Business Strategy (Essay Sample)

BUSINESS STRATEGIES FOR WAL-MART
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Introduction
An organization must have clear and consistent business and corporate level strategies to enhance the attainment of its set goals and objectives. Business level strategies ensure the core competencies of a firm lay emphasis on satisfying the tastes and preferences of the consumer. These strategies provide details on the actual market and business tactics that must be deployed in order to enhance the value proposition of the business to its customers. The delivery of value to customers ensures the core competencies of the firm are exploited in areas such as providing quality products. Besides business level strategies, firms also adopt corporate level strategies to determine the scope and direction of its diverse business activities to enhance success. This paper analyzes the business-level and corporate-level strategies of Wal-Mart Stores Inc.
Business-level strategies
One of the business-level strategies for Wal-Mart (the company) is cost leadership. The company adopts stringent measures to reduce its overhead costs such as enhancing process efficiencies through adoption of technology and lean management principles. There are strict process-monitoring logistics and capabilities within the company in critical areas such as inventory management, transportation, sales orders and employee productivity (Wal-Mart, 2014). Such controls reduce wastages and results to phenomenal resource savings owing to the extensive size of the company through its large multinational chains.
The firm also adopts the vertical integration of its business activities where manufacturers of products deliver them directly to the company thereby eliminating wholesalers. The firm has also engaged in acquisitions of e-commerce products such as the mobile application, Stylr to enhance efficiency for customers when locating products in nearby stores (Wal-Mart, 2014). Such measures result to significant cost savings such that the company can pass them to their customers through enhanced competitiveness in the pricing of products and services on offer (Carney & Gedajlovic, 2011). It means that the adoption of the cost leadership strategy along the supply and value chains of the business ensures the company can offer its products at lower prices in comparison to the competition. The strategy increases the level of customer loyalty the firm enjoys in the market that consequently increases the level of its market share.
Another business-level strategy used by Wal-Mart is differentiation. The company offers a wide range of products in several categories such as foodstuffs, clothes, electronics, and furniture amongst others at marginally low prices. The company implements various approaches such as the ‘roll-back’ pricing strategy where the pricing levels of competitors are continuously monitored to ensure the product pricing in its stores are lower than that of the competition. The company has also engaged in further differentiation efforts through offering unique extended warranties that are not available in most of the competing stores.
The use of these two business-level strategies at Wal-Mart i.e. cost leadership and differentiation is essential to the sustainability of the business. However, the adoption and enhancement of the cost leadership strategy is vital to the long term success of the business. Since the firm aims at maximizing its international presence, the cost leadership strategy will be necessary in increasing the levels of market share in other markets especially in emerging economies. Most of the populations in these economies the firm is targeting are middle income earners. Most of them are, therefore, price sensitive and it requires the company to entrench its cost leadership strategy so as to minimize the cost of operations and offer products at discounted prices and remain profitable.
Since the firm deals with general merchandize, cost leadership guarantees faster acquisition of relevant market shares in these foreign markets to maximize returns for the business (Weber & Tarba, 2014). Maximum returns will be guaranteed as the business enjoying higher economies of scale in such markets. The viability of the cost leadership strategy in the long term success of the business is also due to its emphasis on innovation and elimination of wastes.
The strategy also ensures the firm continuously adopts technology and lean management principles in its operations. Such an approach ensures there is continuous evolvement of new profit centers for the business such as online sales. Prioritizing innovation through the cost leadership strategy also means customer expectations can be proactively managed through technological channels such as social media. Such efforts guarantee long term sustainability of the business through higher levels of customer loyalty and increasing market share in the global market.
The cost leadership strategy is also essential in ensuring the company adapts to diverse political, cultural and social trading environments in the different regions where it operates. It also enhances the ability of the business to leverage on its core competencies since it can offer a diversified product portfolio to its new customer segments in a competitive manner (Carney & Gedajlovic, 2011).
Corporate-level strategies
The first corporate strategy that Wal-Mart embarks on is the value-creating strategy. The strategy mainly focuses on growth in order to continuously increase its market share. Wal-Mart has continuously engaged in aggressive international expansion where it currently has operations in 28 countries across different regions around the globe. The firm aims at exploiting its competitive advantage in resources such as finances and capabilities like innovation to establish its presence in more markets globally. Also, in line with its value-creating strategy, the retailer has adopted several diversification efforts in order to offer different types of products to its diverse clientele.
For instance, the company has subsidiaries such as Neighborhood Wal-Mart that specializes in groceries whereas other subsidiaries such as Wal-Mart.com handle e-commerce orders i.e. online sales. Most of the Wal-Mart supercenters specialize in general merchandize. Other entities such as Sam’s club deal primarily with wholesale orders (Wal-Mart, 2014). In addition, most of the Wal-Mart supercenters in every region offer diversified products and services portfolio such as groceries, jewelry, pharmaceuticals, general merchandize, food products, optical services and even tire and lube. Such diversification endears the company to more customer segments since they consider it a one-stop shop for all their shopping needs (Lynch, 2003).
Also, in line with its value-addition strategy, the company engages in acquisitions of strategic units to enhance faster and efficient entry into some of its target markets. The acquisition of entities such as Woolworth Canada, Boompreco of Brazil and Asda in the UK are some examples of how the firm has increased its international expansion to serve a larger market.
Besides value-creating corporate-level strategy, the company i.e. Wal-Mart also engages in value-neutral strategies in order to maintain its dominance of the retail sector. This strategy primarily aims at maintaining the stability levels of the business owing to various market dynamics such as the last financial crisis of 2008.
In line with its value-neutral strategy, the company ensures it inculcates a spirit of team work and collaboration amongst its employees. Such an approach increases the levels of synergy amongst various departments and employee units throughout the company. It also promotes collaboration amongst all employees regardless of their work stations (Lee & Grewal, 2004). Such interaction ensures seamless delivery of quality service to all customers. The company also engages in leadership sustenance in all levels of management. Low level, middle and top managers share data in all areas of the business that promotes effective decision making. Such trust amongst the company’s management has been central in enhancing the motivation levels of these managers and their subordinates.
The better of these two strategies in guaranteeing the long term sustainability of the business is the value-creation strategy. Owing to the diverse nature of customers being served by the retailer, it is prudent for the products and services on offer to be aligned to the continuously changing tastes and preferences of customers. In order to enhance such alignment, the company needs to use its substantial financial resources and retailing expertise to invest in consumer research. It also needs to continuously utilize its innovative capabilities to gauge the feelings and perceptions of customers towards the products and services on offer (Kourdi, 2009). Such value-creation engagements make the retailer develop competitive advantages over its rivals both locally and internationally. Its value-creation strategy must, therefore, be enhanced to make the retailer the preferred one-stop shop for most of the customers.
Competitive environment
Wal-Mart operates in an increasingly competitive environment both locally and internationally. Its main competitors are Costco and Target Corporation. However, the main competitor for Wal-Mart is Target Corporation. The main business-level strategies for Target Corporation are cost leadership and differentiation just like Wal-Mart. At the corporate level, Target Corporation unlike Wal-Mart adopts a value-neutral strategy. In the long term, Wal-Mart is likely to be more successful than Target Corporation owing to its huge resource capabilities. Wal-Mart has a market capitalization of $188 billion (Wal-Mart, 2014) comp...