Essay on Wal-Mart

The Wal-Mart case, as well as the business itself does not leave you indifferent – you either love it or hate it and hardly anyone will blame you for such expressing feelings.

The Wal-Mart’s story reminds of the Cinderella’s fairy tale, only now the she has gained extra weight and does not know how to manage the castle anymore. Still, the she is a Queen now and nobody dares to question that.

The internal conditions of the America’s largest retailer’s performance are based on the initial approach of low-cost selling. The company’s motto “Always low prices” is what attracts millions of customers to the Wal-Mart superstores every day. Let us now take a closer look at the strengths and weaknesses the company has to face in its internal environment. The major strengths are the pricing, convenience (availability) of the stores, the scale of business, and the capital accumulated, the ability to influence the suppliers and correspond with the customer preferences.

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Wal-Mart’s major weaknesses might include the problems of attracting and holding the labor force, lack of flexibility in following the popular trends, the limitation of the supply to the low-cost products, not the customer’s demand, inefficient store management and insufficiently considered growth plan.

If we analyze the Wal-Mart’s internal activities in terms of the primary and the support components, one would find that the Research and Development (R&D), Production (manufacturing), Marketing and Sales, Customer Service are rather a weakness that a strength. No, I do not claim they are a complete failure; they only do not really help the company compete with the rivals successfully and seeks improvement.

If we consider the Support activities (Company Infrastructure, Human Resources, and Materials Management), the situation is better, but still there are numerous problems on every level of performance. The employees are suffering from the Wal-Mart’s cost-cutting principles most. With the company’s domination on the market numerous smaller businesses have failed to compete. This lead to higher unemployment levels in the region. The number and the quality of jobs Wal-Mart provides do not really compensate the losses. The wages are also not impressive. With this practice in force and the continuing growth (of 6000 superstores in a couple of years), Wal-Mart is facing a serious threat of underemployment or a risk of the need to increase the compensation levels.

In fact, Wal-Mart is currently facing loads of lawsuits concerning various employment issues: from overworking and underpayment to sexual harassment and discrimination charges.

Wal-Mart is still successful, but it has begun to lose the market share because low-pricing is no longer enough. The customer that is able to pay more will look for more sophisticated, unique products, for better services and for more comfort along the shopping-time. Smaller retail businesses differentiate in a corresponding matter. And, what is more threatening, they begin to manage to reduce the prices for Wal-Mart’s strategy to look less impressive than years ago. The local communities also pose a threat to the success of Wal-Mart’s growth and development strategy. They often oppose the construction of the new superstores, creating legal barriers and public opinion mobs in the area and bringing additional expenses to the overall procedure. Moreover, they contribute to the overall negative public relations the company must have been already accustomed to in the course of decades.

The suppliers are also not very happy with Wal-Mart’s cost-cutting strategy: the company controls the supply chain and presses for the low prices, which almost automatically imply lower quality. Some manufacturers care for their name and image so much, they have to refuse to cooperate with the U.S. largest retailer in order to preserve the initial quality of the product. The suppliers are also not very happy with the Wal-Mart’s recent Asia-oriented supply chain – Chinese manufacturers are able to keep the costs impressively low and even the import burdens do not impede the joy of the deal. The antitrust committee watches closely any top-management activities of the enormous retail business leader. If an acquisition of any type takes place in the U.S., the company will face huge problems.

All the cases mentioned above add up to the complication of the company’s structure through the need to hire more lawyers, PR specialists and crisis managers, whose services are quite costly and threat the Wal-Mart’s cost-cutting strategy. The political environment also poses a threat to the success of the Wal-Mart businesses. Due to the political course of the U.S., the prices for fuel have rocketed. And that means Wal-Mart will have to deal with the increased costs for electricity of the superstores as well as the fuel for the company’s transportation and logistics system. And that automatically means the inability to keep the prices down (while the competitors somehow continue to manage and press for Wal-Mart’s existing level of prices). The competition itself is not too threatening to the Wal-Mart business, as long as it concentrates on the customers needs and continues to manage the best price offer and a worthy level of services.

The problem is nowadays some Wal-Mart stores compete with each other and there are neglected stores that lose the competition to their newer and better-managed chain twins.

Still, despite all the troubles and threats the company faces, it has certain impressive opportunities, including the amount to capital and facilities, with a proper approach to the management of these possessions, Wal-Mart could significantly improve the business models and the level of performance of these units. Concentration of the existing businesses, their improvement, is probably the greatest business opportunity for Wal-Mart nowadays.

Another step to improve performance is the well-thought product policy in terms of the customer’s demand, not solely basing on the low-price offer. Wal-Mart should certainly pay more attention to the stock line to avoid the unpopular offers like skinny-leg jeans or absence of products, or unsold consignments.

Another truly suggestive opportunity for Wal-Mart is going abroad, or rather going truly global. Certainly, such opportunity has certain threats, like the Wal-Mart case in Germany. Still, the success in Canada, Mexico and Britain shows there are significant business opportunities outside the U.S., and they will provide the continuing growth rate the stockholders are so striving for. Conquering foreign markets, especially Asian-Pacific ones will need careful consideration of the strategies and approaches, but the initiative would most probably be extremely rewarding.

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