The Evaluation of Wal-Mart PDF

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The Evaluation of Wal-Mart...

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The Evaluation of Wal-Mart 1. What was Sam Walton’s original strategic vision for Wal-Mart? How did this enable the company to gain a competitive advantage? Answer: Wal-Mart is the world’s largest corporation which is founded by Sam Walton. It is the largest as well as the most profitable corporation in the world. Sam Walton’s original strategic vision was to focus on small, southern towns that were ignored by its competitors and also lowering price than the local retailers. To gain competitive advantages, Sam Walton applied one very significant strategy that the competitors had always overlooked which is focusing on small towns. He also discovered that rural people will not drive long to come to major city if Wal-Mart gives them enough facilities. By the time Wal-Mart’s competitors started to realize that many small towns could be a reason to have huge profits. Since Wal-Mart was focusing on southern small towns, it kept a minimum price of the products so that they could easily consume it. On the other hand its rival, K-Mart and Target only focused on urban and suburban areas. But Wal-Mart had already spread out across the whole America. And that was the reason Wal-Mart gained a huge competitive advantage from its rival. 2. How did Wal-Mart continue to strengthen its competitive advantage over time? What does this teach you about the source of a long term competitive advantage? Answer: Wal-Mart has grown to become the world’s largest corporation in1962, but it never fell down because of its own strategy. To strengthen its competitive advantage This company became the innovator in information systems, logistics and human resource practices.  Wherever it took the action in these areas, the profit margin had been increasing with such lower cost and which enabled the company to gain higher revenue than the competitors.  Charging lower price than the rivals made them more popular.  Developing and implementing bar-code technology took them one step ahead.  Checkout scanner was another technology which strengthened its competitive advantage which enabled to track that if the products were being distributed in the right place properly or not.  Wal-Mart used to avoid over-stocking.  Linking its information system with nationwide distribution centers for inventories. To keep long term competitive advantages, a company should analyze the strength, weakness, opportunity and threat of its own company. A company needs to follow up the consumers’ needs and demands and keep inventing new things, using new technology charging low price than the competitors.

3. By the early 1990s, Wal-Mart was encountering limits to growth in the US. How did it overcome its limit to growth? Explain how the expansion moves that Wal-Mart made in 1990s made economic sense & helped to create value for the company’s shareholders. Answer: By the early 1990s, Wal-Mart was encountering limits to growth in the US. They solved the problem by branching out into new sectors of retailing. Wal-Mart was moving into grocery business. This is an example of success - it exemplifies Sam Walton's vision of being the best retailer around. After a store expands physically and geographically, it must then expand in terms of what they sell; branching out and competing with other businesses. They opened 200,000 square-foot supercenter stores that sold groceries and general merchandise under the same roof. Hundreds of supercenters were opened during the 1990s and that’s how they solved the barriers of growth in the US. Supercenters raised the market share and therefore the shareholders became interested to buy their share more in Wal-Mart. As mentioned Wal-Mart enabled employers to buy shares of the company, they were greatly benefited by this in terms of economic sense too. Wal-Mart also aims for sales growth and unit square footage growth by creating super centers. They all increase in sales at stores open for at least one year. So it automatically helped in economic sense as well as maximized the shareholder’s value. 4. Wal-Mart is once again encountering limits to growth. Why do you think this is the case? What might Wal-Mart do to push back these limits? Answer: Wal-Mart is encountering limits to growth within their chosen industries, as there are only so many consumers within America. Wal-Mart should consider diversifying into more profit lines, such as whole food stores in order to push back at these limits.  This is the case because the U.S. market is saturated, and the growth overseas has proved to be more difficult. The moved into the suburban markets where they faced significant competition that didn't allow them to grow like the did before. They were forced to exit Germany and South Korea after losing money there. They are also struggling in several developed nations. I think this is the case from the saturation and possibly because of customers wanting an improvement in quality and become unfocused on the high profitable areas from stretching their empire and footprint into so many areas, countries, and markets.  Refocus their strategic vision and positioning, focusing on the highly profitable areas. They may have stretched too far and been too greedy with expansion and planning with these different markets and businesses they become involved in.

5. How much of Wal-Mart’s strategy do you think was planned at the outset, and how much evolved over time in response to circumstances? What does this suggest to you about the nature of strategy development? Answer:  I think some of the strategy was planned at the outset, specifically expansion into other countries and markets. After dominating the U.S. market, they could use some of those strategies to help penetrate the markets in those other countries like Mexico to successfully expand their footprint and maintain that competitive advantage. Also the grocery business may have been a result from evolution over time, but with their sophisticated product-tracking and “everyday low prices”, they could use that information to easily implement new products through the grocery business.  It revealed how strategies can continuously be improved and altered in order to sustain

the success and competitive advantages a company currently has. It also showed how strategy is what you actually do rather than what you want to do. Wal-Mart failing in some areas could have also been a result of the staging and timing. They could have an inefficient strategy developed for these overseas markets that led to losing money and having to pull out. This would force Wal-Mart to redevelop or update their strategies....