Introduction
Walmart Corporation has become a household name and is a global icon to reckon with. Walmart is always making the headlines for its leadership in business such as being among the fortune 500 companies, being the largest supermarket chain, topping the list of the largest employer among other business acumens. The secret to this acumen is the set of business and corporate strategies that the management has put in place. This paper seeks to explore the corporate and business level strategies of Walmart, its competitive environment and the viability of the strategies in fast and slow markets.
Walmart Business- Level Strategies and Their Justification
Walmart has been at the helm of the fortune 500 list companies for several years consecutively. The growth of Walmart’s brand is mainly driven by Walmart’s philosophy of everyday low prices and the broad diversification strategy. Walmart started as a small grocery shop in Arkansas in 1945, but the corporation has more than 11,450 stores in the in more than 28 countries. Walmart is now a global company, which necessitates the need for sound business strategies. The success of Walmart has not come without a fair share of competition from domestic retailers like Kroger, Costco, target, whole foods among others, as well as competition from foreign retailers like the French based Carrefour and the German based Aldi. The following are the business level strategies attributable to Walmart’s success.
Everyday Low Price
Everyday low prices philosophy has been the core of Walmart business model. Walmart has positioned itself as the global brand that offers the lowest prices. The modern customer has become so enlightened and demanding. The modern customers are interested in quality products, convenience and low prices. Walmart understands this reality and sets itself as the retailer of choice by offering low priced products ranging from grocery to entertainment products to entertainment through discounts and shopping convenience. Many price sensitive customers will not purchase unless there is a discount attached to the sale. Walmart has gone ahead to set discount centers that sell goods on discount bases to cater to the needs of customers obsessed with lower prices.
Walmart has also taken the e-commerce and the digital platforms by storm to create convenience for customers. Walmart mission is to create convenience for customers to shop in any way they want and how they want to shop, whether online and through the physical channels. The everyday low prices business strategy is proving to be an asset for the business as revenues have been steadily increasing. For instance, Walmart’s 2017 net revenue was $ 485 billion, $ 500.34 billion in 2018, $514.4 billion in 2019, and $524 billion in 2020 (SEC, 2020).
Walmart uses the cost leadership strategy to generate a large volume of sales. Walmart seeks to appeal to people from different classes of people as evidenced by its three kinds of stores; supercenters, discount stores and neighborhood centers. Supercenters are made for the upper class who desires to have a one-stop shopping experience with wide range of products from grocery to home furnishings. Discount stores are made to appeal to customers looking for discounted products while the neighborhood stores are tailor-made for ordinary customers.
Walmart also operates a highly efficient supply chain that reduces outlays and maximizes productivity. Walmart has more than 150 distribution centers that are strategically located to service the stores, clubs and direct delivery to customers. Walmart (2020), records that it has a fleet of 61,000 trailers and 6,100 tractors which are operated by more than 7,800 drivers. Walmart is working with the truck drivers to ensure that they are moving gods in the most responsible ways by following the most efficient routes to minimize on the number of “empty miles” they drive. Walmart records that it achieved 87.4% truck fleet efficiency in 2014 compared to 2005 (Walmart, 2020).
Walmart has also achieves cost leadership through low operational and overhead costs in the supply chain. For instance, Walmart takes pride in the just in time inventory management system whereby goods are delivered directly from the manufacturer. Because of its huge size, Walmart is able to procure goods directly from manufacturers to its warehouse. Walmart has also adopted the radio frequency identification to manage inventory better whereby goods are tagged and tracked through private satellite system that Walmart owns. Pofeldt (2017) observes that employee theft is a crime that often goes unnoticed, yet it is a crime costing U.S businesses $50 billion per year. By adopting RFID technology; Walmart has shielded itself from such shocking statistics as it is able to track its inventory from the warehouse to the shelves.
Technological Innovation
As the world is experiencing unprecedented growth in technological advancement, Walmart is not leaving anything to chance. Walmart has invested heavily in setting up a Walmart innovation center that has the brightest minds working to create a seamless experience for shoppers through ecommerce platforms, mobile devices or in physical stores(Walmart, 2020). Walmart has worked to connect the in-store and online shopping experiences using options such as site to store, same-day delivery, home free and pick up today, which has made shopping at Walmart even more convenient.
From the two main business level strategies, the cost leadership is the most important or the long term success of Walmart because it is the foundation in which other strategies are built on (Walmart, 2020). Also, the cost leadership is not imitable by competitors in the short run, and it is imitable at a cost disadvantage in the long-run.
Corporate Level Strategies
Hoskisson (2020) defines corporate level strategies as the act that a business takes to increase competitive advantage by selecting and managing a mix of businesses to compete in various markets. To compete in the competitive retail industry, Walmart adopts various corporate level strategies to fend off competitors like The Home Depot, Target, While Foods Inc, Kroger, Costco among others. The primary strategy that Walmart has adopted is market penetration that entails selling more products and services to the existing markets. Market penetration strategy has led the retail giant to use measures such as discount and price offers in its discount store models. Walmart is also taking the ecommerce platforms to create convenience for its current customers. For instance, Walmart acquired flip kart, modcloth and jet.com to make online shopping convenient as much as possible.
Walmart uses secondary corporate strategies such as diversification, market development and product development. Walmart engages in related and unrelated diversification whereby it seeks to venture in completely new and different markets. For instance, Walmart acquired the video streaming company Vudu in 2010 as a means of diversification in an industry that is completely different from the retail industry. However, the video streaming business has not turned into a flower that Walmart expected it to be. Walmart has made a decision to sell the video streaming business to a movie ticketing company; Fandango (Palmeri, 2020).
Walmart is also pursuing market development whereby it is enlarging into growing economies such as African and Indian market. For instance, Walmart is venturing the African markets through Massmart. Walmart acquired a majority stake in Massmart; a South African based supermarket chain.
From the evaluation of the corporate strategies, market development and diversification is the most imperative for the long term success of Walmart, although Walmart considers the strategy as a secondary strategy. Currently, Walmart uses market penetration as the man strategy, which entails selling more goods and services to the current market share. The justification behind this observation is that Walmart seems to be settling in the comfort zone, and it is also overlying on the current market. There is need for Walmart to make challenging goals such as setting looking for opportunities in new markets where it does not have operations. For instance, the sub-Saharan African countries are proving to be a rich ground for investors in different industries as the economies in the region are fast growing, and the number of middle income earners is estimated to be 350 million. This number is just too much to ignore, and it can be a source of new experiences.
Competitive Environment
The business environment in which Walmart operates is characterized by intense competition because firms operate in a perfect competition market structure. In a perfect market structure, there are many sellers, each selling similar products or perfect substitutes (Hoskisson, 2020). Competition is stiff and is regarded as bloody competition because firms engage in fierce ways of fighting off the competition. Walmart uses price leadership as a means of fending off competitors from its market share, thereby branding itself as the cost leader in the retail industry. Although Walmart has many competitors, The Home Depot is proving to be a fierce competitor to Walmart in the United States. The Home Depot was established in 1978, and has more than our decades in the market. The Home Depot uses a differentiation business strategy whereby it has set itself as the seller of unique products for home improvement. In terms of corporate level strategy, The Home Depot uses a market growth strategy whereby it seeks to establish a strong market presence for its unique products.
Comparing Walmart and The Home Depot strategies in the long term, The Home Depot is likely to be successful because it uses a distinctive combination of corporate and business level strategies. The Home Depot differentiates itself as the seller of home improvement appliances such as carpeting, decorations, kitchen remodeling among many others. By so doing, The Home Depot sets itself as the provider of value and specialty products in a blue ocean strategy. The blue ocean strategy is one where a firm makes products that the market wants, as opposed to the red ocean strategy whereby firms make products and look for customers. In a blue ocean strategy, customers are the ones who search for the products. Walmart strategy uses a strategy that can be adopted by any other business out there in the long run.
Market Cycles
Hoskisson (2020) defines a fast cycle market as a highly competitive market whereby market players have to be watchful of their competitor’s actions and constantly develop new products and strategies to counter their competitors. On the other hand, slow cycle markets are markets where a company’s competitive merit is protected from replication in the long run. Monopolies are examples of firms that operate in slow market cycles where imitation of the business model requires huge capital requirements and is expensive to replicate.
The choice of having The Home Depot strategy of differentiation and market growth as ideal for success in the long-run would be ideal in slow-cycle markets. That is because differentiation cannot be achieved in the short-run, thereby giving the firm competitive advantage in the long run. The strategy by Walmart of using cost leadership and market penetration to guard the market share jealously is ideal in slow cycle markets to ensure that it sells to as many customers as possible within a short time period before other competitors capture the market share. Walmart understands the kind of markets that it operates in, and its business-level strategies of cost leadership and the corporate level strategy of market penetration of selling to as many customers as possible and guard its market share from going to competitors through tactics like Endless Aisles work well in fast-cycle markets. From the research and the findings, there is no doubt that Walmart moves are well calculated, tactical and ideal or the market cycle that the business operates in. technological advances, cost leadership and market penetration are sources of Walmart competitive advantage in the fast cycle market in which it operates.
Walmart Corporation has become a household name and is a global icon to reckon with. Walmart is always making the headlines for its leadership in business such as being among the fortune 500 companies, being the largest supermarket chain, topping the list of the largest employer among other business acumens. The secret to this acumen is the set of business and corporate strategies that the management has put in place. This paper seeks to explore the corporate and business level strategies of Walmart, its competitive environment and the viability of the strategies in fast and slow markets.
Walmart Business- Level Strategies and Their Justification
Walmart has been at the helm of the fortune 500 list companies for several years consecutively. The growth of Walmart’s brand is mainly driven by Walmart’s philosophy of everyday low prices and the broad diversification strategy. Walmart started as a small grocery shop in Arkansas in 1945, but the corporation has more than 11,450 stores in the in more than 28 countries. Walmart is now a global company, which necessitates the need for sound business strategies. The success of Walmart has not come without a fair share of competition from domestic retailers like Kroger, Costco, target, whole foods among others, as well as competition from foreign retailers like the French based Carrefour and the German based Aldi. The following are the business level strategies attributable to Walmart’s success.
Everyday Low Price
Everyday low prices philosophy has been the core of Walmart business model. Walmart has positioned itself as the global brand that offers the lowest prices. The modern customer has become so enlightened and demanding. The modern customers are interested in quality products, convenience and low prices. Walmart understands this reality and sets itself as the retailer of choice by offering low priced products ranging from grocery to entertainment products to entertainment through discounts and shopping convenience. Many price sensitive customers will not purchase unless there is a discount attached to the sale. Walmart has gone ahead to set discount centers that sell goods on discount bases to cater to the needs of customers obsessed with lower prices.
Walmart has also taken the e-commerce and the digital platforms by storm to create convenience for customers. Walmart mission is to create convenience for customers to shop in any way they want and how they want to shop, whether online and through the physical channels. The everyday low prices business strategy is proving to be an asset for the business as revenues have been steadily increasing. For instance, Walmart’s 2017 net revenue was $ 485 billion, $ 500.34 billion in 2018, $514.4 billion in 2019, and $524 billion in 2020 (SEC, 2020).
Walmart uses the cost leadership strategy to generate a large volume of sales. Walmart seeks to appeal to people from different classes of people as evidenced by its three kinds of stores; supercenters, discount stores and neighborhood centers. Supercenters are made for the upper class who desires to have a one-stop shopping experience with wide range of products from grocery to home furnishings. Discount stores are made to appeal to customers looking for discounted products while the neighborhood stores are tailor-made for ordinary customers.
Walmart also operates a highly efficient supply chain that reduces outlays and maximizes productivity. Walmart has more than 150 distribution centers that are strategically located to service the stores, clubs and direct delivery to customers. Walmart (2020), records that it has a fleet of 61,000 trailers and 6,100 tractors which are operated by more than 7,800 drivers. Walmart is working with the truck drivers to ensure that they are moving gods in the most responsible ways by following the most efficient routes to minimize on the number of “empty miles” they drive. Walmart records that it achieved 87.4% truck fleet efficiency in 2014 compared to 2005 (Walmart, 2020).
Walmart has also achieves cost leadership through low operational and overhead costs in the supply chain. For instance, Walmart takes pride in the just in time inventory management system whereby goods are delivered directly from the manufacturer. Because of its huge size, Walmart is able to procure goods directly from manufacturers to its warehouse. Walmart has also adopted the radio frequency identification to manage inventory better whereby goods are tagged and tracked through private satellite system that Walmart owns. Pofeldt (2017) observes that employee theft is a crime that often goes unnoticed, yet it is a crime costing U.S businesses $50 billion per year. By adopting RFID technology; Walmart has shielded itself from such shocking statistics as it is able to track its inventory from the warehouse to the shelves.
Technological Innovation
As the world is experiencing unprecedented growth in technological advancement, Walmart is not leaving anything to chance. Walmart has invested heavily in setting up a Walmart innovation center that has the brightest minds working to create a seamless experience for shoppers through ecommerce platforms, mobile devices or in physical stores(Walmart, 2020). Walmart has worked to connect the in-store and online shopping experiences using options such as site to store, same-day delivery, home free and pick up today, which has made shopping at Walmart even more convenient.
From the two main business level strategies, the cost leadership is the most important or the long term success of Walmart because it is the foundation in which other strategies are built on (Walmart, 2020). Also, the cost leadership is not imitable by competitors in the short run, and it is imitable at a cost disadvantage in the long-run.
Corporate Level Strategies
Hoskisson (2020) defines corporate level strategies as the act that a business takes to increase competitive advantage by selecting and managing a mix of businesses to compete in various markets. To compete in the competitive retail industry, Walmart adopts various corporate level strategies to fend off competitors like The Home Depot, Target, While Foods Inc, Kroger, Costco among others. The primary strategy that Walmart has adopted is market penetration that entails selling more products and services to the existing markets. Market penetration strategy has led the retail giant to use measures such as discount and price offers in its discount store models. Walmart is also taking the ecommerce platforms to create convenience for its current customers. For instance, Walmart acquired flip kart, modcloth and jet.com to make online shopping convenient as much as possible.
Walmart uses secondary corporate strategies such as diversification, market development and product development. Walmart engages in related and unrelated diversification whereby it seeks to venture in completely new and different markets. For instance, Walmart acquired the video streaming company Vudu in 2010 as a means of diversification in an industry that is completely different from the retail industry. However, the video streaming business has not turned into a flower that Walmart expected it to be. Walmart has made a decision to sell the video streaming business to a movie ticketing company; Fandango (Palmeri, 2020).
Walmart is also pursuing market development whereby it is enlarging into growing economies such as African and Indian market. For instance, Walmart is venturing the African markets through Massmart. Walmart acquired a majority stake in Massmart; a South African based supermarket chain.
From the evaluation of the corporate strategies, market development and diversification is the most imperative for the long term success of Walmart, although Walmart considers the strategy as a secondary strategy. Currently, Walmart uses market penetration as the man strategy, which entails selling more goods and services to the current market share. The justification behind this observation is that Walmart seems to be settling in the comfort zone, and it is also overlying on the current market. There is need for Walmart to make challenging goals such as setting looking for opportunities in new markets where it does not have operations. For instance, the sub-Saharan African countries are proving to be a rich ground for investors in different industries as the economies in the region are fast growing, and the number of middle income earners is estimated to be 350 million. This number is just too much to ignore, and it can be a source of new experiences.
Competitive Environment
The business environment in which Walmart operates is characterized by intense competition because firms operate in a perfect competition market structure. In a perfect market structure, there are many sellers, each selling similar products or perfect substitutes (Hoskisson, 2020). Competition is stiff and is regarded as bloody competition because firms engage in fierce ways of fighting off the competition. Walmart uses price leadership as a means of fending off competitors from its market share, thereby branding itself as the cost leader in the retail industry. Although Walmart has many competitors, The Home Depot is proving to be a fierce competitor to Walmart in the United States. The Home Depot was established in 1978, and has more than our decades in the market. The Home Depot uses a differentiation business strategy whereby it has set itself as the seller of unique products for home improvement. In terms of corporate level strategy, The Home Depot uses a market growth strategy whereby it seeks to establish a strong market presence for its unique products.
Comparing Walmart and The Home Depot strategies in the long term, The Home Depot is likely to be successful because it uses a distinctive combination of corporate and business level strategies. The Home Depot differentiates itself as the seller of home improvement appliances such as carpeting, decorations, kitchen remodeling among many others. By so doing, The Home Depot sets itself as the provider of value and specialty products in a blue ocean strategy. The blue ocean strategy is one where a firm makes products that the market wants, as opposed to the red ocean strategy whereby firms make products and look for customers. In a blue ocean strategy, customers are the ones who search for the products. Walmart strategy uses a strategy that can be adopted by any other business out there in the long run.
Market Cycles
Hoskisson (2020) defines a fast cycle market as a highly competitive market whereby market players have to be watchful of their competitor’s actions and constantly develop new products and strategies to counter their competitors. On the other hand, slow cycle markets are markets where a company’s competitive merit is protected from replication in the long run. Monopolies are examples of firms that operate in slow market cycles where imitation of the business model requires huge capital requirements and is expensive to replicate.
The choice of having The Home Depot strategy of differentiation and market growth as ideal for success in the long-run would be ideal in slow-cycle markets. That is because differentiation cannot be achieved in the short-run, thereby giving the firm competitive advantage in the long run. The strategy by Walmart of using cost leadership and market penetration to guard the market share jealously is ideal in slow cycle markets to ensure that it sells to as many customers as possible within a short time period before other competitors capture the market share. Walmart understands the kind of markets that it operates in, and its business-level strategies of cost leadership and the corporate level strategy of market penetration of selling to as many customers as possible and guard its market share from going to competitors through tactics like Endless Aisles work well in fast-cycle markets. From the research and the findings, there is no doubt that Walmart moves are well calculated, tactical and ideal or the market cycle that the business operates in. technological advances, cost leadership and market penetration are sources of Walmart competitive advantage in the fast cycle market in which it operates.
