For this assignment, I wanted to focus on an industry that I feel would affect me in the future. The company I chose to focus on was Wal-mart. Wal-mart is in a very unique and interesting industry. While it is considered a retail industry, Wal-mart can be broken down into multiple smaller industries. This gives them many struggles in keeping up with customers wants and needs.
They complete anywhere from your local grocery store, to Amazon and everywhere in between. First, I wanted to research into Wal-mart as a company to better understand their strategy. Currently, Walmart is in 27 countries with 11,000 stores. They are in the top 10 companies on S&P 500 index. Each week, more than 250 million customers visit their stores across eleven countries. The company as started back in 1962 in Rogers, Arkansas as Discount City.
Their bulk store, Sam’s Club, started in 1984. Walmart is focused on a low price strategy, having transparent, and having quality customer service. In 1970 Walmart became a national traded company. Point of sales systems were implemented in 1983 increase accuracy and speed at the checkout. By 1990, Wal-Mart became the number one retailer.
Helping with this was the new idea of the Wal-mart Supercenter. This gave shoppers a one stop shop which was revolutionary to the industry the time. This is where much of my focus will be for this essay. Specifically focusing on how each of the industry’s that Wal-mart is in and how they are performing in those industries. Wal-mart’s mission statement is “Saving people’s money so they can live better” and their vision is “To be the best retailer in the hearts and minds of consumers and employees.” Some example of what they have done recently include contributing resources to disaster efforts, committed over $2 billion to fight hunger and more recently they have been focusing on employees to increase their minimum wage to $9 an hour by committing $2.7 billion to this cause.
Revenue in the US went up from $482.130 billion in 2016 to $485.873 billion in 2017 which is a 0.77% increase, but profit was actually down. In 2016 Wal-mart profited $14.694 billion then in 2017 they profited $13.
643 billion which is down by 7.2% (Jurevicius). As we dive deeper into a strategic analysis of their company we can see how Wal-mart is working to achieve their mission, value and goals. As we use Porter’s model we see Wal-mart is very much so a cost leader. They strive to keep low prices on their goods and service. If we look more in-depth on their strategies we can see their focus on market penetration, market development, and product development. As we define a strategic formulation, Anthony Henry states that it is a process of evaluation of a strategy or choosing the most appropriate strategy in order to achieve the organizational goals and objectives. As we dive into Wal-mart’s product strategies we see they offer a variety of products both their own and competitors.
They are always look for ways to improve their products such as Great Value and Sam’s Choice to provide more competition for other products and better option for customers. As we see Wal-mart’s service strategy is train their employees to help the customers. By this, they help with their concerns and needs. Wal-mart has made changes to their retail strategy to put neighborhood markets in urban area rather than having larger supercenters. These neighborhood markets sell mostly groceries and fresh products. Wal-mart is also working to increase communication and marketing with their customers.
They have a created a new ad campaign. It is titled “Save Money, Live Better” and their goal is to increase consumer trust and promote their low prices. They are trying to show consumers that they care about them and want to help them. If we perform a PESTLE analysis we see that political factors include high stability and much political support across the world which provide great opportunities for the future growth of Wal-Mart.
Some concerns with moving into new markets/countries is a lot of risk and uncertainty due politically stability issues. Also as Wal-mart look to expand there may be concern if the country will affect its operations in a negative manner. We saw in 2012 that growth of retail markets increased by about five percent. Also private label products sales increased by forty percent over the last ten years which shows that customers are more accepting of supermarket products versus national brands.
Online shopping grew by 4.7 % in 2011 which helped Wal-mart achieve revenues of $197 billion. They also launched mobile shopping app in that year to help provide a better experience for online shopping by making their experience faster and more effective. Threats we see is pressure for higher wages. We find an increased competition from competitors, especially to eliminate the differences in prices between them and Wal-mart. There is more resistance from local retailers because they are struggling to compete with Wal-mart and often times are closing their doors.
A final threat is the constant fluctuation, meaning the potential increase, in cost of products due to fuel prices, currency changes, tariffs, etc. As we focus on the economical factors, we see that major economies are stable, developing countries future growth, and a decrease in unemployment in the United States. With Wal-mart being a multinational corporation, an economic recession may affect Wal-mart positively on most items. While a surge, for the most part, will have a somewhat negative impact on their operations. Other concerns include the ever fluctuating currency exchange which will have an impact on Wal-mart’s imports and exports. The price oil has a major affect on Wal-mart’s pricing and profit margins. Also a factor politically for Wal-mart could be if a political group tries to exploit any views Wal-mart holds that could hurt their growth in certain countries and regions.
Some Social factors include an increase in healthy lifestyles and diversity. As Wal-mart enters new countries, the company needs to be aware of society’s culture. They need to pay attention to labor laws and minimum wage requirements for the countries they are located in. Wal-mart will need to continue to observe social forces to stay up to date. If they don’t, it can severely affect their company as whole.
As Wal-mart enters in new countries, they will need to make sure that their store and employees focus on the social standards that are in the country they enter into.Technological factors that play into Wal-mart, is an increase in business computerization, big data analysis, and increasing use in mobile devices with consumers. As we focus on environmental factors we find business sustainability and environmentally minded products become an increased focus for consumers. Lastly, we see that legal factors include food safety and employment regulations are positive for Wal-mart. A concern for wal-mart will be tax law reforms that may hurt them. Wal-mart has done well at staying at the top in terms of technology, but as they continue to expand and grow, keeping an advantage in technology will save them significant time and money in the future; meaning they will hold a competitive advantage over their competition.
As we shift to another analysis of Wal-mart’s Porter’s Five Forces, we see that they have strong competition, both with smaller companies and large organizations like Old Navy and Amazon. The power of both buyers and suppliers to bargain is pretty weak. Due to the fact that Wal-mart has such a large market and is often times a suppliers largest demand, they have to somewhat succumb to the will of Wal-mart. While Wal-mart doesn’t want to run its suppliers out of business, Wal-mart is often able to negotiate what they want because there is very few who can even demand many supplies from their company. Also having over four thousand trucks, Wal-mart is able to provide much of its own transportation to stores. Since many buyers are looking for a lower costs, if they find another place that sells it for less and is the same product, they will often buy the cheaper option. If buyers are looking for cheaper prices generally, they will often go to Wal-mart because they have almost everything for cheap.
Everything may not be the cheapest and Wal-mart will often take advantage of this sell some stuff a little higher to increase profits. There is moderate concern of substitutes being a threat to their company. While you can buy from smaller local stores, the variety at Wal-mart is uncomparable. Online purchases are an up and coming concern. There still some products that cannot be fulfilled by purchasing online, specifically those products that are used daily or perishable. Wal-mart has also offered delivery to their store for free fairly quickly to help combat this substitute. There is little concern for the threat of new entries into the market because a new firm would struggle to gain such a high economies of scales would be very difficult for new entries. This is due to Wal-mart hold such a great advantage with their brand name, cutting edge technology, tons of stores across the nation and world, and plethora of financial resources.