Case Analysis – Wal-Mart
Introduction
Wal-Mart is one of the leading retailers in the world. The company is incorporated in the US and operates international outlets in a number of countries across the world too. It employs many people through its numerous facilities in the US and other nations.
Wal-Mart history
Wal-Mart dates started in the early 1960s when the discount retail industry had started picking up. In 1962, Sam Walton risked all is property to secure finances to start-up a new venture in the discounts retail industry. In the same year, three other discounts retail stores commenced their operations. These stores included Kmart, Target, and F.W. Woolworth (Wal-Mart, 2012).
The first Wal-Mart was started in Rodgers, Arkansas. The company seemed less likely to succeed as compared to the other discount retail stores. Aware that the business was bound to face stiff competition from new entrants in the industry, Sam sought to expand and grow Wal-Mart as quick as possible to seize the available opportunities. For this reason, Wal-Mart expanded to other towns such as Oklahoma, Missouri, and Kansas. By the year 1967, Wal-Mart had 19 stores and recorded sales of $9 millions. Kmart, the industry leader at the time, had 290 stores and a sales volume of $800 million in the same period (Wal-Mart, 2012).
Wal-Mart was plagued with many challenges in the early years of its operation that rendered its growth difficult. Sam was so much in debt that available funds were not sufficient to sustain business growth beyond Arkansas, Missouri, and Oklahoma. Furthermore, Wal-Mart also faced with high costs of operation. Large vendors were unwilling to deal with Wal-Mart, and if they agreed to supply stocks, they dictated the prices and the quantities of the items that were sold in stores. Additionally, distributors were discriminative in the way they handled their services to Wal-Mart compared to other large competitors in the industry (Wal-Mart, 2012).
Sam Walton issued Wal-Mart shares to the public in an effort to counter the above challenges. This enabled the business stock offerings to increase in value from $1,650 to over $3,000,000 during the early 1990s. Additionally, the store decided to build its own warehouse to enable purchase of voluminous merchandize at attractive prices. This led to a considerable reduction in costs. By the year 1985, the company had expanded and increased its stores from 32 in 1970s to 859. In the years between 1985 and 1990s, Wal-Mart had expanded from small towns in the South where it had a strong presence throughout big cities and towns in the US. In late 1990s and early 2000s, Wal-Mart was the top discount retailers in the US. During this period, Wal-Mart reduced the number of stores by converting them to supercenters, which increased by almost six times to an approximate of 2,843 stores by the year 2006. At the same time, Wal-Mart also operated 607 Sam’s Clubs by the year 2010.
Industry description
Wal-Mart operates in discount retailing industry within the US. The discount retailing industry in the US has evolved tremendously over the last half century. Customers were never allowed to pick products by themselves from the shelves. However, the sale clerks served them directly over the customer. Discount traders started emerging in 1950s were characterized by low commodity prices, limited credit to customers, and low return privileges. The retail stores during these early stages were categorized into general and specialty chains. Specialty chains mostly dealt with narrow product lines such as sporting and office products. General Chain carried a wide assortment of product range. Discount stores enjoyed much success due to low prices and their emphasis on customer convenience, value, and quality. Major players in the general chain discount retailers were established in 1960s. These players include Kmart, Wal-Mart, Target, and Woolworth.
Over the past decades, the discount retailing has witnessed sporadic industry boom in the US. Numerous retail stores have mushroomed and gained substantial growth across the US. The industry in the modern days has become consumer-driven hence creating market challenging conditions. Technology has accelerated the rate of discount retailing industry. Over the years, many stores have heavily invested in sophisticated management systems, state-of-art distribution centers, and other technological platforms have enabled the industry to grow tremendously. These innovative technologies have reduced operation cost significantly in distribution, marketing and so much more.
Competition
Wal-Mart faces stiff competition from both general and specialty discount retailers. Over the years, Kmart has been the most dominant Wal-Mart competitor. The onset of discount retailing industry in 1962, Kmart was the leading industry performance and Wal-Mart was thrown to the periphery for quite some time until Sam Walton successful turnaround of the store. Kmart was hard-hit severely by crises that enabled Wal-Mart to catch up and become the industry leader successfully. Kmart tried to imitate Wal-Mart strategies but could not catch up. Kmart suffered dramatic losses as high as $300 million in the period between 1993 and 1995. Kmart successfully managed to turnaround through restructuring of the business, but only little impact was felt by the year 2004. By the year 2010, Kmart operated 1,300 stores with sales volume of $17.2 billions.
Target is the second fiercest Wal-Mart rival in the industry. Over the years, Target Company has attracted and retain customer through offering upscale product mix. Furthermore, Target has been able to attract a considerable clientele through store ambience that is greatly superior its entire rival in the market. Target has been also been able to overshadow its competitors through designer products. The introduction of Target Guest Card has critically enabled Target Company to differentiate itself from its competitors. Currently, the major Wal-Mart competitors include Kmart, Target, Khol’s Corporation, Sears, Woolworth, and many other stores.
Wal-Mart SWOT analysis
SWOT analysis is critical in the strategic management of organizations. SWOT is an integrated approach that analyses the internal strength and weaknesses of a company (Hill & Jones, 2013). In addition, the external environment is also considered to identify available opportunities that are vital in the achievement of organization strategic goals and the same time identifying the potential threats that can affect its strategic goal achievement (Hill & Jones, 2013).
Wal-Mart has achieved great success since its inception. However, the company has recently stumbled and is facing increasing competition from its perennial rivals, and other new comers like Sears. On the strength side of Wal-Mart, the company is a strong and very powerful retail brand across the US. The store is well re-known as a home of value. The store is also convenient where goods are availed in one place. Additionally, the company has comparatively established core competencies as compared to its competitors. Its core competence comes because of its international logistical system and efficient information technology system, which ensures efficient procurement. Furthermore, it has focused human resources management that heavily invests in training, retaining of employees that offer the company substantial strength in the industry. Wal-Mart is also advantaged by its cost leadership position in the industry thus affording to offer its goods and services to customers at reduced prices. The cost leadership enables Wal-Mart to achieve greater buying power suppliers as compared to other companies.
Wal-Mart does also have weaknesses. The company is a general store that sells a wide range of products. The company has inflexibility weaknesses since it cants cope with specialty focused retailer competitors. Additionally, though the company is global, its presence in the world is only but limited to few countries. Lastly, due to the expansiveness of the company, control of its outlets may pose some challenges.
The analysis of the external environment presents the Wal-Mart with a number of opportunities. Firstly, due to its stature in the industry, Wal-Mart is presented with an opportunity to seek strategic alliances, and mergers with other leading local and global retailers focusing on certain market niche. Additionally, analysis of the external environment suggests unmet targets in the supercenters business. Therefore, this presents Wal-Mart with an opportunity to continue with is current supercenters strategy. The company has an opportunity to take charge of market development through diversification to mall-based sites. Finally, there is an opportunity for the company to increase its investment in foreign countries. This is especially in the emerging markets such as China and other European nations. On the other hand, the biggest threat is increasing competition from local and international competitors. Additionally, the political and media attention about the company threaten the company in terms of its image and operation. The declining manufacturing prices presents a threat to the company since it may result to intense price competition.
Conclusion
With ever-increasing competition in the retailing industry, the Wal-Mart management team should take bold steps to ensure that the company remains the market leader. The company can take advantage of the numerous strengths at its disposal to position itself in the market. Furthermore, the company needs to utilize the available opportunities in the industry to strengthen its market leadership further.
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