As far the opportunities are concerned I think that the European market can be a market where to put more efforts in the expansion . Another opportunity can be the creation of an online store where the people can buy their items and have them delivered at home.
The threats are that some small cities do not want Wal mart to install its business locally because they want to maintain their own business integrity. Another problem is that the products Wal Mart sells are very standardized and so easy to substitute with other products . People choose the products with the best price. (This is why Wal Mart is the most important retailer in USA )
So the competition in this market is very strong.
This was only a small swot analysis , just to start , with the more important element as far the swot analysis is concerned.
The strategy that best describe Wal Mart is the so called “Best Price” strategy.
The most important statement of Wal Mart is “We sell for less” and this is the phrase that appears outside of every store. This strategy derives from the use of “cutting edge technology”, relationship with suppliers, truck fleet operations and employees treatment.
Wal Mart uses a state of the art information system that is very important in the process of cutting the costs of the value chain and it provides a functional efficiency in addition to a faster way of communicating with the suppliers. With this system the suppliers are advised about the stock in the warehouse and they automatically provides new supplies to the stores so that the communication times and costs are drastically reduced.
Wal Mart use of data results as an important competitive advantage. Wal Mart began using computers in 1974 and now it has the most sophisticated system of any retailer in the world.(The competitors have followed the Wal Mart information system to cut their prices).
The advantage of this information system is that the company can have a real time access to detailed figures and track the movement of goods through the value chain. The information system is also important for the improvement of the company. (During the hurricane the company discovered from its information systems that there were lack of some goods in its stores).The system lowers the logistics and inventory costs. In addition, some studies explains that the use of these information systems help to reduce the stockouts by 33% and boost worker productivity by 5%.
Wal Mart found very convenient to work with all the suppliers to obtain a win-win relationship. Wal Mart has a big power on the suppliers because is the most important customer of all its suppliers and can obtain very low prices from them. The company has a powerful team of agents who have the objective to buy the goods at the lowest price . But this is not the only relation with the suppliers ,in fact the buyers have to work out with the suppliers to cut off the costs from the supply chain . In addition to that the suppliers are encouraged to contribute to the Wal Mart business with ideas to improve the relationship. (This not only happens with the suppliers but also with the employees and this is part of the strong strategy of Wal Mart).
The relationship with Wal Mart is important for these suppliers because it adds some competences to the knowledge of the suppliers and it helps them to work better in their own businesses.
The company established also some standard for the suppliers to enhance its strategy and it created a team of controllers to verify that the standards were respected.
To better cut the costs Wal Mart has positioned its stores near the suppliers to provide fast delivery and it has set up a truck fleet with expert drivers. As we know in the process of executing a strategy is always important to recruit good employees with the skill needed to best perform in their job. In addition to that the company provides the drivers with structures where to eat and to sleep between one and another delivery.
Another important fact about the strategy was the employees treatment.
The decision making in Wal Mart can be defined as a “Decentralized decision-making” and this helps the employees to feel an important part of the company. The employees are called associates and they are encouraged to give advices in the process of implementing and executing the strategy.
The structure of the company is horizontal and the bureaucracy is very low.
The managers often walk in the shops to listen to the employees and to catch some important advices that otherwise they wouldn’t catch. Only the persons who work in the shop know really what to do to improve the strategy.
The employees are completely involved in the company and are treated as a part of a “big family”.
The wages were in average below the minimum wage
The company has decided to pay less the employees and to establish a very efficient incentives system. Sometimes is better to provide the employees with lower wages than the average and to give them the possibility to earn more or have benefits performing well. Just to quote some numbers Wal Mart paid ,in 1999, $500 million in incentive bonuses based on store and individual performance to 525,000 employees.
The wage increasing depends on how the employee has worked well during the year. Then they have some fringe benefits as the health insurance , that is gave to the employees after a six months wait and one year exclusion for preexisting conditions , and for full time employees : vacation and personal time , holiday pay , military and maternity leave , child care discount for associates….just to mention some.
The implement of the profit sharing plan is another central element of the strategy.
Another important element is the stock option plan. This kind of plan is a crucial element in a strategy in fact the company does well if the employees work well so the employees are encouraged to increase the value of the company to earn more money from their stocks. Employees that started participating in the early years had accumulated stock worth over $100,000.
A crucial point of the strategy related to the Wal Mart strategy is the training for managers and employees. The company has different ways of training from the classroom courses to the computer based learning to the satellite broadcasts. The company wants to have workers who know what to do and how to behave in the Wal Mart environment . This because the company wants to have long term relationships with its customers and have an efficient strategy that improves in a continuous way.
All these element can be summarized in the Wal Mart culture that derives from the founder , Sam Walton. Sam Walton has became a myth for his numerous qualities as a man and as a manager and the company will enjoy the positive consequences of Walton for all its existence.
The company has bunch of stories and legend related to Wal Mart and the myth of Sam Walton and this is also one the biggest strength of the company that permits the company not to spend lot of money in marketing but to utilize the powerful instrument of the “word of mouth”.
But behind all these positive elements during the last years the company has faced some problems.
The most important problems were related to women discrimination and to associates payments ( they were forced to work overtime without being paid ).
It’s not very easy for the company to solve these problems because we know from the theory that is not always easy to make changes in a such big company. I think that the company should pay more the employees even if the company gives them lot of incentive and fringe benefits. If we take a look to the competitors they pay more their employees and these could be a fact that could encourage the workers to change place where to work.
Obviously implementing this change ,the company will loose some advantages related to the low cost of the products it sells and will have to reduce other kind of costs or increase the prices to the public. The workers are one of the crucial element in a company and especially in a company like Wal Mart where the employees are part of a big family and have learned how to work in the Wal Mart environment. Loosing the employees for Wal Mart could result in a loss bigger than the one it would incur if it increases the employees wages.
Another solution to this problem could be the recruitment of new employees but this would result in very high costs because the new employees have to be trained to work in Wal Mart. So the best solution to solve this problem without changing too much the strategy could be the increasing of the wages. We also know that there is a direct relation between the workers satisfaction and the well functioning of the company and in general of every company.
The problem related to the discriminations is a more big fact. The image of the company is damaged and all the good stories related to the successful of the company and all its positive future can be cancelled in very short time. As the word of mouth is fast for the positive facts , is even more fast for the bad things. The management has to work very hard on this problem and the solution could be giving the same possibility ,as the men ,to reach high level in the management and in the wages to the women . According to that the management has to deeply study a way to give some particular incentives to the women and to organize some special programs (incentives , fringe benefits , more possibility to raise ) that can completely cancel this very big problem.
Another problem concern the fact that some small town doesn’t want Wal Mart to install its stores because they want to maintain a sort of local economy that would be destroyed by the opening of a Wal Mart store. As we know Wal Mart sells highly standardized products and for the people the switching cost to change from one to another store is very low.
I think that Wal Mart is big enough and that the management has now to concentrate on the numerous issues that are arising in this moment. It would be better for the company to stop for a moment its projects of expansion . In addition to that Wal Mart is excellent in America and it’s not obvious that it will be excellent in other countries too. In other countries there different cultures that may not match the Wal Mart strategy .
