Wal-Mart is an American-based multinational discount store, currently operating more than 11,000 retail outlets in 27 different countries, and serving approximately 140 million customers weekly. Headquartered in Bentonville, Arkansas, Wal-Mart grew from a small family-managed retailer in 1945 to the world's largest retailer, and was named the world's largest company by revenues in the 2014 Fortune 500 list. The company operates its retail stores in two forms: i) Sam's clubs, which deal in assorted product lines including jewelry, electronics, hardware, to name but a few; and ii) Wal-Mart stores, dealing in similar product lines in addition to groceries, household appliances, apparel and clothing, beauty and heath products, and so on. In fiscal 2014, Wal-Mart reported a massive $473 billion in sales, more than $80 billion more than Costco, its closest competitor. It is widely believed that the company's corporate governance strategy, codes of conduct, values, mission statements and vision statements have contributed to its continued success year after year; and for this reason, the they will form the basis of analysis for this report.
Vision, Mission, and Primary Stakeholders
Ireland, Hoskisson and Hitt (2011) define a corporate vision statement as a blueprint that shows the future aspirations of a company, and its framework for ethical behavior. Wal-Mart currently does not have a formal vision statement; and its aspirations for the future are mainly pegged on its corporate mission, which is to save people "money so they can live better" (Wal-Mart Annual Report, 2014). The company's positioning for the future can be tied to four basic beliefs, which also represent its responsibility towards primary stakeholders -- i) serving and satisfying customers; ii) expanding opportunities for associates; iii) increasing value for shareholders; and iv) earning trust in communities (Wal-Mart Annual Report, 2014). Through its mission statement, the company commits itself to enhancing capital efficiency and consequently, bringing everyday low prices (EDLP) to more customers across the globe. It is this very integrity postulated in the mission statement that drives the company's goal to be a world-class compliance company. The company promotes a culture of integrity and empowers associates to make the right decisions and uphold integrity so that the company's reputation is maintained, shareholder wealth is maximized, and value added to the community throughout the global supply chain is increased. Through its mission statement and focus on integrity, Wal-Mart has been able formulate and develop strategies in line with its corporate beliefs. The goal of becoming a world-class compliance company has provided a sound foundation for management to make ethical and effective decisions, and this has helped the company maintain a strong reputation year after year.
Porter's Competitive Forces
The U.S. retail industry is more of an oligopoly, dominated by a handful of large, established companies, controlling more than 80% of the customer market. In the general merchandise category, Wal-Mart faces stiff competition from Target and Kmart. Costco poses as a fierce competitor in the club segment; whereas Safeway, Albertson's, and Kroger present substantial competition in the area of supermarket retailing. The company's competitive environment can thus be summarized as shown in figure 1 below.
Figure 1: The Five-Force Model of Competition for the Retail Industry
Threat of Substitute Products
Weak: the threat of substitute products is very weak; small grocery stores may be the more noticeable competitors in this regard, but they may not pose any substantial threat given that the big box retailers still enjoy huge economies of scale, and are able to price their commodities at considerably lower prices
Bargaining power of suppliers
Weak: the big box retailers account for substantial fractions of suppliers' sales volumes; and the latter, who would naturally prefer to continue the streak of high volume purchase, are forced to maintain their loyalty to the former. Further the number of suppliers is considerably large, and the costs of switching from one supplier to another are relatively low.
Competition among sellers
Fierce: price wars are commonplace; each seller enjoys scale economies, and attempts to woo more buyers through low prices. Sellers are always out to identify fresh moves to gain competitive advantage and increase its own market share
Bargaining power of buyers
Weak: the buyer base is so large that no individual buyer can make demands for price concessions. Further, most buyers make purchases in small quantities...
Moreover, the huge capital requirements pose as a barrier for potential entrants; and this being an oligopoly, industry players would strongly contest, through collusion or other common mechanisms, any attempts by potential entrants to eat into their shares of the market.
(Source: Flannery, 2006, p. 2)
Judging from the five-force model, Wal-Mart can be regarded as a going concern and an attractive prospect for investment. Threats of new entrants, substitute products, buyer losses and supplier disloyalty are all very weak; and if the company carries on with the operational strategy of being a low-cost market leader, there is no doubt that it will continue to present promising opportunities for employees, customers, and investors over the coming years.
Its big size and wide scale of operations gives it considerable economies of scale advantages at all stages of the global supply chain
The strong 'save people lives so they can live better' brand image contributes to customer loyalty and builds a strong corporate reputation
It presents unmatched levels of efficiency in the distribution of commodities from manufactures to surrounding stores, owing to the use of integrated technology
Huge cost advantages over competitors; and consequently, highly cost-effective logistics management practices
Strong bargaining power over suppliers due to its enormous sales volumes
Frequent reports of employee maltreatment; and consequently, high annual employee turnover rates (45% to be precise)
Weak presence in a number of metropolitan locations
Lack of proprietary protection for its distribution strategy. This makes it relatively easy for competitors to copy the same, what Flannery (2006) refers to as 'wal-martificating'
Not an attractive venture for quality-obsessed consumers. The reason Seiyu failed in the Japanese market is because the Japanese culture places a lot of emphasis on quality.
Backward integration to make it better-placed to control costs right from the production phase
Forming joint ventures and alliances with major players in specific markets could enhance its competitive capabilities and boost its market coverage
Acquisition of smaller retailers could essentially reduce the number of competitors and help the company cement its position
Globalizing operations, and saturating the emerging markets of India, China, and Brazil with Wal-Mart Supercenters
Pressure from labor unions intended to get the company to raise its employee benefit and compensation schemes to reflect its level of operations
Resistance from local communities who feel that Wal-Mart's penetration into their areas of operation would affect their businesses
Frequent lawsuits following claims of discrimination and employee maltreatment
Increasing competition, particularly in the online market
Wal-Mart's low-cost market leadership strategy has been successful thus far, and it is only logical that the company maintains focus over the same in the coming years. To make its success more sustainable, nevertheless, the company will need to capitalize on its strength and opportunities, and at the same time minimize its threats and weaknesses.
The company's adoption of integrated technology in the distribution chain ought to be extended to the rest of its operations. In order to achieve higher levels of capital and operational efficiency, the company needs to integrate cutting edge technology in the areas of demand and need-assessment so that it is able to structure its operations and allocate resources in a way that best addresses the needs of the customer. The historic Saturday morning meetings, once-a-month meetings where employees interact with their managers and leaders, could be made more regular, say weekly or once every fortnight so that the company is in a better position to respond almost immediately to arising employee needs and concerns, as well as to identify with changing labor trends.
There is concern that Wal-Mart has repeatedly failed to appeal to quality-obsessed shoppers. The company should, in my view, not take any corrective action in this regard, particularly because its strategy is that of a low-cost retailer. As the scale of operations expands both geographically and product-wise, the quality-sensitive consumer is deemed to find something that they may suit their lifestyles.
However, this expansion also presents a major challenge -- the company risks weakening strategy coherence and losing operational control as it implements its current growth strategy of expanding geographically and product-wise. Towards this end, it needs to focus on expanding its commodity range to cater for specific demand markets, particularly the emerging markets of India, China, and Brazil, which have done considerably well in previous years. Any markets that have proven unsuccessful should consequently be dropped; and moving forward, the company should conduct intensive market research before venturing into any foreign markets to prevent a repeat of…
The Price-Sensitive Affluents, Wal-Mart has learned (Wal-Mart Annual Reports) is more interested in finding an exceptionally good deal and not necessarily concerned about the shopping experience. This is particularly true as one of the strongest factors influencing the execution of their strategy, the emerging global recession during this timeframe, takes hold. Again as with the Price Value Shopper and the paradoxical purchasing patterns of the Brand Aspirational segment show,
That would have ended up costing the company customers and their reputation over time as well. It is better that they waited to have catalog online, their logistics and shipping functions defined, and also designed and launched their in-store pick-up program as well. The defining and executing of logistics strategies is critical for the success of any e-commerce enterprise (Siau, 2003). WalMart chose the best possible strategy by concentrating
Once this take place, it means that the overall inflation rate will begin to rise sharply. (Seabury) in the case of Wal-Mart, they have been affected by higher fuel prices, in delivering goods to local stores. However, the company has found a way to keep their fuel costs as low as possible. Currently, they have been contracting out delivery services, from the manufacturer to its different distribution centers. What
Over the next five years, they are working on increasing this amount to as close to: 100% as possible. With the company estimating that such a move would cut logistics costs between $4 billion to $12 billion, over the course of 5 to 15 years. (Cassidy, 2010) This is significant because it shows that the ability of Wal-Mart to seek out ways to reduce logistics costs, are helping to
This ability is likely to keep Wal-Mart a low-price leader. The fact that Cifra is now an integral part of Wal-Mart will allow Wal-Mart to better understand Mexican consumer and employee requirements. It is difficult to imagine that the Mexican workforce would object to the sort of empowerment for which Wal-Mart is famous. On the other hand, in a culture in which most jobs have been poor jobs, hardly
Business Ethics "Wal-Mart: But we do give them a 10% employee discount" reveals a highly quantitative standpoint, by pointing out the facts behind Wal-Mart's management of its human resource. The editor places an increased emphasis on revealing years, amounts, facts and figures and all these are intended to provide a clear image to the reader. Additionally, they are intended to preserve the objectivity of the authors in presenting the situation at