Wal-Mart Stores’ Environment and Business Strategy

Introduction and Big Picture Overview

Wal-Mart Stores is “the biggest retailer in the world in terms of employees and revenues” (Basker, 2007, p. 178). The American multinational firm operates grocery outlets, hypermarkets, and discount stores (Brea-Solis, Casadesus-Masanell, & Grifell-Tatje, 2012). The leading retailer was founded in 1962 by Sam Walton. The firm has its headquarters in the city of Bentonville. The company operates in different nations such as the United Kingdom, Japan, the United States, Canada, Brazil, Argentina, and Mexico. In 2015, Wal-Mart’s revenues surpassed the $485 billion mark thus becoming one of the most successful retailers in the United States. The firm’s mission is “to help more consumers save money and have better lifestyles” (Corona, 2014, p. 27. Its vision is to become a leading retailer that satisfies the needs of its employees and customers.

The company operates in the global retail industry. The organization’s business model attracts more competitors from different sectors. Some of the leading competitors include Costco, Safeway, Carrefour, and Kroger (Lin & Liang, 2014). Amazon Fresh has become a major competitor because it markets a wide range of fruits and vegetables in the United States. The non-grocery segment faces competition from leading companies such as Disney, Samsung, and Apple Corporation. The firm’s entertainment segment encounters competition from Best Buy, Target, and Home Depot (Basker, 2007). However, Wal-Mart has developed a sustainable business model to attract new customers every day. Wal-Mart’s approach to sustainability and collaboration with stakeholders supports its business strategy.

Firm and Industry Structure

Oligopolistic Competitive Environment

As mentioned earlier, Wal-Mart Stores operates in the retail industry. The firm has different segments, stores, and hypermarkets that deliver a wide range of products to more customers. Most of these stores compete in different sectors of the retail industry. That being the case, the industry is oligopolistic in nature. This is the case because the industry is characterized by giant firms that market similar consumer goods. Wal-Mart’s business structure plays a critical role in making it competitive in different market segments (Corona, 2014). Although this approach has been supporting the company’s business model, Wal-Mart continues to attract the attention of more competitors. This fact shows conclusively that the firm is operating in an oligopolistic competitive environment.

Analysis of the Competitive Environment

Oligopolistic competitive environments are usually characterized by a small number of big firms delivering superior products and services in the same market (Corona, 2014). These environments force firms to improve their strategies and business models. Firms that fail to monitor the changes experienced in the industry might eventually become obsolete (Lin & Liang, 2014). Wal-Mart has been analyzing the level of competition in the market in order to remain relevant. Porter’s Five Forces below outlines the unique issues associated with Wal-Mart’s market environment.

Competitive Rivalry

The retail industry has many firms that compete with each other. Wal-Mart examines the level of this rivalry in an attempt to develop superior business approaches. Wal-Mart should embrace new growth strategies to remain competitive (Basker, 2007).

Buyers’ Bargaining Power

The targeted markets have many customers who consume various goods and services (Corona, 2014). The size of the population makes it impossible for specific buyers to pressurize the firms in this industry.

Suppliers’ Bargaining Power

The suppliers in this industry do not have much power. This is the case because the retail industry has attracted many suppliers. The leading firms in the industry set the conditions for different suppliers and business partners (Brea-Solis et al., 2012).

Substitute Goods

Wal-Mart is one of the leading players in the industry and boasts of numerous consumer goods. Some of the services and goods marketed by Wal-Mart are hard to substitute (Brea-Solis et al., 2012). This strength has always supported the company’s business strategy.

Threats of New Entrants

This industry has remained lucrative thus attracting a number of small retailers. New competitors can join the industry and make it hard for the existing giants to realize their goals (Basker, 2007). The low cost of starting and doing business in this industry is expected to attract more firms.

SWOT Analysis

Wal-Mart uses the SWOT Analysis tool to redesign its strategic goals. Such goals are usually guided by the strengths of the company and the opportunities existing in the industry (Brea-Solis et al., 2012). The firm’s weaknesses are addressed using sustainable strategies. The SWOT Analysis of the firm is presented below.

Strengths
  • Global presence
  • Strong supply chain network
  • Effective organizational structure
Weaknesses
  • Small profits
  • Replicable business strategy and model
Opportunities
  • Positive growth in developing nations
  • Availability of quality improvement (QI) models
  • Modern technology
Threats
  • Increasing competition
  • Demand for healthy products

Wal-Mart’s Business Strategy

The above analysis outlines the unique issues affecting the performance of Mal-Mart Stores. The company has been using the above SWOT Analysis and Porter’s Five Forces tools in order to develop the most appropriate business strategy (Brea-Solis et al., 2012). The ultimate goal of the strategy is to tackle the challenge of competition, attract more customers, and deliver quality products to the targeted customers (Corona, 2014). The first aspect of the company’s strategy is market penetration. This goal is achieved by marketing a wide range of services and consumer goods to its clients.

The firm goes further to use promotions, customized packages, and discounts. The company is distinguished from the competitors of its reduced prices. Market development is another powerful approach used to increase the firm’s sales. New stores and segments are identified frequently in order to increase profits. Since Wal-Mart is a global retailer, the concept of product development does not receive much attention (Corona, 2014). However, new efforts are implemented in an attempt to improve the firm’s marketing processes.

Recommendations

Wal-Mart’s business strategy has been successful and sustainable. Wal-Mart remains one of the most successful companies in the retail industry. However, the above SWOT Analysis explains why Wal-Mart should consider new initiatives in order to emerge successfully. The firm can adopt better human resource (HR) practices to support the changing needs of more employees. The firm should also expand its business operations by targeting emerging economies across the globe. The current supply chain network and organizational structure can support Wal-Mart’s global expansion strategy (Basker, 2007). Different foreign markets in Asia and Latin American can result in positive performance. Modern technologies can be used to improve various organizational practices. Research and development (R&D) can be supported to meet the changing needs of different consumers. Suppliers should be guided and supported in order to produce healthy food materials. These recommendations will play a critical role in making Wal-Mart a leading player in the retail industry.

References

Basker, E. (2007). The causes and consequences of Wal-Mart’s growth. Journal of Economic Perspectives, 21(3), 177-198.

Brea-Solis, H., Casadesus-Masanell, R., & Grifell-Tatje, E. (2012). Business model evaluation: quantifying Wal-Mart’s sources of advantage. Harvard Business School, 13(1), 1-46.

Corona, R, (2014). A comparative analysis of major US retailers based on enterprise marketing efficiency. Global Journal of Business Research, 8(4), 25-39.

Lin, M., & Liang, W. (2014). A comparative study of Asia strategy: Wal-Mart versus Carrefour. Web.