BUSA 205 Management Fundamentals: Strategy Formulation

Busa 205 Management Fundamentalschp5 Strategy Formulation

Our mission/purpose statement is: Saving people money so they can live better.

1. Describe Walmart’s External Environment: Place the items from the Walmart Info list in the appropriate category. (10 Points)

Positive Factors - Opportunities: Low prices, expansion into international markets, internet retailing, growth of Aldi food chain, home delivery of goods, Amazon/Whole Foods competition, growth in online shopping, expansion of Sam’s Club, global presence in 27 countries, product categories like bulk purchasing, and the increasing trend of direct-to-consumer sales. Additionally, Walmart's established brand and international expansion provide growth opportunities.

Negative Factors - Threats: Economic recession, intense price competition from other big box retailers and dollar stores, community resistance, international market challenges, rising healthcare and labor costs, law suits by employees, inadequate urban locations, inferior product quality perception, distribution and logistics challenges, and competitors like Amazon and Whole Foods disrupting traditional retail.

2. Describe Walmart’s Internal Resources: Place the items from the Walmart Info List in the appropriate category. (10 Points)

Positive Factors - Strengths: Established brand, low prices leading to low-cost leadership, large and loyal customer base, extensive distribution and logistics system, one-stop-shop approach, global presence, and economies of scale from bulk purchasing.

Negative Factors - Weaknesses: Unfair employment practices, high employee turnover, product safety issues, limited urban store locations, poor working conditions, susceptibility to law suits by employees, community resistance in some markets, and the perception of inferior product quality.

3. Describe a relationship between a strength and an opportunity and formulate a strategy capitalizing on the relationship and write it as a strategic goal. (15 Points)

Strength: Walmart’s extensive distribution and logistics system and established global brand.

Opportunity: Expansion into international markets, particularly in regions with emerging middle classes seeking low-cost products.

Strategic Goal: Leverage Walmart’s advanced logistics infrastructure and strong global brand to expand into emerging international markets, increasing market share and driving international revenue growth.

4. Describe a relationship between a weakness and a threat and formulate a strategy to neutralize the threat and write it as a strategic goal. (15 Points)

Weakness: High employee turnover and poor working conditions.

Threat: Community resistance and increased regulatory scrutiny in urban markets.

Strategic Goal: Implement comprehensive employee engagement and welfare programs to improve working conditions and reduce turnover, thereby mitigating community resistance and complying with regulatory expectations.

5. What corporate strategy is Walmart following: concentration, vertical integration, concentric diversification, conglomerate diversification? Explain why you selected this strategy. (15 Points)

Walmart primarily follows a concentration strategy, focusing on expanding its core retail operations across various geographic markets and product categories. Its emphasis on low-cost leadership and economies of scale demonstrates a focus on strengthening its existing retail business through geographic and product expansion, rather than diversification into unrelated industries.

6. What business strategy is Walmart following: low cost or differentiation? Explain why you selected this strategy. (10 Points)

Walmart follows a low-cost strategy. The company’s core competitive advantage is its ability to offer products at the lowest prices through efficient supply chain management, economies of scale, and cost-cutting measures. This strategy aligns with its mission to help people save money and live better.

Sample Paper For Above instruction

Walmart’s strategic environment is shaped by a complex interplay of internal strengths and weaknesses, along with external opportunities and threats. Analyzing these factors provides insight into how Walmart formulates its strategic approach to sustain and grow its market position.

External Environment Analysis

Walmart’s external environment presents several opportunities, including the expansion into international markets, growth of online retailing, and leveraging its established low-price leadership. These opportunities are complemented by emerging trends such as increased e-commerce penetration and the growth of discount chains like Aldi in Europe and North America. Walmart’s ability to broaden its global footprint, especially in 27 countries outside Europe, positions it for continued expansion. Furthermore, the rise in online shopping, exemplified by Amazon and Whole Foods, challenges Walmart to enhance its digital presence and delivery capabilities.

However, Walmart faces significant threats, including economic downturns, intense price competition from dollar stores and other big-box retailers, community resistance to new stores, and regulatory challenges related to labor laws. The company also grapples with international market risks, such as rising labor and healthcare costs, particularly in countries like China and in regions within the United States where urban store locations are limited. The threat from substitutes such as Amazon’s online platform and premium organic providers like Whole Foods also necessitates strategic adaptations. These external factors require Walmart to continuously innovate and adapt to maintain its competitive edge.

Internal Resources Analysis

Walmart’s internal strengths include its established brand reputation, economies of scale, extensive distribution network, and its position as a low-cost leader. These strengths enable Walmart to keep prices low and attract a broad customer base. Its global presence in numerous countries enhances its bargaining power and operational efficiency. Nonetheless, internal weaknesses such as high employee turnover, poor working conditions, and product safety concerns undermine its reputation and operational effectiveness. The company’s limited urban presence also restricts growth opportunities in dense population centers where urbanization is increasing.

Addressing these weaknesses is critical to sustaining Walmart’s competitiveness. Enhancing employee relations and working conditions will not only reduce turnover but will also improve community perception and regulatory compliance. Internal operational improvements, especially in urban store formats, could further unlock growth potential in densely populated markets.

Strategic Relationships and Goals

A notable example of leveraging internal strengths to exploit external opportunities is Walmart’s logistics and distribution system. By expanding into emerging markets like parts of Africa or Asia, Walmart can capitalize on rising middle classes seeking affordable goods. Its global brand and logistics infrastructure serve as pillars to achieve this expansion goal, aiming to increase market share and revenue from new regions.

Conversely, addressing internal weaknesses such as employee dissatisfaction can be linked to external threats like community resistance and regulatory scrutiny. Implementing comprehensive employee welfare programs will help neutralize these threats, fostering a positive public image and aligning with societal expectations.

Corporate and Business Strategies

Walmart’s corporate strategy emphasizes concentration—expanding and consolidating its retail operations domestically and internationally. It emphasizes low prices and economies of scale as core elements, avoiding diversification into unrelated fields. Its business strategy focuses on cost leadership, leveraging supply chain efficiencies and bulk purchasing to sustain its low-cost advantage, which resonates with its mission to help customers save money.

In conclusion, Walmart’s strategy revolves around exploiting its internal strengths, responding proactively to external threats, and continuously aligning its corporate and business strategies to enhance competitive positioning. Its focus on low-cost retailing, international expansion, and operational efficiency cements its role as a retail leader.

References

• Barney, J. B. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99-120.
• Grant, R. M. (2019). Contemporary Strategy Analysis: Text and Cases. Wiley.
• Kotler, P., & Keller, K. L. (2016). Marketing Management (15th ed.). Pearson.
• Walmart Inc. Annual Report 2022. Walmart Corporate.
• Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
• Friedman, T. L. (2005). The World Is Flat: A Brief History of the Twenty-first Century. Farrar, Straus and Giroux.
• Hill, C. W., & Jones, G. R. (2012). Strategic Management: An Integrated Approach. Houghton Mifflin.
• Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic Management: Concepts and Cases. Cengage Learning.
• Tarpley, F. (2018). Retail Strategies in a Changing Market. Harvard Business Review.
• European Retail Academy (2022). Retail Industry Trends Report. ERA Publications.