy, they are still continuously using this approach to sustain their competitive advantage. One problem which is considered is that of Wal-Mart’s being replicable in the sense that competitors or new players find it easy to imitate Wal-Mart’s ability to attract suppliers by offering higher cost and value for their products. This becomes an unintended problem for Wal-Mart because it compromises the reputation of the company of offering quality products because consumers always attached the company in offering lower prices. Being so, Wal-Mart’s specialty of offering its customers the lowest price in the market still remains a problem that should be given attention.
Its major problem which can be at the same time considered to be a threat, remains to be that of the competitors who are striving hard to reach what Wal-Mart has attained. Wal-Mart has been considered a veteran and a notorious in the game, running over even those that have been long there before its arrival. These stores end up closing because Wal-Mart incredibly beats them. In fact, to prevent Wal-Mart from monopolizing businesses, small-town locals have turned down proposals of building a Wal-Mart store in their area.
In terms of employee and promotion issues, such as those among women and minorities, this has also been observed in Wal-Mart’s initial operations. Discrimination for women and minorities for the business’ leaders have been evident as Sam Walton prefers other individuals for managerial positions. The literature indicating the wrongness of this act has probably influenced the business to do away with this conventional practice and belief (Thompson, Strickland & Gamble, 2007).
From the cited case and nature of promotional policies at Wal-Mart, the root cause of its problems on granting promotions appear to be the managers’ lack of ability to make appropriate personnel decisions. As they are the ones interacting with the employees, it is natural that they are given the responsibility to decide who among the employees should be promoted. However, it is also important that the managers are subjected to proper trainings, particularly how to accomplish performance appraisals of the employees. Clear, specific and definite performance indicators that will make an employee eligible for promotion should also be established initially before the positions are filled in. Another problem with the previous management of the company is its failure to stick to its own policies.
4.0 Criteria for Evaluation
Based on the analysis above, it can be said that the main goal is to enable Wal-mart to have a strategy that will enhance their reputation in the market and to solve the issue for employment biased and discrimination. In this regard, there is a need of a strategic change which enables Wal-Mart to sustain their competitive advantage in the market. The management of the company should focus of pricing approach and employment promotion and motivation approach.
Based on the given case, there are various alternative strategies which can be considered in order to solve the short and long term problems of Wal-mart.
5.1 Short-Term Alternatives
In terms of pricing or cost based approach, it can be noted that Wal-Mart should be able to use a new approach of pricing that will enable the company to be benefited as well and enjoying much profit. With this the company may consider the use of expense control. This would be helpful in ensuring that the company still maintains low price for customers and low operating.
5.2 Long-Term Alternatives
With regards to the long term problems faced by the company, the alternative solution for this is to have a good promotional and motivational approach. It is then recommendable that company develop means that will ensure that its set policies, such as in personnel promotion, are strictly followed by the managers. All job openings should then be posted by the managers and should be communicated well with the employees. The determinants for promotion should also be relayed to all employees. Moreover, all eligible employees must have an equal chance for the position offered. Trainings or seminars that could help the employees to improve them further should not be granted to a select few. In order to facilitate the development of the employees, a superior whom they can share their concerns with should be accessible.
6.0 Recommended Strategy
6.1 Short-Term Recommended Strategy
For this, the recommended strategy is to have enhanced the value of their low prices with other differentiating through product diversification. The company is then recommended that ensure that they must be able to determine whether their price adheres to the quality of their products and that this would not affect the overall reputation of Wal-mart.
6.2 Long-Term Recommended Strategy
For the long term approach, the company is then recommended that amend their employment policies and make sure that the management is following such policies to avoid discrimination among women and minorities.
7.0 Justification of Recommendations
Based from the analysis of the case study, it is then appropriate to recommend that the pricing and employee development strategy be applied by Wal-Mart, considering that these factors serve as the core factors affecting its growth and progress. With this type of strategy, Wal-Mart can increase its sales by means of modifying or enhancing its existing products and services. This strategy has been recommended as it has the ability to support the company’s potential to reach greater markets. Wal-Mart has multiple product lines that will be affected by this strategy. With the analysis, it is appropriate that the company starts off the development with its prime product lines. Through this, the company will have sufficient funds to support other relevant activities in the future. The competitors of the company targets similar markets. However, by means of this strategy, Wal-Mart will be able to strengthen the market position of each of its product divisions, resulting to greater hold to these specific markets.
Similar to all other aspects of the company, Wal-Mart must also consider their employees as an important factor sustaining their competitive growth. For this reason, the company is recommended to be committed to solve the issue of discrimination through promotion and employee motivation. Theory has indicated that motivation of employees used to be focused on the provision of financial benefits. In the case of Wal-Mart, this conventional belief must be applied in motivating the employees. However, while this is evident, there have been significant changes that need to be done. For instance, rather than just giving the employees due recognition and monetary rewards based on their performance, the employees are also treated as an important part of the business’ success. This practice should be further emphasized by Wal-Mart by treating its employees as important associates.
Wal-Mart must be able to apply the theoretical perspective by combining both the new and conventional belief on motivation. In addition to profit sharing and other financial benefits, Wal-Mart must also reach out to its employees and treat them importantly, which in turn serve as a form of motivation. With this example, Wal-Mart must be able to show that money is not the only form of motivation business owners can give to their employees. Similar to Maslow’s theory, there are other needs that employees have to satisfy other than material possessions.
8.0 Implementation, Control and Follow-up
Wal-Mart is indeed one giant retail company whose position in the industry is more or less assured. Nonetheless, there will always be internal and external factors that would affect it and may result to business problems. However, by means of optimizing the company’s available resources and considering its environment, it is possible for the retailer to overcome its present as well as future issues. From this analysis, it has been stressed that the success of the company is actually derived from multiple resources. It is then essential that Wal-Mart and companies in general identify these resources, and use them towards continuous success.
From the results of the analysis, Wal-Mart is left with not much alternative but to pursue this change management approach. In this regard, a good change management play should ensure the management should choose the most appropriate management team which will enable them to sustain their organisational objective. In this action plan, the company must also give emphasis on the problems that may arise during the implementation plan like the completion of the tasks provides unmet schedules and revision of original plans.
Upon its implementation, the management who will handle the change process must continue to evaluate, monitor and control this change process to ensure that they are in the right path. The management should also consider contingency planning to solve the possible risks and resistance to change which is more probably to occur in the company. In this regard, the decision stage must be done by the management of the company, from the higher level down to the marketing and production division to ensure that their organisational goal and objective for change will be successful.
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Dunkley, B., Helling, A., & Sawicki, D. S. (2004). Accessibility versus scale: Examining the tradeoffs in grocery stores. Journal of Planning Education and Research, 23 (4), 387-401.
Gosman, M. & Kelly, T. (2002). Big Customers and Their Suppliers: A Case Examining Changes in Business Relationships and Their Financial Effects. Issues in Accounting Education, 17(1), 41+.
Govindarajan, V. & Gupta, A. (2001). The Quest for Global Dominance: Transforming Global Presence into Global Competitive Advantage. John Wiley & Sons, Inc.
Thompson, A. A., Strickland, A. J., & Gamble, J. E. (2007). Crafting and executing strategy: The quest for competitive advantage (15th ed.). New York: McGraw Hill Irwin.
Wal-Mart. (2008). Wal-Mart Stores, Inc. Retrieved May 22, 2008, from http://walmartstores.com/media/resources/r_2571.pdf
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