2-3 page executive summary
Running Head: Wal-Mart’s Industry Analysis Paper 0
Wal-Mart’s Industry Analysis Paper
Evolution History of Wal-Mart’s Industry
After analyzing the evolution and the trend of the retail, it is my opinion that this industry is maturing. The retail industry has evolved from “brick and mortar’ stores” to online establishments. Initially, the brands held all power in and controlled the consumer products in the retail industry. This is the time the manufacturers of big brands would just seat back and relax as consumers made their way to the retail stores to shop. Then, there came the era of retailers who held the power in the industry. The retailers such as Kmart, Sears, and Walmart which were perceived to be “Big Box” chains controlled the retail industry as they held all the cards. They size, layouts and presentation held up the consumers. However, today the balance has completely shifted to the consumer. Due to increased technology, consumer is so much empowered in terms of information availability and, therefore, shapes the course of the industry.
The current consumers are empowered mainly through online and social channels and have almost limitless alternatives on their path to purchase. Today, it is very common to find consumers explore through the aisles of “brick and mortar stores”, and then proceed to discuss their options with their peers via social media networks and finally look for best price online. It is my opinion that internet is a disruptive innovation that has built a consumer base that is most informed, socially engaged, and demanding. The is an industry that is so maturing that the consumer power is influencing the course of unlike before where the manufacturers would hold the consumers captives. In fact, statistics show that online sales exceeded $200 billion annually in the United States and this figure is an equivalent of 10% of the total retail market share (Guffanti, 2012, September).
The retail stores in this industry should therefore adapt strategies that will live up to the reality of the new consumer. The experience to be offered by the retail stores whether in physical stores or online must be centered on the realization that consumers are now informed, socially engaged, and demanding. Further, it is my view that as the age of the internet becomes world class, we may experience an increased evolution of “brick and mortar” stores. There will be increased distribution centers to enable consumers pick the items they purchase online. The online buying experience will become destinations as they consumers have fun and interact with their friends as they do shopping.
Porter’s National Diamond
Walmart has over the past few years integrated itself vertically to enjoy various advantages over the outsourcing. These advantages include increased food security, capability to re-access fresh credentials to the shoppers as well as transferring best practice of supply chain downstream. First, Walamart aims to provide food security its customers in order to reassure the customers of the food safety and traceability develop private label penetration, minimize transaction costs, ad increase responsiveness in the supply chain. For example, in 2016 Walmart announced that is going to build its own milk processing plant in the United States.
Porter’s National Diamond model helps assess the international success of a firm by looking at the characteristics of its home country. Walmart is an America multinational retailer that has really been successful in several countries across the world. For this reason we can focus on the characteristics of the United Sates market environment and link this with the success of the company especially through Vertical Integration initiatives. The Porter’s Diamond model tries to explain that the international competitive of Walmart can be traced from the characteristics of its home country. For example, the Walmart’s plans to establish a milk processing planning in the United States explain the favorable competitive environment in that country to enhance the company’s growth. Some of the expected advantages of this vertical integration are increased focus on private label ranges; lower sourcing costs, and align with sourcing method of other markets.
Increased focus on private label rages means that Walmart’s processing unit will be able to concentrate on create more value to tits consumers by offering cheaper and wide variety of quality dairy products in its stores. Second, this backward vertical integration will support lower sourcing costs for Walmart. The lower costs will allow the company to focus on its pricing strategy of offering products and services at lower prices as compared to the competitors’ every day. Again, Walmart will gain greater control over the quality of products it produces on its own. The responsiveness of the company to the supply chains demand and needs will highly increase hence further boosting its competitiveness. Walmart will also have a bigger opportunity to test and trial innovations in the supply chain.
Recently, the consumers have increasingly being interested in sources of food items. For this reason, Walmart’s downward integration in terms of processing milk and other initiatives will allow the company to communicate a better and stronger product story to its consumers. Further, the company will able to align with sourcing approach in international markets. It will be able to adhere with various legislative and food safety environment thereby becoming more adaptive to the complexity of various markets. This ultimately increases its competitiveness.
BCG Growth-share Matrix
The Boston Consulting Group’s growth-share matrix is a planning instrument that utilizes graphical portrayals of an organization's products and administrations with an end goal to help the organization choose what it ought to keep, offer or put more in. The BCG development share framework plots an organization's offerings in a four square network, with the y-hub speaking to rate of market development and the x-pivot speaking to market share. It was produced by BCG in 1970.
The BCG Matrix acknowledges that opportunities inside an organization as either stars, questions marks, cash cows, and dogs. This is illustrated below.
In year 2013, Walmart reported profits totaling to $17 billion on sales worth $470 billion. On the year, Target reported a profit amounting to $3 billion on sales worth $73 billion. Although, Walmart posted huge sales than Target, the analysis of profit margin and marketing metrics such as Marketing Return on Investment as well as Marketing Return on Sales show that Target is performing more efficiently that Walmart. This can be explained by BCG Matrix. From the BCG Matrix analysis, Walmart performance in the year 2013 can be place under the quadrant with “Star”. Stars generate large cash flows through more sales and hence command higher market share (John, 2010). However, these organizations use as much as the cash generate in their higher growth rates. The retail industry is maturing and this will eventually turn Walmart slowly into a “cash cow”.
Currently Walmart commands the majority of market share of entire global hypermarket and super center industry and the fact that they have established strengths and competencies in purchasing, advertising, and distribution, the company is likely to maintain this position for quite some time. The higher growth rate of Walmart can be explained by the company’s constant offer of lower prices to its customers. For many years, Walmart has maintained its “Everyday Low Prices” pricing strategy where it gives up to 15% off discounts as compared to its competitors. As a result, the customers remain loyal to the company and even expressed the message to the friends through social media networks especially due to the increased connectivity brought about by advanced information technology. Many stars strive to reach the status of a cash cow. However, Walmart tries to balance the positive attributes associated with being a cash cow as characterized by large cash streams, with an urge and desire to grow similar to that of a star.
Approach to Be Adopted For Implementing the Recommended Strategies
The strategies to be implemented by Walmart are centered on enhancing the innovation to ensure the organization remain competitive and maintain its “Everyday Lower Prices” selling philosophy. In order to enhance creativity and innovation the CEO of Walmart needs to adapt and approach of enhancing employee satisfaction. Employees are the most important asset of any company. They need to be motivated, inspired and supported in order to be committed towards achieving the goals and objectives of a company.
In Walmart, the employees would be responsible for implementing the growth and innovation strategies of the company. The CEO of Walmart should adapt a comprehensive employee satisfaction approach to inspire influence them in following his vision. One way of doing this is practicing a Laissez-Fare Leadership style. Laissez-faire leaders give their team members a lot of freedom to freely work on their own and even set deadline for themselves. These leaders provide their followers with resources and advice yet they do not get involved in what the employees are doing. This style leads to high job satisfaction (Rost, 2012).
One way the CEO can influence his employees to follow the company’s direction is by having a clear vision about what you want to achieve. Secondly is by listening to co-workers and addressing their concerns. Third is consulting the employees as this will enable the employees to feel like they own the decisions that the top management makes and therefore were motivated to implement them.
Further, the CEO needs to act as a good role model. Employees need to be empowered by giving them freedom to make set their own targets and schedules to achieve. Rewarding the employees for the outstanding ideas and innovations will go a long way in nurturing a culture of creativity and innovation. Additionally, the top management needs to continuously conduct training in the areas of creativity and innovation so as the employees can have necessary insights and skills to innovate.
References
Rost, J. C. (2012).Leadership for the twenty-first century.Westport: Praeger Publishers
John, K. (2010). Leadership and Management: 21st Management Approach. London: Oxford Press
Guffanti, A. (2012). The Evolution of Retail. Retrieved from https://consumergoods.com/evolution-retail
