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Wal-Mart from a couple of perspectives. First it analyzes the legal, social and economic environments. The second part analyzes Wal-Mart's managerial, operational and financial issues. Particular attention is paid to project management, contingency planning and staffing needs.
External Environment Analysis.
Wal-Mart competes using a cost leadership strategy. It promises low costs to consumers and backs this up by leveraging its exceptional purchasing power and its efficient inbound logistics system. In the difficult economic environment of the past few years, this strategy has been successful in helping Wal-Mart to avoid the substantial revenue losses faced by many other retailers. At the outset of the recession in 2008-2009, Wal-Mart benefited as consumers traded down to cost leaders from higher-end stores (LaMotta, 2009). Economic recovery has not harmed Wal-Mart either, partly because of the slow gains in employment, and Wal-Mart has continued to see revenue growth over this period as it retains customers attracted during the sluggish economy (MSN Moneycentral, 2011). The Congressional Budget Office is forecasting relatively slow growth, which should help Wal-Mart continue to retain budget-conscious consumers (CBO, 2011).
The legal environment provides few impediments to Wal-Mart. Occasionally, the company has come under legal action for issues relating to workplace discrimination (Stohr, 2011) and this could introduce significant risk to the company given the size of the suit, now before the U.S. Supreme Court. The size and significance of this case notwithstanding, lawsuits including class action suits are a commonly-faced risk for companies the size of Wal-Mart. The company's 2010 Form 10-K indicates that the company is facing legal proceedings relating to consumer law, tort law, employment law and other forms of legal action as well.
The social environment is generally favorable to Wal-Mart. The company may be derided in some quarters, but its sales figures paint the picture of a very popular company that has a high social standing in the community. Wal-Mart is relatively proactive with respect to social trends, for example the promotion of green technology and corporate social responsibility. The company's goals for sustainability, for example, are to be "supplied 100% by renewable energy, to create zero waste and to sell products that sustain people and the environment" (WalMartStores.com, 2011).
Wal-Mart has few financial issues. The company operates on a high-volume, low-margin business model and has been expanding rapidly for well over a decade. These facts characterize the company's income statement and balance sheet. Wal-Mart is a liquid company, despite a relatively high debt level used to fuel growth. Wal-Mart is consistently growing revenues and profits. The company's equity, although it dropped in fiscal 2011 (calendar 2010, roughly) is on a long-term growth trajectory, as is cash flow from operations. The company's cash flows are diversified across product type and geography, further insulating it from economic shocks.
Wal-Mart is among the best-managed companies in the United States and its management is admired by its peers (Fortune, 2011). The company's logistics have long proven to be a source of competitive advantage but in recent years some concerns have been raised about Wal-Mart's ability to continue to generate quality executive talent in-house (CNNMoney.com, 2007). The company needs to continue to build top management talent from the ground up in order to maintain its leading edge innovation in the major cost cutting areas of logistics and merchandising.
Operational issues are critical to Wal-Mart's success. The company relies on procurement to keep product costs down, and efficiency in its distribution system to deliver goods to stores at a lower cost than its competitors are able to achieve. Through these two competencies can Wal-Mart continue to be the cost leader in the retailing industry. Wal-Mart works to implement new projects as quickly and efficiently as possible. The company works with tight time frames in order to lower the total cost of implementation. Partners on Wal-Mart projects can expect to receive tight timetables and face fines if they are unable to meet those guidelines, as happened when Wal-Mart was implementing radio frequency identification tags in its distribution system (Wailgum, 2008).
Wal-Mart has long focused on critical paths as a means of reducing cost. Critical paths seek to find the most effective path for a function, free from bottlenecks and reducing the amount of time a good spends in inventory (Barry, 2010). Wal-Mart holds its suppliers accountable to tight time…[continue]
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