Businessand Corporate Level Strategy
TheBusiness Level Analysis on Wal-Mart Corporation
Wal-Mart’simmense success in the retail industry has been facilitated by theirunique cost leadership strategy. Since its inception, theorganization has been focusing on offering high-quality goods andservices at relatively low prices compared to other companies(Tanwar, 2013). Its primary approach involves reducing theoperational expenses by cutting some links in their supply chain. Forinstance, the company prefers to work directly with manufacturersrather than intermediaries.
Wal-Martachieves differentiation through three approaches, including theprovision of high-quality items, setting low prices, and stocking avariety of brands of the goods and services (Tanwar, 2013). Theseaspects are intertwined and define the company’s brand. As aresult, people go shopping at Wal-Mart stores because they know thatthey will get an opportunity to compare the available range of goodsas well as spend relatively less money compared to other places. Theyare also aware that the company does not compromise quality even whenthey reduce costs significantly.
Inthis section, the company has mastered the art of targeting all themarket segments with their variation strategy and productdiversification. For instance, brands charge differently for theirgoods and services. Therefore, Wal-Mart has capitalized on thisaspect and stocked different brand of items. In this case, peoplewith adequate resources buy premium products while those with lessfinancial capacity go for brands which are not expensive (Tanwar,2013). Correspondingly, the approach also enables people to finditems which appeal to their cultural and religious senses, and meetthe related needs.
Fromthe assessment, it is apparent that the company’s cost leadershipapproach is an essential strategy because it is the link between allother strategies. Reduced cost of operation enables the firm toimplement its differentiation plan successfully. They can afford tostock all kinds of products, regardless of the related expensesbecause of the leverage they get from their short yet effectualsupply chain. Additionally, people`s purchasing decisions are drivenby cost aspect. Therefore, lowering the cost of merchandise isWal-Mart`s greatest tool for overcoming the tight competition in themarket.
CorporateLevel Strategy Analysis on Wal-Mart
Between1960 when the company was established by Sam Walton and 2000, thestrategy focused relatively more on growing into other areas comparedto expansion. As a result, it established branches in over 25countries within the period (Wal-Mart, 2016). At the same time, itincreased the number of retail stores within the nations it operated. From the onset, the organization’s defined how they wanted toovercome the competition in the market. Sam Walton, the pioneer ofthe vision, realized that the retail stores at the time soldexpensive products, thus locking out a large number middle andlow-income category of people. Additionally, they did not diversifytheir goods and services. Wal-Mart saw an opportunity in thisshortcoming and launched a business which sought to meet thecost-related needs of the public. They also wanted to addresscultural and religious requirements of people by stocking varioustypes of brands to provide an opportunity to make appropriatechoices. This tactic was one of the aspects which facilitated thepopularization of the company`s name within this period.
Moderateto High-Level Diversification
After2000, the corporation began to expand its activities based on theplatform they had built in the past. Their growth in other countriesprovided the foundation upon which they established other lines ofbusinesses. For instance, they legitimately distinguishedinternational branches of the mainstream system. Wal-Mart Corporationremains the mother company and operates in the United States. It isthe leading contributor of the firm’s total revenues. On the otherhand, Wal-Mart International, as popularly known, consists of thebusinesses in other countries (Wal-Mart, 2016). Correspondingly, theylaunched Wal-Mart e-commerce by embracing internet and informationtechnology, and using the related tools to facilitate consumerengagement, value co-creation, and online transactions. Technologyprovided an opportunity for the enterprise to establish an efficientvalue chain process because people do not have to travel to the storeto get what they need. They can view the products through theirinternet-enabled gadgets compare prices, place orders, and requestdoorstep delivery. The fourth line of business is called Sam’s clubwhich comprises of people who have registered and are officiallyloyal customers of the company. This way, they get merchandise atrelatively cheaper costs than others. Wal-Mart e-commerce and Sam`sClub are integrated into Wal-Mart Cooperation and Wal-MartInternational business lines.
However,Wal-Mart’s most important strategy is the cost leadership approachwhich they began from the moment the company was established. As themarket becomes increasingly competitive, businesses begin toout-perform each other based on how much they can reduce the pricesof their goods and services. Consumers have always prioritized costand quality as the two essential factors which determine whether theybuy items. They also tend to remain loyal customers of theenterprises which tend to meet their economic interest and give themthe opportunity to make choices by presenting various options.
TheCompetitive Environment of Wal-Mart
The competition in the industry is intense because of the presence ofa high number of retail stores such as COSTCO, Dollar GeneralCorporation, and Kohl`s Corporation among others (Traub, 2012).Furthermore, these companies employ aggressive cost leadership,marketing, and brand management strategies. Therefore, Wal-Mart mustenhance its price reduction techniques further and strive to remainthe industry’s leading enterprise.
Wal-Martexperiences a weak influence from customers because of the lessnumber of individual buyers as well as the increased diversity ofconsumers. Therefore, they cannot marshal any significant force tocompel the corporation to meet their needs. However, Wal-Mart mustremain aware of the large population of buyers who exert a lot ofinfluence in the industry. Otherwise, the company should continuewith its customer attraction and retention approaches.
The overall impact of vendors on Wal-Mart is the weakest forcebecause of the high number of manufacturers and abundance of supplies(Traub, 2012). These aspects have caused a stiff competition toemerge in the supply sector. Additionally, they have been striving topartner with Wal-Mart with the aim of tapping into the company`slarge market base. Currently, Wal-Mart is the dominant and mostaggressive retail store in the United States and other countries.
Theoverall threat imposed on Wal-Mart is weak because of the lessvariety of alternatives. As a result, customers find it difficult toswitch from their favorite retail stores to alternate products.Furthermore, the company has specialized in diversifying itsproducts, thus attracting a lot of people. Moreover, most of thealternative goods and services cost relatively more compared to theones provided by Wal-Mart. However, the corporation should developstrategies to counter the moderate influence imposed on the industryby the availability of supernumerary items.
Thethreat of new entrants is high because of the less capital needed toestablish a store. Additionally, it also cost relatively less tooperate a business in the retail industry compared to other sectors(Traub, 2012). Lastly, brand development does not require a lot ofresources. Therefore, Wal-Mart must develop new strategies to counterthe competition imposed by emerging businesses.
Thecompany’s greatest source of competition is COSTCO because theyhave similar business principles and ideals. In fact, COSTCO almosttook over leadership in the industry when Wal-Mart was facing fiercecriticism related to discrimination against female workers. However,Wal-Mart is likely to succeed more than COSTCO in the long runbecause it has a superior and consistent cost leadership strategycompared to COSTCO.
Performancein Slow and Fast Market Cycles
Wal-Martwould continue to outperform COSTCO in a fast market cycle because ituses a strategy which attracts a lot of customers at once. Thecompany`s cost-cutting approach enables it to achieve productdiversity in a way that meets the economic, cultural, and religiousneeds of the diverse community. Apparently, this attribute would alsomake it victorious in slow market cycles because it has a largenumber of customers to depend on when the economy experiences arecession. COSTCO is likely to lag behind because its price reductionapproaches are not as effective as its opponent’s strategies.Furthermore, they have a smaller customer base owing to their weakperformance in the international market.
Tanwar,R. (2013). Porter’s generic competitive strategies. Journalof Business and Management,15(1),11-17.
Traub,T. (2012). Wal-Mart used technology to become supply chain leader.ArkansasBusiness, July,2.
Walmart.(2016). Walmart.com: Save money. Live better. Retrieved August 09,2016, from http://www.walmart.com/