Introduction to Walmart
Wal-Mart Store, Inc. is an American public multinational organisation which falls under retailing industry. Their mission is to save people money so they can live better. By using this mission, Walmart allowed to growth well continuously.
Nowadays, Walmart become a successful worldwide organisation and it is the world largest retail company. They have growth to more than 8969 retail units with 55 different names and located in 15 different countries. Moreover, Walmart had kept on evolution their company logo. They had changed five logos in between 1962 to 2008.
In additional, Walmart basic value is always focusing on their customer service. Walmart served more than 176 million of customers a year and they served more than 200 million times of customers and members each week and Walmart has hired over 2 million of human capital around the world. In 2010, they had total sales around USD 405 billion.
Furthermore, Walmart ranked as the first among retailers in Fortune Magazine's 2010 Most Admired because of its leader in sustainability, corporate philanthropy, and employee opportunities.
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Strategic analysis can also call as situation analysis. It helps Walmart to analyse their general environment and competitive environment. Besides, it also can analyse the internal environment of Walmart. Therefore, Walmart can continue to formulate and implement it's strategic after evaluate its environments.
The general environment changes will strongly affect organisation in the specific industries. Therefore, organisation should concern about the issues happens in general environment. PESTEL analysis is one of the tools to help organisation to scan and understand its general environment.
PESTEL analysis is a useful tool to make sure organisation has performed well with the changes forces in the external environment. It helps organisation to recognise in their external environment opportunity to compete in their industry. PESTEL analysis help organisation to analyse the political, economic, social, technological, environmental and legal factors.
The political factor will affect the business rule, consumer buying power and other business. Therefore, government policy changes will affect organisation and force them to make changes.
The changes of the economic factor will affect organisation financial, cost, and its purchasing power. Therefore, trading economy in international marketing should be aware by the marketers.
In social factor, the society growth and changes will affect organisation sales. Therefore, organisation should always do research and modify their goods or services to suit the social trends changes.
Organisation need always emphasise in the technological factor because technology able let organisation get new information, operate more rapid, innovation and more competitive in its market.
The law changing or new law found in the local or international will also affect organisation. Therefore, organisation should always concern about the legal factor all the time.
The natural world of global and local environmental factor will affect organisation. Therefore, environmental pressures has force organisation to make changes.
The changes of competitive environment affected organisation immediately. So, organisation needs to strongly focus and concern about the issues that might affect them. In order to react on the issues happen, organisation might use Porter's five forces framework to evaluate its competitive environment.
Porter's five forces framework is a tool to evaluate the opportunities of organisation in its industry by using the strengths of five competitive forces. Michael Porter state the five competitive forces into the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products and services, and intensity of rivalry among firms in an industry. It helps the organisation evaluate their ability to compete in their industry by examining the five forces.
The profit of new organisation will be influence by the potential and existing competitors. The new entrant threat depends on the entry barrier of the market. If the barrier entry is high, then the threat of new entrant will be low.
The buyers' bargaining power influence the industry force the price to be low, force in getting a good quality and more services, and play among the competitors in the industry.
The supplier power is like a mirror image of buyer power. The suppliers' bargain power in the industry can raise the prices up and reduce quality of the products or services.
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The substitute treat occur when there have other lower price products or services which can meet the customer similar needs. However, it is not a competition from the new entrants. The substitution of products may attract a significant part of the customers in the market.
The intensity of rivalry helps to determine the extent of profitability created by an industry will be dissipated through head-to-head competition. It describe the intensity of the competitor between the exist organisations in that industry.
The internal environment of an organisation may direct affect the performance within the organisation. Therefore, organisation has to pay attention on its internal environment. The organisation can use value chain analysis to analyse its internal environment.
The value chain is the movement of the organisation on how the raw materials from the suppliers to the end customers. Value chain analysis can help the organisation to assess its resources and evaluate its strength and weakness. Besides, it helps the organisations to understand the roles have to play in the activities and the linkage between the activities.
Porter had divided the value chain analysis into primary and support activities. The primary activities focus on producing and sales of the product and services. The activities are outbound logistics, operations, inbound logistics, marketing and sales, and service.
However, the support activities use to helps the primary activities to perform efficient and effectively. The activities include organisation infrastructure, human resource management, technology development, and procurement.
Besides, the organisation should view on its resource-based in formulating its strategies. Resource-based view of the organisation will helps them to evaluate its internal capabilities and resources to sustain its competitive advantages to compete in its markets and industries. Therefore, the capabilities and resources are important for the organisation to gain opportunities and naturalise their treats in their external environment.
The resources can divide into tangible resources, intangible resources and human resources in the organisation. The tangible resources are the physical assets of organisation; human resources which are the employees' capabilities to achieve the organisation goals; and the finance resource like its finance ability, debtors and creditors.The intangible resources are resources in routines and practices that developed over time within the organisation. It includes the intellectual/ technological resource and reputation. Besides, the human resources are very important for organisation because people will help the organisation to achieve its goals and manage the organisation effectively and efficiency.
Organisation's resources can configuration efficiently to gain competencies. Competencies are the attributes that organisation want to compete in its marketplace. Besides, the distinctive capabilities are important to sustain organisation's competitive advantages by evaluating organisation's architecture, innovation and reputation.
The core competencies are a set of attributes that organisation processes to let them achieve competitive advantages. Prahalad and Hamel (1990) provided three tests for core competencies. First, a core competence should provide access to a wide variety of markets; second, a core competence should make a significant contribution to the perceived customer benefits of the end products; and third, a core competence should be difficult for competitors to imitate.
Moreover, organisation can identify its sustainable competitive advantages through its valuable resources, rare resources, resources that hard to imitate, and substitutability.
Finally, after finish evaluate organisation environments and resources, they able to form its SWOT analysis. SWOT analysis helps organisation to understand their strength and weakness which come from the internal environment; and the opportunities and threats which come from its external environment.
SWOT analysis helps organisation to build their strengths and improve weakness. Besides, organisation can avoid and overcome their threats and exploit their new opportunities faster then their competitors. SWOT analysis also helps to synchronise resources and capabilities of organisation with the competitive environment in which the organisation operate by providing information.
Formulation is the second phase of strategic management process; it provide a clear set of recommendations with justifications and strategies for Walmart to revise its mission, objective and strategies to become more successful. There are three strategies may help Walmart to formulate its strategies.
Business Level Strategy
Business level strategy is integrating and coordinates commitments and actions helps organisation gain competitive advantage by exploiting core competencies in specific product markets. Organisation decides how to compete within each strategic business unit (SBU) in this level. Organisation need to determine on their customer select their business level strategy.
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Organisation can compete with rivals within its industry by using Generic Competitive Strategies. Organisation need to choose the generic strategies by concentrate its resource and capabilities. There are three types of generic strategies developed by Porter (1980) (Please refer to appendix 1). First, organisation can apply overall cost leadership strategy. By applying this strategy, organisation has to be the lowest cost producer. It helps organisation achieve cost advantages, gain large profit, and compete within its industry. Second, differentiation strategy can also apply in organisation. Organisation provides the products or services which are different or unique that make customer willing to pay. Organisation core competencies, unique resources or capabilities and superior management of value chain activities may help organisation sustain in its differentiation strategy. Third, focus strategy allows organisation concentrate on target their customer segment(s) or niche within market. Organisation can segment base on a group of customers, geographical markets or specific product lines and organisation can use either low-cost or differentiation strategies to achieve its competitive advantage by focus their segment(s). (Please refer the example to Appendix 2)
In addition, there are two fundamental reasons make organisation's resource and capabilities as foundation for its strategy. First, internal resources and capabilities give a basic direction for organisation's strategy. Second, primary source of profit for organisation are resources and capabilities.
Gant (1991) differentiate between resources and capabilities. Capability of organisation is organisation resources. However, the main sources of organisation's competitive advantages are the capabilities. The profit to organisation's resources and capabilities depend on two factors. First is sustainability of competitive advantage which resource and capabilities confer upon organisation. The sustainability of competitive advantages characteristics are durability, transferability, and replicability. Second, organisation ability to appropriate the profit eared form resources and capabilities.
There is a five stage model will help to guide organisation strategy formulation and focuses on organisation internal capabilities. (Please refer to Appendix 3) Organisation should upgrade its resources and capabilities to sustain competitive advantages base on future competition that they believe.
Corporate Level Strategy
Organisation can achieve its purpose and gain competitive advantages by using corporate level strategy to define the scope of industries and markets the organisation compete. It can set a direction for organisation and concerned how resources allocate across the business units.
The corporate parent determine organisation overall direction and objectives. It exists in multiple business units and refers to all management levels which are not part of customer facing and profit run business units. The role of corporate parenting is to concern how a parent organisation adds value across the business that make up the organisation. It may benefit the corporate parent in add more value by its management and coordination of individual business units.
Organisation may grow by using many different strategies that they prepare to countenance, organisation resources and capabilities, and their management expertise. Ansoff (1965) devised a matrix for organisation to analyse the different direction which they can pursue (Please refer to Appendix 4). First, market penetration can help organisation increase its market share in existing market. Second, product development helps organisation to be innovative in develop new products in rapid changing customer market. Third, market development helps organisation to enter new target markets with existed products. Forth, diversification use when organisation move to new product or market and seek to broaden the activities scope to reduce risk of reliance of any one market or product. (Please refer the example to Appendix 5) Diversification can divide into related diversification (choose an industry which related with organisation resource and capabilities) and unrelated diversification (organisation enter an unrelated industry and also call as conglomerate diversification).
Organisation can carry out its corporate strategy through mergers, acquisitions, internal development, joint ventures, and strategic alliances. Organisation can join its resource and technology gaps, and obtain expertise and market positions more quickly than can be done through internal development. And they are useful when organisation want to enter new industry and markets. (Please example to Appendix 6)
Moreover, portfolio analysis is concern in making decision about the portfolio of strategic business units. It helps Organisation assess competitive position and identify rate of return receive from business units. There are two portfolio matrix models useful in re-evaluate organisation's present portfolio. The models can help organisation to understand and consider changes in its portfolio. Besides, it help organisation allocate resources to its different business element.
First, Boston Consulting Group Matrix locate organisation's business units base on its industry growth rate and relative market share. It helps organisation access its business unit's performance. Besides, there are four strategic categories (stars, question marks, cash cow and dogs) which business units can be fall into. (Please refer to Appendix 7 and 8). Secondly, General Electric-McKinsey Matrix considers two composite variables which can customise by organisation for industry attractiveness and competitive strength. It is more comprehensive measure of strategic success and helps to assess the performance of business units by enlarge the criteria. (Please refer to Appendix 9)
The strategic evaluation helps to assess different strategic options by its suitability, feasibility, and acceptability before they implement. However, in the real world, mostly organisation cannot fulfil all three criteria, so, organisation need to decide which strategy can fit them closely.
International Strategy and Globalisation
Globalisation is the linkages (e.g. economic, financial, social or political) between markets that happen across other country. Levitt (1983) argued technology has strong forces for organisation to be globalisation because customer worldwide wants standardized product. Organisation can success in compete on price, quality, offer same product sold through international markets. For localization, organisation needs to ensure the products are responsive to and meet the local preference needs. Therefore, localization implies that different countries have its own preference needs, and, organisation need to have product differences in offering, distributions, and promotion its products.
Organisation factors and environment factors motivate organisation pursue strategy of international diversification. Organisation factors are the role of the senior management team and firm-specific factors. Environment factors are unsolicited proposals, the 'bandwagon' effect, and attractiveness of the host country.
Furthermore, Ghoshal (1987) argued organisation must achieve efficiency in its current activities, manage the risk inherent in carry out activities, and develop learning capabilities for innovate and adapt to future. Therefore, organisation gain benefit in competitive advantages when going global. Organisation can use Goshal's framework to differentiate between the benefits and alternative costs strategies. Besides, national differences, scale economic, and scope economics are the competitive advantages for organisation. (Please refer to Appendix 10)
There are four types of international strategies for organisation to diversify its activity overseas. (Please refer to Appendix 11 and 12). First, multi-domestic strategy is aim to adapt products in foreign markets and get respond more effectively in the changes for condition of local demand. Second, international strategy helps organisation to exploit its core competencies and capabilities in its markets. (Please refer example to Appendix 13) Third, global strategy help organisation provides standardise products to global markets and produced centralised in few locations. Forth, in transnational strategy, organisation seeks to achieve in its efficiency, responsiveness, leverage innovation, and learning by internationally.
In additional, there are different types of entry mode strategies which are exporting, franchising, joint ventures, strategic alliances, and whole owned subsidiary (Please refer to Appendix 14). They help organisation to enter its international markets. Each mode has its own level of investment and risk and level of organisation should control it. Therefore, organisation evaluates and chooses the entry mode to enter its markets. (Please example to Appendix 15)
Walmart can implements its strategies in management process to achieve goals and compete within its industry. Good implementation is important for Walmart because a poor implementation will lead them fail even have the best formulation strategies. Strategy implementation involves design the effective organisational structure, assign resources properly, develop efficiency decision process, and manage human resource effectively.
Organisational Systems and Strategic Change
When implementing strategies, the systems and strategic change of organisation play an important role to provide competitive advantages for organisation.
The changes of organisational structures will lead other things to be equal in organisation. Chandler (1962) argued 'structure follows strategy' because a new formulation strategy involves four steps of need for a new structure (Please refer to Appendix 1). However, Amburgey and Dacin (1994) found that strategy and structure will influence each others, but strategy can influence structure more. Organisational structure can divide employees into separate tasks and coordinate tasks to achieve goals. To achieve specialisation and coordination, organisations can evaluate different types of organisational structures which are entrepreneurial or simple structure, functional structure (Please refer diagram to Appendix 2), divisional structure (Please refer diagram to Appendix 3), matrix structure (Please refer diagram to Appendix 4), and network structure (Please refer diagram to Appendix 5) to form its own suitable structure.
(Please refer the advantages and disadvantages of organisational structures to Appendix 6 and the example in appendix 7)
Ghoshal and Bartlett (1995) argued organisational process is important than structure. They identify three different types of core process which are entrepreneurial process (organisation recognise individual capabilities and decisions on how to exploit opportunities and allocate resources to perform effectively); competence-building process (exploit employees' knowledge in organisation exist business and discuss how to build and deploy its capabilities); and renewal process (form organisational objective and begin of changes in organisation). Each process needs to perform in a new management
In addition, organisation must have control and reward systems to make sure their employees perform their works to meet organisation's goals. There are three reasons to develop control systems in organisation. First, strategic control system helps to coordinate activities in organisation. Secondly, it helps to motivate managers to achieve organisation's objectives. Thirdly, it helps to remind senior managers to intervene their unit manager decisions. Besides, strategic control systems should adapt by different business conditions. (Please refer diagram to Appendix 8)
Furthermore, strategic changes mean how organisation fits resource and capabilities to interact with external environment. Organisation grows through five phases of development which are creativity, direction, delegation, coordination, and collaboration. Through the five phases, it has revolutionary and evolutionary change in the each phase. The growth helps organisation to understand when the changes of organisational systems, process, and structure should involve in external changes. (Please refer diagram to Appendix 9)
For integrative change, re-engineering in use of new technology able for organisations to has good business performance (Hammer, 1991). Besides, visionary organizations are adept at simultaneously managing continuity and involve change through BHAGs (big hairy audacious goals), strategic intent, the genius of 'AND' rather than the tyranny of 'OR', and the cult-like culture.
Strategic leadership is important to lead organisation has effective strategy implementation. Organisation success through their leaders' ability in leading employees, conducts goals clearly, and sustains competitive advantages.
The role of management and leadership is different in the organisation. Kotter (1990) argued management is dealing with complicacy to create systematic and corresponding result; however, leadership is dealing with organisation change to develop vision and strategies for organisation. (Please refer table to Appendix 10 show the activities occur between management and leadership)
Organisation's speed and learning ability help to sustain competitive advantages. Leadership help to build and carry out learning organisation. Leadership roles can defined as designer which helps to structure core value and objective of organisation; teacher which helps employees to concern on metal models and based assumptions; and steward which able to help leader to seek how to satisfy employees in changing competitive environment works. Leader should create a share vision of organisations' objectives and goals. Leadership roles created leadership skills which are building a shared vision, surfacing and testing mental models, and systems thinking.
The emotional intelligence of leader can create better performance in organisation. Besides, leader able to manage organisation changes effectively. Therefore, self-awareness, self-regulation, motivation, empathy, and social skills are emotional intelligence components which need by a leader.
Moreover, the narcissistic leader also can deal in organisation changes effectively. The narcissistic characteristic found under Freud personality types. Narcissists characteristic are self-reliant, aggressive, innovative, and want people to admire them.
Besides, organisation vision, value and culture need to concern in leaders' role. In multinational organisation, it is important for leader to understand national culture that influence personal behaviour (Please refer example to Appendix 11). There are five dimensions helps to evaluate and measure cultures which are power distance index, individualism versus collectivism, masculinity and femininity, uncertainty avoidance, and long or short-term orientation. Understand of cultures help organisation to implement strategies change and avoid cultural error in miss-allocate resources.
Culture of organisation influence its exhibit or inhibit change. Schneider (2000) stated four reasons that excellence management plans hard to carry out within the organisation. First reason is all organisations are living social organisms. Secondly, culture is more powerful than anything else in the organisation. Thirdly, system-focused interventions work while component focused interventions do not. Forth, interventions are clearly linked to an organisation's business strategy. Besides,
Theory E and Theory O identify why and how changes made in different assumption. Theory E assumes improve shareholder value by restructuring and downsizing the organisation. Theory O is more focus on long-term, which assumes that changes will help to improve organisation capabilities and culture. All organisations can measure the changes by six dimensions of changes which are goals, leadership, focus, process, reward system, and use of consultant. The theory E and O should combine with six dimensions of changes to carry out effective changes successfully for organisation.
In addition, Stacey (1993, 2003) encourages leaders to be innovative and develop new strategic management by suggesting eight steps of chaos theory. This helps organisation to implicate for long-term plans and vision. First, develop new perspectives on meaning of control; second, design the use of power; third, encourage self-organising groups, forth, provoke multiple cultures; fifth, present ambiguous challenges instead of clear long-term objectives or vision; sixth, expose business to challenging situations; seventh, devote explicit attention to improve group learning skills; and eighth, create resource slack.
Cadbury (1992) defined corporate governance is the method of organisations to direct and control. Besides, Demb and Neubauer (1992) also defined that corporate governance is the process that corporations made responsive to rights and wishes of stakeholders.
There are four characteristics which occur in the separate and acceptance modern corporations. The characteristics are limited liability (the corporation, owner and employees must have separation in their assets and liabilities); transferability (the shareholders reduce risk by selling their holding shares); legal personality (even though the partnership dissolves because of partners' death, the corporate still can operates as long as it has capital); and the centralised management (the board of director manage the corporation and achieve the goals).
Stemberg (2000) agued purpose of corporation is to maximise long-term value by selling products or services. Baukol (2002) argued corporations exist will provide economic sustainability. There are many arguments in this ideology. Nevertheless, organisation can evaluate purpose base on shareholders and stakeholders.
Friedman (1970) did not see any social role for organisation. He argued social responsibility able for them to increase profits and therefore able to maximise the shareholders' return. However, the agency problems will happen because separation between ownership of organisation and employees. To overcome it, organisation may provide shares to employees.
The stakeholders include customers, suppliers, employees, government, competitors, local community, and shareholders. They will affect achievement of organisation's objectives. Stakeholders can separate into internal and external stakeholders. In this approach, management role is to balance all needs of each stakeholder.
Moreover, poor performances of corporations lead to be takeovers. The threat comes from adequate to discipline managers. The codes of conduct can implemented for corporation to avoid collapse and effective avoid avarice. (Please refer example to Appendix 12)
There are three different standpoints in corporate governance reform which are first, exist system need to reform but only on edges; second, change system in shareholders' assumptions of primacy needs ; and third, need to questions shareholders assumptions.
In order for Walmart to have its strategies, they need to carry out strategic analysis, strategic formulation and strategic implementation.
In strategic analysis they need to evaluate general, competitive and internal environments. Therefore, they can recognise their strength, weakness, opportunities, and threat to form their strategies. Therefore, they can compete within their industry and avoid unsustainable issues happen.
In second stage, Warmat use business level strategies, corporate level strategies, and international strategy and globalisation to formulate its strategy. Besides, it helps them to sustain competitive advantages and operate successfully.
Finally, Walmart can implement its strategies. A good implementation can lead Walmart to achieve goals successfully and they need to changes in order to perform effectively and efficiently.