Free Research Paper About Corporate-Level Strategy Of Walmart
Business and Corporate Level Strategy
Business and Corporate Level Strategy
The industry that will be analyzed in this report is a retail industry, and the public limited company that will be comprehensively evaluated is Walmart. In 1962, Sam Walton established Walmart. It was incorporated on October 31, 1969. It was listed on the New York Stock Exchange in 1972. In 1962, it began with a single store in Rogers, Arkansas. It has developed into what is presently the world's biggest, the most emulated retailer. A few researchers allude to Walmart as the business innovator. Today, this retailing pioneer has annual incomes of over $100 billion, more than 750,000 representatives and 3,000 stores and around the world. Walmart controls each one store, from the items it stocks, to the front-end supplies that helps speed checkout. It gives everyday low costs and predominant customer service. Lower costs additionally reduce the expense of successive sales promotions, and deals are more predictable (Mallaby, 2005).
Business-Level Strategy of Walmart
A business level strategy is the one in which the firm uses a set of commitments in order to gain competitive advantage. Wal-Mart since the beginning has maintained its cost-leadership strategy. This creates barriers to entry for the new entrants because they are considerably unable to beat the low-pricing strategy of Wal-Mart (Mallaby, 2005). The current pricing strategy for Wal-Mart is low price strategy. The slogan of Wal-Mart “Everyday Low Prices” has provided the company with its unique selling point as the consumers - be they want to purchase organic or non-organic items are always interested to make purchases from the place where they are offered one-stop experience with low prices and quality products. This is the entire package that Wal-Mart offers, on the whole (Mallaby, 2005).
The success story of Walmart is a classic example of a company that has been meticulously following its core strategy and philosophy of the cost leadership since 1962 – the year it began its operations. The concept relies on the fact that retain sector is driven by volume rather than high prices, and the company is able to succeed only when it offers better value for their money. The company’s success during the initial two decades was based on this strategy with a focus on establishing discount stores in small towns where the market was left uncaptured and capturing a considerable market share. With the help of this business strategy that the company has been able to make commendable investments in Information Technology (IT) to manage the supply chain (Mallaby, 2005) effectively.
Another business strategy implemented by Walmart is a differentiation strategy that involves offering new services, products, and deals that meet the needs and requirements of the customers. Hence, Walmart uses a combination strategy of differentiation and cost leadership. Through this combination, the company is able to provide different products and services with improved quality and price that is cheaper than what is offered by their main competitors. In order to gain success from these strategies the company continually strives to find ways to lower their costs by thinking and rethinking how to provide their support and primary activities that help in reducing costs while still maintaining differentiation strategy and competitive advantage (Mallaby, 2005).
Walmart’s triumphant and efficient supply chain management is an integral way to implement the cost leadership strategy in an effective manner. The company has implemented an inbound logistics system by using the just-in-time inventory. The outbound logistics costs have been reduced with the better usage of fuel, by decreasing unnecessary miles driven by the trucks and with more pallets on the load (Dess, 2012). Research done for this report shows that Wal-Mart’s use of technology for aligning its business processes and supply chain processes impacts the customer satisfaction and loyalty. Clearly, due to the use of technology, Wal-Mart is able to save cost which could otherwise incur in the coordination and management of supply chain processes. The cost which is saved due to the use of technology provides the customer with the best pricing and differentiation as compared to the other major retailers. Walmart should continue to follow the same business-level strategies as they have turned out to be effective, successful and the company has been able to maintain the competitive advantage (Dess, 2012).
One of the major reasons why the company has been successful is that it believes and concentrates on the corporate level strategy of one business which means that more than 95 percent of Walmart business comes from the grocery. For more than three decades the strategy of single business has been extremely successful for the company and the company hardly believed in the concept of diversification to sustain growth and development and penetrate into international markets (Dess, 2012).
One of the most significant corporate strategies is to dominate the retail market. As mentioned earlier that the strategies designed by Sam Walton are still in place and implemented successfully by Walmart. Walmart is a discount retail as they follow the strategy of Everyday Low Prices. This corporate strategy is still in place as the main concept behind this is to cut the price on each item as much as possible, reduce the markup and earn profit on the increased sales.
Another successful aspect of this corporate strategy is that each unit is competing with another unit. Each Walmart store is encouraged to contend viciously against all the stores in the customer base until it gains competitive advantage against all the other stores in the area (Quinn, 2000). Wal-Mart is ranked among the world’s best retailers and number one company in sales on the Fortune 500 list (Quinn, 2000). The main strategy is to dominate the market, and the company has been able to implement this strategy effectively with its resource and competitive position.
The international expansion and corporate strategy is effectively in place by Walmart.The company currently employs over 1.5 million employees and 4000 stores worldwide. Internationally now it operates in Argentina, China, Korea, Mexico and the United Kingdom. The expansion strategy of Walmart at the international level has been extremely powerful and aggressive. At the international level, the company has been focusing on the corporate takeover. This provides an additional advantage to the company when it intends to enter into new markets (Dess, 2012).
Through corporate takeovers, a large competitor is taken over at once, and Walmart is able to manage a strategic position in that particular location. This is an efficient use of Walmart’s resources and size as not a lot of competitors are able to implement this strategy. Walmart also develops brand familiarity and positioning while able to retain the recognition of old stores. Once the local Walmart store is able to profit and gain competitive advantage over other competitors, the Walmart then gradually redesigns the acquired stores to look like Walmart store and refurbish to make a larger store in the new market. This is the reason; Walmart is one of the largest retailers in UK and Canada. These corporate strategies are effectively incorporated into the chosen business strategy with low-cost leadership, and differentiation strategy of the company and the retail store is performing well since its inception (Trefis Team, 2014).
The Competitive Environment of Walmart and Strategy Comparison
Wal-Mart competitors can be categorized as local competitors, both direct and indirect and international competitors. Three main competitors of Wal-Mart are:
Target (Direct Competitors)
Costco and (Direct Competitors)
Dollar Tree (Indirect Competitors)
Costco and Target are direct competitors of Wal-Mart in the local industry, they are the most prominent, and significant threat to the market share and customer of Wal-Mart. Costco is the biggest wholesale discount store that competes with Sam’s Club of Wal-Mart (Trefis Team, 2014). Target is considered the biggest threat when we consider all levels of competition with Wal-Mart. Wal-Mart’s low price strategy is exactly followed by Target. Target is gaining advantage in comparison to Wal-Mart because the sales are increasing and high-income customer base is attracted towards purchasing from Target store as compared to Wal-Mart because of more variety of groceries and other items available in Target stores (Anthony, 2007).
Target is considered Wal-Mart’s direct competitor as it is the second largest retail store in U.S. after Wal-Mart. Target’s strategy is a bit different from that of Wal-Mart because it is able to provide its customers with discounted goods at higher quality and offer more product variety at its store as compared to Wal-Mart (Edgar, 2011). This is a strength in the retail store because it is able to attract high-income customers to the store and is able to generate higher revenue as compared to Wal-Mart. The main customer that is attracted to shop from Target has an average annual income of US$ 50,000 as compared to average annual income of US$ 35,000 of the customer attracted towards Wal-Mart (Edgar, 2011). The business strategy followed by Target store is differentiation and focus strategy. The main advantage to Target store is that it implements the focus strategy because it caters to a wide variety of segments and can offer competitive products to the customers. On the other hand, the corporate strategy is growth and continuous expansion as compared to focus upon single product line and less expansion strategy. Target store is taking over the profitability and market share of Walmart along with customer share. It is important that Walmart changes its business strategy and start focusing on new products and development and focus on increase customer base.
The industry that is analyzed in this report is a retail industry, and the public limited company that will be comprehensively evaluated is Walmart. In 1962, Sam Walton established Walmart. It was incorporated on October 31, 1969. The Walmart business strategy focuses on cost leadership and differentiation, and the corporate level strategy targets upon one main business which means that more than 95 percent of Walmart business comes from the grocery. Target is considered Wal-Mart’s direct competitor as it is the second largest retail store in U.S. after Wal-Mart. Target’s strategy is a bit different from that of Wal-Mart because it is able to provide its customers with discounted goods at higher quality and offer more product variety at its store as compared to Wal-Mart. Target due to its innovation business and corporate strategy is taking over Walmart market share and customer base.
Anthony Bianco, A. (2007). Wal-Mart's Midlife Crisis: Declining growth, increasing competition, and not an easy fix in site. Business Week, (4032), 46-56.
Dess, L. E. (2012) Corporate Level Strategy, International Strategic Management, http://brianhenderschiedtbsad428.blogspot.ca/2012/03/walmartcorporatelevel strategy.html
Edgar Ambartsoumian (2011) “Target, Wal-Mart, And Costco: Retail's Competitive Environment” http://seekingalpha.com/article/298995-target-wal-mart-and-costco-retails-competitive-environment
Mallaby, S. (2005). Progressive Wal-Mart. Really The Washington Post.
Quinn, Bill (2000) How Wal-Mart is Destroying America and the World, Berkeley CA: Ten Speed Press.
Trefis Team (2014) “Week In Review: Wal-Mart, Costco And Target” Forbes.
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