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Walmart Company Strategic Management Essay

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Updated: Aug 5th, 2021

Introduction

Organizations rely on strategic plans to make suitable decisions that benefit their competitive advantages and capabilities in the market. Although strategic planning remains to be a traditional practice, organizations are embracing decision-focused strategic planning in the present day life (Harvard Business Review, 2000).

This paper carries out an extensive analysis of Walmart, which is America’s biggest and leading chain of retail stores. Apart from the USA market, Walmart operates globally with retail stores established in the international market that spans across all continents in the world. The paper explores the external environmental factors, resources, capabilities, weaknesses, as well as the goals and objectives of the firm.

Key Environmental Forces Facing the Firm

Political forces

As a multinational corporation, Walmart is exposed to various risks, particularly when entering into a new country. Political factions in foreign markets can easily target it, given that the firm is viewed as America’s cultural symbol. This risk is higher in countries holding opposing political views to those of the US.

Economic forces

Economic recessions and surges pose a great challenge to Walmart, particularly owing to the company’s low prices-high sales volume kind of business model. Economic recessions, such as the recent global financial crisis, implying that sales volumes are also affected because most buyers have the less disposable income to spend. Thus, the logic of low prices-high sales volume fails in such an instance.

Social forces

Walmart has been modeled to perfectly suit the American style, culture, and attitude in as far as shopping is concerned. However, exporting the same model to the foreign market reduces chances of success because different societies have varying preferences and cultures.

Technological forces

Technology is highly dynamic, given the modern day advances that are witnessed in the area of technology. This forces companies such as Walmart to continuously acquire improved and latest technologies to enhance performance efficiency. However, these technologies are expensive to acquire and eat into the resources of the firm.

Legal forces

Different laws govern different markets within which Walmart operates. These variations offer challenges to the company because it has to ensure it adheres to all of them fully. Walmart has received a lot of criticism for choosing to expand in developing markets where it seeks to take undue advantage over the less developed legal frameworks.

Strategic Resources

Knowledge management

Walmart relies heavily on knowledge management as part of its strategic resource to operate in the retail industry. The company has devised a knowledge management mechanism in which its suppliers have been provided with a greater role in understanding consumption habits, needs, practices, and buying patterns. Walmart, therefore, acts like a knowledge integrator, where knowledge from thousands of its suppliers is gathered and decisions made to serve consumers better.

Innovation

Walmart is renowned for its great innovation capability, which is built out of the many ideas that it generates. Walmart makes good use of market parameters to determine its potential. For instance, the company determines the present risk, political or economic, as well as growth in real-estate to enable it to determine its potential to grow. In essence, Walmart has a greater understanding when it comes to tackling each investment that it involves itself in and the innovations that they come up with.

Capabilities

Human resources

Walmart equips its workers through training. This makes workers motivated, in addition to adding to their knowledge on how to make Walmart a successful enterprise. This training is offered free of charge. Promotions are conducted from within, where low-level employees are moved to higher positions to retain and satisfy them (Crain, 2009).

Distribution

With its large scale business, Walmart effectively manages its distribution network and system through logistics management techniques. The company’s logistics are highly efficient. This is why Walmart is capable of selling its products at the lowest prices in the market.

Management

Walmart’s inventories are efficiently controlled by the use of the latest information systems and technologies. These include technologies such as the point-of-sale method of collecting data (Crain, 2009).

Weaknesses

Mistreatment of workers

Criticisms have been leveled against the company following the unethical way in which it treats its employees based in the developing world. The company has been accused of underpaying workers to sustain its low prices.

Potential of Walmart’s strategy to meet goals and objectives

Cost leadership

Walmart has maintained highly consistent policies in the management of its human resources. These policies enable Walmart to lower its turnover costs while pursuing intensive and effective training.

This has resulted in high efficiency and effectiveness for its workers. Equally, the firm’s infrastructure is extensive, involving management information systems, as well as the integration of comparatively few managerial layers to help in achieving low overhead costs. It has also helped to create simplified planning practices that, in turn, lower the planning costs.

Differentiation

The technology development level at Walmart has provided it with the ability to perform basic research. This is a positive capability that has enhanced the production of highly differential products. The procurement system adopted is also highly efficient as it enables the firm to locate high-quality raw materials, as well as the acquisition of high-quality replacement parts.

Walmart’s Sustainable Competitive Advantage

Lean inventory

Success in the retail industry performance requires maintenance of lean inventory to eliminate the associated costs of holding stock. Walmart maintains a lean inventory, supported by an extensive network of information systems that link its operations with those of its suppliers. This enables restocking to be done at the opportune time.

Acquisitions

Players in the industry resort to acquisitions mainly as a strategy of overcoming barriers to market entry and to increase their market power (Mankins, & Steele, 2006). Walmart has a huge capital base that has seen it acquire other small market players both in the US and international markets to enhance its market performance.

Current Strategic Issues

Walmart is facing integration difficulties, involving both market and firm integration. While acquisitions have been a common occurrence for the firm, the firm faces a challenge of integrating its operations with those of the acquired firm, a factor that has resulted in the loss of customers and even workers to some extent. Walmart can counter this challenge by conducting extensive research before sanctioning the acquisition moves.

Conclusion

Walmart operates in the international market scene. This environment subjects it to the risk of being targeted by political factions for its propagation of the American culture. The complex global economic interplay also subjects it to high risks as it seeks to sustain its low price policy.

The firm relies on its knowledge management capability and innovation as its main strategic resource. Maintenance of lean inventory and market acquisitions support the retailer’s competitive advantage over its market rivals, thus enabling Walmart to attain its goals and objectives.

References

Crain, D. W. (2009). Only the right people are strategic assets of the firm. Strategy & Leadership, 37(6), 33-38.

Harvard Business Review (2000). Corporate strategy: A manager’s guide. Harvard Management Update, 5(1), 1-12

Mankins, M. C., & Steele, R. (2006). Stop making plans: Start making decisions. Harvard Business Review, 84(1), 76-84

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IvyPanda. 2021. "Walmart Company Strategic Management." August 5, 2021. https://ivypanda.com/essays/walmart-company-strategic-management/.

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