Research Journal of Social Sciences 2018. 11(1): 32-36 DOI: 10.22587/rjss.2018.11.1.6 ISSN: 1815-9125 EISSN: 2309-9631 Journal home page: http://www.aensiweb.com/RJSS/
RSEARCH ARTICLE
Strategic Management Of Walmart
1Ekta Kumari and 2Dr. Vijayshri Tewari
1Department of Management Studies, Indian Institute of Information Technology, Allahabad, India.
Address For Correspondence: Ekta Kumari, Indian Institute of Information Technology, Management Studies, Allahabad-211015, India, 9631319086, [email protected].
Received 23 January 2018, Accepted 25 May 2018, Published Online 11 June 2018
A B S T R A C T
Strategic management is a continuous process of identifying the opportunities and exploiting them to sustain competitive advantage and identify direction in which the organization moves in future. It also involves a series of effective decisions which a manager takes and which in return decides the growth and performance of firm. It is an art of effectively managing the workforce within an organization to strategically relate them with the firm’s objectives and goals. Walmart is an American multinational retail organization and world market leader in its cost leadership strategy. Value chain analysis of Walmart is chain of activities from concept and raw material of product to its sales & marketing and customer service. The flow of the study also describes the Walmart Business Strategy apart from its value chain analysis with better understanding of the strategic management of the company. Both these strategies help Walmart to achieve success and sustain competition across the globe. The functional area of Walmart is synchronized with its strategic goal to make effective use of its resources. The company also focuses on measuring the gap between its present strategy and the expected strategy to control the desired outcome and increase its productivity. The main focus of the company is on mitigating challenges such as competitive pressures due to changing environment, growing technology and changing customer’s preferences.
Key words: Value chain analysis, Walmart Business strategy, Strategic management, Cost Leadership
INTRODUCTION
1. Company Overview: Wal-Mart Stores, Inc., commonly known as Walmart, is an American multinational retail organization working as a chain of markets, grocery stores, and supermarkets. It is headquartered in Bentonville, Arkansas. The organization was established by Sam Walton in 1962 and consolidated on October 31, 1969. As of January 31, 2018, Walmart has 11,718 stores globally and clubs in 28 nations, working under 59 distinct names. Walmart is the world's biggest organization by income – around US$485.87 billion as per the Fortune Global 500 list in 2017 – and the real private employer across globe with 2.3 million representatives. The organization is controlled by the Walton family and it is traded on an open market family-possessed business. "The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience." - Sam Walton (1918-1992)
1.1 Vision Statement-: The organization follow beliefs and values of its founder, Sam Walton. The goals are underscored in Walmart's vision declaration: “To be the best retailer in the hearts and minds of consumers and employees.” The organization performs to accomplish a best position in the retail business. At present, Walmart has effectively achieved the "bestretailer" position to some portion of its vision. Walmart's vision articulation additionally
Open Access Journal Published BY AENSI Publication © 2018 AENSI Publisher All rights reserved This work is licensed under the Creative Commons Attribution International License (CC BY). http://creativecommons.org/licenses/by/4.0/
To Cite This Article: Ekta Kumari and Dr. Vijayshri Tewari., Strategic Management Of Walmart. Research Journal of Social Sciences, 11(1): 32-36, 2018
33 Ekta Kumari and Dr. Vijayshri Tewari, 2018/Research Journal of Social Sciences 11(1), Jan, Pages: 32-36 indicates the minds and hearts of the general population that values most to the business, i.e. customers and workers. The organization has truly affected the minds of buyers and workers based on monetary advantages. Workers gain compensation, while customers spare cash through Walmart's low costs. Nonetheless, the "heart" part of the vision explanation stays to be demonstrated.
1.2 Mission Statement-: The organization's key choices are too an immediate sign of its central goal. Walmart’s mission statement is “Saving people money so they can live better.” This statement is indistinguishable to the organization's trademark, "Save Money. Live better." The firm succeed with regards to satisfying the "saving people money" part of the mission statement. Customers save money through Walmart's cost leadership strategy. However, it isn't yet clear if the organization satisfies the "live better" part of the mission statement. There are reactions on Walmart's little wages that are scarcely enough for representatives to make a decent quality living. There are likewise reactions about the long haul impacts of the association's managed expansive scale offers of reduced cost and once in a while unsafe imported goods.
2. Value Chain Analysis: Porter value chain analysis is a systematic tool for business activities developed by Michael E Porter of Harvard Business School to create sustainable value and competitive advantage to the business process as a whole. Walmart is market leader for its cost leadership strategy. Value chain analysis of Walmart is chain of activities from concept and raw material of product to its sales & marketing and customer service. These activities are further classified into primary and supporting activities which indulge cooperation from suppliers in to provide their customers with goods whenever and wherever they want at suitable pricing thus supporting their tagline “Save Money, Live Better”.
Fig. 1: Value Chain Source: www.smartsheet.com
2.1 Primary Activities: 2.1.1 Inbound Logistics: It supports raw material handling, warehouse and inventory management to control andmanageits supply chain cost. This process depends on suppliers spread across the globe. Walmart have built strategic partnership with its suppliers who provide raw materials in real time as per requirement. This long term relationship is built through purchasing in bulk quantity hence reducing cost. This whole process is streamlined through information system which communicates and provides real time data of sales and stock status so that a balance can be maintained.
2.1.2 Operations: As of January 31, 2018 Walmart operates in 28 countries under 59 different names across 11,718 stores. Its operation is divided into three segments namely Walmart US, Walmart International and Sam’s Club. It is transformation of input into output through chain of process. To achieve inventory efficiency, a supply chain practice Cross Docking is followed which supports no stocking of goods. Most goods not even touch the warehouse floor as they are directly transferred from incoming trucks to outgoing trucks on a 24 miles length conveyor belt hence reducing transportation cost, transportation time, and inventory cost.
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2.1.3 Outbound Logistics: The products from warehouse are delivered at stores within span of 48 hours. The stores are immediately replenished before the stocks started to empty and hence increases the overall efficiency of the operation.
2.1.4 Marketing and Sales: It follows a balanced and effective marketing & sales strategy. For the same they encourage new products and innovative ideas along with the risk involved in introducing the same in the market. To capture customer segment it promotes the products from promotional videos and channels to social media. The most important attribute is customer service to maintain brand image and reputation in the open market.
2.1.5 Services: It adds more value to the product to meet customer satisfaction. All stores are organized in a similar way with uniform prices and stores opening hours so that customers recognize stores wherever they go. The shop floor employees are trained to communicate with customers’ requirements.
2.2 Supporting Activities: 2.2.1 Firm Infrastructure: The infrastructure of any firm comprises of Organizational culture, operational activities and employees. Walmart’s have very large infrastructure which supports activities such as management of technology, Supply Chain management & Human Resource management to serve their customers.
2.2.2 Human Resource Management: Walmart is in Fortune’s 100 Best places to work list though in past it faced severe criticism for poor human resource management and surpassed that phase. There is open communication between employees and organization to promote new ideas, take risks and to strive for excellence. It focuses on employees’ career development by providing competitive wages and comprehensive benefits like medical coverage, vacations, holiday pay etc. The employees are taught that the customer is always right and to replicate the same.
Fig. 2: Walmart Strategic Human Resource Management Source: https://bohatala.com
2.2.3 Technology Development: At Walmart technology has been lifeline of organization and foundation of its supply chain. With the help of technical tools the organization predicts inventory levels, efficient transportation routes, forecasting demands, managing customer relationship etc. It has a central database connected with satellite network incorporated at every level of supply chain. Walmart have developed RFID system for inventory handling and smart tags for automated re-ordering of goods as they move out of stores achieving greater operational efficiency across the chain.
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2.2.4 Procurement: Walmart manages the purchasing of its raw materials at lower cost by building strategic relationship with its suppliers. These suppliers contribute by providing standard products and services to meet the demand thus building relationship and streamlining production activities.
3. Walmart Business Strategy: Cost leadership strategy of Walmart revolves around being lowest cost company in its domain creating unique products that customers will be ready to pay at its best price. Focus Strategy is further segmented into cost focus strategy and differentiation strategy and hence it focuses on targeting a particular segment in their domain by modifying the products or services according to the need of consumers.
Fig. 3: Business Strategy Source: www.themoneyedge.com
3.1 Cost Leadership: Walmart is truly dedicated towards its low cost strategy. Its evidences could be noticeable in its supply chain management and operational efficiency from where huge cost saving is derived through bulk purchasing, stock holding for less than 48 hours etc. These savings provide funds for growth and low prices for customer giving them easy and better life.
3.2 Differentiation: Walmart have created distinctive offerings of goods and services through its many dimensions such as creating unique products by adding value to it; integrating innovative ideas into its product development; range of products with distinctive design, features, technology, fine quality and customer satisfaction. Apart from these dimensions, Walmart enjoys this differentiation from competitors through its board composition of broad skills sets and business expertise. Also to sustain the differentiation, its focus is on improving fresh and organic offerings along with its cost leadership strategy.
3.3 Focus Strategy: The focus strategy focuses on a particular segment of people or geographical location or even particular segment of product line and market to provide an edge to its strategy from its competitors. To make customers reach to the stores more convenient, the focus strategy was on locations in radius of few miles which competitors could not gave thought to it. Walmart is offering seamless shopping experience where customers can scan items as they shop and then pay using smart phones. The focus is also on E-commerce to improve sales through growing range of brands and expansion of marketplace.
Conclusion: Strategic management is a continuous process which pervade whether an organization is going to succeed or not in the long run. Any organization having sufficient internal resources and external environmentalfactors will improve its performance and will be sustainable in the long run. But for successful implementation of strategy any organization must go for environmental scanning and flexible internal process. However as we are
36 Ekta Kumari and Dr. Vijayshri Tewari, 2018/Research Journal of Social Sciences 11(1), Jan, Pages: 32-36 not aware what future may unfold thus the formulation, planning and implementation is not sufficient, organizations must evaluate the process with continuous feedback and take appropriate decision to fulfill stakeholder interest and improve organization efficiency. Walmart have faced challenges and have countered those with continuous improvement and have reached glory after 50 years of their operational performance. In order to stay ahead of their competitors,reciprocating the company strategy and achieving their key goals, Walmart is moving towards digital organization with speed and agility to become lean organization in coming future. In conjunction with this, the associates of Walmart need to be equipped to deliver this change. Since Walmart has been successful in sustaining their low-cost strategy through effective implementation and evaluation process, they must protect their unique intervention as other retailers may attempt to replicate their supply chain management. Apart from this focus should be on mitigating challenges such as competitive pressures due to changing environment, growing technology, changing customers preferences; fluctuation in exchange rates and policies; Shopping pattern especially seasonal buying pattern etc.
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