Introduction To Us Based Retail Industries Commerce Essay

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Wal-Mart, a US based retail industry, which is known as the giant in the retail industry has survived and is still the huge enterprise in the world which deals with almost all the F&B products, apparels, etc. It is not only the largest company in world but also the largest company in the history of world.

Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy

Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates.

Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions.

Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

Wal-Mart is extraordinary which manages and operates over 4150 retail facilities globally. The key components of Wal-Mart (The Value Chain), which offers cheap prices than its competitors includes firm infrastructure like frugal culture, no regional offices and pleasant environment to work. Managements take lots of visits and it is learnt there are no rehearsals before any meeting which is usually scheduled on every Saturday. In any organization, human resource is the key to development and Wal-Mart efficiently manages its sources. Wal-Mart terms its employees as associates. Manager compensation is linked to the profit of store operated by him, within promotions, compensation offered to associates depending on company's profits and also offered some incentives on their performances. The workforce at Wal-Mart is not unionized as the company takes all the measures of their benefits and provides them training on related issues. Technology plays a vital role in development of the organization and Wal-Mart is well equipped with technological innovations like POS, store performance tracking, real time market research, satellite system and UPC. Wal-Mart procurement measures like hard-nosed negotiations, partnerships with some vendors, centralized buying, planning packets, etc. helps at large the cause of providing the goods and services on cheap prices. The other factors that increase the margin of profit for Wal-Mart are inbound logistics with frequent replenishment, automated DCs cross docking, pick to flight, EDI, hub and spoke system. Wal-Mart strategy of operation is innovative with big stores in small towns with monopoly in the market at low rental costs, local prices, concentric expansion, merchandising in brand name, private labels, little space for inventory, store within store, etc. In relation to marketing and sales, merchandising is tailored from locals, spent less on advertising and the prices are fixed low and it depends on the store manager to fix the latitude of pricing. All the above factors combined together form the key components of Wal-Mart which not only increase the margin of profits through bulk sales but also boost the confidence of the customers with services like point of sale information system and everyday low prices.

Wal-Mart dominates the American retailing industry due to number of factors like its business model which is still a mystery and its effectiveness in not letting the rivals let know about the weaknesses. Wal-Mart made strategic attempts in the its formulation to dominate the retail market where it has its presence, growth by expansion in the US and Internationally, create widespread name recognition and customer satisfaction in relation to brand name Wal-Mart and branching into new sectors of retailing.

It is learnt that Wal-Mart strives on three generic strategies consisting of Focus Strategy, the Differentiation Strategy and overall cost leadership. Managers strive hard to make their organizations unique, distinctive and identify key success factors that will drive the customers to buy their products. Thus, firm specific resources and capabilities are crucial in explaining the firm's performance.

The company's capability can be found through its functionality, reliable performance, like Wal-Mart superior logistics. Wal-Mart has firm infrastructure, well equipped in human resource with management professionals and technologically too.

Any organizations thrive hard to be successful for which it needs to have better resources and superior capabilities. Wal-Mart operates on low price strategy which is operated as every day low prices which builds trust among the customers. The strategy lies in purchasing the goods at lower prices and selling the goods to customer at much lower prices, cutting the price as far as possible and increasing the profit by increasing the number of sales. This ferociously increases the competition in the market and Wal-Mart competes with all its competitors till it is dominant it the market.

Wal-Mart is expanding seriously and rapidly which is also its strategic goal. Wal-Mart employs over 1.3 associates, owns over 4000 stores out of which 3000 are in US and serves around 100 million customers weekly. Wal-Mart has acquired many international stores and merged with some super stores like ASDA in UK. Wal-Mart far flung network of retail outlets has ensured that Wal-Mart interacts with and has impact on virtually every locality within US. (Helfat, 2002) The expanded strategy has led the hunger of Wal-Mart to many European Countries. It is learnt that three countries with no Wal-Mart stores became part of corporation's international presence wherein the domestic retail chains were taken over by Wal-Mart including 122 Woolco stores in Canada, 21 Wertkauf stores in Germany and 229 ASDA units in United Kingdom. The takeover strategy by Wal-Mart keeps the company at forefront when entering into the new market and the number of competitors is also minimized. The strategies have helped the Wal-Mart to rein in number one position in international countries making it the largest retailer in the world.

It is seen that Wal-Mart has significantly the Porters five force model wherein through proper strategic planning and strategic implementation has led to removal of barrier entry, rivalry from competitors and pricing norms. In regard to substitutes, Wal-Mart in order to achieve its aim of customer satisfaction has selling goods under its own legal brand.  Wal-Mart's big box phenomenon has changed the retailing industry in the United States which is often considered as discount stores and makes profit through high volume of purchases and low mark-up on profits. Wal-Mart with its low cost and ever expanding strategy has made a dramatic impact since 1962 when Sam Walton first started his business. With this strategy, Wal-Mart has now over 4000 stores and outlets in US and other countries through acquisition and mergers.

According to Porter, (2002) operational effectiveness and efficiency are the key elements of success in any organization. A company can outperform its rivals or competitors in the market only with superior management and efficient control creating a difference from the others which eventually attracts customers. Porter defines operational effectiveness as performance of similar activities as its rivals but better than them. 

Expectation of the stakeholders and strategic decision

Wal-Mart is expert in manipulating perceptions. It is termed that low price is not the strategy of Wal-Mart but the advertisement manipulates the consumer perceptions by making them think that its prices are lower than its competitors' price using 'price spin'. Wal-Mart makes the consumer addicted coming to its stores by convincing them the prices are lower than in the other stores by selling itself cheaper by advertising that 'we have lower prices than anyone else' and placing a 'opening price point'. The 'opening price point' is the lowest price in the store which is kept at high visibility which makes consumer believes that the products in this store are really cheaper.

The SWOT analysis of Wal-Mart reveals that it is most powerful retail brand, reputation for money, value, commitment, and provides wide range of products. It is growing at a brisk pace with expanding its horizon to other parts of world through acquisition and merger.

Know your stake holders

Know what you are supposed to deliver from the perspective of the stakeholders

Hold your stake holders accountable to the realities of the project

Analyse and evaluate the effects current business plans are having within the organisation

A 2005 Washington Post story reported that "Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least $50 billion per year.

For healthy food products Wal mart took the decision of discounted food product would be available on the outlets

Each week, about 100 million customers, nearly one-third of the U.S. population, visit Wal-Mart's U.S. stores. Walmart customers give low prices as the most important reason for shopping there, reflecting the" Low prices, always" advertising slogan that Wal-Mart used from 1962 until 2006.

Porter states that root of the problem lies in the lack of distinguishing between operation effectiveness and strategy. The expedition for productivity, quality and speed has resulted in management tools and techniques, total quality management benchmarking, time based competition, outsourcing, partnering, reengineering, change management.  In any organization, strategy management is the key to its success.

In 2006, Wal-Mart took steps to expand its US customer base, announcing a modification in its US stores from a "one-size-fits-all" merchandising strategy to one designed to "reflect each of six demographic groups - African-Americans, the affluent, empty-nesters, Hispanics, suburbanites and rural residents." Around six months later, it unveiled a new slogan: "Saving people money so they can live better lives". This reflects the three main groups into which Wal-Mart categorizes its 200 million customers: "brand aspirationals" (people with low incomes who are obsessed with names like KitchenAid), "price-sensitive affluent" (wealthier shoppers who love deals), and "value-price shoppers" (people who like low prices and cannot afford much more).

Wal-Mart's plan to promote healthy foods made food history. The nation faces a crisis with diseases related to unhealthy eating -- most notably obesity and diabetes -- but has not found ways of counteracting the effects of factors that are responsible.

Strategy plan that includes the resources that will be needed to implement the plan

Wal-Mart is having great network with almost over 7800 stores and Sam's Club locations in 16 markets worldwide. It employs more than 2 million associates and serves more than 100 million customers every year. According to Fishman (2006) Americans spend $26 million every hour at Wal-Mart which makes it believable that Wal-Mart is financially very strong and is capable of combating any threat from its rivals in the market. Wal-Mart is ever expanding its boundaries by way of acquisition and mergers.

The public health community, and to a lesser extent the government, have put pressure on the food industry to clean up its act. Most attention has been on food manufacturers, large companies like Nestlé, Unilever, Kraft, Coca-Cola and PepsiCo. But the food sellers are also important.

Enter Wal-Mart, the country's largest food seller. Wal-Mart has been holding discussions with nutrition experts to change for the better, and the rubber has now hit the road. Its actions could ripple through the food supply industry in powerful ways.

If this bold initiative affects only the foods Wal-Mart sells under its store brand, millions of people could benefit, but this new program could have more far-reaching impact.

Wal-Mart reducing the sugar in its soft drinks sends a powerful message to Coca-Cola and PepsiCo: do the same or be seen as obstructing the effort to improve health and lower health care costs. It will become more difficult for companies to pump out highly processed products loaded with sugar, fat, salt and artificial ingredients.

Vision and mission statements

Certainly there is more room to improve, but the Wal-Mart announcement was a major step. I hope they will continue to make progress, and, in so doing, have a positive impact on many sectors of the American food supply. There are many winners in this picture.

Schedule for implementing their strategy plan in the organisation

Sustainability at the top place is the most important job that makes its managers strives hard to frame the policies and strategy to compete with its rivals in the market. Slack, Imitation, Substitution and Hold-up are some of the threats to any organization in retail industry. However, Wal-Mart with its visionary goal of attaining zero waste status and reaching 100% renewable energy has planned to launch number of sustainability initiatives. Imitation increase profits by increasing the supply. But imitation puts reputation, relationship at stake. James Hall reports that Wal-Mart is planning to open convenience stores as Tesco has started and operating in US called Fresh & Easy Neighborhood Markets. Such tactics will create mixed response among the consumers while degrading the reputation of the leader in market. Substitution reduces the demand for what a firm uniquely provides by shifting the demand elsewhere due to changes in technology. The threats of substitution can be subtle and unexpected like minimizing expenses through videoconferencing instead of air flights to long distance meetings with its managers of other stores, etc.

So how do business owners turn plans into working practices? I've found the following five steps greatly improve your chance for success in implementing long-range objectives and changing your business. These five rules are:

* make it a group effort

* use the coaching method

* start with the end in mind

* establish mini-milestones

* follow through.

Group effort. No matter what size your business, involving your employees greatly improves your chances of implementing change.

Develop measures for evaluating their strategy plan.

The implementation of the management measures outlined in Plan A and Plan B will result in water quality improvements while minimizing flooding and promoting groundwater recharge.

Both modelling and monitoring can be conducted to quantify these improvements.

Measures of Change

The important first step for identifying these measures is to create common health disparities definitions and terminology to ensure uniformity at all levels and across all sectors. Once the definitions and terminology have been agreed upon, then a core set of measures can be established. 

The types of measures essential evaluation include predictor, process, outcome, and performance measures. 

Predictor measures: Examples of predictor measures are the social determinants of health, such as education, income, access to transportation and other services, social stressors, and the environment. 

Process measures: The concept of collaboration to increase capacity and leverage resources and relations in order to address the myriad factors that contribute to the health disparities in the United States. 

Outcome measures: The evaluation will examine three types of outcomes: short-term, intermediate, and long-term. Examples of short-term outcome measures are organizational and community capacity, leadership and public will to end health disparities, resources for the elimination of such disparities, and goal attainment. Intermediate outcome measures are the systems and policy changes that support ending health disparities, while long-term outcome measures are the conditions for which disparities exist.

Schedule for implementing their strategy plan in the organisation

Be willing to take risks.

Make the process meaningful to people's work.

Create cross-functional teams.

Use metaphors to help focus the group.

Talk regularly about how people will be involved and where their ideas will be used.

Initiate the brainstorming early in the process.

Provide regular updates.


Therefore, substation is an especially effective way of attacking dominant rivals in the market. Substitution offers mixed responses after identifying and understanding the threats. The organization should fight the threat and merging with them, switching to different options of substitution to be in the market. Hold-up diverts the value to customers, suppliers or complementors who have some bargaining leverage which results in tough negotiations, contractual agreements and vertical integration.




Strategic Planning - Gary May - 2010 - page 55

Making Food History- Kelly D. Brownell- January 25, 2011, 01:24 PM