Planning and Strategic Management

Written by  Thursday, 14 April 2016 11:45

Overview

Two brothers Sam Walton and James Walton founded Wal-Mart in 1962. Since then, Wal-Mart has grown to be the second biggest organization in the world (Miller and Vaughan, 2001). In the United States, the organization includes Wal-Mart discount shops, Supercenters, Neighborhood Markets, and Sam’s Club.  The organization also has many international functions.  Wal-Mart is considered a variety shop, which concentrates on low prices presenting outfits as well as hard goods, and has been dedicated to maintaining their basic value of client service. Developments in technology have provided a lot to the growth of Wal-Mart.  Highly computerized distribution centers were applied, and Wal-Mart was able to cut significantly delivery time and shipping costs.  The firm has installed innovative computer systems to track stock, which led to quicker reordering and check out time.  More recently, wire-less in-store techniques have been used to improve client support.  Beginning in the early 90's, Wal-Mart went to excellent measures to improve their market share.  They are appealing to certain cultural groups through multilingual ads and took steps to advertise the attention of ecological issues. Currently, Wal-Mart has a net revenue of $256.3 billion dollars, translating into an 11.6% improve over net revenue of the similar period last year (Daft, 2013).

A SWOT analysis

Strengths

Even though Wal-Mart has been belittled for their low salaries, they are doing in terms of low-income earners.  Families can save roughly $1,000 annually with their low costs. Wal-Mart can defeat many opponents with their low costs technique.  They have the capability to cut costs on some items, such as toys and games, by 30 % (Kotter, 1999) to activate more revenue.  Wal-Mart has even been able to attract higher-income clients when they erect shop in towns.  Since Wal-Mart has become the nation’s biggest retailer, individuals from all income levels are purchasing there for their necessity goods.  

Weaknesses

Wal-Mart has weak points that impact not only their reputation but the lives of other individuals.  Wal-Mart has been branded a retailing giant that has taken over the retail store market.  Because of Wal-Mart’s low costs and reputation, they have been able to catch the revenue of an incredible number of customers and have therefore made it incredibly hard for little suppliers to endure.  From an ethical perspective, those who are involved with the well-being of little retailers, are upset at Wal-Mart's monopolizing power in previous years (Daft, 2013).  Most little stores have been compelled to close due to deficiency of revenue.  Some individuals do not visit Wal-Mart because of these problems.  Such a poor reputation of Wal-Mart cost its stock price.

Opportunities

Wal-Mart has dominated the retail store market that its choices can have an impact on the international economic system, the society, and environment.  They have the ability to reduce the price of rising prices because of their low-cost strategy.

Threats

To maintain low prices, Wal-Mart has had to cut expenses in other places.  This contains pressing suppliers to providing their items at much lower costs.  This has motivated opponents to do the same, which is resulting in earnings to drop downwards significantly (Kotter, 1999).

The company's strategic objectives

Wal-Mart is viewed as a retail giant, whose key strategic objectives include reducing expenses, increasing global returns and increasing comparable store sales in America.

Plans in place to meet objectives

The business focuses on near-term execution to build sales in the United States. This is amidst fierce competition and an uncertain economy. Better in-stock levels and fantastic new merchandise characterize Wal-Mart stores. Reports indicate that the firm plans to improve its international stores, even in places where they are already doing good. This reveals that they have recently analyzed their product portfolio and are reviewing their current operational strategy (Miller and Vaughan, 2001).

Contingency plans for possible risk events

Based on the nature, complexity and size of a firm, varying enterprise risk management (ERM) techniques ought to be implemented. A giant retailer like Wal-Mart needs a simple procedure, which is likely to assess and counter the numerous risks the firm confronts. Wal-Mart’s ERM is rooted on a five-step process. Risk identification is the first step, and it starts with a clear identification of business objectives (Mintzberg et al. 2002). The senior leadership gathers information, which helps them identify the top five risks likely to hinder the firm from achieving those business objectives. This leads to a list of the risks that are then taken into a discussion to garner consensus on the top five risks.

Risk mitigation is the second step of the ERM process (Mintzberg et al. 2002). It starts with a facilitated session. This stage involves defining and quantifying the five most significant risks. Then, a project team is composed to evaluate the mechanisms in place to counter risks. Action planning is the third step of the five-step process. Here, each risk is assigned to a project team. Then, the project teams for the risks meet to allocate responsibilities to individuals to counter the risks. These project teams allocate metrics, making this the fourth step of the process. The results are measured as having either a negative or a positive effect on the identified risks. To achieve this, the target performance is compared against the actual performance. Return on Investment/Shareholder Value is the final step. It involves evaluating if the project improved shareholder value via increased sales or decreased expenditure (Kotter, 1999). Via this five-step procedure, Wal-Mart understands that they have concentrated on the major risks that exist. This is because it helps them identify and mitigate the few risks that are most important to address.

Business strategy

The primary characteristic of Wal-Mart’s business strategy is low-cost leadership (Kotter, 1999). I support this strategy because it helps the firm draw a wide variety of customers by providing many the lowest-cost products. Wal-Mart accomplishes a price advantage by managing its price drivers and constantly wringing price effectiveness from its supply chain.

To enhance its competitive position, Wal-Mart works carefully with providers with powerful brand-name who are prominent in their industries, who have full products, and who can generate new and better products to retail shelves.  Wal-Mart’s procurement department spends time meeting with providers, knowing their price framework and learning how a supplier could cut down its costs to create win-win connections for both sides

Regarding, Wal-Mart’s strategic change in the global field, the company should try to make a more significant access into the Asian market. This can be achieved through acquisitions and mergers (Mintzberg et al. 2002). For instance, the acquisition of a Taiwanese-owned supermarket called Trust-Mart. Here, Wal-Mart will contend against the giant Carrefour of France. There are some clear reasons for Wal-Mart’s strategic change. China’s economic system is growing more than 10 % annually, retail store sales increased 12.9 % in 2010 over the previous fiscal year, to 847 billion. Moreover, by 2020, it is expected that the industry could increase to about $3 trillion (Kotter, 1999). As you know, Wal-Mart has been effective in England, Mexico and Canada until today. However, they succumbed to competition in Germany, Indonesia, Japan, South Korea and Hong Kong since they could not evaluate the culture of these nations as well as the particular industry features. This strategic change of Wal-Mart penetrating into the Asian industry will carry success.

 

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