Which strategic management concepts are useful in the analysis of this case? 1. SWOT Analysis Walmart’s internal strengths and weaknesses and environmental opportunities and threads are: Strengths Highly motivated and committed employees (Associates) Top management involved on daily operations (street managers) Latitude price setting (allows more profitability in different locations) Technology oriented (Satellite system and logistic software) Alliance with suppliers (data sharing and loyal relationships) Various format stores for different segments.
Weakness Associates stock ownership linked to economy cycles. Top executes flaunt millionaire salaries. Complex operation and coordination of 1953 stores (enormous size) Cannibalize sales between stores. Opportunities International expansion (Emerging markets growth represent great demand) House brands expansion (Customers increasing acceptance to this products) Test new store formats and segments (innovation) Threats Opposition groups and bad media (small merchants out of business) Industry concentration (more competition affects profitability) Government sanctions (below cost selling)
2. Internal Value Chain Walmart’s most important internal activities are: -Logistics and operations: (primary activity) Walmart has 40 distribution center which are 24 hours operated, have one million square feet, and equipped with computerized systems that are geographically located to generate important savings associated to logistics. -Partnership with suppliers: (support activity)
Walmart shares information electronically of daily sales data with suppliers to improve performance. Key suppliers located their own employees inside Walmart’s premises to manage products orders, reducing personnel and capital (inventory) costs.
-Sales point infrastructure: (primary activity) Walmart high speed store openings rate compared with competitors and different retail formats was based on the premise of economy of scale, more sales capacity would allow more bargain power with suppliers, more effective logistics and inventory optimization. -Human resources management: (support activity)
Walmart is strongly focused on empowering its associates by sharing results, involving them in teamwork to address suggestions and extend their range of work responsibility to encourage motivation. Allowed managers to set product prices according to their understanding about specific customer preferences, which increased profitability on different segments. -Communication and supervision: (support activity)
Walmart’s top executives are “street managers” because they are highly involved with daily operations, visiting stores on weekly basis increased customer preferences knowledge on individual product sales and specific stores. Walmart also developed a strong supervision team and encourage frequent meeting to incentive communication. Proactive and well informed managers can take faster and better decisions reducing opportunity costs. Why do you think each of your selected concepts are useful for understanding this case?
The SWOT analysis is useful to identify the internal and external factors that affect Walmart in pursue of its objectives in the food retail industry. The Internal value chain is useful to identify those activities that create competitive advantage. My analysis is based on a low cost differentiation generic strategy and location niche. Walmart marketing slogan “Always low prices—always” represents the business core philosophy, cost leadership.
The structure and the activities of the corporation fit to generate a cost efficiency platform that allows lower sales prices than competitors. Location niche allows Walmart to operate stores in less competitive geography where it can increase prices to leverage overall profitability. What strategic understanding did you develop as a result of this case analysis? The analysis of this case helped me to develop the concept of how different activities are selected and fitted together to achieve a desired goal, in this case low costs. Sharing information with employees and suppliers allowed Walmart to develop strong alliances and commitment in contrast to family business which tend to keep key information as secret as possible.
In addition I learned that low cost strategy can accomplish to keep employees motivated and non-unionized by using diverse activities and policies such us: Profit sharing, suggestion programs, incentive plans, and increased job responsibilities. Based upon your analysis, what specific strategic recommendation would you make for the situation presented? 1. Continue updating its logistic operations with leading technology to be ahead of the industry in operation effectiveness. 2. Gradually continue entering emerging markets by analyzing growth opportunities and acquiring firms that have strong infrastructure in local or regional markets.