Introduction
Over the years, Wal-Mart has witnessed a rampant growth both in its domestic and foreign markets. This is evident from the fact that the firm has been able to establish a number of stores. For example, the firm has established approximately 3,200 stores in US, 900 in the Americas, 350 in Europe and 440 in Asia. During the period ranging from 2002 to 2004, the firm continued to witness a positive growth. Its net income increased from $6,592 million in 2002 to $9,054 million in 2004. On the other hand, the shareholders equity increased from $ 35,192 million to $43,623 million. As a result, the firm has managed to become the leading retail store in the world with a human resource base of 2.1 million employees. By 2005, the firm's annual sales were $260 billion. In addition, the firm had managed to establish a total of 5,000 stores.
The firm's success is associated with a number of strengths. For example, the firm has a strong management team which enables it to formulate and implement effective corporate culture. One of these strategies relate to its marketing strategies. According to Yoffie (2005, p.1), the firm has managed to attract a large number of customers due to its low pricing strategy. The firm's management team implemented the low pricing strategy from realization of the fact that consumers are price conscious. During the year 2005, the number of customers who patronized the store on weekly approximately 100 million customers patronized the store weekly. In addition, the firm has implemented an effective internal control system. For example, the firm has adopted a comprehensive internal financial control system. This is attained through effective financial reporting. Efficiency in financial control has contributed towards the firm success through attainment of financial stability. Another strategy that is contributing to the firm's rampant growth is adoption of expansion strategy.
In order for the firm to sustain and increase its extraordinary growth in the long-term, it is paramount for the management team to formulate effective operational strategies. Of great concern to the firm's executive is how to continue its expansion strategy. In addition, the firm's management team should evaluate the chances of expanding in markets in which the retail industry is not saturated. Considering the nature of environment in which a firm operates, the firm will face a number of challenges. However, the firm can take advantage of its global reach to propel itself through the years to come.
Firm's SWOT analysis
Strengths
Over the years, Wal-Mart has developed a good reputation. This has resulted from its low pricing strategy. In addition; the firm provides a wide range of consumer products. This results into increased customer satisfaction. The low pricing strategy contributes towards an increment in the firm's sales volume since the customers are able to attain a high value for their money through purchasing in the firm's stores. The firm's strength is also associated with implementation of information technologies thus supporting its logistic system. For example, the firm has been utilizing electronic commerce technology since 1990's. This has enabled the firm to increase the level of its sales through conduction of online marketing (Yoffie 2005, p.2). During the period ranging from 2004 to 2005, the firm was committed at implementing Radio Frequency Identification which is a new technology in the retail industry. This technology enabled the firm to minimize its loss with a margin of 6%. In 2005, its online sales accounted for 6% of the firm's total sales in US. The firm's management team has also recognized the importance of human resource in its operation. As a result the firm has integrated an effective human resource management. This is attained through training of its staff. A good relationship has been established between the management and its employees. For example, the employees are encouraged to provide their opinion on how to improve sales through analysis of its sales data.
Weaknesses
Despite its effort in recognizing the importance of human capital in its effort to succeed, the firm has faced numerous criticisms in relation to human resource management. For example, the firm is criticized for its overreliance on temporary and part-time workers in an effort to reduce costs associated with employee benefits such as healthcare coverage. In addition, the firm's remuneration strategy is not sufficient. This is evident from the low pay which is paid to employees.
The firm has a limited coverage in the international market. This is evident from the fact that the firm operates in only a few countries globally. In addition, the firm has had failures in relation planning. For example, Wal-Mart has had failures in the past in relation to planning. This relates to introduction of the 'Bring it Home' strategy which entailed ensuring that the firm marketed products made in USA. However, it was revealed that the firm was selling products which were made in Bangladesh whereas they were being marketed under the symbol 'Made in US.
Opportunities
The high rate of technological innovation presents an opportunity to the firm (Yoffie 2005, p. 2). This is due to the fact that the firm will be able to attain efficiency in its operation. For example, incorporation of emerging technologies will enhance the firm's competitive advantage in serving customers. In addition, the emerging technologies will enable the firm to be efficient in relation to inventory management.
Threats
Currently, the firm is facing increased challenge resulting from the business environment. For example, the firm faces intense of competition in its domestic and foreign market. Some of the firm's presenting intense competition to the firm includes Costco, Target, and Home Depot. These firms are fighting to attain a significant market share through adoption of discount merchandise strategy. Wal-Mart also faces intense competition in the foreign market. In some cases, intensity of competition has often forced the firm to exit some of these markets. For example, the firm exited its Germany food market due to fierce competition from Aldi which is the leading player in Germany (Burt & Davison 2006, p. 1). In addition, the firm also exited South Korean market by selling its outlets to Shinsegae which is a local player.
Sustaining extraordinary growth and feasibility of Asia and Europe
It is universally accepted that firms must attain and sustain their growth order to succeed in the long run as going concern entity. Attaining extraordinary growth increases a firm's competitive advantage. This results from the fact that the firm increases its profitability level contributing to its efficiency in entering the market. According to Sexton, Pricer, & Nenide (2000, p. 3), a firm's growth is an indicator of its health. Considering the fact that the retail market has become saturated, it is important for firms to develop strategies aimed at sustaining growth both in the local and foreign market (Hayden, Lee, McMahon & Pereira 2002, p. 13).
. There are a number of strategies that Wal-Marts Management team can consider in an effort to sustain extraordinary growth some of these are discussed below.
Increasing its global expansion
Wal-Mart management team should consider increasing its penetration to other countries through adoption of internationalization strategy. The firm's team should ensure that its expansion strategy is aggressive. As a result, it will be possible for the firm to attain economies of scale. This means that the firm's cost of operation will be greatly improved thus increasing its survival rate. According to Sexton, Pricer, & Nenide (2000, p.4), a large firm has a high probability of surviving compared to a small firm. In addition, attaining economies of scale in the course of the firm operation will contribute towards the firm attaining a higher operational scope.
There are a number of strategies that are at Wal-Mart's disposal in the process of conducting its internationalization. Some of these strategies include formation of joint ventures, merger and acquisition, partnering or going it alone through foreign direct investment. Acquisition is one of the most effective strategies that Wal-Mart should consider in its internationalization process. Wal-Mart's management should conduct a comprehensive market study to evaluate the best firms to consider in its acquisition. Some of the issues that the management should consider include the firms operation and management strategies. To ensure that the firm is quick in penetrating the foreign market, it is vital for the management team to target national retailers. After acquiring the foreign firm, Wal-Mart should convert them into its own stores through redesigning them. This will play a vital role in building the firm's brand familiarity in the foreign market. After effective penetration, the firm's local management should scan the environment to evaluate the intensity of competition. This will enable the firm to determine on the best strategy to adopt in dealing with competition. For example, the firm can consider conducting foreign direct investment by building larger stores (Hayden et al 2002, p. 13).
Targeting the large corporations will contribute towards the firm eliminating competition from large players in the foreign industry. In addition, massive presence will be attained in the foreign market. A substantial amount of capital is required if the firm is to penetrate the foreign market successfully. As a result, it is vital for the firm's management team to increase the rate of financial reservation so as to build the firm's financial stability.
One of the regions which present a viable opportunity for international market dominance to Wal-Mart is Asia and Europe. This results from the fact that the retail industry in these countries has not been saturated. In Europe, Wal-Mart has not succeeded in penetrating the entire market. According to Hayden et al (2002, p. 13),
, the firm has only established 400 stores most of which are located in Germany and UK. In addition, the concept of discount retailing is gaining prominence in emerging economies such as Asia. In order to penetrate countries located in Asia and Europe, Wal-Mart should adopt inorganic penetration strategies.
Creation of a positive brand and brand name recognition
Customer loyalty is one of the issues that Wal-Mart should consider in an effort to sustain its extraordinary growth. In order to achieve this, the firm's management team should create a positive brand image. The ultimate effect is that customers will develop emotional association with the firm. Brand name recognition can be attained through effective communication which will culminate into creation of positive publicity. Brand recognition will enable the firm to attract and retain a large number of customers.
Currently, the retail industry is characterized by hyper competition. As a result, customers have got a wide range of product choices which they are able to fulfill instantly. In their purchasing patterns, consumers base their decisions on uniqueness of products that are provided by a give firm. In order to sustain its extraordinary growth, it is paramount for the firm to integrate the concept of product differentiation. Wal-Mart has integrated product diversity in its operation. This makes consumers to consider the store in their purchasing purpose due to convenience attained. To enhance its brand recognition, Wal-Mart's management team should be committed at ensuring that it provides quality products and services. This will contribute towards the customers attaining value for their money (Hayden et al 2002, p. 14). The firm's management team should consider integrating private branding with its differentiation strategy. According to Ching-Ling (2009, p.741), there has been an increment in the rate at which private branding is being utilized by firms in the retail industry. The core objective is to meet the customers shopping preference. Private branding will enable the firm to survive in a market characterized by continuous product development. Ching-Ling (2009, p.741) asserts that private branding enables a firm to meet diverse customer product and service requirements.
Sustaining its extraordinary growth through brand recognition can also be attained thorough integration of other retailing sectors in its operation. This will give the firm a higher competitive edge in competing with other firms which have already specialized in provision of such products and services. The ultimate result is that Wal-Mart will be able to limit competition from small firms.
Improvement of its supply chain
Apart from physical and territorial expansion, Wal-Mart's management team should be committed at improving its entire supply chain. For effectiveness, it is vital for the firm to integrate channel management. This will enable the firm to develop a good relationship with other parties within the channel. For example, good relationship with suppliers will enable to stock its stores sufficiently. All the activities involved within the supply chain should be focused at customer satisfaction. One of the ways through which this can be attained is incorporation of Enterprise Resource Management (ERP) and Customer Relationship Management (CRM) technologies. These are software which enables a firm to create an effective communication network with its stakeholders. Upon implementing these technologies in its supply chain, Wal-Mart will attain efficiency in its information management process. This is due to the fact that the firm will be able to connect with all its suppliers, stores and warehouses. The CRM will enable the firm to understand its customer's needs through the interaction that is created. As a result, the firm will provide products that result into increased customer satisfaction.
Factors that may limit Wal-Mart's growth
Political factors
There is a probability of Wal-Mart's growth being affected by a number of factors. One of these factors is politics. Difference in political systems across countries can limit the firm's international expansion. For example, in venturing into some countries, the firm may be required to partner with local firms. This may limit the firm's expansion strategy since the firm may not have a large stake to influence decision making in that firm. In addition, the firm may be restricted on the extent to which it can expand in the foreign market. This means that Wal-Mart will not be able to achieve the desired market share.
Economic factors
Economic factors can also contribute towards a reduction in the firm's extraordinary growth. For example, during the 2007 financial crisis, both individual and institutional customers reduced their consumption rate. This had a negative impact on the firm's sales despite its low pricing strategy. Reduction in sales volume arose from a reduction in demand for luxury products. This resulted from the fact that consumer's disposal income was reduced which forcing them to cut consumption of some products (Emerson 2008, para. 1-4). In the event of the financial crisis occurring again, there firm's expansion strategy may be affected. This may result from a decline in the firm's profitability leading into financial constraints which may have negative impact tin the process of the firm conducting international expansion.
Social and technological factors
Change in social factors can also contribute towards a reduction in the firm's growth. This is due to the fact that consumers cannot be able to penetrate the entire market. For example, a shift in consumer preferences may culminate into a reduction in the firm's customer base and hence its profitability. Considering the volatility of the technological environment, Wal-Mart's growth faces a challenge in relation to its effort to incorporate emerging supply chain technologies. For example, the firm will incur significant cost in implementing and managing the required technologies. In addition, some countries that the firm may consider as feasible investment destination may not have the necessary technological infrastructure to support such technologies.
Taking advantage of its global reach
In spite of the challenges facing Wal-Mart in sustaining its growth, the firm's management team can take advantage of its global reach to propel its future growth. This will be achieved through product innovation. Its presence in a wide market will enable the firm to localize its operation. For example, the firm's management team in the foreign country will be able to understand local market through comprehensive market research. As a result, the firm's management team will be able to develop strategies aimed at meeting the local customer demand. This will enhance the firm's efficiency in serving the local market compared to when universal international operating strategies are adopted.
Conclusion
Considering the nature of retail business environment, it is vital for firm's management teams to develop strategies aimed at attaining growth. Over the years, Wal-Mart has been able to attain an extraordinary growth. This arises from formulation and implementation of effective operational strategies such as expansion. In order to sustain its growth, it's paramount for management team to consider improving its international expansion strategy. Some of the regions that it should consider include Asia and Europe since they the retail industry in these regions is not yet saturated. However, there are some environmental factors which may limit the firm's growth. These relate to social, economic, technological and political factors. The firm can take advantage of its global reach and develop strategies that focus a particular country instead of adopting a global strategy. This will enhance the firm's penetration rate.
