Corporate website analysis and information gathering

Wal-Mart Inc.

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 and have very little influence over price.

Threat of New entrants

Weak: the established firms enjoy huge scale economies and are capable of setting prices at levels that would essentially render any start-ups inoperable. 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.

SWOT Analysis

Strengths

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

Weaknesses

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.

Opportunities

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

Threats

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

Recommendations

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 Seiyu situation. In other words, the company ought to focus only on those markers that have proven successful.

Wal-Mart has so far shown a positive response to pressure from women groups, the civil society, and labor unions. Well, this pressure may not have a direct effect on the company's bottom-line, but the positive response has created a positive image among stakeholder groups; and the company, therefore, ought to carry on with its display and commitment to environmental sustainability and ethical sourcing programs. On the compensation issue, I feel that the company should impact changes on its current wage structure so that compensation accurately reflects its scope of retail trade.

Strategies for Increasing Competitiveness and Profitability

Core Strategy: low-cost leadership is Wal-Mart's core strategy. The company appeals to price-sensitive customers by supplying a broad spectrum of low-cost general merchandise. Its low-cost strategy is made possible by its relentless attempts to control cost drivers and eliminate cost inefficiencies in the supply chain (Flannery, 2006).

Complementary Strategies: To maximize its competitiveness, Wal-Mart could focus on developing close collaborations with suppliers who enjoy strong brand names, and who are capable of supplying good quality commodity to the company shelves. One way of doing this is to have the company's procurement staff spend time with suppliers, getting a feel of what they expect from the company and also helping them in developing cost-effective strategies that would see them cut down on costs so that their relationship with the company is more of as win-win affair (Flannery, 2006).

Moreover, the company could practice backward expansion, where it "opens stores in small towns surrounding a targeted metropolitan and saturates each area before moving into new territory" (Flannery, 2006, p. 3). This would help it expand its geographical presence locally. To achieve successful international growth, however, the company will need to invest more in the strategy of differentiation, where it employs natives of those countries in managerial roles and at the same time customizes its products to reflect the culture, needs, and expectations of the people there. Promotions would also go a long way in driving growth.

Support Strategies

Technology: Wal-Mart is known for its almost-unmatched technological capabilities. Currently, automated systems are used in several key areas - maintaining communication with suppliers, wringing costs out of the supply chain, identifying slow-moving commodities, track inventory and sales, and developing purchase orders. The same technology could be adopted in the area of needs-assessment, so that rather than just identify slow-moving commodities, the company can assess the needs of specific markets and allocate resources in such a way that they respond to those needs.

Distribution Center Operations: labor-intensive tasks could be automated through the adoption of hand-held computers and conveyor systems to ensure that operations at the distribution centers are streamlined and the company's goal of eliminating cost inefficiencies is made more attainable.

Well, as appealing as they may look, these strategies are of little use unless they are communicated to the company's stakeholders. An effective communication plan would comprise of four crucial steps -- stakeholder analysis, communication assessment, communication planning, and monitoring and feedback. The procedures involved in each step have been summarized in the tabular representation below.

Table 1: Stakeholder Communication Plan

Step

Procedures Involved

Stakeholder analysis

Communication assessment

Communication planning

Monitoring and feedback

Involves identifying the company's primary and secondary stakeholders (all parties likely to be affected by the implementation of the identified strategies); and making an attempt to understand the various stakeholder groups better

Involves categorizing stakeholders based on the amount of influence and power they could have over the proposed strategies. This would help the company dedicate more attention towards appealing to the stakeholders who exert the greatest influence and power

Specifying the objectives of communication and identifying the communication mechanisms that would help the company best meet these objectives. There is a wide variety of channels to choose from -- print media; social media platforms such as Facebook, Twitter, etc.; audiovisual formats such as blogs; online and web communication such as postings on the company website; or face-to-face interactions in the form of meetings or seminars.

Monitoring how stakeholder perceptions have changed

(Source: KPMG, n.d.)

Corporate Governance

The Composition of the Board: Wal-Mart's organizational leadership has been identified as one of its most valuable success factors. The company's board of directors comprises of the CEO and several senior directors. Doug Mcmillon currently serves as President and CEO of Wal-Mart. Some of the other key names in the board include Douglas Daft, retired CEO, Coca-Cola Inc.; Marissa Mayer, CEO and President, Yahoo Inc.; Michael Duke, retired CEO, Wal-Mart Inc.; Timothy Flynn, retired chairman, KPMG; Jim Walton, CEO and President, Arvest Bank Group; and Roger Corbett, retired CEO, Woolworths (Wal-Mart Annual Report, 2014. The board's composition obviously reflects the company's appreciation for global business expertise. It draws on outstanding achievers from a diverse range of fields, ranging from compliance to finance, retail, and technology. Generally, the board's diverse experiences and perspectives provide relevant foundation and support for the company's management team as it works towards refining business strategy (Wal-Mart Annual Report, 2014).

Segregation of Control and Policy Development: members of the board are elected by shareholders to serve in the best interest of the company and its owners. The shareholders thus delegate the role of policy development to the board; and in as much as they retain the aspect of control, they commit to giving the board the independence it needs to carry out its duties effectively (Wal-Mart Annual Report, 2014). At present, 10 out of the 16 board members are independent; and the company reckons that having an independent board is one of the best decisions it could have made. Board independence has gone a long way in aligning the managerial "interests with long-term shareholder value," and Wal-Mart is what it is today, partly because of its owners' commitment to independent board governance (Wal-Mart Annual Report, 2014, p. 14).

Leadership at Wal-Mart

Lussier and Achua (2009) identify two types of effective leadership -- transformational leadership and transactional leadership. Transformational leadership is leadership that aims at changing the community in which the leader operates, as well as the lives of the people who work for him for the better (Lussier & Achua, 2009). Transactional leadership, on the other hand, is more of a give-and-take affair between a leader and his subordinates -- the subordinate puts in effort to help the leader achieve his objectives, and the leader, in return, administers a reward or punishment (Lussier & Achua, 2009). Both transactional and transformational leadership are evident in Wal-Mart's leadership strategy, and the company's leadership can thus rightly be regarded as effective.

Transformational Leadership: this was instigated by founder, Sam Walton, from the very onset. Some of the ways through which Wal-Mart's leadership demonstrates transformational leadership include paying physical visits to Wal-Mart stores, being willing to take tough decisions in the face of uncertainty, and building leadership pipeline. These leadership efforts have been quite beneficial to the company -- for instance, following his visit to the Chinese outlets in 2012, former CEO, Mike Duke was able to make the discovery that it would actually be cheaper for the company to stock local bananas, as opposed to the imported ones it was stocking at the time. Corrective action was taken immediately and the company was able to realize huge cost savings.