Introduction
The retail business constantly evolves from traditional brick-and-mortar stores to the expanding online or e-commerce trade. Within online trade, one main issue businesses need help with is the mode of delivery, which involves providing the best service to customers. In the United States, Walmart is one of the leading companies in the retail space. The company operates a chain of discount department stores and grocery stores, offering low prices on a range of products, including groceries, electronics, clothing, and home goods. However, the online retail is characterized by high competition from established corporations, such as Amazon.
Walmart has developed a strategy to expand its in-home delivery service, remarkably as the globe overcomes the effects of the coronavirus pandemic. A company relies upon a keen evaluation of the strategic plan, which points to various assumptions. This paper generally focuses on the three most critical assumptions and offers ways to substantiate them. In the strategy paper, Walmart made assumptions regarding market demand, costs, and competitors.
The implementation of any strategy depends on an entity’s capacity to identify specific actions, allocate resources to act on them, and monitor the results. Therefore, there is a need for any strategic team to create and follow an execution plan. Most importantly, strategic plans are based on assumptions that must be recognized and managed appropriately.
The assumptions stand out as necessary tools for planning and are regarded as specific, accurate, and true factors that aid in creating a shared understanding of the plan (Heracleous, 2018). The assumptions in planning should be arrived at using available information, sound judgment, and relevant data. With keen consideration of the assumptions, a strategic plan may be rendered as an ordinary manuscript that few people believe. The execution of the strategic plan needs to be acted upon, mainly considering the risks that assumptions may be wrong. Accordingly, the best and standard approach to avoid significant mistakes is to record the assumptions and constantly validate them during implementation.
The process of transforming Walmart is based on strategies to become a tech-centric company, moving away from its traditional form of operation. Over the past decade, the company has invested heavily in startups and technologies that have enabled it to remain a permanent fixture at the helm of the Fortune 500 Company List (Moran, 2022). Its major threat is the cut-throat competition it faces from e-commerce retailers like Amazon.
As the coronavirus pandemic recedes, the company has developed a novel strategy in the form of in-home delivery services (Moran, 2022). The service would require a one-time access code and smart access technology to alert shoppers to the entry. Customers would have access to a camera on the associate’s vest, allowing them to watch live as their groceries are dropped off or returns are picked up.
Market Demand Assumption
Market demand assumption is one of the most critical in strategic planning. The assumption emerges the moment the strategic team has to come up with the sales targets, marketing strategies, product development, pricing, and distribution (Heracleous, 2018). Walmart’s strategic plan is based on a market demand assumption that considers various factors.
In expanding its reach through in-home delivery, Walmart assumes adequate market demand for convenient, premium delivery options. These are expected to help the company expand its last-mile delivery capacities as the market was predicted to grow exponentially to over 30 million U.S. households by the end of 2022 (Moran, 2022). Even though the company has positioned itself as a value-oriented retailer, it still strives to attract affluent customers through premium services, such as Walmart+.
However, the market demand assumption can be questioned, given that the demand for the product or service is variable. Several external factors, including the state of the economy, competition, and shifts in customer preferences, can influence it. It can be substantiated by conducting proper marketing research and analysis. This channel enables the collection of sufficient data on current and future market trends, market size, growth rate, market segmentation, and customer behavior (Heracleous, 2018).
Market size can help estimate the target market’s size and forecast the potential demand for the products and services. Market segmentation can help define the market demographics, geography, and psychographics to further describe the potential demand in different segments. The data becomes integral in developing realistic projections and validating the market demand assumption.
Cost Assumption
Another critical assumption in a strategy paper is the cost assumption. Expenses incurred in producing and delivering a product or service can vary primarily due to several factors. There may be changes in raw material costs, labor costs, and production efficiency. Walmart pegged its cost assumption on labor and equipment requirements.
Moran (2022) states that the company would need an additional 3,000 associate delivery drivers to help it rapidly scale its in-home delivery services. The new role would be facilitated by deploying a fully electric fleet of delivery vans, and drivers would receive an additional $1.50 per hour, in most cases, from their existing roles (Moran, 2022). In addition, the company planned to tap into the existing workforce, but it would still incur costs in providing in-person and virtual reality training.
Walmart described the in-home delivery service as costing $19.95 per month or $148 per year (Moran, 2022). The amount covers tips and excludes fees, with the intelligent locks expected to cost $49.95 (Moran, 2022). The figures indicate the extent to which the company considered the new strategy would impact its finances.
To substantiate this assumption, a detailed cost analysis can be conducted to determine the accurate cost structure. This analysis can consider all relevant factors that influence costs and provide a more accurate estimate of production costs. This evaluates the costs associated with implementing a particular strategy and compares them to the expected benefits.
The goal is to determine the feasibility of the strategy and identify potential areas for cost savings (Heracleous, 2018). It can be conducted by identifying and comparing the costs of alternatives to determine the most cost-effective solution. A further cost analysis involves forecasting future costs based on historical trends and assumptions, while also accounting for non-financial factors such as risks, benefits, and trade-offs. This will help to guide the strategic team in making informed choices about the best way to allocate resources.
Competitor Assumption
The third most critical assumption of the strategic plan involves competition. When developing a strategic plan, a company makes numerous assumptions about its key competitors. This includes their behavior, strengths and weaknesses, and strategies that can significantly impact the success of the proposed strategic action. Walmart’s plan captured this assumption as it indicated it would grow the service following Amazon’s report that it was extending its in-garage grocery delivery service in its markets. Therefore, Walmart’s strategic plan needed to capture these developments.
Competitor assumptions can be effectively evaluated through a thorough competitor analysis. It involves collecting essential information regarding the competitors’ products, marketing strategies, and market share. The information becomes handy when developing a clear picture of the competitive environment and validating competitors’ assumptions. In this case, Walmart considers Amazon a significant competitor to online shoppers.
The company believes that in-home delivery will enhance competitiveness in its last-mile delivery strategy, as it incorporates a two-hour express service. The strategic plan indicates that the company has a vast network of deliveries. The existing network can distribute over 160,000 products across its 3,400 stores, covering over 70 percent of U.S. consumers (Moran, 2022). Such information becomes a critical step that can help to substantiate the competition assumption.
Conclusion
In conclusion, strategic planning is critical in organizational management and improvement. The expanding online retail and e-commerce opportunities attracted Walmart to create a strategic plan to enhance product delivery through in-home services. Strategic plans rely on assumptions that outline the key elements contributing to a common understanding of the plan.
The significant assumptions in Walmart’s strategic plan for in-home delivery include market demand, cost, and competition. The market demand assumption is based on the need for the service in the market, which can be substantiated through market research and analysis. Cost assumption captures the expenses incurred in implementing the plan, which can be validated through a detailed cost analysis. Finally, the competitor assumption is based on the behavior, strategies, strengths, and weaknesses of business rivals, which can be substantiated through a competitor analysis.
References
Heracleous, L. (2018). Strategic thinking or strategic planning?Long Range Planning, 31(3), 481–487.
Moran, C.D. (2022). Walmart aims to expand in-home delivery to 30M US households this year. Retail Dive.