1) Who are Wal-Mart’s major external stakeholders? Do a strategic
constituency analysis creating a new figure that describes Wal-Mart as you
understand it.
External stakeholders are
individuals, groups and entities from outside that are affected by the
consequences and outcomes of an organizations decision. External stakeholders
include customers, supplies, government and communities. The external
stakeholders of Wal-Mart henceforth are the customers, suppliers, communities,
competitors and the unions.
The strategic constituency
analysis is an approach that suggests that an efficient organization is the one
which fulfills the demands of these constituencies in its environment from whom
it needs support for its survival. It assesses the effectiveness to satisfy
multiple strategic constituencies both internal and external to the
organization. This approach is ideal for organizations which rely highly on
response to demand. The strategic constituency approach takes explicitly into
consideration that the organizations fulfill multiple goals like workers,
consumers and the local community. In these there opt to be a distinct
interests vis-à-vis the corporation and thus use different evaluation criteria.
However, isolating the strategic
constituencies from their environment within which they function is a
challenging and tricky task because the environment swiftly changes that is
what is a crucial goal today, might not be so tomorrow. Individual
constituencies may create significantly diverse ratings of organization
effectiveness.
Creating the new figure of
Wal-Mart using the strategic constituency
Customers
Wal-Mart reason for existence is
to provide goods and services which is evidenced from its objectives which
states that they want to provide the customers with what they want, when they
want it, all at a value. Wal-Mart thereby wants to provide these goods and
services that meet the customers need and benefits in a more meaningful way.
The customers therefore plays vital role in the success of the business and to
its survival. The customers provide the feedback to the company which helps the
organization to consistently improve their goods and services to meet the
customer’s expectations. With this somebody can depicts that the customers are
the major external stakeholders of Wal-Mart. More so, customers do not
necessarily have to wait for the promotions to kick off so as to buy from the
organization because they offer lower prices as they are based with the low
margin and high sales volume strategy, so the customers then boost their
savings by buying from Wal-Mart. Wal-Mart has become so passionate to the
customers as the organization appreciates that their success is just
contributed by its customers and they focus on the needs of the customers to
obtain the total customer satisfaction.
Community
The community plays a major role
in Wal-Mart as they are also the major external stakeholders of the company.
The communities provide with the source of labor to Wal-Mart and they also
provide with customers who buy goods and services from the organization, as
well as the potential customers. With that Wal-Mart has to plough back to the
community so as to show the appreciation, this then build a good reputation of
the company thereby no protests can be encountered from the community as the
one which happened in several towns in Massachusetts.
Competitors
Competitors are the Wal-Marts
external stakeholder and they play a very pivotal role in the success of the
business. These competitors provide competition to the company so that at the
end of the day Wal-Mart is forced to provide quality products to the customers.
Competitors also makes the organization to become efficient that is Wal-Mart
has the best logistic system, so to achieve all these competition is vital to
put pressure on the organization so that it strives for the best. The
competition opt to be a fair and an ethical one so that the organization builds
its reputation, unlike what happened with Wal-Mart where it opened the branch
small retailers were closing because they were pushed out of the business which
caused the protests from some communities and they didn’t allow them to open
the other branch in some areas. This maybe was due unfair competition and some
ethical issues as some newspapers published results concerning the results of
Wal-Marts entrance into new markets.
Suppliers
The suppliers are also the
external stakeholders of Wal-Mart. The suppliers of the company must be
reliable and efficient, that is they opt to provide the materials at time. They
is also a need to be a relationship with the suppliers, that is the good relations
with the suppliers for the continuous and long lasting business. The suppliers
also must have a clean ways of doing business, not what happened with the
Wal-Mart suppliers who were using the child labor in Bangladesh. This kind of
publication might ruin the reputation of the company, so the organization must
choose wisely its suppliers.
Government
Government is also a major
external stakeholder of Wal-Mart. Government governs laws and regulation to the
organization. It portrays the laws to be adhered to as a company which sees
Wal-Mart abiding to those laws and thereby expanding internationally. In the
case study there is no situation whereby the organization did not adhere to the
laws and regulations.
2) Do a SWOT analysis of Wal-Mart. What are the company’s distinctive
competencies?
THE SWOT ANALYSIS STRENGTHS
Marketing Aspect
Wal-Mart emphasis is on its brand
image that is providing the customers what they want, when they want it, all at
a value and treating each other as they would hope to be treated. Wal-Mart has
roughly 2500 stores in US, and then internationally it has bought 122 Canadian
Woolco stores as at March 1994 which is set to grow drastically. In UK, it has
a new firm base. Wal-Mart has excellent logistic system. They create the ideal
one - stop shopping experience, due to the acquisition and conglomerate of its
wide product range customers can do one stop shopping products, because in
Wal-Mart there is all that the customer might need.
Management Aspect
Wal-Mart's policies and practices
are designed to ensure an environment that is inclusive and equitable. They
provide training on working with people, equal employment opportunities,
leading skills, diversity and help to achieve career objectives. Wal-Mart has
strong community - based initiatives. Corporate structure of Wal-Mart is very
well rounded and managed with core values like respect for the individual,
striving for excellence and service to their customers. The management of
Wal-Mart is the backbone to the entire firm and these core values have
propelled them to the top of their industry. They have allowed Wal-Mart to be
world's largest company.
Finance and Accounting Aspect
The company operates stores
worldwide, and in the international market whereby in it bought 122 Canadian
Woolco stores. The company focuses on offering the lowest prices across its
business segments, which together earned $80 billion in revenue in 1994.
Research and development
Wal-Mart's innovation keeps it a
leading retailer in retail industry as it is regularly turning out new
patents/proprietary technology. Development and innovation are high at Wal-Mart
with regard to their products/services which give ultimate profit.
Computer Information System
Wal-Mart uses satellite based
communications for connecting the entire network of stores and to track the
company’s delivery trucks so increase efficient. Wal-Mart is offering safe,
secure and informative complete website where consumer can purchase products
easily. Through web-site of Wal-Mart, one can find whatever information about
Wal-Mart.
WEAKNESSES
Marketing Aspect
One of the biggest marketing
weaknesses from Wal-Mart is the resistance to expand into new market nationally
and internationally. There are many areas across the US tried to block the
introduction of Wal-Mart because of the economic impact like local stores,
traffic and environmental problem, for example in 1994 several towns in
Massachusetts forced the company to withdraw its buildings plans. Wal-Mart has
a damaged reputation because when they move into a new location they end up
"forcing" for opening new stores which is unethical.
Finance and Accounting Aspect
Wal-Mart ratios compared to that
of the industry are unfavorable. The sales growth of its warehouse club lowered
far below the industry of 27%, this then shows that the company is not in a
good financial position.
Production and operation Aspect
Wal-Mart sell products across
many sectors, as it follows a low margin and high volume sales strategy which
means it emphasizes on pushing the sales which then compromises the quality of
the products they produce, and it may
not have the flexibility of some of its more focused competitors.
Research and Development Aspect
Wal-Mart is not actively engaged
in any Research and Development. Specifically, they do not do prior research
before opening a new store in any new area.
OPPORTUNITIES
Economic Aspect
Whenever any country encourages
foreign investment with new trade agreements, large businesses like Wal-Mart
have the ability to offer its products and services. This simply increases the
markets available to retailers. Wal-Mart offers all products under private
labels. Expanding brand portfolio, Wal-Mart incurs lower operational costs,
high quality product and gaining higher margin. Wal-Mart has tremendous
opportunities for future business in expanding consumer market, this is
evidenced by its acquisition, merging and entering into a joint venture with
Cifra which is a Mexican retail chain. This then shows that Wal-Mart has the
greatest opportunity to be one of the leading retailers in the world.
Social, cultural, demographic and environmental Aspect
In order to fulfill obligation
and responsibilities towards social and culture, Wal-Mart opened an in - store
clinic called ‘The Clinic at Wal-Mart' to connect with local hospitals. The
company then could leverage rising health care spending in the US to boost
revenues of its pharmacies and health clinics.
Political, Legal and Government Aspect
Asian market is virtually
untapped by the retail world in many extent. It gives huge opportunities to
expand business with unlimited and unexpected potential growth and profits. The
company then took into account the consideration of expanding to Brazil, China and
Hong Kong in December 1994.
Technological Aspect
In these modern days, online
shopping is growing at a faster pace. To take advantage and experience of internet
shopping, customers can easily purchase products by receiving friendly site
designs, efficient order fulfillment, fast delivery and response. It can help
Wal-Mart to make huge revenue online as most customers now prefer to shop
online.
THREATS
Economic, social, demographic and environmental Aspect
Wal-Mart is facing stiff
competition from a large number of companies in the retail market worldwide and
local stores. Intense competition could adversely affect the revenues and
profitability of Wal-Mart. They face opposition and resistance from communities
by local and international market like small retailer in US and opposition of
shopkeepers and retailers on introduction of Wal-Mart in Massachusetts.
Political, Legal and Governmental Aspect
Being a global retailer, each
firm is being threatened by the political aspect, that is in the countries
where they operate in they are governed by the nation's industrial and general
laws, rules and regulations. Like Chinese government does not take kindly open
to their country to foreign establishments.
Technological
As technology changes and
advances, products being sold today are gone tomorrow; this provides fewer
products to sell and continuous change with technology update. Thus, Wal-Mart
has to update technology as per current demand and upgrading requires high
investment.
Apart from the SWOT analysis,
there is the SCOT analysis of which the W is replaced by the C which stands for
the challenges. Wal-Mart was facing the challenges which included the growing
number of less than complimentary newspapers articles concerning the results
of, Wal-Marts entrance into markets. This then led to the rising of the
eyebrows from other stakeholders of the company.
WAL-MART CORE COMPETENCIES
A core competency is defined as
something unique that an organization has, or as something unique it can do. A
company that develops a unique core competency can create a long lasting
competitive advantage.
The organizations core competency
is the culture. The company’s employees are hardworking, efficient, and process
oriented. The founder of the Wal-Mart called his employees partners as he
valued their input and ideas on how to make the company better. Sam Walton
always wanted the best, in that in every branch the customer goes they received
the excellent customer service and always receive low prices.
More so, the company core
competency is low cost operations. Wal-Mart focused on small towns and lower
overhead. As the economy worsened, people began looking for lower prices and
moving to smaller towns and suburbs. Today Wal-Mart can create big sales volume
which allows the company to gain profits with low profit margin giving it an advantage
over its competitors.
CONCLUSION
Wal-Mart is the largest retail
firm in the world with strong market position in the US. The company's strong
market position in the US provides economies of scale and enhances the brand
image to the company. It derived almost 75% of revenue from the US market.
However, the company faces stiff competition with local players which can
adversely affect the revenue and profitability of Wal-Mart.
In order for Wal-Mart to stay at
the top of their game and follow the company strategy and achieve their key
policy goals, they are going to have deal better with their stakeholders and
make sure they guard their reputation well nevertheless they are criticized by
some community groups, women's rights groups, labor union, grassroots
organizations and resistance to union represent.
Key Strengths
The key strengths are employees,
financial position, customer oriented, one-stop shopping, satisfaction
guaranteed programs, employee stock ownership and profit-sharing, well-rounded
business, ease of website, good reputation, and favorable access to distribution
networks.
Key Weaknesses
The key weaknesses are some
ratios are not sufficient, non-unionization, no formal mission statement,
undifferentiated products and services, site research, and finally a damaged
reputation.
Key Opportunities
Key Threats
The key threats are competition,
labor unrest, brand loyalty disappearance, supplier backlash affects
performance of company.
3. How would you describe Wal-Marts “grand’ strategy? In terms of
Porters generic strategies? In Miles and Snows adaptive models
A grand strategy is a
comprehensive, long term plan of essential actions by which a film plans to
achieve its major objectives. The key factors being market, product or
organizational development through acquisition, divestiture, diversification,
joint venture or strategic alliances. According to Wal-Mart its grand strategy
is that it used the strategy of paying
careful attention to its market segment of customers looking for quality at a
bargain price that’s it followed a low margin and high volume sales strategy so
to achieve its two main objectives which are, providing customers what they
want, when they want it, all at a value and secondly, treating each other as
they would hope to be treated, acknowledging their total dependency on their
associate partners to sustain success.
Porter described an industry as
having multiple segments that can be targeted by a firm. The breadth of its
targeting refers to the competitive scope of the business. Porter defined two
types of competitive advantage lower cost or differentiation relative to its
rivals.
COST LEADERSHIP STRATEGY
This strategy involves the firm
winning market share by appealing to cost-conscious or price-sensitive
customers. This is achieved by having the lowest prices in the target market
segment, or at least the lowest price to value ratio (price compared to what
customers receive). To succeed at offering the lowest price while still
achieving profitability and a high return on investment, the firm must be able
to operate at a lower cost than its rivals. There are three main ways to
achieve this.
Cost leadership strategies are
only viable for large firms with the opportunity to enjoy economies of scale
and large production volumes and big market share. Small businesses can be cost
focus not cost leaders if they enjoy any advantages conducive to low costs.
Innovation of products or processes may also enable a startup or small company
to offer a cheaper product or service where incumbents' costs and prices have
become too high.
A cost leadership strategy may
have the disadvantage of lower customer loyalty, as price-sensitive customers
will switch once a lower-priced substitute is available. A reputation as a cost
leader may also result in a reputation for low quality, which may make it
difficult for a firm to rebrand itself or its products if it chooses to shift
to a differentiation strategy in future.
In terms of the Wal-Mart
organization, its grand strategy is described in terms of porters cost
leadership strategy in that it sold cheaper goods so as to achieve its two long
term objective it has. With that the organization grew more than its rivals
because it then expanded internationally in terms of joint ventures,
acquisition and conglomerate.
DIFFERENTIATION STRATEGY
A differentiation strategy is
appropriate where the target customer segment is not price-sensitive, the
market is competitive or saturated, customers have very specific needs which
are possibly under-served, and the firm has unique resources and capabilities
which enable it to satisfy these needs in ways that are difficult to copy. Successful
differentiation is displayed when a company accomplishes either a premium price
for the product or service, increased revenue per unit, or the consumers'
loyalty to purchase the company's product or service (brand loyalty).
Differentiation drives profitability when the added price of the product
outweighs the added expense to acquire the product or service but is
ineffective when its uniqueness is easily replicated by its competitors.
Successful brand management also results in perceived uniqueness even when the
physical product is the same as competitors.
Differentiation strategy is not
suitable for small companies. It is more appropriate for big companies. To
apply differentiation with attributes throughout predominant intensity in any
one or several of the functional groups (finance, purchase, marketing, and
inventory.
FOCUS STRATEGY
This dimension is not a separate
strategy for big companies due to small market conditions. Big companies which
chose applying differentiation strategies may also choose to apply in
conjunction with focus strategies (either cost or differentiation). On the
other hand, this is definitely an appropriate strategy for small companies
especially for those wanting to avoid competition with big ones.
In adopting a narrow focus, the
company ideally focuses on a few markets targeted(also called a segmentation
strategy or niche strategy). These should be distinct groups with specialized
needs. The choice of offering low prices or differentiated products/services
should depend on the needs of the selected segment and the resources and
capabilities of the firm. It is hoped that by focusing your marketing efforts
on one or two narrow market segments and tailoring your marketing mix to these
specialized markets, you can better meet the needs of that target market. The
firm typically looks to gain a competitive advantage through product innovation
and/or brand marketing rather than efficiency. A focused strategy should target
market segments that are less vulnerable to substitutes or where a competition
is weakest to earn above-average return on investment.
Having described the Porters
generic strategies, which imply that a firm positions itself by leveraging its
strengths. Porters argued that a firm strength fall into either cost leadership
or differentiation, thereby it results in his three generic strategies which
are explained above.
Wal-Mart grand strategy according
to Porter grand strategy is cost leadership strategy. This strategy calls for low cost producer in
an industry. The firm sells its products at an average industry price to earn a
profit higher than that of the rivals. The cost leadership strategy targets the
broader market. This strategy has helped Wal-Mart to become the low cost leader
in the retail market. It requires selling products at the lowest prices to
achieve economies of scale and attracts the pool of consumers and of which it
is exactly what Wal-Mart is doing. It sells products at much lower prices than
competitors do.
Wal-Mart must continue to satisfy
the needs of customers in places abroad like in the Asian market. Lastly,
Wal-Mart must continue offering lower prices to its consumers.
Miles and Snow's Strategies
Miles and Snow identified four
business-level strategies which are defender, prospector, analyzer and reactor.
DEFENDER STRATEGY
Organizations implementing the
defender strategy attempt to protect their market from new competitors. As a
result of this narrow focus, these organizations seldom need to make major
adjustments in their technology, structure and or methods of operation. Instead
they devote primary attention to improving the efficiency of their existing
operations. Defenders can be successful especially when they exist in a
declining industry or a stable environment.
PROSPECTOR STRATEGY
Organizations implementing a prospector
strategy are innovative, seek out new opportunities, take risks and grow. For
an organization to implement this strategy it needs to encourage creativity and
flexibility. They regularly experiment with potential responses to emerging
environmental trends. Thus, these organizations often are the creators of
change and uncertainty to which their competitors must respond. In such an
environment, creativity is more vital than efficiency.
ANALYSER STRATEGY
Organizations implementing
analyzer strategies attempt to maintain their current businesses in be somewhat
innovative in their new businesses. Some products are targeted in stable
environments, in which an efficiency strategy designed to retain current
customers is employed. They attempt to balance efficient production for current
lines along with the creative development of new product lines. Analyzers have
tight accounting and financial control and high flexibility, efficient
production and customized products, creativity and low costs. However, it is
difficult for companies to maintain these multiple and contradictory processes.
REACTOR STRATEGY
The firms that follow a reactor
strategy have no a consistent strategy-structure relationship. Rather than
defining a strategy to suit a specific environment, reactors respond to
environmental threats and opportunities. Sometimes these organizations are
innovative, sometimes they attempt to reduce costs and sometimes they do both.
Reactors are organizations in which top management frequently perceive change
and uncertainty occurring in their organizational environments but are unable
to respond effectively. Therefore failed organizations often are the result of
reactor strategies.
Having described the Miles and
Snows adaptive model, then we look at the Wal-Mart grand strategy in terms of
these adaptive models. In this case Wal-Mart seems to be following the
prospector strategy, whereby it is continually searching for more and new
opportunities. It means that the business thrives in the changing business environments
to have an element of unpredictability, and succeed by constantly examining the
market. Wal-Mart seems to be constantly responding to the emerging
environmental trends. The prospectors’ strategy involves pursuing innovation
and new opportunities; Wal-Mart has bought the idea of being innovative by
creating the one stop shop for the convenience of its customers and also at
reasonable price.
4. Would you consider Wal-Mart to be an entrepreneurial organization? Why or why not?
Entrepreneurial organization can
be defined as an organization that places innovation and opportunism at its
heart in order to produce economic or social value. It is a simple
organizational form that typically includes one large operational unit, one or
a few individuals in top management. There are some characteristics that show
that Wal-Mart is an entrepreneur organization which is described below.
Integrity
When it comes to integrity, it is
important to make your word your bond and always stand by it. Treat others as
you would like to be treated, Wal-Marx treated each other as they would like to
be treated which is actually the main objective of the organization. More so,
the organization is making good deals for example it entered into a joint
venture with Cifra, a Mexican retail chain which resulted in the opening of 60
Wal-Mart stores in 1994.
Customer Focus
A company is nothing if it does
not have customers. Wal-Mart focuses more on its customers as one of its
objective states that they focus on providing the customers what they want, when
they want it, all at a value.
Innovation
As competition was increasing at
a faster pace, Wal-Mart created the one stop shopping in 1987 Swhere customers
would not have to go to another shop to buy some goods but to get everything in
one shop. Creating this kind of atmosphere it then shows the level of
innovative Wal-Mart has. In most cases unsuccessful people resist change due to
the fear of the unknown, but with Wal-Mart it’s not the case because the
founder always accepted change and depended on the continuous improvement of
effectiveness which led to the success of the organization.
Risk Takers
Wal-Mart proved that it is a risk
taker by acquiring the 122 Canadian Woolco stores in 1994. Being a high risk
taker means that a group or an individual is an excellent entrepreneur and more
so, they are prepared to fail. They think outside the box and always try new
things for example Wal-Mart acquired the 326 Wholesale clubs although the
Wholesale club sales slowed considerably from the industry which was 27%, but
it did not close the branch, which portrays the high level of being a high risk
taker.
Results Oriented
The profits that Wal-Mart makes
show really that it is an entrepreneur organization. Being an entrepreneur
means a firm has to focus on results. Wal-Mart attained its results by
developing something that customers want and producing then delivering it at a
price that is fair to all parties involved as the organization sold its goods
and services at the lowest prices than the competitors.
Vision
Vision is the ability to think
about or plan the future with imagination or wisdom. The founder of Wal-Mart
had a vision which even today stands as a guideline of the organization.
Moreover the C.E.O laid out a philosophy of the organization which is their
main two objectives which are to provide the customers with what they want,
when they want it, all at a value and treating each other as they would like to
be treated. The vision they had they clarified it and used it on their daily
basis.
BIBLIOGRAPHY
1. Michael E Porter (1980)
competitive strategy, Free press
2. Philip Kotler (1975) Marketing Management analysis, Planning and control 3rd edition Prentice Hall
2. Philip Kotler (1975) Marketing Management analysis, Planning and control 3rd edition Prentice Hall
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