Strengths Scale of Operations Low Cost Strategy International Operations Information Systems Technology Weaknesses Poor Human Relations Implantation Of Entering International Market
Opportunities Store Leasing Green Operations Rental Business Retail Market Growth In Emerging Markets
Threats Pending Lawsuits By Disgruntled Employees Rising Commodity Prices Strategies Are Being imitated
Strengths Wal-Mart has many strengths that have propelled it to become the “largest retailer in the world with over $400 billion in revenue and 10,310 stores.” (Strategic Management Insight, 2013) One of its greatest strengths is actually in response to it being the largest. Wal-Mart’s scale of operations is the corner stone of all the strengths below. This strength allows them to carry 120,000-140,000 items within their stores and over 1,000,000 online. (Yoffie, D. & Slind, M, 2007) Wal-Mart’s low cost strategy is another strength that has pushed competitors aside. Wal-Mart has a low price guarantee which allows a cashier to match any price at the register.
This strategy has eliminated a lot of the competition such as small Mom’s & Pop’s stores in small community’s as well as larger competitors like K-mart. Wal-Mart’s International Operations allows it to not only depend on its sales in the United States; in 2013 it earned $135 billion in other nations. (Strategic Management Insight, 2013)
This strength helps to bring stability as well as great growth opportunities in developing nations. Wal-Mart’s information systems technology is a strength that holds the company together. Over a decade ago Wal-Mart trailed K-Mart due to its size but implementing a point-of-sale system and other technological advancements has lead it to be the largest retailer in the world.
“Over a five year period Wal-Mart invested over 600 Million in information systems”. (Prentice Hall Inc., 1999) This investment has allowed them to use only 10% of the floor space for inventory as compared to the industry average of 25%. (Prentice Hall Inc., 1999) Weaknesses
Wal-Mart, a multi-billion dollar business, has internal weaknesses that if left unaddressed will ultimately affect the strengths of the company. To begin with, Yoffie and Slind pointed out that, “Rising criticism of Wal-Mart’s business practices, particularly those pertaining to labor relations, contributed to a tarnishing of its image” (Yoffie & Slind, 2007, p.2). Wal-Mart, throughout the years, has been accused of poor Human Relations; these accusations range from low wages paid out to employees to worker’s rights violations. In recent years, Wal-Mart has faced an on slot of negative reports that indicate its policy of paying its employees low wages and the negative impact it has on its business are intertwined.
According to Rick Ungar, “Without enough employees to get the basic work of a retail operation done—and with those on site being paid a wage so low that it is difficult to expect much in the way of pride or motivation—Wal-Mart merchandise remains stacked on pallets in the warehouse rather than making it to the floor where customers can find the products they want” (2013).
Additionally, Wal-Mart has been linked to companies that have been suspected of using sweatshops for production of the products being sold by Wal-Mart. Yoffie & Slind stated, “…Wal-Mart, in its relations with international suppliers, failed to enforce child-labor laws and worker-safety rules” (2007, p. 2).
This has led to a public outcry of support for the employees who have suffered Human Rights violations; consequently, this has contributed to a drop in Wal-Mart’s sales. The lack of proper planning by Wal-Mart has ultimately caused considerable financial losses associated with the cost of entering into some foreign markets, in addition to the long term financial loss of failing in these said markets.
Although Wal-Mart has successfully become a global giant, many examples exist to support the notion that while entering a foreign market can be strength for the company, without proper planning it is also a weakness; this can have largely negative financial ramifications for the company. “In some cases, it neglected to adapt to local markets, arguably forcing its culture on certain regions at too rapid a pace” (Yoffie & Slind, 2007, p. 3).
This was the case in South Korea. Furthermore, Wal-Mart’s attempt to enter into Germany’s market is an example of the financial risk associated with entering into a market without first determining how well the company fits into that country’s culture and the people’s desire to deviate from their norm. “In July 2006, Wal-Mart left German market, selling its assets there to German retailer Metro AG at an expected pretax loss of $1 billion” ( Yoffie & Slind, 2007, p.3).
Finally, Wal-Mart spent years trying to exploit the Russian market. It has invested time and money into its attempted entry and has yet to establish an effective business plan to enter into the Russian market. Van Dyk has reported that, “Russia's underdeveloped retail sector lures international giants with promises of high returns. But Wal-Mart has struggled to find a way in” (2010). Opportunities
Wal-Mart stores have crossed borders into many other countries, succeeded in many and failed in others like South Korea, having to sell its store to another discount chain. Wal-Mart can use what it has learned to further build more companies in other up and coming global markets. Wal-Mart also needs to start looking into building and strengthening the current stores they currently own. Wal-Mart currently offers many products within its stores, from nail and hair salons, to eye doctors and photography.
What many don’t realize is that Wal-Mart also rents out space. The Wal-Mart In-Store Leasing Program provides local, regional, and national businesses the opportunity to lease space in front of operating Wal-Mart Stores and Supercenters. (Wal-Mart, 2013)
By offering leasing space to local businesses, Wal-Mart is able to earn revenue without having the expenses of paying employees. Offering space to local businesses will also help to bring the community together by offering the local businesses to feel that Wal-Mart cares not just about Wal-Mart, but a community as a whole. Wal-Mart can create a better name for the company by expanding into the “Green” market.
By going “Green” not only can Wal-Mart gain some tax advantages, but learning to make packaging lighter and more efficient can also be cost saving and reduce waste. Going “Green” can also sustain a positive response from the public and earn the respect and loyalty from a different customer base. Another department that Wal-Mart could jump into is the rental services.
Wal-Mart currently has an automotive department where they change oil and tires and other minor mechanical issues. Therefore, it could be a great way for Wal-Mart to expand the company name and offer vehicle rental comparable to Avis or Budget rental companies. With many locations worldwide the access for a customer to be able to drop off and pick up vehicles and do a little shopping would be very profitable for Wal-Mart. Threats
The biggest threat against Wal-Mart is the retail chain of Target. Target is the only chain that has prospered against Wal-Mart. Although it still only has one fifth of the sales and profits of Wal-Mart (Schlosser). In recent years, the recession has set back the trendy Target, but not the price conscious Wal-Mart, whose earnings rose during the housing market bust. Target has tried to imitate Wal-Mart but cannot compete with the good relationship with suppliers that Wal-Mart has built over the years. This enables Wal-Mart to give consumers the lowest possible prices on food, medicine and clothing unattainable by Target.
(Maesri) If Wal-Mart keeps doing this Target is at least ten years away from catching up to the global giant. (Schlosser) Wal-Mart employs 2.2 million employees in 8,500 stores and the lawsuits are staggering. (Samakow)Sam Walton’s policy on lawsuits was to ask “What did we do wrong? If we are at fault, admit it and fix it, if not we will take them to court.”(Willing) In recent years Wal-Mart has been slipping from this policy. They need to get back on track; if not a surge of negative public opinion on Wal-Mart could become another major threat. References
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Van Dyk, P. (December 14, 2010). Wal-Mart Abandons Efforts to Enter Russian Market. Retrieved from http://www.npr.org/2010/12/14/132046158/Wal-Mart-Abandons-Efforts-To-Enter-Russian-Market
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