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

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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, Sam’s

Club and Wal-Mart International (Barley et al., 2007, p.356). The Wal-Mart Store segment

operates Wal-Mart.com 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).

Sam’s Club operates as a membership-based retail warehouse and online at samsclub.com.

Barley et al.,(2007), pointed out that “the segments 579 clubs average 132,000 square feet, and
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provides exceptional value on brand-name merchandise at ‘members only price’ for both

business and 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 Wal-

Mart 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-Mart’s 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 Wal-

Mart’s competitive advantage will be offered.

Requirement 1: Wal-Mart’s External and Internal Environment Analysis

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Like every other business organization, Wal-Mart’s goal to realize strategic

competitiveness and earn above –average return is significantly influenced by the internal and

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 firm’s visions, developing its mission, identifying and implementing

its strategic actions (P.36).

External Environment

An organization’s 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 organization’s

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 dad’s vision to improve the lives of everyday people by making everyday
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things more affordable” (Barley et al., 2007, p.359). The general environment influenced Wal-

Mart and its competitors in several ways as a result of higher cost of goods, consumer debt level

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

business-level strategies to gain competitive advantage. So, Wal-Mart converted these threats to

opportunities by strategically optimizing its resources, core competencies and capabilities. Wal-

Mart 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
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environment forces created threats which Wal-Mart converted into opportunities and tapped into

them to develop competitive advantage.

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 company’s capabilities. With effective business-level strategy Wal-
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Mart has developed a value chain that offers cost/product differentiation that allows consumers

greater degree of preference and lowers the company’s cost of switching to other suppliers to

maintain its goal of everyday low price vision.

Competitor’s 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 competitor’s 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 Wal-Mart 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
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general discount competitors and niche market competitors (Barley et al., 2007, p. 367).

According to Barley et al.,(2007),”Sears Holding(Kmart & Sear) offer 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, Amazon.com 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, Kohl’s 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 firm’s 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

Wal-Mart discovered what it can do by integrating its unique resources, competences and

capabilities to create competitive advantage and sustained it.

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Resources are the sources of a firm’s 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

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 company’s 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-Mart’s 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 firm’s 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-Mart’s 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).
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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. Wal-

Mart 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 dividend. The foundation of Wal-Mart’s 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 firm’s

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-Mart’s success
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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

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.
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External Opportunities External Threats

Growing international sales resulting from Harsh economic conditions such as recession, high
new market opportunities that exist in interest rate, customer preference, cost of labor,
foreign markets including Canada, Mexico, inflation, currency exchange fluctuation, and fuel
Japan, UK, Taiwan, Korea and Porto Rico. prices.

Rising customer’s diverse needs for Slow market growth rate in the domestic economy.
products and services.

Needs in new market segment such as Fierce market competition from Costco, Kroger,
banking. Target and other niche market competitors.

Strong power over suppliers due to large Growing bargaining powers of suppliers.
volume of purchases.

Economies of scale and scope arising from Growing bargaining powers of customers due to
effective supply chain system. alternative products offered by competitors.

Good competitor’s intelligence. Loss of sale to substitute products and online stores

Everyday low price. Entry of new competitors in the niche market

Acquisition of competitive firms e.g. Asada Strategic alliance by competitors

in UK.

Internal Strength Internal Weakness

Strong brand name built on low price and Overly complex strategy with a unified corporate
large assortment of products and services. strategy that do not allow units flexibility to
customize operations to their locality.

Wide geographic coverage with 6,782 High turnover rate of inventory

stores 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.

Pricing advantage over rivals. Behind rivals in the use of e-commerce

Good customer service and pleasant Does not survey customers and has no research and
shopping experience with free parking. development program.

Strong financial and IT resources. Huge financial resources commitment in expansion

Good supply chain management.

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Requirement 2- Wal-Mart’s Generic Business-Level Strategy.

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-Mart’s 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-Mart’s business-level strategy was basically

cost leadership through everyday low price but with Costco and Target’s differentiation strategy

positioning the companies against Wal-Mart competitively, the most proactive competitive action
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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

(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

Target’s 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 company’s 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).

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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

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-Mart’s Generic Business-Level Strategy

Based on the analysis of Wal-Mart’s internal and external environment, they factors that

influence the company’s generic business-level strategy are outlined in the chart below.

These factors are analyzed according to their influence to various stockholders’ groups.

Product Market Stakeholders

Strength Weakness Opportunities Threats


The everyday low price allows
customers affordability of the
product and services.
Neighborhood stores give
customers easy access to
shopping round the clock.
The IT capability helps suppliers
to interchange data, monitor
stock level, ordering and manage
delivery timely.
The privilege to chose from the
differentiate products, services
and stores.
Capabilities and core
competence to harness
opportunities to create value for
customers, suppliers, unions and
host communities
Capital Market
Strength
Stock price appreciation reflects
good performance and increases
investor’s confidence.
Appropriate business-level
strategy responds to challenging
external environmental forces
and help to gain above average
return on investment.
Case Study Analysis | 16
The low price increase Customers are The low price diminishes
customers switching cost empowered to choose customers bargaining
to competitors’ products. from large assortment of power.
products and services.
Discount stores are Customers have easy Customers do not get the
usually overcrowded access to store, product education and
during festive period convenience parking personal attention needed
and pleasant shopping for decisions.
experience.
Wal-Mart’s Data Cost of transmitting data Unauthorized access to
interchange system is reduced and real-time classified corporate
compromises its information exchange is information.
suppliers’ privacy. made possible.
Differentiation changes Expectations are met Differentiation shifts the
customers’ preferences through innovation and focus from the customer to
from quality to low price. product development the products.
which are the driving
force for differentiation.
Wal-Mart’s undue Customer’s, Often,Wal-Mart limits its
negotiation powers allow expectations are value creation to itself and
it to dictate the product reflected from the customers cutting off
design and specification purchases trend. unions and communities.
– i.e. doing it Wal-Mart’s
way.
Stakeholders
Weakness Opportunities Threats
Stock price fluctuation Appreciation in stock Demoralizes shareholders
gives an indication that prices increase the value and could lead to divesting
capital market of shareholder their investments.
stakeholders may not be investment
met.
Failure of business-level Share holders wealth is This could lead to
strategy leads to maximized through dissatisfaction which can
divestiture, loss in returns and bonus stock. generate conflict.
revenue and decrease in
investment returns.

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-Mart’s sustained growth
preserves and enhances the
funding from lenders.
Organizational
Strength
Provision of good work
environment.
Encouragement of organizational It may be an expensive
learning. strategy in terms of
resource commitment.
Improve efficiency
Introduction of new corporate
culture.
To develop human capital
capability.
Case Study Analysis | 17
High interest rate Higher returns are
increases the risk of expected of high risk
lending and repayment. investments.
The redistribution of This offers shareholders
risks increases the cost of the opportunity to
insurance which may minimize their
likely affect investment investment risk.
returns.
Dissatisfied lenders may When strategies succeed
impose stricter conditions the performance of a
for future borrowing. business is significantly
improved allowing it to
fulfill its obligations.
Implying that the lender
maximizes his
investment.
Stakeholders
Weakness Opportunities
Expectation to exceed Skill development and
performance. rewarding work
environment.
It will offer avenue to
introduce change
management.
Overall organizational Employees will be
efficiency may not be motivated to higher
realized. productivity.
The needs of the Employee’s potentials
employees may not even can be fully utilized
be met. creating opportunity for
growth.
Proper application of the This could lead to
new knowledge and development of critical
culture may prove skills that is critical to
problematic the success of
competitive capability
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 the
lender’s operation due to
high cost and risk of
lending.
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.
 Case Study Analysis | 18

Requirement 4- Evaluation of Wal-Mart’s 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-Mart’s 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

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
 Case Study Analysis | 19

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.

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 customer’s 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-Mart’s Technological supply-chain sophistication provides “value for

customers, associates and shareholders” (Barley et al., 2007, p. 3743). This system depends on
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Wal-Mart’s 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 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-Mart’s 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-Mart’s market dominance. Some argue that Wal-Mart has run off a lot of
 Case Study Analysis | 21

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-Mart’s 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 pay and general anti corporate sentiment” ( p. 386). This

accumulated resentment against Wal-Mart 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. Wal-

Mart 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.
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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 International’s 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

long-term 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-to-

face contact with customers” (p.375).

From the above analysis and strategic issues I will offer two recommendations that will

strengthen Wal-Mart’s 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
 Case Study Analysis | 23

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.

Reference

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.