Wal Mart Case
http://www. economist. com/node/2593089 http://www. authorstream. com/Presentation/akmohideen-193472-wal-mart-case-study-education-ppt-powerpoint/ How Could Wal Mart Continue Its Extraordinary Growth Management Essay Introduction The history of Wal-Mart started in 1962 with the opening of its first store in Arkansas, USA. The store stared as a retailer in the United States, but grew to reach extraordinary levels in the years to come. Wal-Mart grew rapidly, and used several methods to accomplish this growth. They opened their own stores as well as acquiring existing stores and chains to facilitate their entry to the new markets.
The growth was not limited to the number of stores that the company opened, but it extended to the areas of operation for the store. For example, Wal-Mart entered new areas of business as it grew like pharmacies and jewelries. Wal-Mart followed an aggressive expansion strategy that was the model for their business for years, redefining concepts as they grew. But what is Wal-Mart. The store can be described as the following. It is chain of discount department stores that operate with the purpose of reducing prices, and focusing on the volume of sales.
The company’s growth is extraordinary in every sense; Wal-Mart is currently the world’s largest company by sales. Wal-Mart has recorded $260 billion in sales in 2005. The company manages over 5000 stores worldwide, 3200 of the stores located in the US, 900 in the Americas, 350 in Europe, and 440 in Asia. Wal-Mart employs a very large workforce, it has over 2 million employees, and the number is gradually increasing. Wal-Mart has adopted advance mean of technology to help it run its operations, this methods helped the growth of the company. But can Wal-Mart continue with the same level of growth.
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A company needs to maintain growth, and to Wal-Mart a reduction in the level of growth would be a cause of concern for the company’s stakeholders, because growth has a competitive advantage for Wal-Mart ever since it started. But in the saturated business of retail can Wal-Mart sustain the levels of growth anymore. SWOT Analysis Can Wal-Mart maintain the level of growth it has seen any longer? The company has made a reputation on the bases of their growth can they keep it up, to answer that we need to conduct an analysis of the company and see elements that could determine this.
A SWOT analysis would give us the needed insight. Strengths Wal-Mart is the largest company in the world; it has large volume of sales and operates over 500 stores worldwide, with 100 million clients a week. Wal-Mart has a great standing in the domestic market based on the low pricing methods they have used. Wal-Mart can change their formula to fit the market. (stores, supercenters, sam’s club, and neighborhood markets) Wal-Mart utilizes the latest technologies in inventory management to control their large inventory, and they have a wide range of products reaching over 100,000 items.
Weaknesses Wal-Mart has faced criticism regarding their management of human resources, including accusation of the use of child labor, low pay for employees by industry standards, lack of benefit like health care, and reliance on temporary workers to lower their cost. The huge size of the company causes issues, like in the case of acquiring international ventures and integrating then in the Wal-Mart system. Despite its size it has a week presence and brand image in the international market. Opportunities
Wal-Mart has a competitive advantage over its rivals; their incorporation of the latest technologies in their daily operation increases the efficiency of these operations and saves them some money while trying to enter new markets. So they would have an easier time that their rivals. Wal-Mart can further expand into Europe and Asia, both huge markets that Wal-Mart have not began to fully pursue. Wal-Mart can use their adaptability and introduce cultural clusters products. For example utilize the model that worked in Mexico in Latin America. Threats
The market is saturated, and Wal-Mart faces intense competition in both domestic and international market. Also they face competition from specialty stores. Wal-Mart faces different laws by different countries that force it to change it methods. For example being forced to unionize the workers in china under pressure from the government. Summary Wal-Mart faces several challenges in order to sustain the levels of growth it has experienced. But it is possible Wal-Mart to grow further. The company has to use the opportunities that are present to it.
They can pursue international markets more aggressively, expand in under developed markets, and continue to incorporate technology to increase efficiency and reduce costs and delays. Wal-Mart could also begin appealing to the niche markets by introducing and focusing on some special products. Question 2- What would be the limits of that growth? Introduction Growth is an essential an essential aspect of every successful corporation, and Wal-Mart in particular has made it their trademark. The rapid growth and expansion has been a competitive edge for Wal-Mart since the beginning of its operation.
However, as previously mentioned, for how long can the company maintain this level of growth? Wal-Mart’s domestic market in the United States is already saturated and they face heavy competition as well, therefore, it is logical to assume that Wal-Mart’s options lies in its international ventures. The company has started to successfully dominate several foreign markets, especially in Mexico, Canada, and to some degree, the United Kingdom, at the same time, it remains absent from other regional markets in Europe and Asia.
These unused markets would be the next step for Wal-Marts’ expansion, and their ability to cultivate those opportunities would be the key factor that would determine the limit of their growth. When a company ventures into international markets and unfamiliar cultures, they could face challenges that exist in adapting and changing to fit the culture. In addition, there are always external forces that would affect the growth potential of a corporation, and these factors are usually beyond the corporations’ control.
So in order to determine the limit of Wal-Marts growth, we have to first analyze the external environments that would affect it, the analysis is named the PESTLE analysis of external forces. PESTLE Analysis The PESTLE analysis is a tool, used to examine the external forces that could affect a company or a corporation. This analysis tool would focus on six aspects which are the political forces, the economical factors, social elements, technological innovations, legal issues, and environmental considerations.
Political Forces The political orders and systems differ from one country to another; they vary depending on the region you target. A company would be under the mercy of the political forces in each country it tries to enter; this will be a huge burden on companies and especially Wal-Mart. Since Wal-Mart prefers standardization methods, it would be a deviation from their successful methods of operation if they have to cater and change in every country they enter.
To further elaborate, if Wal-Mart had to change in every country they entered, they would have to create different processes for every time they penetrate a new market, including, administration, training, and management. When it comes to growth, those factors could very well limit the growth of Wal-Mart in a new market or make it too expensive to be economically feasible. Economic Factors The economic cycle would obviously have a great effect on all aspects of any corporation. The economic booms encourage companies to expand, while the economic downturns force them to retreat.
The effects of an economical downturn would limit or end the growth of a corporation, when a company plans to venture into new markets; they would have to take into consideration the type of economy they enter or the forecasted performance of said economy. Wal-Mart could expand into a market and be faced with an unexpected situation that would force it to cease operation, thus incurring a loss. Wal-Mart is in a constant state of expansion, so, suffering a loss in any of its fronts would reduce the profitability of the company and would damage future international expansion plans. Social Elements
Societies differ from one country to another, the differences could be unimportant to a multinational corporation like Wal-Mart, or they could be severe enough that Wal-Marts would not be able to operate in that market. For example, Wal-Marts retail chain depends on low prices with low profit margins, but large volume of sales. That method could very well not work in other countries in which the society has different purchasing habits. The inability of a company to adapt to the social characteristics of a new country would severely limit their clients’ base in that country, or it could end their operations completely.
Technological Innovations Wal-Mart has always utilized state of the art technology to gain a competitive edge, they have an integrated system of inventories that controls and monitors replenishing the stock in every store, this aspect dramatically increases the companys’ efficiency. Furthermore, the company is always looking for new technological ways to cut costs and increase efficiency. In the case of expansion into foreign markets, this vital aspect of Wal-Marts operation would be threatened.
If a certain country does not have the infrastructure to support this kind of technology, Wal-Mart would lose that competitive edge in that market. As a result, the Wal-Mart model would not be fully usable in that market, which would decrease profitability and eventually limit the organizations growth. Legal Issues Laws that are different from one country to another could very well limit the growth of a company, by restricting certain aspects and eliminating others; they disturb the work flow of a company. These limitations forced by foreign laws are a major concern for an international company.
Environmental Considerations The environment and the quest to maintain it has a great effect on major international corporations. Wal-Mart in specific, have had their run-ins with this certain issue, they have faced criticism and limitations in several countries due to a wide range of basis. Issues such as building stores on historic sites, or selling products that used wood from protected forests are issues that have more than once halted the expansion of Wal-Mart. Summary As seen, the company has no choice but to seek new markets to keep expanding, the growth rate could not be sustained in the US retail market.
The limit of the Wal-Marts growth would be their abilities in penetrating international markets, and how they deal with the barriers that those external forces push them into. Ultimately, it would come down to flexibility and willingness to change from the companies’ part. On the other hand, Wal-Mart can recreate its amazing growth performance in its domestic market by fully analyzing all the possible external forces that could have a hand in limiting their growth and formulating the strategic plans that would allow them to carry the essence of their successful model into new markets, even if it was in a new form.
Question 3- Did Asia and Europe offer Wal-Mart real opportunities for international market dominance? Introduction One of the major aims of any company is growth; they seek to expand their market share or client base or any of the several elements. Eventually, the growth is their goal, due to that fact that when a company stops growing it gives the image of trouble to its stakeholders. Companies will at some point have to consider exploring new markets, these markets would most likely be outside the companys home country.
Expansion into a foreign market offers many advantages to companies and is very appealing to most of them, however, it is important that all corporations carefully analyze the environments that they are about to enter. In these foreign markets, there could be forces that if ignored could cost a company greatly. Wal-Mart is not new to international expansion and they already operate in several countries. Despite that fact, Wal-Marts performance in some international markets did not match their extraordinary domestic growth.
To better understand those reasons, we have to analyze the environments that Wal-Mart ventured into, as well as the forces they faced. Porters Five Forces The Porter Five Forces is a tool used to analyze the competitive environment in any industry in order to determine the level of threats that the company faces. Porter categorized the threats into five headings. Threat of new entry Wal-Mart is in the retail business and more specifically the discount retail industry, the threat of new entry is low to medium.
Wal-Mart is a well established company that has mastered the processes and has set up highly efficient operations, especially their distribution networks. Threats on this level is low due to the barriers that a new competitor would face in order to compete against Wal-Mart. This point is at its strongest in Wal-Marts domestic market, the situation is different when Wal-Mart ventured abroad where Wal-Marts lesser presence acts against it, but even then, Wal-Mart could enter the market and use its pricing methods to successfully obtain a share in the new market. Threat of Rivalry
This threat is medium to high; Wal-Mart has a lot of competitors in both domestic and international markets and as a result of Wal-Marts nature, it has a large number of competitors. Wal-Mart faces intense competition from organizations such as Target and Best Buy, each of those companies are a threat to Wal-Marts dominance in the market. In the international field, Wal-Mart faces competition from well established multinational corporations like Carrefour, the level of competition that Wal-Mart faces abroad is significantly higher due to their weaker presence in those markets. The bargaining power of customers
The bargaining power of customers is how much of an effect can the reaction and interaction of customers have on the strategies that companies use. This force is medium, while it is true that customers would have a wide range of choices and options to choose from other than Wal-Mart, the company possesses the characteristics that attracted people to it in the first place, that aspect being convenience. A single individual/customer would have no bargaining power if he/she sought the convenience of having everything in one place; however, customers that have specific needs would simply go to another store for their purchases.
The bargaining power suppliers Wal-Mart sells general items in addition to some of its own product lines; they are a dominant force in the domestic US market, which means that suppliers have very little bargaining power over them. As a dominating force, Wal-Mart can move from one supplier to the other very easily, and with the massive variety they have, they can afford to remove some products. Larger companies that deal with Wal-Mart have somewhat more bargaining power, but in general, Wal-Mart is safe from this threat. Threat of substitutes
This threat could be viewed from two different perspectives, if you consider that Wal-Mart has been selling general products, then it is easily changeable, however, if we look at it and view that the convenience of having everything in one place combined with low prices is Wal-Marts main product, then this threat is very low. There are very few places that could even offer a similar level of convenience. Summary Wal-Mart has different situations in Europe and Asia. In Europe, Wal-Marts methods were successful in the UK, but less so in other parts of the continent.
They faced stiff competition and the unfamiliarity of some of those markets played a role in limiting their dominance. In Asia, their situation is rather different; many of the Asian countries are ones that have developing economies. Wal-Marts low price strategy and their ability to function with low profit margins will enable them to establish themselves in those markets. Question 4- How could the company take advantage of its global reach to propel itself through the years to come? Introduction
Few companies can successfully expand to the extent that Wal-Mart has; the companys growth has been extraordinary to say the least, however, taking into consideration the companys size, Wal-Mart has a weak international presence. It is true that Wal-Mart has hundreds of stores operating outside its domestic market, which gives it a certain level of international reach. By strengthening their presence in foreign markets, they are lowering their risks and also increasing their profitability.
When a company operates in many different markets, the risk of an economic downturn is less severe since the company would not depend on only one market for its profitability. Moreover, foreign markets are opportunities for growth and untapped potential. Wal-Mart could use their presence in foreign markets to grow and penetrate other close by regions. By going international, the company guarantees their presence in several markets. Companies need a strategic plan for the future, without it they have no hope of maintaining any success they might have had. Strategic Planning
Strategic planning is a process in which every company plans what to do for the future; the process requires that the company have clear goals and understanding of themselves. Wal-Mart is a company that has been well aware of this process, the organization has built its name by focusing on providing items at low prices, in technical terms, and they are following the generic strategy of cost leadership. Wal-Mart aimed to be the competitor that attracts clients on the basis of low cost, despite having a wide range of products, Wal-Mart appeals to its clients’ base with their low prices.
After going international, Wal-Mart attempted to immolate the formula that led to its success. However, they were faced with difficulties stemming from the cultural and social differences between its domestic market and the foreign market. Wal-Mart partially overcame that obstacle by abandoning the strategy of standardization, and adapting a flexible mean of market penetration, they have on several occasions changed their store formula to fit the local image.
Wal-Marts success overseas could almost entirely be attributed to its ability to formulate their stores around local concepts by partnering up or buying out well established local chains, thus, not forcing a clash with the American image of Wal-Mart. Summary Wal-Mart has a dominating presence in their domestic market and a strong presence in several other countries. The company can use that global reach to sustain its growth for many more years to come by using the strategies that made it succeed in the first place and applying them to those new markets.
This feature backed up by the companys ability to adapt to differences from one country to another would help make the penetration of the new markets run smoothly. Moreover, the global reach would allow it to make use of the ideas and resources of their partners in those markets, the ideas could benefit Wal-Mart in the fact that they could transfer it to other markets without the need of creating entirely new models. Read more: http://www. ukessays. com/essays/management/how-could-wal-mart-continue-its-extraordinary-growth-management-essay. php#ixzz2NFqxWBIn
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Wal Mart Case. (2017, Jan 06). Retrieved from https://phdessay.com/wal-mart-case/
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