Issues at Wal-Mart
Wal-Mart is one of the most successful retail stores in the world, with over $ 469 billion in revenues. However, it faces several challenges that may affect its future in the market. According to the case study, the biggest challenge that this firm faces is the slow market growth, which makes it difficult to maintain the traditional growth rates that have enabled it to reach its current position. The issue of slow market growth has been attributed to mature markets that limit its ability to open new stores.
The second issue, as revealed in the case study, is that Wal-Mart’s same-store sales have experienced a consistent decline in the last few years, reducing the revenues of this firm. The third issue is that Sam’s club is performing poorly against its main market competitor, Costco.
The revenues from Costco are almost twice as much as that from Sam’s Club even though the two have nearly the same number of stores. Criticism in social media is another issue that this firm has had to deal with in the recent past. Wal-Mart is accused of pushing its production from the United States which has reduced employment opportunities in the country.
Analysis & Evaluation
Wal-Mart has experienced rapid growth over the years, and it is now difficult to achieve the same percentage growth rates that were witnessed over the past three decades. The market has matured, and this has left a limited window for this firm to expand. Currently, this firm finds itself in a delicate situation where any new store opened in the United States affects its stores, which are nearby.
The new stores cannibalize on the existing stores. The underperformance of Sam’s Club as compared to Costco, may be attributed to the leadership. Founded in the same year, Sam’s club has had 12 presidents while Costco has been led by just two presidents. The high turnover rates at the management make it difficult to maintain consistency in the strategies, the fact that has led to poor performance.
It is clear that Wal-Mart will need to reevaluate its strategies and develop mechanisms to manage some of the issues that have been identified in this case. The management will need to come up with several alternatives to solve this problem. The first alternative will be to redefine its growth rates. The firm’s growth rate was set at 11 percent at a time when it was relatively small compared to its current size, and growth prospects were high.
It has expanded tremendously, and the growth prospects are low because of market maturity. The growth rates should be lowered to reasonable rates to eliminate the current frustration of the management as they struggle to maintain the traditional growth. Another alternative that Wal-Mart can consider is to redefine the leadership structure and tenure at its Sam’s club stores. The current turnover rates of the management are worrying, and the management needs to address it.
To maintain its expansion, this firm has the alternative of expanding its online presence. Alternatively, it can use acquisitions and takeovers to maintain its growth, especially in highly saturated markets. This will not only help in its expansion program but also reduce competition in the current market. The management of Sam’s club should develop new strategies to attract new members to increase the firm’s profitability.
In order to address the problems that Wal-Mart is currently facing in the market, the management will need to redefine its growth strategies. It will need a different approach such as acquisitions other than building new stores, especially in regions where the market is saturated.