Grand strategy is about an organization utilizing all resources at its disposal for the purpose of winning a competitive edge or maintaining a competitive edge. Therefore, an organization can continue its extraordinary growth when it identifies and aligns all its resources towards the strategic goal (Ireland et al 45). Wal-mart can only continue its extraordinary growth by capitalizing on its strengths, tapping into opportunities in the market, addressing weaknesses and eliminating or minimizing threats.
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Porter frames some of the common strategies that market leaders employ to maintain market leadership. These strategies are commonly referred to as generic strategies and are diagrammatically represented as shown in table below
Wal-mart as an organization has a high market scope and a high low cost competence. Therefore, by adopting multivariate strategy i.e. combining product differentiation, cost leadership and proper market segmentation, it can maintain its extraordinary growth.
Building and sustaining a competitive advantage is largely dependent on product characteristics, value for customer’s money and proper positioning and targeting of products. In porter’s generic strategies, market segmentation looks at customer peculiarities and narrows concern to particular markets.
Product differentiation and cost leadership as strategies are more diverse and broader in their scope. As Wal-marts characteristics show clearly, a good fusion of these generic strategies should enable it to continue growing in an extraordinary way.
Wal-Mart is a strong brand developed over many years and supported by over 42 years experience as a major market player (Yoffie 1). It has a high market share and due to expanded operations benefits immensely from economies of scale. Management, by riding on its huge market share and well built brand resonance, can create more revenue streams under the same brand.
This would require, in line with product differentiation, identifying other unique merchandise that could be added to the product line without jeopardizing the brand image. The merchandise has to be unique enough as to be easily associated with Wal-Mart as a brand. The company is already doing this through creation of superstores with a variety of products on offer (Yoffie 1).
There exists opportunities in the international market. However, in as much as the low pricing strategy has driven its growth in America, the company has to devise market segmentation strategies to fruitfully enjoy opportunities abroad.
For example, instead of positioning itself only as a low priced store, it should look into positioning itself as the most fashionable store that guarantees a wholesome experience. Proper positioning coupled with its low pricing strategy should continue to drive sales; it will attract both high end and low end customers.
One weakness with Wal-Mart is its store formats (Yoffie 2). It is getting stiff competition because while it is building super stores, competition is going for specialized store formats. Product differentiation comes in handy here so that as competition from specialized stores grows, Wal-Mart retains and grows its market share.
Wal-Mart needs to appreciate the growth potential in small stores like the ones it initially had; the stores it is replacing with super stores. Although having superstores has its own advantages, a fusion of superstores and small specialized stores should guarantee continued extraordinary growth.
What would be the limits to that growth?
Porter’s five forces would be helpful in determining what would limit Wal-Mart’s growth. According to porter, an organization or products performance is dependent on five distinct forces (Mintzberg et al 100). Wal-Mart does not deal in totally differentiated products.
Therefore, the threat of new entrants and competitive rivalry is very high in the retail industry and is likely to go up. Considering supplier power in the retail industry, there are many suppliers thus minimizing supplier power. On the other hand, buyers have enormous power due to many retailers and a variety of substitutes. Therefore, the greatest limit to Wal-Mart’s growth is likely to result from competition activity and customer perception of the competition rivalry.
A company’s growth is limited both by internal and external factors. Considering internal factors, the only limitation to Wal-Mart’s growth is hiccups in managing a global conglomerate of sorts. Externally, social and cultural perceptions are likely to shape and limit Wal-Marts expansion.
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As the case indicates, Wal-Mart employs very many people. As it continues on the path of extraordinary growth, it means more people being employed to work in the branches and subsidiaries or joint ventures. Managing all the people and the multifaceted conglomerate will not be ease.
In actual sense, unless the organization is fragmented such that given regions or lines become close to totally independent, managing the organization becomes a nightmare. Therefore, the extraordinary growth of Wal-Mart is likely to be checked by management complexities or challenges.
On the external front, there is likely to gradually grow a sort of disenchantment about Wal-Mart and its conglomerate size. Although Wal-Mart is growing based on honest and best business practices, as it continues to rake in billions in profits, seeds of discontent will sprout among people of different nations. Wal-Marts growth will be interpreted as the reason why small businesses can no longer develop or grow.
A percentage of the world population does not like identifying with Mega things (Dess & Taylor 27). Therefore, they will continue to seek small specialty brands rather than a mega brand that promises everything. For some people, small specialized is identical to personalized, caring and detailed thus more quality conscious.
Such like sentiments are likely to make competition to mega retailers buoyant. Other people will just desert Wal-Mart in search of difference or something new. The products may not be new but given they buy from a new brand, the shopping experience is different.
Did Asia and Europe offer Wal-Mart real opportunities for international market dominance?
A pestel analysis of the Asian and European market shows that they offered Wal-Mart perfect opportunity for international market dominance. Politico-legally and even environmentally, there is no mention, in the case study, of opposition to Wal-Mart’s foray into Asia or Europe. Through acquisitions, mergers and joint venture techniques, Wal-Mart was able to take people by surprise that no social resistance is reported in the case (Yoffie 4).
In those countries, Wal-Mart, economically, found liberal economies and luring economies of scale due to the block markets they offered. Technologically, Wal-Mart was better placed than all other retail stores in the new markets; having adopted IT in its logistical processes. Therefore, using its economic advantage and awesome business strategy, Wal-Mart entered the Asian and European market and by outwitting competition in those markets, it became a dominant global player.
How could the company take advantage of its global reach to propel itself through the years to come?
When analyzing competitive strength, key success factors are often analyzed to understand how businesses in an industry are fairing. In the retail industry, some of the key success factors are price, store format, range of product, store cleanliness, flexibility or readiness to change and customer care (Ireland et al 117).
Among the key success factors, there are those that are critical success factors for giant operators. The history of Wal-Mart shows that the critical success factors in the retail business are low pricing and good logistics.
Due to economies of scale enjoyed as a result of volumes moved around the world, going into the future, Wal-Mart may always offer the most competitive prices in the market. The economies of scale enjoyed due to a global reach makes Wal-Mart better positioned to offer lower prices than other retailers.
Secondly, due to a global outreach, with stores in many countries around the world, Wal-mart will continue to enjoy better logistical possibilities than other retailers. Wal-Mart currently has a logistical strategy that allows for Just in Time operations. Considering that the future of business will be more information technology driven, online stores complemented by physical stores around the world gives a global player a big competitive edge.
Information technology and improvement in transportation has made the world a small village. Much business is happening on-line and Wal-Mart is not being left behind. Through e-commerce processes, Wal-Mart can continue to access even more customers from all over the globe. With stores in every part of the world, the e-processes complement sales activities in the stores.
Dess, Gregory, G. & Lumpkin G. Taylor. Strategic Management: Creating Competitive Advantages, 2nd Ed. London: Mcgraw Hill Book Co, 2004.
Ireland, R. Duane, Hoskisson E. Robert & Hitt, E. Michael. Understanding Business Strategy: Concepts and Cases, London: Cengage Learning, 2008.
Mintzberg, Henry, Ahlstrand W. Bruce & Lampel, Joseph. Strategy Safari: A Guided Tour through the Wilds of Strategic Management. New York: Free Press, 1998.
Yoffie, David B. “Wal-Mart, 2005”. Harvard Business School, 705.460 (April 14, 2005): 1- 9.