Strategic Management and Strategic Competitiveness

Wal-Mart is the world's largest retailer, and it has been significantly affected by the forces of globalization. This paper will consider those forces in the context of both the company's vision and in terms of organizational theory.

Globalization

Wal-Mart has been opportunistic in its approach to globalization. The company famously has become the subject of studies on globalization not just for its retail reach but for its supply chain management. Wal-Mart's vision and mission relate to delivering low prices to the consumer. The company feels that the promise of low prices will attract consumers to its stores. Thus, Wal-Mart follows through with its "everyday low prices" mantra by sourcing goods from the lowest-cost producers it can find. While for its first few decades this meant finding goods from American suppliers, Wal-Mart has seen in the past couple of decades a shift towards overseas production. All of this is done through second-party suppliers, but Wal-Mart exerts a high level of influence throughout its supply chain, to the point where it can guide the actions of its suppliers, leading them overseas. The globalization of Wal-Mart's supply chain has therefore become integral to its strategy, as its moves overseas combined with other elements of the supply chain management have allowed Wal-Mart to deliver, more or less, on its promise of lower prices.

Wal-Mart has also grown into a player in a number of markets around the world. Rugman & Girod (2003) argue that Wal-Mart is essentially a regional retailer within NAFTA, but this is to ignore the company's substantial presence in the Chinese market. In addition, Wal-Mart utilizes other brands in Europe, although it has been less successful on that continent. That said, the company does derive a significant amount of its sales in Mexico and Canada, which along with China provide close to a quarter of systemwide sales.

The industrial organizational view holds that a firm is an industrial organization that seeks to organization itself in such a way as to extract economic value for the shareholders (Tirole, 1993). This view makes some sense for Wal-Mart. Most of its move to globalize has been spurred strictly by economic considerations. Bear in mind the company's mission and vision relate to a high-volume, low-cost business model. Wal-Mart must do two things to succeed -- it must drive down costs and it must be able to extract some temporary monopoly rents typical of a firm in a state of monopolistic competition.

Driving down costs is something that Wal-Mart can do by leveraging its economies of scale. However, this does not push it into global markets. There are other ways to drive down costs as well, including through the use of information. The more information the buyer has, the easier it will be for the buyer to drive down costs. This is the strategy Wal-Mart has utilized. With its intense knowledge of the supply chains of its suppliers, it pressures them to find solutions that bring down costs further. Often, this leads overseas, and Wal-Mart knows this. The company has fostered a special relationship with China in order to help facilitate better access to low-cost Chinese goods. Wal-Mart does this with other countries as well when needed. The company's push for globalization therefore relates to it finding more information and then using that information to drive down the prices it pays to suppliers.

The resource view of the firm focuses on the idea that the firm achieves profits in the resources is acquires and how it uses them. Knowledge is definitely one resource that Wal-Mart employs, but it also employs its brand. The company is desirable for the volume that it can offer suppliers, but beyond that Wal-Mart can use its brand power to enter foreign markets. Consumers may or may not respond well -- in Europe they did not -- but the company has been able to expand its presence to several other countries around the world with its brand name. In addition the brand is attached quite clearly to the mission and vision of the company. Wal-Mart has performed well in attaching to the brand the values that are espoused in the company's mission and vision.

Given Wal-Mart's business model, it is not seeking "above-average returns." The business model clearly represents a tradeoff between margins and volume, with Wal-Mart seeking high volumes. It will not return substantially to shareholders, even compared with other retailers. Success for Wal-Mart continues to be defined as growth. There is significant room for growth, something that drives Wal-Mart to continually leverage its capabilities. IT would be foolish to tell Wal-Mart how to succeed in business. The reality is that Wal-Mart has done quite well, and does so focused on cultivating high volume rather than high returns. Wal-Mart's core resources are its supply chain management and it marketing. The company has sold its vision to consumers and successfully associated this with the brand. The result is that Wal-Mart is one of the world's largest companies.

With respect to stakeholder management, Wal-Mart has succeeded because it engages all of its stakeholders in its mission. Media partners, customers, and suppliers alike characterize Wal-Mart in terms of its cost leadership, and this high level of buy-in among its stakeholders is part of the reason for the company's success. It is easier for Wal-Mart to move to overseas markets if its reputation precedes it. Thus, Wal-Mart has found that the best strategy for stakeholders is to have them buy in to the company's mission and vision as well. The result is that everybody -- employees, suppliers, managers, and even customers -- is working towards the same objectives. At times, as with delivery drivers for example, there are penalties with non-compliance with the company's vision, but overall most people simply believe in the mission of Wal-Mart and the value that it offers them.

Lastly, Wal-Mart has succeeded in part because of its mastery of technology. The company uses technology in particular with its information systems, such as the store sales tracking systems that provide near-instant feedback to managers about the company's performance, and lets them make rapid decisions about where items are placed within the store. As well, Wal-Mart was an early adopter for a number of distribution innovations, like using GPS and satellites to track the location of shipments, and using cross-docking to move goods out within an hour of their arrival. The high level of technology that Wal-Mart uses has made it a leader in logistics.