Synopsis of Wal-Mart - Analysis of Resources, Capabilities, and Value Creation - Term Paper Example

STRATEGIC MANAGEMENT By Name Course Instructor Institution City/State Date Strategic Management 1.0 Synopsis of Wal-Mart Wal-Mart’s strategies have continued generating better performance; as a result, the firm is enjoying a competitive advantage over its main competitors. Wal-Mart competitive advantage was achieved thanks to the successful quest for numerous strategies by the firm’s managers, particularly Sam Walton, the founder of the company (Hill et al., 2014, p.1). The strategies (business-level Strategy, corporate-level Strategy, and international-level strategy) helped Wal-Mart to lower the structure of its cost, gain more market share, charge low prices, as well as develop into a more profitable company as compared to its competitors. Notably, these strategies behind Wal-Mart success were selected by the firm’s managers. Akin to other companies’ successes, Wal-Mart’s success has been rooted largely in how fruitfully its managers perform their strategic roles. With regard to business-level Strategy, Wal-Mart utilises a combination strategy of cost differentiation as well as leadership, offering a broader variety of services and products with the improved or similar quality at a cheaper price as compared to that offered by its rivals (Ireland et al., 2008, p.88). Wal-Mart focuses on seeking means for reducing their costs by continually rethinking way to conclude their support and primary activities so as to cut costs more whilst maintaining differentiation competitive levels. Their triumphant supply chain management has been the crucial way of the firm to put into practice the strategy for cost leadership. Through just-in-time inventory the firm has obtained valuable inbound logistics, and from outbound logistics they have reduced costs by generating improved fuel efficiency in their trucks; thus, receiving extra pallets on a load, as well as reducing bare miles covered by their trucks. Besides that, technology continues playing an important part in Wal-Mart’s supply chain, given that it enables it to correctly project demand, forecast and track inventory levels generate transportation routes that are highly efficient, as well as handle service response logistics and customer relationships. Therefore, Wal-Mart’s productive overall strategy on cost leadership/differentiation has resulted in high market penetration hurdles for competitors. Based on corporate-level Strategy, the key answer behind Wal-Mart’s success lies on the verity that the firm focuses and believes on the single business strategy, considering over 95% of its profits is attributed by the firm’s grocery business. For more than three decades, the single business strategy has greatly resulted in Wal-Mart success, bearing in mind that the firm has never have faith in the diversification concept for the growth rations (Harrison & John, 2009, p.88). With regard to international-level strategy, Wal-Mart has succeeded in penetrating into the global market as a consequence of using multinational business strategy. According to this strategy, customers from different nations must be treated in a different way and for this reason profitability and productivity remains higher. It has been very important for Wal-Mart to cater differences in all regions in preferences of product; therefore, they operate under the philosophy "Different Stores for Different Folks (Biy, 2011).” 2.0 Written Presentation 2.1 Analysis of Industry In the retail industry where Wal-Mart operates, there is medium pressure on potential competitors: for instance, entry barriers are moderately high, given that Wal-Mart has an excellent brand name, locations, distribution systems, as well as financial capital to dissuade competitors. Furthermore, there is medium pressure on competition amongst established companies. At present, the main incumbent firms existing in the similar market as Wal-Mart includes: Target Corporation, K Mart, and Sears. Of the three competitors, Target Corporation is the strongest bearing in mind that it has experienced incredible local markets’ growth and its niche is somewhat defined effectively. The other two competitors (K-Mart and Sears) appear to be drifting and lack the ability to challenge Wal-Mart (Bidness Etc, 2013). Moreover, there is low pressure in the buyers bargaining power, such that an entity buyer lacks pressure on Wal-Mart. For years there have been complaints from consumer advocate groups concerning the pricing techniques used by Wal-Mart. Besides that, there is low pressure on substitute products, considering that when it comes to retail industry, substitutes offering low pricing as well as convenience are not many. So the buyers have the option of going to scores of Wal-Mart’s competitors so as to get their needed products; however, they cannot find low pricing offered by Wal-Mart in such stores. Evidently, online shopping and e-commerce have proved to be an additional option for the reason that they are poles apart and buyers may get price advantages since the firm requires no brick and mortar store; thus, the savings are passed onto the consumer. This without doubt will influence strategy development and implementation, considering that in current very competitive environment a strategy insuring a reliable approach to providing the company’s product/service in a manner outselling the competition is important. Still, at the level of defining the business strategy, Wal-Mart must as well have a methodology that is well defined for the routine implementation process. 2.2 Analysis of Resources, Capabilities and Value Creation Low prices and logistics have been distinguishing capabilities of Wal-Mart that have made it exceedingly competitive. Wal-Mart’s concentrates on some outstanding capabilities, which have generated distinguished value for its customers.  These unique capabilities consist of their advanced supply chain management, store design, international acquisitions, in addition to professional point-of-sale data analytics. Undoubtedly, these important resources have aided in giving Wal-Mart the chance to compete in the competitive retail market. Basically, Wal-Mart stores are always designed around the experience of its customers. A number of the stores’ features include bright interior paint format, low-profile shelving, wide walkways, and luminescent lighting. Such features are implemented so as to make shopping at firm easier and improve the customer experience (Fanno, 2012). Besides that, Wal-Mart has as well at all times been a technological leader in supply chain systems. These technology systems have enabled Wal-Mart together with its suppliers get important information concerning consumer trends. IT systems have as well helped Wal-Mart maintain instant inventory and minimal human error (Fanno, 2012). Information from these systems is also passed on to suppliers; thus resulting in value creation. With regard to tangible resources, Wal-Mart operates a biggest private satellite system for communication, which allows tracking of sales, inventory replenishing, and process payments. On the other hand, Wal-Mart, intangible resources includes its exceptional brand reputation across the globe, which was brought about by the company emphasis on community and customer service. Furthermore, Wal-Mart has outstanding worker loyalty thanks to its workers profit-sharing as well as stock ownership plans that has helped workers to behave and think like the company owner. An additional resource utilized by Wal-Mart is the Point of Sales (POS) System used in facilitating supply chain management. In this case, the POS system has assisted workers in monitoring current sales, stores’ inventory, as well as backup goods and deliveries at the centres of distribution. This has to a great extent reduced workers stress and more stock is kept on the customers’ shelves. Additionally, Wal-Mart carries out all its transportation individually considering that by owning a distribution infrastructure, Wal-Mart gas managed to successfully move its goods to the various distribution centres and stores. Considerably, this has managed to reduce the firm’s costs of transportation. Wal-Mart’s capabilities of restocking their stores’ shelves are almost four times faster as cored to its rivals (Fanno, 2012). Their system for internal transportation has as proved to be exceedingly valuable and is tied in with great simplicity. Cross docking is one of one of the flourishing logistic practices done by Wal-Mart, and is involved in loading and unloading of materials without unneeded storage. Basically, cross-docking has offered Wal-Mart an increased competitive advantage by cutting lead time and improving inventory levels forecast. Furthermore, cross-docking has aided in reducing labour, storage, as well as managing costs; thus making Wal-Mart to remain more competitive. 2.3 Strategy Options/Recommendations for Wal-Mart Business-level Strategy: Wal-Mart has to determine how to bundle capabilities and resources so as to generate core competencies and afterwards make use of the generated core competencies to satisfy the needs of the customer through business-Level Strategy. Wal-Mart ongoing efforts to cut costs compared with competitors are essential so as to fruitfully become a cost leader. They can achieve this through building modern efficient facilities that can be hard to be imitated by competitors, maintain firm control on overhead and production costs, and reduce cost of service, research and development, and sales (Hoskisson et al., 2012, p.143). Wal-Mart management must understand that value is offered to customers through distinctive attributes and features of the firm’s products and services, instead of through the lowest price. This may be achieved through rapid innovation of products, high customer service, highly developed technological features, and so forth. In order to create Value Wal-Mart must lower buyers’ cost, raise performance of buyers, and creating sustainable reputation. Corporate-level Strategy: Wal-Mart corporate strategy must handle a number of the most important strategic issues facing the firm. These may involve issues such as how to structure the financing of the company and what capabilities the firm can invest in. without a doubt corporate strategy is imperative to Wal-Mart for the reason that it offers the firm an overall direction to follow so as to attain a competitive advantage. The strategy enables the firm to be proactive, instead of reactive (Hill et al., 2014, p.288). This connotes that Wal-Mart can exploit opportunities and plan for the future rather than just responding to changes in the local and international market as they ensue. Thanks to this strategy, Wal-Mart can boost the firm's efficiency, productivity, revenue, and competitive advantage. Cooperative Strategy; A well structured cooperative, which is currently missing can offer Wal-Mart noteworthy benefits in areas it lacks certain competencies, resources, or knowledge; thus allowing the company to protect these by connections to other firms having complementary assets or skills. Furthermore, cooperative strategy may as well enable Wal-Mart easily access new opportunities, and markets (Hitt et al., 2009, p.247). Through cooperative strategy, Wal-Mart international presence may be boosted given that the strategy facilitates international expansion. International Strategy: International strategy can help Wal-Mart leverage economies of scale: considering that it sells numerous types of product globally, so it can buy purchase its stock in bulk, potentially resulting in saving lots of money. In this case, economies of scale can help Wal-Mart save money in packaging cost, labor cost as well as costs for marketing materials (Calori et al., 2000, p.165). International strategy may as well be valuable with reference to product life cycle, whereby Wal-Mart can phase its products’ release, bringing older products in newer markets; thus saving money. 3.0 Questions and Responses Do formal planning systems help managers make better strategic decisions? In order for strategic planning to function, I think it is imperative that senior managers strategies not only from the perspective of the present competitive setting but as well from the perspective of the future competitive environment, and this can be only be made possible by formal planning systems. So to attempt and predict what that future will appear, managers may use formal planning systems to plan for diverse likely futures. Formal planning systems make it possible for top managers to focus on important matters and still make decisions, but this can become imbalanced if such systems are missing (Rowe & Nejad, 2009). Thanks to such systems, procedures for formal strategic planning may lessen the effects of some over excited planning process partakers aspiring to dictate the decision making process with their individual views, devoid of properly taking into account other people views. How can the procedures of strategic planning moderate the power use in a planning group? Influential members of a top management group or amongst partakers in planning meetings may make use of the unstructured planning processes informality for their individual aspirations. But under the moderating effects of formal strategic planning procedures, this is less likely to happen particularly when led by a skilled, autonomous and experienced facilitator (Rowe & Nejad, 2009). It is worth noting that the power issue in strategic planning teams is not just about the exercising formal authority related to the roles of the most top management. Given that numerous less senior managers, with strong political skills as well as hidden agendas may lead the discussions in the strategic planning process to directions best suiting their individual ambitions. Therefore, well-made guidelines used in a formal and systematic and strategic planning process can make it harder for influential group members to unjustifiably influence what takes place during the deliberations of strategic planning (Rowe & Nejad, 2009). 4.0 Conclusions Competition in the current global financial system is multifaceted, demanding, and full of competitive threats and opportunities. Therefore, practices of effective strategic leadership have assisted Wal-Mart improve its performance whilst competing in unstable and changeable business environment. Given that the social energy is driving Wal-Mart, organizational culture puts forth a very important influence on its performance. So to make continued Wal-Mart growth possible, its strategic planning department at all times will remain truthful, open and frank while interacting with the stakeholders, and also workers. Furthermore, strategic planning department will have to develop, use, and guard Wal-Mart intellectual capital limited to the knowledge bases it its citizens. The firm will at all times be challenged to develop means through which knowledge may be transferred to units as well as people wherein it may be used and developed further so as to achieve strategic competitiveness. With perceptive leaders, strategic planning department know that they have to keep control over particular key decisions within the firm. Therefore, even though the department will delegate scores of imperative decisions to lower-level workers, it will not delegate decisions that they deem to be of vital significance to the future achievement of Wal-Mart, like articulating the firm’s business model as well as vision. References Bidness Etc, 2013. Walmart (WMT) Industry Analysis. [Online] Available at: http://www.bidnessetc.com/business/walmart/industry-analysis/ [Accessed 8 November 2014]. Biy, K., 2011. Walmart. [Online] Available at: http://www.scribd.com/doc/54690779/Walmart [Accessed 8 November 2014]. Calori, R., Atamer, T. & Nunes, P., 2000. The Dynamics of International Competition: From Practice to Theory. New Jersey: SAGE. Fanno, A., 2012. Walmart – Part 3: Internal Analysis. [Online] Available at: http://andrewfanno.wordpress.com/2012/02/23/walmart-part-3-internal-analysis/ [Accessed 8 November 2014]. Harrison, J. & John, C.S., 2009. Foundations in Strategic Management. New York: Cengage Learning. Hill, C., Jones, G. & Schilling, M., 2014. Strategic Management: Theory: An Integrated Approach. New York: Cengage Learning. Hitt, M., Ireland, R.D. & Hoskisson, R., 2009. Strategic Management: Competitiveness and Globalization, Concepts. 1st ed. New York: Cengage Learning. Hoskisson, R., Hitt, M., Ireland, R.D. & Harrison, J., 2012. Competing for Advantage. New York: Cengage Learning. Ireland, R.D., Hoskisson, R. & Hitt, M., 2008. Understanding Business Strategy: Concepts and Cases. New York: Cengage Learning. West, D., Ford, J. & Ibrahim, E., 2010. Strategic Marketing: Creating Competitive Advantage. Oxford : Oxford University Press. Read More