INTRODUCTION Wal-Mart Stores, Inc. also known as Walmart, is an American multinational retail corporation headquartered in Bentonville Arkansas, United Stated, was formed by Sam Walton in 1962. It runs chains of large department discount stores and warehouses. The company focuses on providing high quality branded products at the lowest price. In connection to this, the company offers general merchandise such as family apparel, health & beauty aids, household needs, electronics, toys, fabrics, crafts, lawn & garden, jewelry and shoes. The business started launching in small-towns eventually moving into larger cities throughout South and Midwest way back the aftermath of Second World War when the retailing style in US changed into discount merchandising. In early 1970s, Walmart became a public traded company and cracked sales of $78 million with its 51 stores. Upon building its distribution center, home office, it opened its first Walmart Supercenter encompassing both supermarkets with general. Later on, it was recognized as the American Top retailer in 1980s and topped the fortune 500 ranking of American largest companies in 2000s. The rivalry in retail industry has become highly competitive and intensified putting Walmart under pressures of different aspects. During 2006 and 2007, the company had faced its tough years in only achieving low sales and stock value weakening. With other legal troubles, public relations problems and labor issues, Walmart is starting to be outperformed by its rival’s competitive actions. In response to the low profits, the company uses the strategy of opening new stores that lead to its growth. However, dilemmas continued to appear specifically the political and environmental ones that are likely affecting its ability to attract new customers and maximize sales. With these factors at hand, Walmart initiated actions to cover the issues and pressures of its environment. It pledged to raise wages 6 percent in a third of its stores, reduced cost of health care benefits, and even revamped its environmental strategy. As Walmart continues to grow and enter additional international markets, the number of entities and complexity of environmental pressures also surges. EXTERNAL ENVIRONMENT GENERAL ENVIRONMENT Political Environment As one of the leading retail companies operating across the globe, Walmart have become subject to various political matters. As they operate in different regions and nations, the policies there can directly influence Walmart’s manufacturers and suppliers, operation of the stores, and even threats to its corporate revenues. With other different environmental issues, several cities impose legal obstacles to the locations of Walmart stores in specific areas which are an indication that the governments keep attention closely to the store’s operations. Thus life and entry of the company stores highly depends on the degree of its compliance to the existing policies and rules established by the government in certain area. Economic Factors Walmart’s operations are also affected by economic stability. If the economy is booming then it sales goes up and vice versa. However, the company faces criticism concerning its work culture and employee satisfaction which undermine the reputation of the company. Therefore, as low cost strategist, the company should take into account the economic landscape of the locations where it operates like if the place has high taxes, interests, minimum wages policies which critically affects its sales and decisions resulting from former dilemmas stated. Social Environment The company is an American retail global brand. Operating across the globe, Walmart has to face social challenges particularly the meeting of its strategy and way of market to the culture and preference of the people in certain location. The company adapt according to the nature to seek social acceptance of its brand. Technological Factor From the start, Walmart has used technology as a tool to improve its operations. The firm utilizes Internet for data exchange with thousands of its global suppliers. It also created its data warehouse prototype to store historical sales data and implemented Retail Link system which provides vendors information on sale trends and inventory levels, and used RFID technology which automatically identify and track tags attached to object. Furthermore, the company has also introduced Site to Store service, enabling online customers to pick up merchandise in stores. Environmental Factor Walmart has undergone several environmental pressures. As a major retail brand company, the company has produced so much wastes products such as usage of plastics for packaging, greenhouses gases from operations which have an impact directly to the environment. With these issues, Walmart has taken new green initiatives with the assistance of Conversation International aiming to a goal of producing of no waste, providing fuel from renewable resources, to work closely with its suppliers to promote good environmental practices. As a commitment to its environmental sustainability, the company provided data on its Web site that can be used to track its reduction of waste and greenhouse gas production. Legal Factor Targeting to be the greatest retail brand firm recognized internationally, Walmart must abide the laws and regulations of the world. Some of the common laws which can influence its stores operations and management include employment regulations, data protection laws, labor laws, and health and safety laws. Failure of compliance may affect the performance and image of the brand. For the past years, several lawsuits have taken against Walmart for its poor labor management and low compensations which resulted to huge payments for damages inflicted to the complainants. PORTER’S FIVE FORCES MODEL Threat of New Entrants- Weak Force In consideration that a retail industry is a highly saturated market, new entrants would face difficulties in succeeding in the industry. Walmart, as one of the leading giant retail brand, have invested high initial capital on proprietary materials and technologies, efficient access of distribution channels, skilled labor and human resources and its low cost strategy will make other competitors hard to enter the industry without heavy amount of capital and complete marketing strategy based on comprehensive research. Though small local retail companies with specialization in particular products can offer competition to Walmart in specific areas, still based on its size and scope, there is a weak force in the threats of new entrants. Bargain Power of Supplier- Weak Force In Walmart’s nature of business, forging of relationship with suppliers is essential. The company offers variety of low priced products hence purchases huge quantities of products from its suppliers. The bargaining power of the suppliers is low because Walmart as a retail company have a lot of substitutes for products for inventory stocks and low switching costs from one supplier to another. Therefore, suppliers have minimal influence in Walmart. Bargain Power of Buyer- Weak Force Wal-Mart has known for its high quality but low-priced products. These conveniences and prices are the main factors which reduces the bargaining power of customers. The switching cost in the retail industry so customers do give very low pressure in Walmart. Threat of Substitute Products- Weak Force Due to the wide variety of products like groceries, hardware, health, pharmacy, entertainment, apparel, stationaries, house appliances and home furnishing with substitutes of each of them, Walmart has become a leading retailing company. With this reason, the threat of substitute products is weak because of its offered broad range products which also cost low. Also, some available substitutes are more expensive than the low-cost goods and services available at the company’s stores or if some substitutes have higher quality but still it has minimal effect. Competitive Rivalry- Strong Force The intensity of competitive rivalry is strong in the retail industry. Retail giant Walmart have facing several competitors of its same nature and scope like Target Corporation, Costco Wholesale Corporation, Sears Holding Corporation, etc. in the industry environment. Because the products are undifferentiated, these rivals formulated strategies trying to inflict difficulties to Walmart’s low cost strategy. However, the company is already familiar with business war thus making successful marketing and business strategies enough to maintain its global position in the industry. INTERNAL ENVIRONMENT Strengths: 1. Walmart offered wide range of high quality low cost products of multiple categories such as groceries, hardware, health, pharmacy, entertainment, apparel, accessories, stationaries, house appliances and home furnishing 2. Walmart has established high brand name due to successful marketing and operations 3. Utilizing customer-oriented approach securing customers’ loyalty 4. Has high efficient global supply chain provides business resilience from market-specific risks, such as disruptions in local supply chain, and 5. Has information advanced technologies for monitoring and controlling the movement of products from suppliers to its stores 6. Has strength in its entire operation of stores across the globe Weaknesses: 1. Have faced numerous lawsuits concerning to its employees mistreatment – unfair wages, poor benefits, discrimination resulting to tarnished reputation as an employer and lost significant money 2. Some products are undifferentiated or same merchandise or inferior quality in related to other competitors 3. Poor emphasis on Human Resource management and development resulting to employee turnover and lack of motivation among employees 4. The ambience of the stores is dull and feels like a warehouse wheel making it hard for customers to find their products of interest and do not bring “shopping galore” vibes. Opportunities: 1. Increasing demand through adjusting to customers’ taste and preference just like as the trend toward healthier eating continues, Walmart has the opportunity to introduce special products related to this trend, including more organic and gluten-free options. 2. Walmart has an opportunity to improve its stores design and ambience through creating new efficient and organized way of places of goods, establishment of larger signage, etc. 3. To consider in expanding its online store and presence most especially to the emerging economies that are considering shopping online. 4. Offering the American market to both the developed and developing country’s customers 5. Mergers and acquisitions to strengthen the brand. 6. Acquire more advanced technologies to improve its operations Threats: 1. Intense and increasing competition amongst other retail companies targeting to minimize price difference with Walmart while offering more enjoyable shopping experience which can affect the market share of Walmart 2. Since Walmart is a global operating company, recessions, fluctuating dollar prices, economic crisis etc. can affect its business operations 3. Imposing legal obstacles of local communities to prevent the entry of Walmart stores in their area. 4. A threat of rising commodity product prices due to increased manufacturing costs and other regulatory factors, thereby diminishing Walmart's profit margin and competitive advantage. CORPORATE-LEVEL STRATEGY Wal-Mart has quite a number of corporate-level strategies, such as the single business strategy and public affairs strategy. The public affairs strategy of this firm is important for its long term success in that it creates room for expansion into other sectors, as well as into foreign countries. By taking the public affairs approach, the organization is forced to focus on customer satisfaction, as well as getting involved in other community activities thereby keeping a good name and not to be subject of government regulators and is less likely to be sued by environmentalists and activists. Cost Leadership Strategy of Walmart Walmart emphasizes on the long-term strategy of cost leadership. With this strategy, the company ensures that it offers customers with quality products at relatively lower prices than other providers in the industry. This captures the customers’ attention thereby makes the most of revenues in the industry. Differentiation Strategy of Walmart The company uses differentiation strategy by providing wide range of products with distinctive design, features, technology, fine quality and customer satisfaction compared to other competitors. Walmart also differs from its competitors because of its unique transportation, logistics, and information systems which lower the costs of the Walmart’s products. Furthermore, Walmart’s website allows product recommendation for consumers which helps enforce the brand's differentiation strategy Focus Strategy of Walmart To make customers reach to the stores more convenient, Walmart is offering seamless shopping experience where customers can scan items as they shop and then pay using smart phones. Thus, the company focuses on E-commerce to improve sales through growing range of brands and expansion of marketplace. STRUCTURE Walmart have a Divisional Organization Structure at the top level which is relevant to a company operating in different markets and a matrix organizational structure at the store level where employees are divided into teams by projects or product lead by a manager. The key divisions are Wal-Mart Realty, Wal-Mart International, Wal-Mart Specialty, Sam's Clubs and Super-centers. Each division is given enough resources and autonomy and has its own functional workforce. The benefit of this organizational structure is that companies are able to specialize its activities into self-reliant divisions, each capable of satisfying e.g. customer demands and changes business environment. RECOMMENDATION Walmart has become the leading global retail company. In order to stay at the top of the industry, they should exercise strategies modifications and alterations to achieve it key goals. Walmart has been aggressive entering the market globally therefore they should increase investment on research and development to understand foreign markets and its environment before the market entry in order to reduce social and cultural difference and avoid possible significant losses and lawsuits cases that they have experienced for the past years. Another one is to continue to develop its online store giving shopping satisfaction to customers as Ecommerce continues to emerge. Raise the satisfaction of traditional customers through giving more benefits like promotions and gifts to maintain loyalty and increased mouth advertising. Lastly, make strategic alliances with successful companies and maintain good relationship with stakeholders to strengthen its brand name.
