Strategic Management

Strategic Management

Table of Contents

List of Figures & Tables3Executive Summary4The Purpose4The Objectives41.0 Introduction41.1 Retail Industry51.2 Wal-Mart Retail Corporation5Literature Review82.0 Financial Highlights for the years 2012-201483.0 Analyzing Industry Structure103.1 Competitive Forces: 5 forces model of Michael Porter103.2 Application of Five Forces Model103.2.2 Bargaining Power of Substitutes: Low pressure113.2.3 Buyers Buying Power: Low Pressure113.2.4 Bargaining Power of Suppliers: Low Pressure113.2.5 Rivalry among existing players: Medium pressure124.0 Critical evaluation of application of Five Forces Model125.0 Application of PESTLE Analysis135.1 Political Factors135.2 Analysis of Economic Factors135.3 Analysis of Socio-Cultural factors135.4 Analysis of Technological Factors145.5 Critical Evaluation of Application of PEST Analysis146.0 Application of Generic Strategies of Michael E. Porter146.1 Cost Leadership Strategy: Wal-Mart156.2 Differentiation Strategy: Wal-Mart167.0 Evaluation of the Application of Generic Strategies into Wal-Mart168.0 Application of McKinsey 7-S Model179.0 Recommendations18Emerging Markets: Russia & Australia: Why?18Focusing more on Differentiation Strategy: Why?19Recommendation for application of McKinsey 7S model19Conclusion19Bibliography21

List of Figures & TablesFigure1: Wal-Mart Retail Corporation Logo ...Figure 2: Wal-Mart International Figure 3: Porters Five Forces Framework.Figure 4: Porters Generic strategy..Figure5: Supply Chain Flow of Wal-MartFigure6: McKinsey 7s FrameworkTable 1: Wal-Mart's net sales worldwide from 2006 to 2014 (in billion U.S. dollars)Table 2: Wal-Mart's net sales worldwide from 2008 to 20014 by division (in billion U.S dollars) Table3: The spending of two giants Wal-Mart and Costco Wholesale Table 4: Financial Statement of Wal-Mart of the years 2012-2014 (2015)..

Executive SummaryThe PurposeThis following paper analyses strategy development through critical analyses and how the strategy is applied in the business. Also, the research will critically evaluate the application of environmental analysis models: Five Force Model of Michael Porter, PESTEL in order to identify the current situation and attractiveness of the retail industry and Porters Generic Strategy in order to define the strategies is being undertaken by businesses. Therefore, the paper will analyze how the business performed by retail industry players in last three years of time, 2012-2014, and development of strategies in recent years to survive, to achieve success and making aimed income.The Objectives

To critically examine strategic development of Wal-Mart Retail CorporationTo investigate the environmental influences, in strategy developmentTo examine the strategic tactics of Wal-Mart through applying Porters Generic Strategies To determine how the firm uses McKinsey 7s Model in its strategy development1.0 IntroductionAn industry is a combination of businesses that offer the same product and services to consumer market. (Johnson, 2008)The field that competition takes place is the industry in which an organization and organizations rivals compete for business. Every industry has a distinct structure and strategy which characters the nature of the competitive interaction which make known there. (Porter, 2007)

1.1 Retail Industry This industry is one of the areas of the economy which is involved of individuals and engaged companies in the selling of the finished goods to customers (end users). In the United States, multi-store retail chains are publicly traded on the stock exchange and also privately owned. U.S has the 5 largest retail companies of the world out of ten. Size of the United States Retail Industry:As annual report released in 2013 by the Commerce Department of U.S, total sales of the retail industry has been $4.7 trillion in 2011, that represented an 8 percent growth over one year before and it has been the largest increase since 1999. (Farfan, 2015)

1.2 Wal-Mart Retail Corporation

Figure1: Wal-Mart Retail Corporation Logo (Walmart , 2015) Type of Company : Pubic Industry : Retailing Founded : 1962 Founder : Sam Walton Headquarters : Bentonville, Arkansas, United States Number of Locations : 8,970 (2013) Area Served : Worldwide Employees : Approx. 2.2 million (2013) Subsidiaries : Walmex, Asda, Sams Club, Seiyu Group Key People : Mike Duke (CEO), H. Lee Scott (Chairman), S, Robson Walton (Chairman) (Alemdag, 2013)S. Robson Walton(Oct 28, 1944, age 71)The oldest son of Wal-Mart founder has been Chairman of Wal-Mart since his fathers death in October 1992. Also, he has been listed as 11th worlds richest person. He personally holds about 339 million shares of company. (OpenSectrets, 2013)

Figure 2: Wal-Mart International. (Walmart , 2015)The graph describes that the net sales of the company in the last 6 years has been successfully managed to continue the growth by the company. From the beginning of the given years till the last years net sales has been increased by 164.13 billion U.S dollars. In the last year, Company has operated nearly 11 thousand stores internationally and in U.S alone, has employed about one and the half of million people. Wal-Mart has been criticized for their low wages but the thing is company claim to do a lot of good for lower income families.

Table 1: Wal-Mart's net sales worldwide from 2006 to 2014 (in billion U.S. dollars) (The Statistics Portal, 2015)The figure above clearly shows that one family can be able to manage to save about 1000$ dollars a year with the ability of them to cut prices on some items, like toys, by 30 % in order to stimulate more sales.

Table 2: Wal-Mart's net sales worldwide from 2008 to 20014 by division (in billion U.S dollars) (The Statistics Portal, 2015)

Literature Review2.0 Financial Highlights for the years 2012-2014

Table3: The spending of two giants Wal-Mart and Costco Wholesale (Costco Wholesale, 2013)

Table 4: Financial Statement of Wal-Mart of the years 2012-2014 (2015) (BloombergBusiness, 2015)3.0 Analyzing Industry Structure

3.1 Competitive Forces: 5 forces model of Michael Porter

Five forces framework of Porter helps the companies in order to identify the attractiveness of an industry in terms of 5 competitive forces: the threat of new entrants, the power of buyers, and the power of suppliers and the extent of rivalry between competitors. (Johnson, 2011)

3.2 Application of Five Forces Model

Examining the model example doesnt every time yield a humble or direct evaluation of the attractiveness and profitability of and industry. Forces may be different, for example some forces might be strong, growing competition and reducing revenue potential, while other forces might be weak, decreasing competition and increasing income potential. (Wilkinson, 2013)

Figure 3: Porters Five Forces Framework. (Porter, 2008)

. 3.2.1 Threat of New Competitors: Low pressureIt doesnt mean that competitive threat for the company only is from current players in the market but also from potential new entrants into the market place. When the industry is much profitable, it will more attract the new companies to come in. Why Low threat of EntryWal-Mart has an outstanding distribution channels, locations, brand name, and huge capital to kick off competitors, therefore entry barriers are relatively high. As it is well known that company has an absolute cost advantage over its competitors, it is very hard to say that any company which might be new entrant can have cost advantage over current giant company of retail industry, also one thing should be mentioned, cost to build retail company like Wal-Mart is intimidating. Existing BusinessesIt will not be easy to compete against with the businesses that have been running the business for many years in the industry and have learnt the industry over the years. The thing will not be have with new entrants to compete with existing business is the experience that present companies have which also mentioned above 3.2.2 Bargaining Power of Substitutes: Low pressureWhen it comes to the retail industry, not many substitutes are there that can offer convenience and low price. Also as the retail industry which sells goods of daily common use, it cannot be seen direct substitutes. The products from gray market are the only one which can be threat that can also harm the sales of well branded goods. (Nair, 2013)

3.2.3 Buyers Buying Power: Low PressureBuyers of company have moderate influence over the Wal-Marts decisions. As a result of conveniences and lower costs that are being offered by the company, buyers will not easily move to other retailers. This means pricing techniques which company decides with little input from the final consumer. Buyers might demand certain popular brands or goods which will reduce companys power over those suppliers. (Marcon, 2014)

3.2.4 Bargaining Power of Suppliers: Low PressureBecause of its size, Wal-Mart can represent the moment of truth a little supplier. It is on account of organizations are exceptionally reliant on Wal-Mart purchases thus suppliers have almost no force against it. The firm regularly offers medicines to its suppliers that occasionally are definitely not reasonable in the way that they don't lead suppliers to raise advantages. All things considered, a large portion of the sellers acknowledge those agreements on account of the considerable impact Wal-Mart makes on their turnover. Placed it in an alternate words, an organization that offers 30% of its items to Wal-Mart thinks that it difficult to reject the retail offer regardless of the fact that it is not the most alluring treatment they In this way, it can be said that the bartering force of suppliers is low for the situation of Wal-Mart. (Marcilla, 2014)

3.2.5 Rivalry among existing players: Medium pressureBecause of the extension around the globe, Wal-Mart is additionally confronting a great deal of rivals in diverse nations through altogether different sorts of rivalry. 70% of Wal-Mart deals are from the U.S, so the contenders that most influence its execution are the ones working in this nation. Kroger, Target, Costco, The home terminal, Walgreen and CVS Caremark, are the greatest direct competitors, as they offer fundamentally the same range of products to their customers. Kroger and Target just work in U.S. region while the rest have stores in remote nations. 4.0 Critical evaluation of application of Five Forces ModelAfter analyzing the model into Wal-Mart it seems that company do not need to use model because of results of application the model. There are not any serious forces that Wal-Mart might face with. Only last force, Rivalry among existing player may have impact of company that is resulted as Medium pressure. There is no relevance between strategic development of company and usage of model. Five Forces model have not played any role of developing strategy of Wal-Mart in recent years. But as a being careful about future situation company should not forget about applying the model into organization. 5.0 Application of PESTLE Analysis5.1 Political FactorsThe company is currently operates its operation internationally, in 17 countries. In thus operation it needs to follow certain rules and regulations of the host countries. Last year company generated 279.41 billion $ from international operations. Wal-Mart is still facing big challenge from Chinese government and its forced to work with local firms To expand the organization's foot shaped impression in California in the term of growing open restriction, the dubious methodology has been utilized by Wal-Mart. As per a late report in which, it is specified that Wal-Mart have fundamentally raised their political commitment. Report expresses that Wal-Mart has burned through millions on state and neighborhood ventures and over $17 million in government decisions. More than 69% which represented $11.6 a huge number of Walton family and Wal- Shop's commitment has gone to Republican competitors and councils. An individual from Wal-Mart has reported that Walton's family is the wealthiest family in the world; they are putting millions to their radical philosophy and conservative motivation as opposed to putting their cash to expand compensation for Wal- Store's laborers. (Atif, 2014)5.2 Analysis of Economic FactorsCompanies face greater impact from economic conditions of the host countries. Currently, Wal-Mart is facing high inflation rate and currency devaluations. Especially in United States which is home country of the firm company is facing challenge of high interest rate, higher fuel and energy price, inflation, higher customer debt level, unavailability of customer credit and other economic factors might adversely have impact on consume demand of the goods or services of the company. (Marcilla, 2014)5.3 Analysis of Socio-Cultural factorsInternational operations of the firm should operate according to local culture of countries that Wal-Mart is running business. Population growth, age distribution and emphasis on safety all are included. Wal-Mart products and services are affected by the trend of those countries. Due to the huge differences in culture Wal-Mart has faced big challenge in Japan. Company came to the country without deeply analyzing the Japanese culture and as consequence it has given them challenges. 5.4 Analysis of Technological FactorsWal-Mart launched its first satellite network in 1987 that connects home office to every company store and clubs vie video, data voice communication. Currently Wal-Mart is the one of the innovative and productive company coz of technologies available inside the company and logistics management is much more successful now. It is very well known that Wal-Mart is much ahead in terms of technology from its competitors. (Atif, 2014)5.5 Critical Evaluation of Application of PEST AnalysisAfter analyzing the PEST analysis on Wal-Mart there are some certain understandings taken that Wal-Mart should take some actions according to analysis such as when it came to Political Factors it is facing difficulties in host countries and it should be said that it has main competitors in international market who operates in the same countries with Wal-Mart. Company should focus on strengthening its business in those countries it operates and need to build good relationship with governments and before expanding the business Political conditions need to be deeply analyzed. As long as company is Low Cost Concentrated there might be future challenges and threats from Economic conditions but till today there were not have big issues related to economic factors for the company. It seems for the firm main Macro Environmental factors to analyze are Political and Economic factors because till today company have not had difficulties with other factors but they also still need to keep in mind. 6.0 Application of Generic Strategies of Michael E. PorterCreated by Michael Porter in 1979, Porter's Generic Strategies is a structures used to framework the three strategic key choices open to companies that wish to attain to a advantage of competition. Each of the three alternatives needs to be considered inside the connection of two parts of the focused environment. (Tanwar, 2013)

Figure 4: Porters Generic strategy. (Oxford Leraning Lab, 2012)The Company uses a combination of two strategies: Cost Leadership and Differentiation. Wal-Mart provides range of goods and services with the same or better quality at lower price than its competitors. Company reduces costs by buying in large blocks and using efficient supply chain flow. Company uses Cost Leadership strategy in broad scene and most focus on it. 6.1 Cost Leadership Strategy: Wal-MartCost leadership strategy specially is being used by the company and integrated this strategy with the Five Forces model and likely to say that created price barrier for the potential competitors. Slogan of the firm Always Low Prices, Always came from the strategy of the company and it gives the Wal-Mart unique selling point as customers always are attracted to buy goods from a place that they can buy value for the proposition. (Laura Wei, 2014)How Wal-Mart has become a Cost Leader is its Efficient Supply Chain Management. Company applies the most reliable supply chain management system that is much efficient because of all goods data can be tracked to and from the manufacturer, warehouse and the store shelf. Efficiency in supply chain system saves million dollars of expenses and Wal-Mart is able to sell its goods at lowest prices possible. Figure5: Supply Chain Flow of Wal-Mart

6.2 Differentiation Strategy: Wal-MartWal-Mart is using the Differentiation Strategy in order to achieve its goals by creating a goods and services unique to its consumers. The firm achieved this strategy through offering unique warranties and brand images. Customers of the company believe that they are being provided with unique product which other retailers not offered. Also Wal-Mart has several differentiation value-chain activities. 7.0 Evaluation of the Application of Generic Strategies into Wal-MartThe Wal-Mart Retailer Corporation has had its unique strategy since the time Sam Walton brought up the company into the business world. By examining the company through applying the Porters Generic Strategy its clearly identified that the company has entered the market concentrating mainly on lowering their costs. They have seek to be the cheapest rather than unique and when it comes to the strategic planning even though its said that they use combination of two strategies their main choice would be categorized under generic strategies of Cost Leadership. Even though Wal-Mart is leading the market with its Cost Leadership strategy its facing several issues in some countries due to the lack of Differentiation Strategy. 8.0 Application of McKinsey 7-S Model

Figure6: McKinsey 7s Framework (Peters, 2011)McKinsey 7s Framework is important to review within the firms marketing capabilities from different aspects. Also, model in useful to identify gaps and irregularities in business. Aim of applying the framework into Wal-Mart that to know how it is helping the firm in its operational activities by helping it accomplish organizational objectives. Wal-Mart employed Hard Elements of the model: Strategy, Structure and Systems.Hard Ss: Strategy: as it mentioned earlier, strategy of the firm is to provide lowest price and aim of company to provide a store that under one roof consumer are able to shop everything they needed. Strategies of convenience shopping and low cost have made company to be market leader. System: Company has a system which is the basis of achieving low price strategy every day. Information Technology is the largest and most profitable system that Wal-Mart has. Also company has employed computer, networking to decrease inventories and waste and to speed deliveries. Structure: Company has design an effective and efficient management structure which makes easy to eliminate regional office, plans and operations is from Headquarters (Bentonville). Wal-Mart used to save millions of dollars by using this structure ever year. Continuing to dominate three hard elements of McKinsey 7s model, Wal-Mart will be able to continue dominate the retail market in future also.

9.0 Recommendations

Emerging Markets: Russia & Australia: Why?As company sees that emerging markets as an important source of growth, company can expand into Russia. Russian market will be a perfect target for firm due to the economic progress in recent years in Russia. Because of variety reasons country faced reactions from Westerns, sanctions from US and EU. Despite sanctions Russias economy is still growing says (Adomanis, 2014). In the situation of struggling against sanctions Russia is also very likely to predict that country will welcome the Cost Leader. And another reason of the following recommendation is as it said above countrys economy is still growing and Wal-Mart will be able to make aimed profit. Another perfect market for the Wal-Mart is Australia which has had one of the most outstanding economies of the world. If Wal-Mart comes in to Australia, company will not face big competition because of in the country there is only one big retailer which is Costco Wholesale Corporation that can compete against Wal-Mart. Focusing more on Differentiation Strategy: Why?Low cost strategy of the Wal-Mart are not giving expected result in all the host countries and it is facing challenges in some countries such as China, Mexico and India. Recommendation in this situation is giving much more attention and focusing on more its Differentiation Strategy. Every country Wal-Mart entered it entered its own and due to the lack of differentiation strategy and environmental and societal differences between countries the formula of the firm is not working well in some host countries those mentioned above. Recommendation for application of McKinsey 7S modelWal-Mart rarely uses soft elements of model and much attention on hard elements. In order to increase performance of the company it should implement the soft elements of the model also. By fully applying the model it can bring benefits through performance, managing changes synchronizing departments and its responsibility.

ConclusionConclusions here will be provided in terms of research objectives:1. In conclusion, Wal-Mart is the largest retailer in the U.S and the biggest employer in the world. Wal-Mart is at the top of the Fortune 500 listing and every single year it moving in new country and now they are in 27. 2. During analyzing the Wal-Mart externally it found that its 5 forces has very big positive effect on the firm. The Wal-Mart has very high barriers of entry, it moderate threat of rivalry with Target and has unbelievable influence over suppliers reason why? It purchases range of goods and suppliers have little bargaining power and at last company technically has a great power over consumer because of firms product diversity and low price. 3. Cost Leadership has been the best competitive advantage and the best strategy of the firm during more than half of the century. With the strategy Cost Leadership Wal-Mart has the greatest potential to grow local and international and also, experience and technology. 4. Company using McKinsey 7s Framework as an additional source that help to sustain their and makes stronger their strategy development. Hard elements of model have been very beneficial for the company in their strategy development and its profitability by saving millions of dollars. Sam Walton was an extraordinary entrepreneur and the business he created has already proven their strength and efficiency in years of operations. Thus, management should regularly and conscientiously stick through his guiding principles in strategy execution.

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