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Wal-Mart International: Strategic Management

Introduction

This paper explores benefits and limitations to strategic management. To appraise the benefits of strategic management, this paper discusses in depth how the different aspects of strategic management are applied. To concretize the analysis of strategic management, the paper focuses on Wal-Mart International, which is one of the world’s most successful retail stores.

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Wal-Mart International’s Identity

Wal-Mart International has grown steadily to have its presence felt all over the world. Wal-Mart has experienced phenomenal growth since inception due to embracing strategic management practices. Most successful organizations make strategic planning central to their operations (Sanchez & Heene, 2004, p. 23). The main aim of working on a strategic plan or business plan is to identify ways and means through which an organization can guarantee good results, a competitive edge or a competitive advantage in the long term (Ulwick, 2000, p. 11).

A strategic process should be able to help a company or an organization to understand its current situation, identify a desirable future status and ways of ensuring it arrives at its desired status or end (Wernerfelt, 1984, p. 174). Wal-Mart already has a vision, mission and overriding objectives. This is critical because the strategic process begins by identifying or framing the desired future. The future of an organization is captured in its vision, mission and strategic objectives.

Strategic Analysis tools

The first logical step in a strategic process is understanding the current status or where an organization is. It is from understanding the business environment that a company can identify its purpose or mission. The process of analyzing a business environment requires looking at different facets. To do a proper business analysis, one would have to employ such tools as SWOT analysis, Five Forces model by Porter, Global model or PESTEL, Value chain analysis, among others (Joyce & Woods, 2001, p.233).

These tools help in analysis both the internal and external environment to establish how factors in either environment are affecting or are likely to affect the organization. From the internal environment, the strengths and weakness of the organization are identified for the purposes of defining how best to restructure the organization. From factors in the external environment, an industry analysis is done enabling the organization to identify opportunities and like threats to its operations.

Strategic Opportunities and Challenges

Despite registered gains, Wal-Mart can only continue extraordinary growth when it identifies and manages strengths, opportunities, weakness and threats creatively. Therefore, Wal-mart can only continue its extraordinary growth by capitalizing on its strengths, tapping into opportunities in the market, addressing weaknesses and eliminating or minimizing threats. A SWOT analysis is an important tool towards understanding a business’ environment (Ireland et al, 2008, p. 45).

Strengths
  • High sales (strong brand)
  • Large market
  • IT enabled logistical functions
  • Diverse (international) work force
  • Long tradition of operations (42 years)
  • Good pricing strategy
Weaknesses
  • Store format issue
  • Technology deployment issue
  • Human capital issues
  • Internationalization related issues
Opportunities
  • International markets
  • E-commerce
  • Large super store opportunities
Threats
  • Vigorous, focused competition
  • Price fluctuations

SWOT analysis on Wal-Mart based Yoffie (2005).

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Porter’s five forces would be helpful in determining what would limit Wal-Mart’s growth. According to porter, an organization or products performance is dependent on five distinct forces (Mintzberg et al, 1998, p. 100). Wal-Mart does not deal in totally differentiated products. Therefore, the threat of new entrants and competitive rivalry is very high in the retail industry and is likely to go up. Considering supplier power in the retail industry, there are many suppliers thus minimizing supplier power. On the other hand, buyers have enormous power due to many retailers and a variety of substitutes. Therefore, the greatest limit to Wal-Mart’s growth is likely to result from competition activity and customer perception of the competition rivalry.

Further, A PESTEL analysis can help in outline other factors likely to affect the performance of Wal-Mart. Politico-legally and even environmentally, there is no opposition to Wal-Mart’s foray into intentional markets (Fishman, 2006). Around the world, Wal-Mart thrives on free market systems and the fact that it enjoys huge economies of scale due its huge operations. Technologically, Wal-Mart is better placed than all other retail stores in the new markets having adopted IT in its logistical processes (Bianco, 2007). Therefore, using its economic advantage and awesome business strategy, Wal-Mart enters other international markets as is able to outwit competition in those markets; consequently, it became a dominant global player.

A company’s growth is limited both by internal and external factors (Peteraf, 1993, p. 178). Considering internal factors, the only limitation to Wal-Mart’s growth is challenge in managing a global conglomerate of sorts. Externally, social and cultural perceptions are likely to shape and limit Wal-Marts expansion. Wal-Mart employs very many people.

As it continues on the path of extraordinary growth, it means more people being employed to work in the branches and subsidiaries or joint ventures. Managing all the people and the multifaceted conglomerate will not be ease. In actual sense, unless the organization is fragmented such that given regions or lines become completely independent, managing the organization becomes a nightmare. Therefore, the extraordinary growth of Wal-Mart is likely to be checked by management complexities or challenges.

On the external front, there is likely to grow a sort of disenchantment about Wal-Mart and its conglomerate size. For many individuals out there, although Wal-Mart is growing based on honest and best business practices, as it continues to whoop in billions in profits; inevitably, seeds of discontent will sprout among people of different nations. Wal-Marts growth will be interpreted as the reason why small businesses can no longer develop or grow.

A percentage of the world population does not like identifying with Mega things (Dess et al, 2009, p. 227). Therefore, they will continue to seek small specialty brands rather than a mega brand that promises everything. For some people, small specialized is identical to personalized, caring and detailed thus more quality conscious (Sadler & Craig, 2003, p. 66). Such like sentiments are likely to make competition buoyant. Other people will just desert Wal-Mart in search of difference or something new. The products may not be new but given they buy from a new brand, the shopping experience is different.

Strategy Formulation: Grand Strategies

Wal-mart already has a vision and mission that defines the organization’s aspirations and its purpose or key business functions. As an organization, it has a high market scope and a high low cost competence. The organization’s characteristics and the business environment should determine the kind of strategies that an organization adopts. In the case of Wal-Mart, by adopting multivariate strategy e.g. combining product differentiation, cost leadership and proper market segmentation, it can maintain its extraordinary growth.

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The two grand strategies should be translated into business objectives that are further translated into operational objectives and strategies. Building and sustaining a competitive advantage is largely dependent on product characteristics, value for customer’s money and proper positioning and targeting of products. In porter’s generic strategies, market segmentation looks at customer peculiarities and narrows concern to particular markets. Product differentiation and cost leadership as strategies are more diverse and broader in their scope. As Wal-mart’s characteristics show clearly, a good fusion of these generic strategies should enable it to continue growing in an extraordinary way (Bianco, 2007).

Wal-Mart is a strong brand developed over many years and supported by over 42 years experience as a major market player (Yoffie, 2005, p. 1). It has a high market share and due to expanded operations benefits immensely from economies of scale. Management, by riding on its huge market share and well-built brand resonance, can create more revenue streams under the same brand. The company is already doing this through creation of superstores with a variety of products on offer (Yoffie, 2005, p. 1).

There exists opportunities in the international market. However, in as much as the low pricing strategy has driven its growth in America, the company has to devise market segmentation strategies to enjoy opportunities abroad.

One weakness with Wal-Mart is its store formats (Yoffie, 2005, p. 2). It is getting stiff competition because while it is building super stores, competition is going for specialized store formats. Product differentiation comes in handy here so that as competition from specialized stores grows, Wal-Mart retains and grows its market share. Wal-Mart needs to appreciate the growth potential in small stores like the ones it initially had; the stores it is replacing with super stores. Although having superstores has its own advantages, a fusion of superstores and small-specialized stores should guarantee continued extraordinary growth (Fishman, 2006).

Strategy Implementation

In implementing strategies, their internal consistency thus plausibility and feasibility should guide the implementation process (Joyce & Woods, 2001, 113). Strategies have to be broken into specific actions that deliver on strategic objectives. There has to be interrelation and consistence in the specific actions flowing from each adopted strategy. Each strategy should somehow have a bearing on other strategies i.e. they should mutually and intrinsically be complementary towards the same goals. The intrinsic consistency of strategies translates into the internal consistency in the specific actions to be carried out during implementation. This inner consistency and plausibility gives a sequence or order in which the implementation is to be done.

Strategic Control

Even as implementation is done, it is critical that monitoring and evaluation is instituted. The strategic process is not complete without strategic control (Dess et al, 2009, p. 234). Strategic control consists in putting in place long term measures that would ensure deviations are identified and corrected. There are always changes in the environment. Therefore, in as much as one may have a great plan and strategies in place, the environmental changes require close monitoring. Monitoring helps identify ways of improving on strategy or correcting deviations from strategy (Yergin & Stanislaw, 2002). It is only through such a process that strategies are applied effectively.

There are about five elements of control i.e. there is the activity or item to be controlled, the performance indicator, the standard against which performance is compared, the corrective action to be taken in case of deviations and the individual who is to take the corrective action (Morden, 2004, p. 165). All these elements have to be identified during strategic planning and proper directions given with respect to each of them (Morden, 2004, p. 165).

Strategic control in a conglomerate like Wal-Mart is not easy. However, through standardization of procedures and operations, this can be achieved. To ensure proper monitoring and evaluation, Wal-Mart managers would have to consider setting up a special restructuring team. The restructuring/ strategy team would have to receive daily, weekly and monthly reports on implementation activities. Such a feedback mechanism handled by a special M & E team would ensure earlier identification of deviations and prompt corrections

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Conclusion

This paper explores the benefits and limitations of strategic management. For better appraisal of the strategic process, Wal-Mart International was used. From the discussions based on Wal-Mart, it is clear that strategic management helps guarantee an organization long-term result. Clearly, proper planning is critical and no organization succeeds without planning. However, environmental changes or not scanning the environment properly limits planning efforts. Due to poor environmental scanning, organizations come up with plans based on wrong data.

As discussed, detailed planning cannot be accomplished unless one answers the question of “where to”. Therefore, in strategic management starts in deciding on the long term aspirations of an organization. The long-term aspirations are largely captured through an organization’s vision, mission and strategic objectives. Once the strategic objectives are clear, the organization then considers the necessary changes, steps, or plans that will enable the realization of the same (Kay, 2001, p. 113). Such tactics or plans are widely known as strategies. Strategy implementation is only successful if the strategies have been selected rationally. The strategies have to complement organizational resources, respond accurately to the organizational environment and have internal consistency. Finally, it is clear that strategic management is not complete without the element of control.

Reference List

Bianco, A. (2007) Wal-Mart: The Bully Of Bentonville: How The High Cost Of Everyday Low Prices Is Hurting America. New York: Doubleday.

Dess. G. G. Lumpkin, G.T. & Eisner, A. (2009). Strategic Management: Creating Competitive Advantages. London: McGraw-Hill.

Fishman, C. (2006). The Wal-Mart Effect: How The World’s Most Powerful Company Really Works– And How It’s Transforming The American Economy. New York: Penguin.

Ireland, D., R. Hoskisson, R. E. & Hitt, E. M. (2008). Understanding Business Strategy: Concepts and Cases, London: Cengage Learning.

Joyce, P. & Woods, A. (2001). Strategic Management: A Fresh Approach to Developing Skills, Knowledge and Creativity. New York: Kogan Page Publishers.

Kay, J. (2003). Foundations of Corporate Success: How Business Strategies add Value. Oxford: Oxford University Press.

Mintzberg, H. Ahlstrand, B. W. & Lampel, J. (1998). Strategy Safari: A Guided Tour through the Wilds of Strategic Management. New York: Free Press.

Morden, T. (2004). Principles of Management 2nd Ed., London: Ashgate Publishing, Ltd.

Peteraf, M. A. (1993). “The cornerstones of competitive advantage: a resource-based view”. Strategic Management Journal, 14(3), 179–191.

Sadler, P. & Craig, J. C. (2003). Strategic Management. 2nd ed. New York: Kogan Page Publishers.

Sanchez, R., & Heene, A. (2004). The New Strategic Management: Organizations, Competition and Competence. New York: John Wiley & Sons.

Ulwick, A. W. (2000). Business Strategy Formulation: Theory, Process and the Intellectual Revolution. Charlotte, NC: IAP Inc.

Wernerfelt, B. (1984). “A Resource-Based View of the Firm”. Strategic Management Journal, 5(3), 171–180.

Yergin, D. & Stanislaw, J. (2002). The Commanding Heights, New York: Simon and Schuster.

Yoffie, D. B. (2005). “Wal-Mart”. Harvard Business School, 9, 705- 460.

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