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Case Study Analysis | 1 Final Examination Case Study

Wal-Mart Stores, Inc. (WST) Analysis

Christopher A. Osuoha

BUAD 5312 Strategic Management

Instructor Dr. David J. Rambow Associate Professor of Management

Wayland Baptist University

Wal-Mart Stores, Inc. (WST) Analysis

Case Study Analysis | 2 Wal-Mart Stores Inc. is the largest retail company in the United States and the world at large having being consistently ranked number one on the Fortune 500 index by Fortune Magazine (Barley, Bragg, Dawson, Shah, Sillanpaa, & Sleeper, 2007, p.356). According to Barley et al., (2007), Wal-Mart Stores Inc. was founded by Sam Walton in 1962 with its first store opened in Rogers Arkansas the same year its rivals Kmart and Target were founded (p.356). As of February 8, 2007 Wal-Mart operated 6,782 stores in 14 countries with annual record sales of $345 billion and employee base of 1.8 million (Barley et al., 2007, p.353 & 356). Wal-Mart growth has soared recently with the company adding a new outlet almost every day with significant presence in international markets. This expansion did not come so cheaply but with antecedent controversies that range from multiple accusations and charges to law suits, many resulting in fines, including environmental violations, child labor law violations, use of illegal immigrants by subcontractors and poor working conditions for associates (Barley et al., 2007, p.356). Wal-Mart provides general merchandise and retail services that offer family apparels, health & beauty products, household needs, electronics, toys, fabrics, craft, lawn & garden, jewelry and shoes (Barley et al., 2007, p.356). Also, Wal-Mart runs a pharmacy department, tire & lube express, photo processing and banking services as well to broaden its offerings to its customers. The company grouped its businesses into three segments: Wal-Mart Stores, Sams Club and WalMart International (Barley et al., 2007, p.356). The Wal-Mart Store segment operates and three store formats in the U.S. domestic market including 2,257 supercenters, 1,074 discount stores and 112 Neighborhood Markets (Barley et al., 2007, p.356). Sams Club operates as a membership-based retail warehouse and online at Barley et al.,(2007), pointed out that the segments 579 clubs average 132,000 square feet, and provides exceptional value on brand-name merchandise at members only price for both business and

Case Study Analysis | 3 personal uses (p. 356). Wal-Mart International operates 2,760 stores outside the United States in various formats, under different brand names in 14 countries and territories as at 2007(Barley et al., 2007, p.353 &357). Wal-Mart International includes wholly owned operations in Argentina, Brazil, Canada, Porto Rico, and the United Kingdom; and the operation of a joint venture in China; and operations of majority owned subsidiaries in Central America, Japan and Mexico (Barley et al., 2007, p.357). Wal-Mart has been able to maintain its global leadership role in retail business by carefully analyzing its internal and external environment; optimized its strength, weakness, opportunities and threats; and carefully integrate its core competencies, resources and capabilities by applying appropriate generic business-level strategy to develop competitive advantage it has sustained over a reasonable time frame. This case study analysis will analyze the internal and external environments that WalMart operates and develop a comprehensive list of the strength, weakness, opportunities and threats. Wal-Marts generic business-level strategy will be identified and the primary factors influencing the generic business-level strategy will be outlined in a matrix format according to stakeholders groups. However, Wal-Marts potential for success will be evaluated in terms of the strategic inputs from stakeholders group analysis. Three strategic issues of Wal-Mart U.S. business-level strategy will be discussed and finally two recommendations to strengthen WalMarts competitive advantage will be offered. Requirement 1: Wal-Marts External and Internal Environment Analysis Like every other business organization, Wal-Marts goal to realize strategic competitiveness and earn above average return is significantly influenced by the internal and

Case Study Analysis | 4 external environmental factors. Hitt, Ireland & Hoskisson (2011), pointed out that the understanding about the conditions in its external environment that the firm gains by analyzing that environment is matched with knowledge about its internal organization to provide the foundation for forming the firms visions, developing its mission, identifying and implementing its strategic actions (P.36). External Environment An organizations external environment is categorized into three broad classifications including the general, industry and competitors environments (Hitt et al., 2011). General environment is composed of dimensions in the broader society that influence an industry and the firms within it (Hitt et al., 2011). The general environment is grouped into seven environmental segments which include economic, physical, demographic, political/legal, sociocultural, technological and global environmental forces (Hitt et al., 2011). These forces cannot be directly controlled by firms hence they are referred to as non-controllable to which Wal-Mart has to monitor and respond to. This is because no organization has control over external environmental forces and the best any firm could do is to cope with the changes through the business strategies. This was the basic reason the founder Sam Walton built the organizations vision on change and embedded it in the leadership as the corporate culture of Wal-Mart to continue to ensure the sustenance of its core competency of everyday low price. Rob Walton reemphasized the importance of low price core competence when he pointed out that we lead when we embrace my dads vision to improve the lives of everyday people by making everyday things more affordable (Barley et al., 2007, p.359). The general environment influenced WalMart and its competitors in several ways as a result of higher cost of goods, consumer debt level

Case Study Analysis | 5 and buying patterns, stock price fluctuation, harsh economic conditions, high interest rate, customer preference, unemployment, cost of labor, inflation, currency exchange fluctuation, fuel prices, weather patterns, catastrophic event and high insurance cost (Barley et al., 2007, p.364). These environment forces posed a big threat to Wal-Mart and other competitors in the industry. The influence of the general environmental forces compelled Wal-Mart to tap into its repertoire of core competencies, resources and capabilities, integrating them with effective generic businesslevel strategies to gain competitive advantage. So, Wal-Mart converted these threats to opportunities by strategically optimizing its resources, core competencies and capabilities. WalMart divested its businesses in Germany and Korea due to harsh business environment that hampered it from realizing the scale and desired result and applied its resources in markets where the growth potentials are high(Barley et al., 2007, p.357). The Wal-Mart International cashed in on the international sales that is growing annually at 33.6% to expand its operations in Canada, South America, United Kingdom, Mexico, Porto Rico, Japan, China, India and other countries where sales growth has been quite impressive (Barley et al., 2007,p.358). Wal-Mart applied product/service diversification strategy to provide more products and services to customers at low prices. Barley et al., (2007) pointed out that this strategy reflects Sam Walton idea of a wide assortment of good quality merchandise, lowest possible prices, guaranteed customer satisfaction, friendly knowledgeable service, convenient hours, free parking and a pleasant shopping experience (p. 358). The general environment also compelled Wal-Mart to provide banking services to 20% of its customers that were characterized as unbanked. So the general environment forces created threats which Wal-Mart converted into opportunities and tapped into them to develop competitive advantage.

Case Study Analysis | 6 Industry environment, according to Hitt et al., (2011), is the set of factors that directly influences a firm and its competitive actions and responses: the threat of new entrants, the power of suppliers, the power of buyers, the threats of product substitutes and the intensity of rivalry among competitors (p.38). Wal-Mart has always managed over the years to build capacity to favorably influence its industry environment or successfully defend against the five factors that influence the industry environment. Wal-Mart focused the analysis of its industry environment on the factors and conditions that influence profitability potentials and develop strategies that will harness such factors. When Wal-Mart realized the challenges arising from loss of sale to substitute products, slow market growth and entry of new competitors, it allowed each of the segments to determine the appropriate product offering for each location. The forces of the industry environment created threat to Wal-Mart and compelled the company to develop product/service diversification strategies that continue to build on the discount store concept (Barley et al., 2007, p.358). According to Barley et al., (2007), Wal-Mart realized the strategic importance of supplier power and set up a 1,600-member Global procurement service team based in 23 countries that buy products from suppliers in over 70 countries including 61,000 suppliers in the United States (p.367). As a matter of fact Wal-Mart developed strong supplier power due to its large purchase of merchandise and plays significant role in determining delivery and stock level. Barley et al.,(2007) pointed out that Wal-Mart not only determine delivery schedule and inventory level but also heavily influence product specification(p.367). The influence Wal-Mart has over the industry environment served as a leverage to develop economies of scope and scale which are embedded in the companys capabilities. With effective business-level strategy Wal-Mart has developed a value chain that offers cost/product differentiation that allows consumers greater degree of preference

Case Study Analysis | 7 and lowers the companys cost of switching to other suppliers to maintain its goal of everyday low price vision. Competitors environment involves companies against which a firm competes directly against (Hitt et al., 2011). Wal-Mart has always emphasized on the need to understand and acquire knowledge about its competitors strategies, objectives, assumptions, and capabilities. The CEO of Wal-Mart reiterated this in the 2007 Wal-Mart annual report that the company faces strong sale competition from other discount, department, drug, variety and specialty stores and supermarkets, many of which are regional, national and international chains as well as internet-based retailers and catalog businesses (Barley et al., 2007,p.364). From the case study it is apparent that the major competitors include Target, Costco and Kroger. Target Corporation with annual revenue of $59 billion and annual growth rate of 12.5% in 2006 operates 1,318 general merchandise stores and 182 supertarget stores in 47 States in addition to its online stores is the next big thing that WalMart has to face domestic market (Barley et al., 2007, p. 366). Costco Wholesale Corporation runs 510 warehouses averaging 140,000 square feet in 38 States and six foreign countries including; Mexico, Canada, UK, Taiwan, Korea and Japan , and also in Porto Rico (Barley et al., 2007, p. 366). Costco core competitive advantage lies on limited number of products sold in high volume, high inventory turnover, low price via purchasing discount and favorable store locations (Barley et al., 2007, p. 366). Kroger operates 2,468 outlets competes against Wal-Mart on the supermarket and multidepartment store category and poses a challenge in terms of assortment of alternative products(Barley et al., 2007, p. 366). Target, Costco and Kroger constitute the strategic group that emphasize similar dimensions and use strategy similar to that of Wal-Mart. Other competitors outside the strategic group include general discount competitors and niche market competitors (Barley et al., 2007, p. 367). According to Barley et al.,(2007),Sears Holding(Kmart & Sear) offer

Case Study Analysis | 8 additional U.S. competition in general merchandise, while Tesco of Britain and Carrefour of France compete with Wal-Mart International(p. 366). Carrefour being the second largest retail chain in the world is the closest international competitor to Wal-Mart International from strategic perspective and in terms of market format (Barley et al., 2007, p. 367). Tesco emphasizes convenience and competes against Asada, a subsidiary of Wal-Mart UK. However, is another firm that poses a big threat to Wal-Mart in online retail. At the niche market segment Best Buy, Safeway, Circuit City, Home Depot, Lowes, Kohls and others compete against Wal-Mart at departmental level (Barley et al., 2007, p. 367). The bottom-line in terms of the competition is that even though these competitors offer the same products as Wal-Mart, it is difficult for any of them to replicate the convenience, price and diversity of products found in Wal-Mart. Internal Environment Internal environment encompasses forces and factors that influence a firms portfolio of resources, bundles of heterogeneous resources, capabilities and core competencies that managers have created to leverage competitive advantage (Hitt et al., 2011). Wal-Mart developed its internal organization on a broad perspective of global mind-set with a unique generic business-level strategy that competitors are unable to apply their resources and capabilities to replicate. The internal environmental forces can be controlled by managers and that was the main reason WalMart discovered what it can do by integrating its unique resources, competences and capabilities to create competitive advantage and sustained it. Resources are the sources of a firms capabilities that stretch across a spectrum of individual, social and organizational phenomena that do not yield competitive advantage by themselves but only when discovered and integrated effectively (Hitt et al., 2011). Wal-Mart

Case Study Analysis | 9 realized the opportunities that exist in big cities, small towns and international markets and responded by tapping into these opportunities through the establishment of supercenters & discount stores, neighborhood markets and expansion into 14 countries outside the United States through Wal-Mart International. The companys Neighborhood Market locations provided an average of 29,000 items per store, its Discount Store offer 120,000 items in each store and its supercenter stock more than 142,000 different items (Barley et al., 2007, p. 358). Wal-Mart resources are made up of two broad categories the tangible and intangible resources. According to Hitt et al., (2011) tangible resources can be seen and quantified and further classified tangible resources into financial, physical, organizational and technological resources (p.78). Wal-Marts net income of $11.709 billion in 2007; its store segments, the integrated data management system and e-commerce technology coupled with its 2,275 supercenters, 1,074 discount center, and 112 neighborhood markets in 2007 represent huge financial, organizational, technological and physical resources respectively. In the other hand, intangible resources are assets that are rooted deeply in the firms history and have accumulated over (Hitt et al., 2011). Hitt et al., (2011) classified intangible resources into human, innovation and reputational resources (p.79). Wal-Marts 1.8 million employees, its IT capabilities and strong brand name represent its intangible resources. According to Hitt et al., (2011) Capabilities exist when resources have been purposely integrated to achieve a specific task or set of tasks (p.80). These tasks range from human resource selection to product marketing and research & development activities (Hitt et al., 2011). Capabilities represent the capacity to deploy resources that have been integrated to achieve a desired end state which emerged over time through complex interaction among resources. WalMart has maximized shareholders wealth by taking appropriate business-level strategies to improve the stock performance and earn above average returns which trickles down to shareholders as

Case Study Analysis | 10 dividend. The foundation of Wal-Marts capabilities lays in the unique skills and knowledge of its 1.8 million employees especially its bunch of talented managers and strategic leaders. With appropriate corporate-level cooperative strategy Wal-Mart has successfully transferred knowledge and learning among the various units of its business segments. The strategic managers have developed winning strategies through sharing and transfer of unique knowledge among various units. Wal-Mart has used effective distribution system to build capabilities based on effective use of logistic management techniques. The use of Radio Frequency Identification (RFID) enabled Wal-Mart to track inventory locations, store shelving status, packages, en-route to and fro suppliers, warehouses, shelves, and even shoplifting (Barley et al., 2007, p. 371). The combination of these capabilities empowered Wal-Mart to leverage competitive advantage it has sustained for a longer period of time. Core competencies are the resources and capabilities that are the source of a firms competitive advantage (Hitt et al., 2011). Technically speaking the ability of a firm to compete effectively and develop advantages depends on how well the firm influences its internal environment by harnessing the opportunities through the deployment of its core competences, resources and capabilities. This is what distinguished Wal-Mart from its rival and reflects its true personality as the global market leader. Hitt et al., (2011) pointed out that core competencies emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities (p. 81). This has been the secret behind Wal-Marts success in developing competitive advantage. Wal-Mart built its core competencies on the concepts it performs exceptionally well compared to its competitors and activities through which it add unique values to its activities over a long period of time. These concepts and activities include: a. product differentiation large assortment of goods and services

Case Study Analysis | 11 b. cost leadership- everyday low price by making products and services affordable c. convenience parking pleasant shopping experience d. segmentation- meets customers expectations by offering particular goods and service at unique locations e. innovation introduction of new products to meet the expectation of customers f. customer focus localizing selections based on store neighborhood demographics (Barley et al., 2007, p. 370 374). However these competences meet the four criteria that Hitt et al., (2011) set forth which include valuable, rare, costly to imitate and nonsubstitutable (p.82). The combination of the resources, core competences and capabilities constitute the internal environment. Wal-Mart has been quite impressive in its ability to purposefully integrate these essential elements to develop competitive advantages that are non-substitutable. This case study analysis presents a comprehensive list of opportunities, threats, strengths and weaknesses below in a chart from the analysis of the external and internal environment above.

External Opportunities Growing international sales resulting from new market opportunities that exist in foreign markets including Canada, Mexico, Japan, UK, Taiwan, Korea and Porto Rico. Rising customers diverse needs for

External Threats Harsh economic conditions such as recession, high interest rate, customer preference, cost of labor, inflation, currency exchange fluctuation, and fuel prices. Slow market growth rate in the domestic economy.

Case Study Analysis | 12 products and services. Needs in new market segment such as banking. Strong power over suppliers due to large volume of purchases. Economies of scale and scope arising from effective supply chain system. Good competitors intelligence. Everyday low price. Acquisition of competitive firms e.g. Asada in UK. Fierce market competition from Costco, Kroger, Target and other niche market competitors. Growing bargaining powers of suppliers. Growing bargaining powers of customers due to alternative products offered by competitors. Loss of sale to substitute products and online stores Entry of new competitors in the niche market Strategic alliance by competitors

Internal Strength Strong brand name built on low price and large assortment of products and services.

Internal Weakness Overly complex strategy with a unified corporate strategy that do not allow units flexibility to customize operations to their locality.

Wide geographic coverage with 6,782 stores High turnover rate of inventory in 14 countries and United States. Economy of scale & scope. Dwindling reputation due to competitive pressure from the strategic group and competitors in the niche market. Behind rivals in the use of e-commerce Does not survey customers and has no research and development program. Huge financial resources commitment in expansion

Pricing advantage over rivals. Good customer service and pleasant shopping experience with free parking. Strong financial and IT resources. Good supply chain management.

Requirement 2- Wal-Marts Generic Business-Level Strategy.

Case Study Analysis | 13 Business-level strategy is defined according to Hitt et al., (2011) as an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets (p. 100). The implication of this concept is that businesses make choices on how they intend to compete in individual markets and gain competitive advantage. Every successful business-level strategy revolves around the customer and that is the reason why Wal-Mart focused its business-level strategy on customers satisfaction not only through cost leadership but also through differentiation of products and services. Michael Potter classified business-level strategy into five groups which include cost leadership, differentiation, focused cost leadership, focused differentiation and integrated cost leadership /differentiation (Hit et al., 2011). These business-level strategies are generic which implies that the can be applied by any firm in any industry. The basic concept underlying generic business-level strategy is that it allows a firm to distinguish itself from the rest of the competitors (Hitt et al., 2011). Wal-Marts generic business-level strategy is integrated cost leadership/differentiation strategy. According to Hitt et al., (2011), integrated cost leadership/differentiation strategy involves engaging in primary and support activities that allow a firm to simultaneously pursue low cost and differentiation (p. 120). Initially Wal-Marts business-level strategy was basically cost leadership through everyday low price but with Costco and Targets differentiation strategy positioning the companies against Wal-Mart competitively, the most proactive competitive action Wal-Mart had to take was to replicate the differentiation strategy and integrate it into is cost leadership strategy. This move propelled Wal-Mart to the forefront of the competition. This was the main reason why Wal-Mart Stores recently realigned its merchandising around five key power categories entertainment, grocery, health and wellness, apparel and home products

Case Study Analysis | 14 (Barley et al., 2007, p. 373). Wal-Mart through its Global Procurement program established a group of technical experts- specialists that focused on the many important dynamics of particular category purchase aimed at driving its three customer-focused strategies (Barley et al., 2007, p. 374). The three customer focused strategies stipulated by Barley et al., (2007) include mimicking Targets upscale fashion-forward appeal, localizing selection based on store neighborhood demographics and appealing to the universal low price seeking customers (p.374). The primary competitive activity of Wal-Mart is everyday price while its support competitive activity is provision of differentiated products and services at its store locations. Mimicking Target by providing upscale fashion-forward appeal flopped because Wal-Mart did not replicate Targets core competencies and capabilities in providing upscale fashion-forward appeal products. Localizing selection based on neighborhood demographics was a successful customer-focused strategy that allowed Wal-Mart to expand and empower regional marketing teams moving away many executives from the headquarters into the regions to understand the companys wide customer base (Barley et al., 2007, p. 374). The customer-focused strategy to appeal to the universal low price customers (i.e. brand aspirationals, price sensitive affluent, and value price shoppers) succeeded and allowed Wal-Mart Store segments to develop unique, innovative products and provide distinguished brands to better appeal to its core customers as a low price leader in well-known brands (Barley et al., 2007, p. 374). Through effective sustainability and localized charitable giving strategy Wal-Mart has portrayed itself as a socially responsible corporate citizen and a good neighbor (Barley et al., 2007, p. 372). Wal-Mart demonstrated this by selling over 100 million environmentally friendly florescent bulbs since the commencement of its global environmentally sustainable program in

Case Study Analysis | 15 2004, set a goal to reduce package by 5% by 2013 and has as well given over $415 million in cash and kind to over 100,000 charities worldwide(Barley et al., 2007, p. 372). To confront changes and address its external reputational challenges Wal-Mart rolled out a new strategy to redefine its operations and how it will compete. The new strategy just like Scout(2007) described, the corporate plan encompasses previous change initiatives as well as new ones, rest on five pillars: broadening our appeals to our customers , making Wal-Mart even a better place to work, improving operations and efficiency, driving global growth and contributing to our communities((Barley et al., 2007, p. 372). Requirement 3 Primary Factors influencing Wal-Marts Generic Business-Level Strategy Based on the analysis of Wal-Marts internal and external environment, they factors that influence the companys generic business-level strategy are outlined in the chart below. These factors are analyzed according to their influence to various stockholders groups.

Product Market Strength The everyday low price allows customers affordability of the product and services. Neighborhood stores give customers easy access to shopping round the clock.

Stakeholders Weakness The low price increase customers switching cost to competitors products. Discount stores are usually overcrowded during festive period Opportunities Customers are empowered to choose from large assortment of products and services. Customers have easy access to store, convenience parking and pleasant shopping experience. Cost of transmitting data Threats The low price diminishes customers bargaining power. Customers do not get the product education and personal attention needed for decisions. Unauthorized access to

The IT capability helps suppliers

Wal-Marts Data

Case Study Analysis | 16 to interchange data, monitor stock level, ordering and manage delivery timely. The privilege to chose from the differentiate products, services and stores. interchange system compromises its suppliers privacy. Differentiation changes customers preferences from quality to low price. is reduced and real-time information exchange is made possible. Expectations are met through innovation and product development which are the driving force for differentiation. classified corporate information. Differentiation shifts the focus from the customer to the products.

Capabilities and core competence to harness opportunities to create value for customers, suppliers, unions and host communities

Wal-Marts undue negotiation powers allow it to dictate the product design and specification i.e. doing it Wal-Marts way. Stakeholders Weakness Stock price fluctuation gives an indication that capital market stakeholders may not be met. Failure of business-level strategy leads to divestiture, loss in revenue and decrease in investment returns. High interest rate increases the risk of lending and repayment. The redistribution of risks increases the cost of insurance which may likely affect investment returns. Dissatisfied lenders may impose stricter conditions for future borrowing.

Customers, expectations Often,Wal-Mart limits its are reflected from the value creation to itself and purchases trend. customers cutting off unions and communities.

Capital Market Strength Stock price appreciation reflects good performance and increases investors confidence.

Opportunities Appreciation in stock prices increase the value of shareholder investment Share holders wealth is maximized through returns and bonus stock.

Threats Demoralizes shareholders and could lead to divesting their investments.

Appropriate business-level strategy responds to challenging external environmental forces and help to gain above average return on investment. Low interest rates keep the cost of borrowing low and make repayment easier to the lender. High risk associated with higher interest compels a firm to reduce its risk through purchase of insurance policies. Wal-Marts sustained growth preserves and enhances the funding from lenders.

This could lead to dissatisfaction which can generate conflict.

Higher returns are expected of high risk investments. This offers shareholders the opportunity to minimize their investment risk. When strategies succeed the performance of a business is significantly improved allowing it to fulfill its obligations.

The risk of default is high when the interest rates are high. Investment returns may be uncertain.

Failure of strategies leads to failure in fulfilling obligations which is capable of cutting off future source of capital. This may hamper

Case Study Analysis | 17 Implying that the lender maximizes his investment. Organizational Strength Provision of good work environment. Encouragement of organizational learning. Improve efficiency Stakeholders Weakness Expectation to exceed performance. It may be an expensive strategy in terms of resource commitment. Overall organizational efficiency may not be realized. The needs of the employees may not even be met. Proper application of the new knowledge and culture may prove problematic Opportunities Skill development and rewarding work environment. It will offer avenue to introduce change management. Employees will be motivated to higher productivity. Employees potentials can be fully utilized creating opportunity for growth. This could lead to development of critical skills that is critical to the success of competitive capability Threats There may be undue pressure to perform or be relieved. New methods and procedures may be hard to be transitioned. Resentment can lead to reorganization and massive job loss. This could lead to dissatisfaction for those who could not embrace the new corporate culture. Some employees may be slow to developing these critical skills and that could lead to a dysfunctional organizational structure. the lenders operation due to high cost and risk of lending.

Introduction of new corporate culture.

To develop human capital capability.

Requirement 4- Evaluation of Wal-Marts potential of Success using the Strategic Input from the Stakeholders Group Analysis The business-level strategy Wal-Mart applied defined its competitive methodology and has allowed it to develop competitive advantage by leveraging its resources, core competencies and capabilities. From the analysis of Wal-Marts business-level strategy above it is quite evident that Wal-Mart used its generic business-level strategy of integrated cost leadership/differentiation to make choices of how it competes and address strategic issues. The business-level strategy has

Case Study Analysis | 18 been expanded to incorporate the entire stakeholders within the value chain. Wal-Mart galvanized its business-level strategy to redefine its operations and respond to strategic challenges to position itself well ahead of its competitors. This strategy modification which Barley et al., (2007) described as encompassing previous change initiatives as well as new ones, rest on five pillars focusing on broadening appeals to customers , creating a better work environment, improving operations and efficiency, driving global growth and contributing to host communities (p. 372). These modifications have improved the potency of effective strategy. Wal-Mart has a very powerful strategy but it is also one that is hardly measurable or easy to communicate. Wal-Mart has an effective business-level strategy that focused on empowering the stakeholders and building an effective value chain that will continue to be the flagship of retail business. As regards to the product market stakeholders which include the customers, suppliers, host communities and unions, Wal-Mart has empowered them by creating higher value services and opportunities that will benefit them and reduce the threats that may be a clog on the wheel of their individual or corporate progress. The low price core competency of Wal-Mart which is an indispensible strength affords customers the opportunity to choose from large assortment of differentiated products at low prices. This strategy creates value for customers and serves as a link that keep bringing them back to shop at Wal-Mart stores. The customer-focused strategy to appeal to the universal low price customers succeeded and allowed Wal-Mart Store segments to develop unique, innovative products and provide distinguished brands to better appeal to its core customers as a low price leader in well-known brands (Barley et al., 2007, p. 374). So this strategy provides low price and also meets customers expectations the implication is that the loyalty of these customer will still be unalloyed to Wal-Mart.

Case Study Analysis | 19 The neighborhood store locations give customers easy access to shopping with convenience parking and pleasant shopping experience. This is what an average customer looks out for; satisfaction of customers need is the key to winning their loyalty. Even with large assortment of goods Costco could not replicate this competitive advantage and this is the reason why Wal-Mart attracts about 175 million each week to its stores (Barley et al., 2007, p. 368). The IT capabilities of Wal-Mart create huge opportunities that empower suppliers and allowed them to participate in the Retail Link, a computerized network system that allow them to plan, execute and analyze their business (Barley et al., 2007, p. 373). Along with electronic data interchange suppliers receive purchase order information and supply invoices electronically, thereby lowering cost, increase the speed of data transmission and improve productivity (Barley et al., 2007, p. 373).This capability create and effective supply chain management that reduces the cost of logistics and create a mutual partnership between suppliers and Wal-Mart. The Wal-Marts Technological supply-chain sophistication provides value for customers, associates and shareholders (Barley et al., 2007, p. 3743). This system depends on Wal-Marts 1.8 million employees to provide the final link in the value chain to customers. The improved working conditions and increase in hourly pay rate associates are provided the opportunity to develop their skills while working in good job environment. This opens the door for career growth for associates and motivates them to higher productivity. With appropriate business-level strategy to respond to challenging external environmental forces and help to gain above average return on investment Wal-Mart has continually maximized its shareholders wealth. The 312,423 shareholders have been enjoying regular average annual equity returns of 22% on their investment and with strong corporate governance the equity returns

Case Study Analysis | 20 will even get better. So a careful evaluation of the growth potentials of from its business-level strategy and its antecedent modification above shows that Wal-Mart has not fully maximized its growth and success potential. The field is still large enough for Wal-Mart to realize its full potential with careful integration of its resources, core competencies and capabilities; Wal-Marts success potential is very huge. Requirement 5- Strategic Issues & Recommendations Due to the complexity that characterized the internal and external business environment, Wal-Mart has strategic issues to address to maintain its market leadership position. However, any business that competes globally like Wal-Mart will continually appraise its performance to seek for the effectiveness of it business-level strategy and take corrective actions to remain competitive. The first strategic issue that is most challenging to Wal-Mart is public resentment. There has been wide spread resent from unions, communities, press, government and regulatory agencies against Wal-Marts market dominance. Some argue that Wal-Mart has run off a lot of retail businesses using its unique core competencies, capabilities and resources which many competitors cannot replicate. According to Barley et al., (2007), the same products can be purchased from different types of retail stores but it is difficult to replicate the convenience, price and diversity of merchandise found at Wal-Mart (p.368). Some communities are even seeking legal ways to keep Wal-Mart away from establishing in their communities. However, negative press has been another factor responsible for Wal-Marts battered public image. Governments and regulatory authorities have not helped matters either accusing Wal-Mart of gross violation of labor laws, environmental laws and trade regulations. Barley et al.,(2007) pointed out that Wal-Mart has become a poster company on political issues related to trade, health care , the environment, discrimination, worker

Case Study Analysis | 21 pay and general anti corporate sentiment ( p. 386). This accumulated resentment against WalMart resulted from reluctance and lack of effective strategy to positively position its image before the American consumers as socially responsible corporate body. Wal-Mart also needs to relax its anti-unionization policy and afford its employees to free elect to organize themselves into unions. The second strategic issue is a pending federal law suit instituted against Wal-Mart by a group of employees alleging gender discrimination against female workers. It is very clear that in the past Wal-Mart was fined heavily to the tune of $198 million in the case of Savaglio vs. WalMart Stores (Barley et al., 2007, p.371). I believe Wal-Mart has good strategies but it should be more proactive and thorough in developing its compensation and incentive policies. The issue of discrimination should be addressed and the equal pay for equal work Federal Law should be respected. However a peaceful resolution and out of court settlement will be ideal for Wal-Mart to save its image from be further dragged to the gutters by the press. The third strategic issue is that Wal-Mart is recording declining domestic revenue and increasing revenue from overseas markets. This calls for an articulate strategy to harness the opportunities where they potentials seem to be optimum. Wal-Mart Internationals strategy is to prioritize where the greatest growth and great returns exist (Barley et al., 2007, p.375). Wal-Mart should articulate effective business-level strategy to focus on the right challenges for their longterm and short-term success in the global market place. Wal-Mart should allow Wal-Mart International some degree of flexibility to localize its strategies to reflect the taste, preferences and consumers expectations in their host countries. Just like Barley et al., (2007) pointed out that Wal-Mart should be looking abroad for future sales growth and struggle against the urge to centralize operations and eliminate decision making from frontline where manager have face-toface contact with customers (p.375).

Case Study Analysis | 22 From the above analysis and strategic issues I will offer two recommendations that will strengthen Wal-Marts competitive advantage. As the global leader in retail business Wal-Mart has been quite impressive but it need to launder its battered public image and reposition itself as a socially responsible corporate organization. Wal-Mart should deepen its efforts in encouraging environmental safety , respect for labor regulations and engage more communities in discharging its corporate social responsibilities to show that it cares for it business environment just like it cares to maximize profit. It will be a proactive move to resolve the pending law suit and settle out of court to save the company from further damage to its already questionable public image. Finally, Wal-Mart should take advantage of the global growth opportunities to expand its international operations but it must learn from the experience of local retailers to make the right strategic moves. Wal-Mart must be willing to be their uniformity in operation and centralization of decision making to allow its overseas operations acculturate to the local business culture. It should modify its strategy in entering the Japanese market through a Japanese retailer; Seiyu to avoiding divesting like it did in Germany and Korea due to inability to compete effectively in those markets.


Case Study Analysis | 23 Hitt, M. A., Ireland, R.D, & Hoskisson, R.E. (2011). Strategic Management: Competitiveness & Globalization. (9th Ed.)pp. 20-22,36-61,72 -88,100-123, 352-366. Mason: South-Western Cengage Learning. Barley, F., Bragg, D., Dawson, M., Shah, H., Sillanpaa, B., & Sleeper, N. (2007). Wal-Mart stores, Inc. (WMT) In Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2009). Strategic management: Competitiveness & globalization: Concept and cases (8th ed.) pp. 353-379. Mason, OH: South-Western Cengage Learning.