Sample Essay: Walmart’s Strategic

Wal-Mart is a unique company in the sense that it has used a business model that is not new to the retail industry to make it the biggest retailer in the world. As a result, it has changed corporate business and labor practices. One of its core strengths has been its size. In 2004 it had the highest sales figures that were US $33 billion more than ExxonMobil and greater than the combined sales of the other top five US retailers. Wal-Mart’s strategy for low-cost leadership is their competitive advantage.

Another strategy that has worked from Wal-Mart has been in the selling of a variety of products at discounted prices in all their stores. The firm, unlike its competitors has not focused on providing consumers with specialized goods. According to Peter Solomon (of Peter J Solomon Company), this strategy has increased Wal-Mart’s ability to control the retail industry and in effect to be able to dictate to their suppliers with regards to lowering of their prices (Harper para. 5).

Wal-Mart had a growth strategy that was dissimilar to that of other expanding retail stores. It focused its growth around small towns with it every day lower prices strategy. However many academics and human rights groups have accused Wal-Mart’s commitment to lowering its prices on having an adverse effect on their labor practices locally and on the suppliers from abroad who have to lower their costs to lower their prices.

When it all goes down to strategy, Wal-Mart comes out as visionary in its approach.  The low-wage, low- labor, cheap imports from other nations, and lower-prices from suppliers approach has been used as a tactic by other major retailers yet it is only Wal-Mart that perfected it to its benefit. The average customer has also benefited from consistently lower prices, notwithstanding the Wal-Mart effect which has forced other retailers to also lower their prices. UBS Warburg conducted a study in 2002 and discovered that Wal-Mart centers offered prices up to 14% lower than competitors.

According to Harper Wal-Mart‘s strategic growth from its Arkansas base by constructing stores near distribution hubs and smaller towns was in stark contrast to other retailers who grew by opening stores targeting major towns. This made the retailer to be in touch with the average consumer more and as such be able to understand them and seek ways of satisfying their needs better (para.18).

Another ingenious approach applied by Wal-Mart was the use of IT to develop a sophisticated distribution system that lowered their inventory costs. Distribution centers were strategically placed so that they could serve up to 200 Wal-Mart stores in a day. A satellite network system linked stores, distribution centers and suppliers consolidated orders for goods and reduced inventory costs to a minimum. This enabled Wal-Mart to further reduce their prices.

Wal-mart also developed an aggressive productivity-driven philosophy. This it did by its building too many stores, more than was necessary so that they could compete with each other after which only the fittest would be left to survive. This made managers to improve on the efficiency of their stores. In this case study management creativity was encouraged and successful experiments were recognized and applied to other stores. Wal-Mart also introduced the use of profit sharing as a tool of improving productivity and employee sense of ownership. Employees would either receive cash or Wal-Mart stock for their share of profits accumulated at the end of their tenure.

In a nutshell, Wal-Mart has been able to maintain its competitive advantage by utilizing the following key strategies: information sharing, availability of a variety of products at low prices within its stores, prodigious infrastructure and service differentiation. Information sharing through IT has enabled efficient communication between its stores, distributors and suppliers. Availability of a variety of products has made Wal-Mart to be a customer one-stop shop. The huge infrastructure has made it easy to reach most parts of the US cost effectively among other economies of scale. Service differentiation, where customers are greeted and assisted by friendly staff has made the Wal-Mart stores to be attractive to the average consumers.

In spite of its successes, Oxfam has directly accused Wal-Mart for the continued dilapidating working conditions for women workers across the world. The firm influences its suppliers to sell their products at a lower price which can only be sustainable if the manufacturers produce the same goods at a bargain. To do so, these outsourced manufacturers offer low wages and poor working conditions to their workers. Even though Lictenstein endeavors to counter this allegation by saying that Wal-Mart has been targeted because it is seen as the epitome of arrogant corporate culture, a company of its stature must practice more corporate social responsibility (Harper para. 31).

Conclusion

A study into Wal-Marts meteoric rise and ability to stay above its competitors is recommended for any student of business. Their unique growth and innovative business strategies are at present unmatched.  From the discussion, we can see that Wal-Mart’s strategies are aimed at low-cost leadership, their competitive advantage over other retailers; however, we need to put a caution to the extent to which Wal-Mart shall go to maintain its lower prices. Wal-Mart must seek to clean its image with regards to addressing issues of low-wages and working conditions within itself and among its suppliers.

Works Cited

Harper, Liz .”Wal-Mart: Impact of a Retail Giant” Online NewsHour. 20 August 2004. 27 July             2009. <http://www.pbs.org/newshour/bb/business/wal-mart/unique.html >.