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Wal Mart Industry Analysis

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Autor:  anton  06 June 2011
Tags:  Industry,  Analysis
Words: 1168   |   Pages: 5
Views: 398

Business Policy

Wal-Mart Case

Industry Analysis – Analyzing the Task Environment

Analyzing important stakeholder groups such as suppliers and customers in a particular

Corporation’s task environment.

Short History of Wal-Mart

Founded by Sam Walton. He was in business since 1940 but in 1962 decided to focus on low price-high quality discounter. His personal charisma, simple upbringing and a dedication towards hard work has made his business a success. He found a right market niche, also the main focus was customer oriented and employees were made to feel part of the team and called “associates” to make them feel part of the company and give them the drive for success. Also there is a scheme where employees get shares in the company. This was later copied by such giants as Microsoft. Wal-mart is the largest and most profitable retailer in the USA.

2 Main Slogans of Corporate Strategy of Wal-Mart

a) Customers will be provided with what they want, when they want it and all at value

b) Treat each other as we would hope to be treated , acknowledge our total dependence on Associate-partners (employees of the company) for our success.

Forces Driving Industry Competition

Industry Competitors

- Wal-Mart, Kmart, Khol’s Corporation, Sears, Woolworths, others.

Rivalry among existing firms

- Number of competitors - Around 5 major players, medium threat of competition.

- Rate of Industry Growth – Slow business start, medium to high progressive growth up to 1980’s, after that high growth due to various store formats, domination of the market, high employee motivation, clever business tactics.

- Product and Service characteristics – High Service standards, employee participation scheme, employee motivation – making them run their departments as though their own business, escorting customers to their cars, distinctive blue uniform, wide aisles and varied assortment.

High Quality/Low Prices – high quality branded goods offered at low prices, money back guarantee to guarantee quality, different schemes such as American produced goods – supporting the local producer, Green Goods – goods that are environmentally friendly in production and are chemical free.

Wide Assortment – a customer can buy everything from jeans to dog food in one store.

- Amount of fixed costs – mark downs on titles were offered to attract destination shoppers to create store traffic.

Capacity – High capacity, Wal-mart built huge warehouses for each area and then opened shops close proximity to it for quick distribution and to avoid out of stock.

Large volumes of goods sold helped keep prices down.

- Height of Exit Barriers – High exit barriers as Wal-mart was limited to retailing, but could diversify it’s operations within this framework .

Potential Entrants

Threat of New Entrants:

Sam Walton has been in retailing since 1940 and Wal-Mart has been in existence since 1962 and has had a low entry barrier, as at the time it was started by Sam Walton there were no developed retail chains, only small grocery stores and most of the competition was related to being in the right location such as a main street.

There is a low threat of new entrants in competition to Wall Mart as it is the biggest retailer in the USA and has much greater resources.

Buyers

Bargaining Power of Buyers

- High bargaining power of Wal-mart due to large volumes.

- Wal-mart did not integrate backwards, it did not start producing it’s own goods, it was more profitable to buy them and there was too much of a variety.

- Wal-mart had high bargaining power due to a large number of alternate suppliers, it could dictate it’s own terms to suppliers.

- Wal-mart used computerized processes from the 1980’s like scanning data linked to the main computer, to see which products are high demand and need to be replenished often. A lot of low demand products were eliminated, thus discontinued to be purchased from suppliers.

Suppliers

Bargaining power of suppliers

The bargaining power of suppliers was low to non-existent. Wal-mart has a low price, consumer oriented strategy. Only the consumer matters. Wal-mart executives refuse to admit this fact but it is widely known that it uses intimidation tactics working directly with manufacturers and cutting out the supplier to keep costs to a minimum. Wal-mart is a tough negotiator and had it’s way due to the enormous volumes of products that they purchase for their stores in 55 states of the USA and accounting for more than 200 billion annual sales.

Substitutes

Threat of Substitutes

- A low threat of substitutes before the introduction of the internet. Medium threat of substitute after the introduction of the internet. Wal-mart did introduce a Wal-mart website, but shopping is a cultural thing and the need for large supermarkets will unlikely become eradicated.

Other Stakeholders

Trade Associations and Unions – Wal-Mart is very anti trade union activity. It has pressured trade unions and made all efforts to curb their activity.

For example, when majority of meat-cutters at a store in Jacksonville , Texas voted to organize,

The company quickly closed it’s butcher department at Jackson and other stores.

There is low impact on wal-mart from these groups.

Local Communities – Wal-Mart tries to integrate into local communities who support it’s business.

Shareholders – Shareholders have come to expect high profits and this drives the company forward by expanding, staying ahead of the competition, and providing a higher service.

Wal-mart tries to be a Global industry but it’s American approach does not work in all countries so it has to adjust or just buys existing retail chains abroad.

WAL-MART SWOT ANALYSIS

Strengths.

• Good reputation in price and quality correspondence. Variety of goods. Cheap prices.

• Experienced global expansion

• The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.

• A focused strategy in development. People are key assets to Wal-Mart's business; therefore, Wall- Mart invests time and money in training and developing their personnel.

Weaknesses.

• Wal-Mart is the World's largest retailer store, despite its IT advantages, could leave it weak in some areas due to the huge span of control.

• Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.

• The company is global, but doesn’t operate in a lot of countries Worldwide.

Opportunities.

• Joint Ventures with other global retailers, focusing on specific markets (Europe or China).

• Opportunities for future business expansion in consumer markets, such as China and India.

• New locations and store types, from large super stores, to mall-based sites.

• Continue with its current strategy of large, super stores.

Threats.

• Local and Global competition

• Political problems in operating countries

• The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat.



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