1

Sustainable Solutions Paper

[Student Name]

DBA Strategy

[Instructor Name]

[Date]

2

Introduction

The purpose of this sustainable solutions paper (SSP) is to analyze Wal-Mart Corporation

and propose appropriate strategies and sustainable solutions for enhancing the success of the

organization. The SSP commences with an executive summary and then splits the content into

two parts. Part one encompasses various sections including stakeholder identification, general

force analysis, Porter’s five forces analysis, detailed value chain analysis, detailed SWOT

analysis. Part two comprises of an analysis of the company strategy type, an analysis of the

company strategy moves, alignment and goals analysis, action plan analysis, fitness landscape

analysis, Boid analysis, industrial evolution modeling, life cycle assessment, compliance to

innovation analysis and the sustainable value framework. The paper concludes by summarizing

key arguments and presenting conclusive ideas.

Executive Summary

The SSP offers an analysis of Wal-Mart Corporation and recommendation of appropriate

strategies and sustainable solutions for the organization. Wal-Mart is an American retailer that

operates a chain of over 11,000 stores around the globe. It is the biggest private firm on the globe

in terms of revenue and the largest private employers. This paper begins the analysis by

examining Wal-Mart’s stakeholders. In this section, the paper discusses Wal-Mart enterprise

level strategies, culture type, integrated concepts from reading, and evidence and implications.

The second section presents an analysis of general environmental forces that impact Wal-

Mart’s operations. This section focuses on four main environmental factor namely political,

social-cultural, economic, technological, and the physical environment. The section also

discusses the implications of these factors on Wal-Mart by identifying the threats and

3

opportunities that they present. Results of the analysis reveal that Wal-Mart top threats include

the aging of the country’s citizenry and the rise of ecommerce technologies. Top opportunities

include economic growth and political stability. The third section presents an analysis of Wal-

Mart industry environment using the Porter Five Forces Model. The analysis reveals that the top

threats include low product differentiation and low customer switching costs. The third section

offers an examination of Wal-Mart internal environment using the value chain analysis model.

The analysis identified several strengths including technology development and strong

partnership with suppliers. Weakness includes the present of poor customer service and poor

human resource practices. The part concludes by presenting a detailed SWOT analysis.

The second part commences by examining Wal-Mart’s strategy types. According to the

analysis, Wal-Mart utilizes a cost leadership strategy that entails competing on price. The second

recommends a shift from this strategy to a hybrid strategy that incorporates elements of cost

leadership and differentiation. The second part also offers an analysis strategy moves and

identifies the capturing contested market space as the most ideal strategy move for Wal-Mart.

The third section of part two presents an analysis of whether Wal-Mart’s strategy is congruent

with its people, incentives, systems and other aspects of the organization. The analysis show that

the strategies are not in line with the people and incentives of the firm. The remainder of part two

presents the fitness landscape analysis, Boid analysis, industry evolution modeling, life cycle

assessment, and the sustainable value framework analysis.

4

Stakeholder Identification and Value Analysis

Firms need to identify and assess stakeholders because they affect or affected by the

strategy of the firm. This section analyzes the Wal-Mart’s stakeholders. Specifically, the section

offers a discussion of the Wal-Mart’s enterprise level strategy, culture type, integrated concepts

from the readings, and evidence and implications.

Enterprise Level Strategy

Enterprise level strategy is the pattern of decision that reveals and determines the

corporate objectives of a given firm and produces policies and plans for achieving these

objectives (Sekulic, 2009). This strategy is concerned with aiding the company to select

businesses in which the company should compete (Casadesus-Masanell & Ricart, 2009). It seeks

to assist the organization to develop an optimal portfolio of businesses and promote synergy

among two or more business units so as to generate greater value. Enterprise level strategy is

concerned with the selection of businesses in which the organization should compete. Wal-

Mart’s uses the concentric diversification strategy in determining the business in which it should

compete. Concentric diversification strategy entails developing or acquiring products that are

closely related to the firm’s core business or technology so as to enter one or more markets (Ojo,

2009). Wal-Mart has several products/ business subsidiaries including Wal-Mart stores U.S.,

Sam’s Club, Wal-Mart International, Wal-Mart Global E-Commerce, Private Label Brands, and

Vudu (Wal-Mart, 2014). All these businesses apart from Vudu are directly related to retailing,

which is Wal-Mart’s core business. Companies use concentric diversification for three reasons;

to provide options for consumers, to capture maximum share of the market, and to pile pressure

on competitors (Khan, 2012). Wal-Mart businesses support the company’s mission by assisting

5

the organization to create economies of scale. Vudu, an entertainment business, also contributes

to Wal-Mart’s corporate competitiveness by supporting the firm’s promotional campaigns.

Recently, Wal-Mart launched the Wal-Mart Money Center, a subsidiary that provide financial

services such as credit cards, check printing, money transfer, check cashing, and insurance. This

business subsidiary also supports Wal-Mart retailing business as finances and shopping go hand-

in-hand. Providing these services within Wal-Mart’s stores increases shoppers’ convenience.

Concentric diversification also enables a given firm to make optimal use of company’s its

resources, core competencies, and know-how (Ojo, 2009). All of Wal-Mart’s businesses enable

Wal-Mart to exploit its competencies in operational and technological areas to reach a wider

market and increase profits. The Wal-Mart Money Center exploits Wal-Mart technological and

physical infrastructure. Wal-Mart has thousands of stores located in diverse regions of the globe,

which facilitate the transfer of money to and from different regions.

Strategy begins at the top. In many instances, it begins with the stakeholders. The word

stakeholder refers to groups or individuals that must be taken into thought by leaders of the firm

(Bryson, 2004). Wal-Mart stakeholders can be classified into two; internal and external

stakeholders. Internal stakeholders are entities that work directly within the organizations. These

entities include employees, owners, and managers. Each of these stakeholders has a genuine

interest in the organization. Owners are interested in optimizing profits and add value to the

organization by bearing the risks of the organizations. Owners want to be compensated by

bearing the risks through high returns. Workers add value to the organization by providing skills,

knowledge and expertise. They contributed towards the productivity of the organization.

Workers are interested in higher wages and job security. Managers are liable for supervising and

6

coordinating all the activities of the organizations. They act as agents to the owners and other

stakeholders. Managers are interested in the growth of the firm. External stakeholders are entities

who do not work directly in the organization, but are impacted by the decisions of the company.

Wal-Mart’s external stakeholders include customers, trade unions, communities, creditors,

suppliers, and the government. These stakeholders also have different interests. The government

wants taxes, increase in the employment opportunities and fair trade practices. The government

adds value to the company by providing security, order, critical infrastructure, and essential

amenities. Customers add value to the organization by purchasing the company’s products.

Customers want quality products at lower prices. Suppliers add value to Wal-Mart’s operations

by providing inputs. Suppliers want high prices for inputs and timely payment. Local

communities provide a setting for the firm to establish the business. They also bear the brand of

the effect of activities of the firm such as pollution, congestion and others. Therefore, local

communities expect to be compensated through investment in social infrastructure. Wal-Mart

mission is better the lives of people by assisting them to save money (Wal-Mart, 2014). This

mission is driven by a number of values including respect for suppliers, customers, employees

and other members of the community. Other corporate values of Wal-Mart include surpassing

the expectations of consumers and striving for excellence. Wal-Mart mission, vision and values

are aligned with the interest of its key stakeholders.

Culture Type

Culture within an organization’s setting refers to an assortment of shared values, beliefs

and norms that influence how members of the organization act, feel or think (Lunenburg, 2011).

Organizational culture has a momentous effect on the strategy of the firm. Organizational culture

7

can be deciphered through the examination of artifacts. While it is not practical to see the values

and beliefs of an organization, the firm’s culture can be deduced from various artifacts. These

artifacts include organizational stories and legends, ceremonies and rituals, organizational

language, and symbols and physical structures. Wal-Mart’s organizational culture can be

described as aggressive. The aggressive culture can be traced back to the founder of the

organization, Sam Walton. Sam Walton had an aggressive personality. He started the business

and established an aggressive growth strategy that saw the company revenues rise to $250,000,

which is equivalent to $2.48 million in 2014, by the fifth year of operations (Wal-Mart, 2014).

The aggressive culture is still visible in the modern day Wal-Mart. The firm has engaged in

massive expansion plans that entail taking over existing business and establishing new stores in

different areas. Wal-Mart culture is also result oriented. This culture is depicted in Wal-Mart’s

reward systems and organizational messages. Wal-Mart has a performance-based reward system

that is characterized by profit sharing programs. The company’s message to employees is that if

they work hard they become rich. Customer focus is also a significant cultural value in Wal-

Mart. This cultural value is exhibited in various artifacts such as company language and physical

structure. Wal-Mart mission is to make customers life better by helping them to save money.

Wal-Mart also has a policy that requires employees to great any customer that comes within ten

feet. The firm’s slogan is “exceeding customer expectation” (Kotter, 2010). These messages

demonstrate that customer focus is central cultural value in Wal-Mart. The U.S. retail industry

also has an aggressive culture because it is highly saturated by competitive brands (Harrison,

2014). Players within the industry have to adopt aggressive strategies in order to survive

competition. Wal-Mart’s organizational cultural is consistent with the interests of customers and

8

owners. Customers want to get high-quality products at affordable prices. Wal-Mart’s value of

customer focus supports the realization of this interest. Wal-Mart’s culture of aggressiveness also

supports owners’ interest of maximizing wealth. The aggressive expansion plans facilitate the

growth of shareholders’ value.

Integrated Concepts from Readings

There is a close link between culture and enterprise level strategy. Culture has a

significant influence on the implementation of strategies. Organizational culture affects the

implementation of the enterprise-level strategy by impacting employee-related variables such as

learning, systems thinking, flexibility, cohesion, commitment and performance (Ahmadi,

Salamzadeh, Daraei & Akbari, 2012). Some cultures will aid the implementation of the strategy

while others will act as an impediment. For instance, a culture of systems thinking facilitates the

execution of corporate strategy by encouraging cohesiveness, cooperation and teamwork.

Enterprise-level strategy applies to all business units and all departments of the organization.

Therefore, all business units and departments must work cooperatively so as to guarantee

successful implementation of the enterprise level strategy. Systems-thinking encourages

employees to assume a holistic view of the organization rather than focus on individual tasks and

business units (Kunsch, theys & Brans, 2007). It motivates employees to look at the relationships

between different tasks and business units, and the impact on the entire organization. A culture

of systems thinking also facilitates learning within the organization (Caldwell, 2011). Learning

also enables employees to questions existing ways of doing things. Morgan explained that an

organization must possess both single-loop and double-loop learning capabilities in order to

implement strategies successful. Single-loop learning enables firms to rectify variations from

9

desired results based on existing organizational norms (Torlak, 2005). Double-loop learning

enables an organization to questions and challenge existing norms. Both single and double-loop

learning facilitate the implementation of strategies by enabling creating a positive attitude

towards change. Enterprise-level strategy creates change within organizations. Sometimes the

change being created challenges existing habits, beliefs and values. Organizations that can learn

tend to embrace change; hence, does to experience resistance during the execution of strategies.

A flexible and adaptive culture facilitates change by encouraging employees to challenge

fundamental beliefs and values. Conversely, organizations with rigid cultures face strong

resistance to the execution of strategies as such culture always attempt to protect the status quo.

Evidence and Implications

Wal-Mart culture, mission, vision, and enterprise level strategy are aligned. Wal-Mart’s

cultural of aggressiveness and cultural value of customer focus is a significant driver of the firm

concentric diversification strategy. This strategy is designed to enable Wal-Mart to provide

customers with options, to increase economies of scale, and enhance the cost efficiency of the

firm’s operations. Realizations of these objectives lead to lower prices for consumers, which is in

line with the firm’s mission of bettering customers life by helping them to save money. For

example, Wal-Mart aggressive expansion strategy has enabled the firm to establish a large scale

of operation that enables it to increase economies of scale (Brea-Solis, Masanell & Tatje, 2012).

Consequently, the savings that are made through economies of scale are transferred to consumers

through reduce prices leading to the realization of the organization’s mission. Elements of

systems thinking are also exhibited in Wal-Mart’s culture. Wal-Mart creates a cost advantage by

enhancing efficiency and saving cost in each process and at each level of the organization. Wal-

10

Mart has established cost saving measures at levels of the value chain including inbound

logistics, operations, procurement, outbound logistics and customer service. For instance, at

inbound and outbound logistics level, the company has adopted a cross-docking strategy of

shipping supplies in order to minimize transportation and holding costs (Greenwald & Kahn,

2005). At the procurement level, Wal-Mart has developed information systems that transfer the

task of managing inventory from the company to vendors. This information system not only

reduce administration costs but also reduce holding cost as each vendor will deliver the right

amount of commodities when needed. Similarly, the firm has invested in supplier development

programs that seek to assist suppliers to enhance the efficiency of their product processes. This

strategy is founded on the reasoning that inefficiency among suppliers will also affect the cost

advantage of Wal-Mart. At the service level, Wal-Mart collects data about consumers’ habit and

use this data to adjust its systems and operations (Brea-Solis, Masanell, & Tatje, 2012). This

strategy is enabled by the organization’s capability to learn and convert knowledge into a

competitive advantage. However, not all elements in Wal-Mart culture are consistent with the

concepts of systems thinking and learning. The concept of learning organizations proposes that

for the organization to learn it must motivate employees and create energy and commitment

among its people. These traits are not evident in Wal-Mart. Wal-Mart has always embraced an

exploitative approach in the management of its human resource. The company’s stores are

understaffed, existing employees overworked, and underpaid. While these human resource

practices help the organization to save costs, they have a negative impact on the experiences of

customers. Sometimes customers experience difficulties in finding products on the shelf as the

11

overstretched workforce is not able to replace out of stock products and arrange them appropriate

(Dudley, 2013).

General Force Analysis: External – Remote Environment

The external environment of firms is classified into the remote and industry environment.

This section focuses on Wal-Mart’s remote environment. The remote environment refers to

aspects that affect all business that operates in a given market.

General Force Matrix Analysis

There are five categories of forces in the external environment: political, economic,

social-cultural, technology and the physical environment (Pearce & Robinson, 2003). Political

forces refer to all factors that are brought by the political regime that exist in a given country.

These factors may include taxation policies, labor policies, balance-of-trade policies and others.

Economic forces refer to factors that are brought about the economic performance of a given

market. These forces include economic growth, inflation, the employment rate, and interest rate.

Social-cultural forces refer to factors that are brought about by changes in the social and cultural

dimensions of the market. Social-cultural forces may include changes in household income,

changes in taste preferences, and changes in the population structure. Technological forces refer

to factors that result from development in the technological field. The PEST model examines the

remote business environment by assessing how these four factors are likely to affect

organizations that function in a given market. These factors have the potency of affecting the

profitability of corporations either negatively or positively.

12

Economics. The economic environment influences the profitability of corporations by

influencing consumers’ purchasing power, availability of capital and other business aspects. The

economic environment influences factors such as economic growth, interest rates, the

employment rate, and inflation rates. These factors have a momentous effect on consumers’

purchasing power. The U.S economic environment has shown some positive trends in the past

few months. In quarter three of 2014, the economy grew by 3%; the unemployment rate declined

to 5.9%, and the rate if inflation remained constant at 1.6% (Davidson, 2014). These trends had a

significant effect on consumers’ purchasing power as spending increased by 2.5%. Economists

anticipate that these trends will persist, in the immediate future. Therefore, the economic

environment presents an opportunity for the industry to increase its profitability.

Technology. The technological environment can affect profitability of firms within our

industry either positively or negatively. Advancement in technology can create efficient ways of

operating thereby increasing the profits of organizations. Technological advancements can also

result in the formation of new industries that become threats to existing organization

(Koumparoulis, 2013). Technological developments such as the radio frequency identification

have helped firms to enhance the efficiency of its operations; hence, they present an opportunity

to the organization. Conversely, the expansion of the internet and computing technology has

given rise to e-retailers such as Amazon. This technological development threatens the

profitability of the industry.

Demographics / social / culture. The social-cultural/ demographics environment affects

profitability of firms by influencing tastes and demand. A significant demographic element that

is likely to affect the operations of the retail industry is income. The income of citizens is likely

13

to increase due to improvement in the economic landscape. An increase in income will increase

consumption; hence, it offers an opportunity for the retail industry to increase profits. Another

demographic factor that will affect Wal-Mart’s operation is the aging of the United States’

human population. The aging of the general population will have an adverse effect on the labor

market. It is project that the growth in the U.S. labor force will decline to 0.7% for the 2010-

2020 decade. This trend is likely to increase the cost of labor; hence, it presents a threat to the

industry’s profitability (Toossi, 2012).

Government / legal / military. This environment affects the profitability of firms by

influencing policies such as taxes, labor laws, competition laws, and many others. The political

environment is the United States is relatively stable. There are no signs of noteworthy changes in

taxation, labor, competition or other policies, in the foreseeable future. Similarly, there are no

indications of there being a military operation that will have a significant effect on the country.

Stability in the political environment minimizes uncertainty, thereby, encouraging businesses and

the economy to grow. Growth in the economy, in turns, affects the purchasing power of

consumers in a positive fashion. Therefore, the political environment does not present an

opportunity for the retail industry to increase its profitability.

Physical environment. Several elements of the physical environment affect the

operation of retailers. Climate change is one of the elements that are bound to have a noteworthy

effect on the operations of retailers. People anticipate that climate change will have an

unpleasant effect on production especially in areas such as agriculture. This element will threaten

the profitability of the retail industry since food is one of the central products that retailers offer.

The climate change phenomenon is also likely to exert pressure on manufacturers to adopt

14

conservation measures. This pressure is likely to affect manufacturing costs thereby affecting the

cost of acquiring inputs among retailers.

Implications of General Forces

Threats. Threats to the profitability of the retail industry include; technological

advancement, climate change, and the aging of the country’s citizenry. Technological

advancement will lead to the development of online retail platforms that will compete against

brick and motor retailers such as Wal-Mart. Technological advancement will also enable

producers to develop platforms that enable them to sell their products directly to consumers. This

threat comes from the technological component of GFA. Retail organization need to respond to

this threat by building customer loyalty so as to avoid switching of consumers to these online

platforms. Retailers can also create their own online platform so as to tap into the market that is

interested in online transactions. Climate change is another significant threat to the retail

industry. Climate change threatens profitability of the industry by hampering production and

increasing the cost of production. The aging of the nation’s citizenry is also a threat because this

trend has a momentous effect on the country’s labor force. Aging of the populace will result in

the shortage of workers thereby increase the cost of labor.

Opportunities. Opportunities in the retail industry include economic growth, decline in

the unemployment rate, low inflation rates, technological advancement, stability in government

policies, and increase in household income. Economic growth is an opportunity to the industry is

it will increase demand for the retailers’ products translated to increased sales volume. Decline in

the unemployment rate will increase the purchasing power of the market; hence, it will also

increase consumption. Similarly, a drop in the inflation rate will increase the real income of

15

individuals and household; hence, increasing consumption. Economic growth, decline in the

unemployment rate, and the reduction in the inflation rate comes from the economic component

of the GFA. Stability in government policies minimizes uncertainty; hence, will promote the

growth of the economy and business. Technological advancement provides retailers the

opportunity to boost their profitability by making their operations more efficient. The top two

opportunities are economic growth and stability in government policies.

Porter’s Five Forces Industry Analysis: External – Industry Environment

The industry environment comprises of factors that affect businesses that function in a

specific industry. Porter’s Five Forces is an established model that is used to analyze the industry

environment. This section offers an analysis of the industry environment of Wal-Mart.

Specifically, the section presents a discussion of five forces matrix and implications of the five

forces.

Five Forces Matrix Analysis

The Five Forces Matrix examines the industry environment by examining five forces;

rivalry, threats of new entrants; threat of substitutes; buyer power and supplier power. Rivalry

refers to the intensity of competition among existing players. Rivalry is high in industries that

have numerous players that have similar market strength (Porter, 2008). Threat of new entrant

refers to the danger posed to the industry by the possibility of new companies joining the

industry. New entrant increases the level of competition in the retail industry; hence, affect the

profitability of the industry negatively. Substitutes are products that are used as alternatives to

products offered by a given industry. The threat of substitute is high in Industries whose product

have many substitutes and are least differentiated. Buyer power refers to the bargaining power of

16

buyers. Very powerful buyers are a threat to industry profitability because their power enables

them to negotiate prices of final commodities downwards. The power of buyers is determined by

the level of organization, size, and the availability of options. Supplier power refers to the

bargaining power of suppliers. Powerful suppliers are a threat to the industry as their power

enables them to charge high prices for inputs. The power of suppliers is determined by their size,

level of organization, and availability of options. The Five Forces model analyzes an industry’s

underlying structure by examining five forces: buyer power, supplier power, new entrants,

substitutes, and rivalry (Porter, 2008). These forces affect the profitability of firms that function

with a given industry either positively or negatively.

Barriers to entry. Barriers to entry have a significant effect on the threat of new

entrants. The U.S. retail industry is typified by few regulations and compliance issues and a low

capital requirement (Grant Thornton, 2008). The presence of few regulations and compliance

issues make it easy for new firms to enter the industry; hence, is a threat to the profitability of the

industry (Pearce & Robinson, 2003). Similarly, low capital requirement make it easy for new

entities to establish operations in the industry; hence, it constitute a threat to the profitability of

the industry. There is also low-level of product differentiation in the retail industry. In addition,

consumers in the retail industry have low switching cost and low-levels of brand loyalty. These

factors make it easy for new firms to establish operations in the industry. Therefore, the factors

present a threat to the profitability of the industry. The U.S. retail industry is typified by high

levels of economies of scale. Economies of scale make it hard for new entities to set up

operations; hence, it is an opportunity for the industry to increase profitability.

17

Substitutes. Substitutes are products that can be used as alternatives to the products

being provided by a given industry. Retailers offer a product that is service in nature (Grant

Thornton, 2008). They act as intermediaries for producers and consumers. They make the

shopping process more convenient by obtaining products from different producers and making

them available to customers under one roof. The most noteworthy substitutes for the services

offered by the retail industry are the direct distribution channels offered by producers. The threat

of these substitutes is likely to become stronger as technology in the areas of internet and

computing continue to advance. Technological advancements will make it possible for large

producers to reach and sell their products directly to consumers; hence, eliminating the need for

retailers. Therefore, this force presents a threat to the profitability of the retail industry. The low

switching cost among retail consumers and low product differentiation in the retail industry also

increase the threat of substitutes.

Bargaining power of suppliers. Supplier power is determined by various factors include

the number of suppliers, the uniqueness of suppliers’ products or services, the threat of forward

integration, the suppliers strength over the firm and firm’s cost of switching to other suppliers.

There are many suppliers in the retail industry. This feature presents an opportunity for firms to

increase profits by taking advantage of the competition among suppliers. Some suppliers are

huge manufacturing companies while the majority of suppliers are small producers such as

farmers (Grant Thornton, 2008). Since the majority of suppliers to the retail industry are small

and fragmented, their bargaining power is low. This characteristic is also an opportunity for

retailers to increase profits. A few suppliers are large; hence, they have the capacity to integrate

forward by establishing their own outlets. However, many of suppliers to the retail industry are

18

small; hence, they do not have the capacity to integrate forward. This feature is an opportunity

for the industry to increase its profits. The cost of switching suppliers is also low; hence, retailers

have an opportunity of increasing profits by switching to suppliers with the lowest prices.

Therefore, this force is an opportunity to the retail industry.

Bargaining power of buyers. Buyer power is influenced by the number of buyers, the

importance of an individual buyer, their cost of switching to other companies, availability of

options, and product differentiation. Buyers in the retail industry are small and unorganized;

hence, retailers can exploit them and increase profits. However, the present of many retailers

within the industry gives these consumers a significant bargaining power over the retailers. Many

retailers give buyers many options when it comes to shopping. Consequently, buyers have gained

the power to influence prices. Similarly, the products offered by retailers are standard and

undifferentiated making it easy for consumers to switch between players. Therefore, buyer power

is a threat to the profitability of the industry.

Competitive rivalry. The level of rivalry in a given industry is influenced by the

number of players within the industry and the capabilities of these players. The degree of rivalry

in the U.S. retail industry is extremely high. The industry is typified by numerous competitors.

The industry comprises of large retailers such as Wal-Mart, Target and Costco, who have

capabilities such as cost efficiency and service excellence (Wal-Mart, 2014). Presence of several

large retailers presents a threat to the profitability of the industry. The industry also consists of

small independent stores that have advantages such as high level of flexibility and personal

relationship with consumers. Presence of these small and independent retailers also threatens the

profitability of the industry. Therefore, this force is a threat to the profitability of the industry.

19

Implications of Five Forces

The retail industry is characterized by numerous players who possess unique capabilities.

This characteristic is a threat to industry profitability as a high degree of rivalry drives down

prices. Rivalry also gives customers a large bargaining power, which has an impact on the

profitability of the firm. The retail industry is also characterized by low switching costs, few

regulatory requirements, and low product differentiation. These characteristics are also threats to

the industry as they encourage the entry of new players. Low product differentiation and low

switching costs increase the threat of substitutes. Technological development will enable

producers to develop online distribution channels thereby reaching consumers directly and

eliminating the retailers. This trend is also a threat to profitability of the industry. Economies of

scale and the limited access to distribution channels discourage new entrants from joining the

industry. These trends offers an opportunity to the industry. Similarly, the small size of suppliers

and their disorganizations give retailers the power to control prices. This trend also offers an

opportunity for retailers to increase profits.

Threats. The threat to the retail industry includes low product differentiation, low

capital requirement, few restrictive policies, and low switching costs. These threats came from

the low entry barrier component of the FFA. Technological advancement is another threat that

comes from the substitute-component of the FFA. Technological advancement has aided

producers to develop online distribution channels that threaten to eliminate middlemen such as

Wal-Mart. Low product differentiation, low switching cost, and availability of substitutes gives

consumer a greater bargaining power. Presence of several large players and numerous small

retailers in the industry has increased rivalry in the industry; hence, threatens the profitability of

20

the industry. High level of rivalry erodes the profitability of the retail industry as existing players

engage in price wars that drive down prices of commodity (Porter, 2008). Low product

differentiation and low switching cost are the top two threats to the profitability of the retail

industry. This is because low product differentiation and low switching costs are the root cause

of most of the other threats facing industry including high rivalry, significant threat of substitute

and new entrants, and high bargaining power for buyers. Players within the retail industry can

address most of these threats by differentiating their products and increasing the switching cost

for consumers. For instance, industry players can overcome the threats of new entrants and

rivalry by differentiating their products so as to avoid price wars. They can also focus on creating

customer loyalty so as to increase switching cost of customers

Opportunities. The opportunities in the retail industry include economies of scale,

control over distribution channels, small size of suppliers and disorganization among suppliers.

Economies of scale and control over distribution channels come from the barriers to entry

components of FFA. These factors make the industry least attractive to new businesses; hence,

are opportunities for industry players to increase profitability. Small size of suppliers and

disorganizations among suppliers come from the supplier power component of the FFA. These

factors give retailers the power to control the prices of inputs; hence, they are opportunities for

industry players to increase profits.

Detailed Value Chain Analysis: Internal Environment

The firm’s internal environment has a significant effect on the competitiveness of the

firm. Therefore, it is essential for managers to analyze the internal environment of the firm. This

21

section offers an analysis of Wal-Mart’s internal business environment using the value chain

model.

Customized Value Chain of Activities in Table Form

The Porter’s Value Chain model is an approach of developing competitive advantage and

creating value. This approach creates a competitive advantage by separating the business system

into a chain of value-generating activities (Ankli, 1999). In the initial model, Porter established a

sequence of primary and supporting activities that are common in the majority of firms. The

supporting activities included; inbound logistics, operations, outbound logistics, sales and

marketing, and service. Supporting activities included firm infrastructure, HR management,

technology development, and procurement. The aim of the value chain is to provide consumers

with value that surpasses the cost of undertaking the activities, thereby resulting in a profit

margin. A competitive advantage is realized when the value chain is reconfigured to provide

better differentiation or lower cost. Firms create a cost advantage by either reconfiguring the

value chain or by decreasing the cost of individual activities in the value chain. Differentiation

advantage is realized by changing individual value chain activities so as to increase the

uniqueness of the final product.

Value Chain Analysis

Business Process Wal-Mart Target Costco

Infrastructure Wal-Mart has an elaborate stores

infrastructure that enables it to take

products closer to consumers.

Strength Strength

Technological

development

Wal-Mart has uses its technology

skills to create efficient supply

system.

Strength Strength

22

HR Uses traditional approach to HR

management where workers are

viewed as resources to be exploited.

Weakness Weakness

Procurement Has an elaborate procurement strategy

that entails forming partnership with

suppliers and developing the capacity

of suppliers.

Strength Strength

Inbound logistics Has an elaborate inbound logistics

system that minimizes holding and

transportation costs.

Strength Strength

Operations The firm boosts the effectiveness of

its operations by establishing strategic

locations for its distribution centers.

Strength Strength

Outbound logistics Has an elaborate outbound logistics

system that minimizes holding and

transportation costs.

Strength Strength

Marketing and Sales Has a strong brand and elaborate

promotional strategy.

Strength Strength

Service Long queues and poorly arranged

shelves

Weakness Weakness

According to Value Chain model, an organization can establish a cost advantage by

reconfiguring the value chain. A typical organization has the following activities in its value

chain; inbound logistics, operations, outbound logistics, sales and marketing, and service (Porter,

2004). The situation is not different in Wal-Mart. In Wal-Mart’s value chain, inputs are

delivered directly to Wal-Mart distribution centers that the firm has strategically located near

suppliers and stores (Brea-Solis, Masanell & Tatje, 2012). The strategic location of Wal-Mart

distribution centers enables the firm to reduce the cost of transporting and holding inputs; hence,

23

is a point of strength. At the inbound logistic stage, Wal-Mart purchases goods in bulk so as to

capitalize on economies of scale (Baroto, Abdullah & Wan, 2012). This trait is another point of

strength as purchasing in bulk gives Wal-Mart greater bargaining power; hence, enables it to

purchase inputs at lower costs. Wal-Mart also reduces inbound logistics costs by picking the

products from suppliers and transporting them using company tracks. This practice is another

point of strength as the corporation enhances its transportation efficiency by transporting large

amounts of goods.

At the operations stage, Wal-Mart ensures that goods are delivered to stores within 48

hours. A short operating cycle minimizes holding costs such as storage costs, security and

spoilage; hence, is also a point of strength for the organization. At the outbound logistic level,

Wal-Mart ensures that goods are delivered to stores with tracks with backhaul (Brea-Solis,

Masanell & Tatje, 2012). The backhaul strategy is transportation model where no track comes

back to the distribution center empty. The backhaul transportation strategy minimizes costs;

hence, is an area of strength for Wal-Mart. Wal-Mart also creates a cost advantage through its

supporting activities. Technology development is among the supportive activities that Wal-Mart

leveraged in creating it cost advantage. Wal-Mart utilized its technological skills to create an

efficient supply chain and an elaborate business intelligence system. The firm supply chain

system enables vendors to manage their inventory; hence, reducing Wal-Mart’s administration

costs, as well as, holding costs (Brea-Solis, Masanell & Tatje, 2012). The business intelligence

system enables Wal-Mart to analyze customer habits and adjust its operations to fit these habits.

These are also areas of strengths to the organization. In procurement, Wal-Mart has established

strong partnerships with suppliers, which have enabled Wal-Mart to enhance operational

24

efficiency of suppliers (Greenwald & Kahn, 2005). For instance, Wal-Mart shares sales data with

major suppliers such as Proctor and Gamble so as to enable these suppliers to improve their

processes. These partnerships have enhanced suppliers cost efficiency leading to the transfer of

cost benefits to consumers. This partnership is also a significant strength for Wal-Mart. The

company vast store infrastructure ensures that customers do not have to travel lengthy distances

in order to access. This minimizes transport cost for shoppers, which is another point of strength

for Wal-Mart.

Wal-Mart also creates a cost advantage at the service stage by recruiting fewer customer

service employees. While hiring few employees helps Wal-Mart to save cost, this is a weakness

as it jeopardizes the quality of services given to consumers. A thinly spread workforce has

consequences including poorly organized stores and long queues at the tills, which has an

adverse effect on customers’ satisfaction (Dudley, 2013). Another area of weakness is the firm’s

human resource management practices. Wal-Mart has always employed the tradition approach of

managing human resource where the management views employees as a liability that needs to be

managed. Consequently, Wal-Mart hires few employees leading to massive understaffing in its

stores. The lower-level employees also work for long hours and receive little pay. (Saporito,

2013). This working conditions lead to high employee turnover resulting in higher recruitment

and training costs. Poor human resources practices also increase the risk of litigation and other

forms of industrial actions such as strikes. These actions can have an adverse impact on the

profitability of the firm; hence, they are points of weakness for the organization.

25

Company Skills / Capabilities

Company skills refer to the know-how that the organization has acquired and perfected.

Wal-Mart has developed know-how in various areas include operations, procurement and

logistics, supplier management, business analytics, and technology development. Capabilities are

cluster of skills, technical and managerial systems that enable firms to deal with organizational

problems in a firm-specific way (Leonard-Barton, 1992). The fact that the capabilities are firm-

specific makes them valuable. Wal-Mart’s capabilities include cost efficiency and operational

excellence. These capability and skills are enabled by various strengths include economies of

scale, vast physical infrastructure, technology, and an elaborate supply system. Process

excellence is also enabled by Wal-Mart technological and operational skills. Wal-Mart’s

business analytic and knowledge management capabilities enable the firm to collect and analyze

vast quantities of data regarding consumers’ shopping habits. This analysis is used to predict and

optimize the operations of the firm by enabling it to learn, adapt and evolve its process in line

with the habits of consumers (Malhotra, 2005). These capabilities are created by Wal-Mart

strengths in technological, analytical, and managerial areas.

Implications of Competitive Analysis

An analysis of the company’s internal environment using the value chain model enables

managers to identify the firm strengths, weaknesses, skills, and capabilities. This section presents

a summary of Wal-Mart’s strengths, weaknesses, skills, and capabilities.

Strengths. Wal-Mart strengths include the strategic location of distribution centers, bulk

purchasing, and bulk transportation. These strengths come from the inbound logistics component

of the VCA. A short operating cycle is another area of strength that Wal-Mart exhibits in the

26

operations component of the VCA. Other areas of strength include backhaul transportation

strategy, technology development, strong partnerships with suppliers, and a vast store

infrastructure. These strategies come from the outbound logistics, technology, procurement and

infrastructure components of the VCA respectively. Technology development and strong

partnership with suppliers are top two areas of strength for Wal-Mart. Technology development

is a significant strength for Wal-Mart because it facilitates the realization of most of the other

advantages that Wal-Mart enjoys. Bulk purchasing, bulk transportation, short operating cycle,

and the backhaul transportation strategy are all enabled by Wal-Mart’s strength in technology

development (Brea-Solis, Masanell & Tatje, 2012). Technology enables the organization to

coordinate outbound and inbound transportation activities so as to optimize transport resources.

It also facilitates inventory management activities thereby shortening the operating cycle. Strong

partnership with its suppliers is also a significant strength to Wal-Mart because this strength is

difficult to imitate. Strengths lead to a competitive advantage when competitors are not able to

replicate them (Leornard-Barton, 1992). It is easier for competitors to replicate technical aspects

of a given organization than to replicate cultural and human aspects. The relationship between

Wal-Mart and suppliers is created through complex interaction of multiple cultural and human

factors making it difficult for other firms to replicate.

Weaknesses. Wal-Mart’s weaknesses include poor customer service and poor human

resource practices. Thinly spread workforce has affected the quality of service at Wal-Mart.

Customers find long queues and poorly arranged shelves when they shop at Wal-Mart (Dudley,

2013). This weakness comes from the service component of the VCA. Poor human resource

practices come from the human resource component of the VCA. These two factors are the most

27

significant areas of weakness in Wal-Mart. A thinly spread workforce has affected the quality

services rendered to customers. Often, customers fail to find products on the shelf because

existing workers cannot manage to restock the shelf in time. Similarly, customers are treated to

long queues when they shop at Wal-Mart because the firm has few service employees. These

shortcomings drive customer away; hence, they have a momentous effect on the profitability of

the firm. Similarly, Wal-Mart poor human resource practice affect profits in an adverse fashion.

Poor practices such as overworking and underpaying employees tend to affect the level of

employee commitment leading to high employee turnover (Dudley, 2013). High turnover of

employees increases the cost of recruiting, selecting and training; hence, it has a negative effect

on profits. These practices also create a negative image of the organization that tends to drive

customers away. Similarly, these practices expose the firm to risks such as litigation and

industrial strikes, which will impact the profitability of the firm adversely.

Skills. Wal-Mart top two skills include procurement and logistics management and

business analytics. Wal-Mart leads other players within the retail industry when it comes to skills

in procurement and logistics and business analytics. Wal-Mart has an elaborate and highly

structured procurement and logistic systems that incorporate technology, distribution centers and

a vast network of suppliers (Greenwald & Kahn, 2005). Other retailers have tried to replicate

Wal-Mart strategies in procurement and logistics management with little success. Wal-Mart also

utilizes big data to study consumer habits and uses the knowledge it acquires to modify its

processes and products. Wal-Mart derives these skills from its organizational strengths. For

instance, Wal-Mart skills in operations, procurement and logistics management are exhibited in

28

strengths such as ability to buy and transport goods in bulk, short operating cycle, and backhaul

transportation.

Capabilities. Wal-Mart’s top two capabilities include cost efficiency and operational

excellence. Wal-Mart is an industry leader when it comes to cost efficiency. Wal-Mart has

managed to use its cost efficiency capability to outcompete other retailers by lowering prices.

The firm gets this capability from its strengths such as ability to buy and transport goods in bulk,

backhaul transportation; technology development, and vast store infrastructure. Wal-Mart is also

an industry leader when it comes to operational excellence. Operational excellence is an

approach of conducting business that seek to continuously reduce costs, improve the quality of

products, increase speed and enhance flexibility so as to achieve a superior competitive position

(Adkins, 2007). It is an incremental approach for improving processes and systems. Wal-Mart

operation excellence comes from various strengths and skills including technology development,

business analytics, and strong partnership with suppliers.

Detailed SWOT Analysis

The SWOT model enables managers to integrate elements of internal and external

business environment so as to determine the best strategy for the organization. This section

presents a SWOT analysis of Wal-Mart. Specifically, the paper offer a discussion of SWOT

Factor matrix, SCOT factor matrix, key success factor analysis, and the implication of the

analysis.

SWOT Factor Matrix

SO strategies. The SO strategies seek to utilize the organization’s strengths in exploiting

opportunities. Technology development and strong partnership with suppliers are top two areas

29

of strength for Wal-Mart while economies of scale and economic growth among the key

opportunities that the environment has presented to the firm. Wal-Mart can use its strength in

technology development to exploit the opportunities presented by economies of scale within the

industry. Economy of scale makes it difficult for new players to join the industry as new entrants.

Wal-Mart can develop technologies that enable the firm to increase its scale of operation. For

instance, Wal-Mart can strengthen its online retail platforms so as to increase the number of

consumers and, consequently, expand the scale of operation. Wal-Mart can also use its

relationship with suppliers to increase economies of scale. Wal-Mart can also use its

technological capabilities and its relationship with suppliers to exploit the opportunities

presented by the growth of the economy. The growth of the economy is bound to increase

consumption and demand for commodities within the U.S. market. Wal-Mart can use

technological platform to tap this demand and translate it into sales for the organization.

Similarly, Wal-Mart can use its relationship with suppliers to increase its capacity to meet the

increased demand.

ST strategies. ST strategies seek to utilize the firm strength to avoid or mitigate threats.

The FFA and GFA identified low product differentiation, low switching cost, and the aging of

the country’s populace as the most significant threats to the profitability of Wal-Mart. Wal-Mart

can use its strong relationship with suppliers to facilitate branding of products sold in Wal-Mart’s

stores. Wal-Mart can enter into contracts with its suppliers that will see these suppliers produce

brands that are exclusive to Wal-Mart. Wal-Mart can also use its strength in technology

development to increase the switching cost for consumers. For instance, Wal-Mart can use its

prowess in technology to design customer relation management systems and reward programs

30

that build loyalty among consumers thereby increase the cost of switching. Technological

capabilities can also assist Wal-Mart to overcome the effect of the aging of the population. Wal-

Mart can use its technological expertise to develop systems and process that make optimal

utilization of the firm’s workforce. For instance, enhance the Wal-Mart online retailing platform

can eliminate the need for cashiers and attendants.

WO strategies. WO strategies focus on mitigating organizational weakness using

identified opportunities. A thinly spread workforce and poor human resource practices are the

most significant weaknesses in Wal-Mart. The firm can use the opportunities presented by the

growth of the economy to mitigate the effects of a thinly spread workforce. These effects include

long queues, and poorly arranged shelves that lead to low customer satisfaction. Wal-Mart

should tap the benefits presented by economy growth, and translate them into additional revenue

and profits. The firm should then use the additional revenue to recruit additional staff. Wal-Mart

can also utilize the opportunities presented by the growth of the economy to mitigate the risks

associated with poor human resource practices. These practices include making employees work

for long hours, giving employees heavy workload and paying low wages. Wal-Mart can leverage

on the growth of the economy to raise additional revenues that can be used to hire more staff,

increase employees’ pay, and reduce employees’ workload.

WT strategies. WT strategies emphasize on managing the firm’s weakness so as to

minimize identified threats. A thinly spread workforce and poor human resource practices are

Wal-Mart’s most significant weaknesses while low product differentiation, low switching cost,

and the aging of the nation’s citizenry are the most substantial threats. Increasing the staffing

level of the organization can assist Wal-Mart to increase the switching cost for consumer and

31

differentiate its product offers. Increasing the staffing level will minimize queues and enhance

the arrangement of shelves making it easy for customers to locate commodities. This strategy

will increase the level of customer satisfaction resulting in higher switching costs. Increasing the

level of staffing can also help Wal-Mart to differentiate its product by excellent services. Wal-

Mart is a retail organization and, therefore, it product is service in nature. Increasing staffing

level will reduce the workload; hence, increase employees’ motivation and satisfaction. This

move will lead to significant improvement in Wal-Mart’s services and, consequently,

differentiate the firm from its competitors. Wal-Mart can minimize the threat posed by the aging

of the population by addressing its poor human resource practices. Wal-Mart should focus on

reducing working hours for its employees, hire more workers so as to reduce workload, and

increase wages for low-level workers. These initiatives will increase Wal-Mart capability to

attract new and talented employees, in the future; hence, will minimize the effect of the aging of

the population on its workforce.

SCOT Factor Matrix

SO strategies. SO strategy focuses on utilizing the firm’s skills to exploit identified

opportunities. Wal-Mart key skills include procurement and logistics management and business

analytics skills while key opportunities include economic growth and economies of scale. Wal-

Mart can use its skills in procurement and logistics management to exploit the opportunities

presented by economies of scale. Wal-Mart can use these skills to develop elaborate and efficient

procurement and logistics systems that enable the firm to purchase goods in bulk. Wal-Mart can

also utilize its skills in procurement and logistics management to exploit the opportunities

present by the growth of the economy. For instance, Wal-Mart can use these skills to boost that

32

firm capacity to meet additional demand that the growth in the economy will create. Wal-Mart

skills in business analytics can also be instrumental in helping the firm to exploit economies of

scale. Wal-Mart can use these skills to develop systems and platforms that enable the firm to

source, purchase and transport goods in bulk. Wal-Mart can also its business analytics skills

analyze the characteristics of the new market that will be created by the economic growth and

design products that will appeal to this market.

ST strategies. ST strategies seek to utilize the skills of the organization to avoid

identified threats. Wal-Mart’s threats include low product differentiation, low switching costs,

and the gaining of the population. Wal-Mart can use its skills in procurement and logistics

management to increase product differentiation and the switching cost of customers. The firm

can use it procurement and logistics management skills to establish strategies that will enable

Wal-Mart to procure branded products from suppliers. The company strong relationship with

suppliers will aid Wal-Mart to secure contract that will see suppliers produce branded products.

This strategy will help to differentiate Wal-Mart’s products from those of consumers. Similarly,

Wal-Mart can use its prowess in procurement and logistics management to ensure that customers

receive high-quality goods at cheaper prices. The firm can establish management practices that

reduce holding and transportation time and enhance the safety of good during transportation

thereby guarantee the delivery of high-quality good. This strategy will increase customers

switching costs. Wal-Mart can use its skills in business analytics to study trends and habits in the

labor market and use this knowledge to craft human resources strategies that will enable the firm

to attract and retain workers. These strategies will assist Wal-Mart to avoid the threats presented

by the gaining of the country’s human population.

33

CO strategies. CO strategies emphasize on using the firm’s capabilities to exploit the

identified opportunities. Wal-Mart key capabilities include cost efficiency and operational

excellence. Wal-Mart can use it cost efficiency capability to exploit the opportunity presented by

the growth of the economy. The growth of the economy is bound to increase consumption

creating a new bunch of consumers. The firm can use its cost efficiency capability to lower

prices so as to attract these new customers. Wal-Mart can also use its operational excellence

capability to adapt it process and systems in a way that make them more appealing to the new

customers. The operational excellence capability can also assist Wal-Mart to exploit economies

of scale. The firm can use this capabilities to develop systems and process that enable the firm to

expand its scale of operation and make optimal use of existing resources.

CT strategies. CT strategies focus on utilizing the firm’s capability to avoid or mitigate

the identified threats. Wal-Mart’s threats include low product differentiation, low switching cost

among customers, and the aging of the population. Wal-Mart can use its operational excellence

capability to differentiate its products. Wal-Mart’s products are service in nature. There are many

ways in which firms can differentiate services. Enhancing the way the firm serves its customers

is one of the approaches that can be used to differentiate services. Wal-Mart can use its

operational excellence to reduce the time that customers wait on queues. It can also use its

operational excellence to create new and innovative ways of serving consumers. These strategies

will not only differentiate Wal-Mart’s services but will also create customer loyalty; hence,

increase the switching cost. The cost efficiency strategy can also help Wal-Mart to differentiate

its product from consumers. Wal-Mart can also utilize its operational excellence capability to

create human resources processes and systems that enable it to attract and hang on to employees.

34

These processes and systems will help the organization to avoid the threat present by the aging of

the country’s citizens.

Key Success Factor Matrix Analysis

Key success factors pricing, location, hours of operations, commodity diversity, quality

of commodities, and customer service. Pricing is one of the critical success factors in the retail

industry. With the spike in the cost of living with the country, shoppers are interested in saving

money when they shop (Saroja, 2012). Therefore, retailers have to device pricing strategies that

enable shoppers to save money in order to excel. Wal-Mart has performed exceptionally well

when it comes to the pricing factors. Wal-Mart has managed to offer commodity prices that are

lower than those of competitors. This ability has enabled the firm to attract a noteworthy section

of the U.S. and the global retail industry and propelled the firm to the top of the retail industry, in

terms of profitability and revenues.

Location is also a vital success factor in the retail industry. Shoppers want locations that

make shopping cheaper, safer, and convenient (Saroja, 2012). Lowering commodity prices will

not be of much help to a retailer when customers have to travel lengthy distances in order to

access its outlets. Wal-Mart has also excelled in terms of providing appropriate locations to its

customers. Wal-Mart has the largest number of retail outlets totaling. The firm had over 11,088

locations around the world, in 2014 (Wal-Mart, 2014). Wal-Mart vast store infrastructure makes

shopping cheaper, safer and more convenient to customers; hence, it gives the firm a competitive

edge.

Hours of operation also matter in the retail business. Consumers in the retail industry

have become value-conscious (Azad, Zarifi & Hazouri, 2013). Shoppers want to get

35

commodities at the appropriate location and at the time they want. Consequently, retailers have

to ensure that they remain open around the clock so as to attract customers. Wal-Mart has also

excelled in this area. Wal-Mart has more 24-hours stores in the country than any other retail

chain. These 24-hours stores enable the firm to provide convenient shopping hours to customers;

hence, it is a source of competitive advantage for Wal-Mart.

The ability to provide customers with variety and options is also a critical success factor

in the retail industry. Retail consumers want convenience and value (Saroja, 2012). They want to

find all commodities under one roof. Wal-Mart also outperforms other retailers when it comes to

the provision of options and variety. Wal-Mart provides a broad assortment of commodities

ranging from grocery items, clothes and other wares to electronics and furniture. The company

also offers different brands of these commodities in order to give consumers the freedom to

choose. Wal-Mart also offers additional services such as credit and debit card services, medical

clinics, and medical and general insurance. The ability to provide variety and options give Wal-

Mart a competitive edge.

The quality of commodities that retailers offer is also a critical success factor in the retail

industry. Shoppers tend to avoid retailers that offer defective and low-quality goods (Azad, Zarifi

& Hazouri, 2013). Wal-Mart has excelled in terms of ensuring that customers get high-quality

products. The company has established an efficient way of operating that ensures that good reach

customers within 48; hence, avoiding spoilage. Wal-Mart also has a structured system for

assessing the quality of suppliers’ production process and for assisting suppliers to enhance the

quality of their produce. Wal-Mart works closely with suppliers such as farmers in boosting the

quality of produce.

36

The final key success factor in the retail industry is customer service. Shoppers want to

get fulfilling experiences when they shop (Saroja, 2012). Wal-Mart lags behind other large

retailers such as target and Costco and many small retailers when it comes to providing fulfilling

experiences to customers. Customers often find disorganized shelves and long queues when they

go to Wal-Mart (Dudley, 2013). The level of customer service is also affected by low level of

employee motivation and satisfaction at Wal-Mart stores. The poor quality of customer service at

Wal-Mart is bound to affect the firm competitiveness, in the future.

Implications of Analysis

The SWOT and SCOT analysis has led to the identification of various strategies

including strengthening online operations, liaising with suppliers to produce branded products,

increasing staffing levels, increasing wages and providing flexible work hours. The analysis also

identified critical success factors such pricing, location, diversity of commodity, and customer

service. Most of these strategies are congruent. For instance, increasing staffing levels and wages

and providing flexible work hours will increase employee motivation. Increase motivation will,

in turn, enhance customer service and increasing switching costs. Strengthening Wal-Mart’s

online operations will also help the firm to provide better location, increase the quality customer

service, and reduce prices. However, a few strategies are not congruent. For instance, the

strategy that proposes the branding of commodities offered at Wal-Mart conflicts with the key

success factor of providing diversity of commodity. Branding commodity will mean that Wal-

Mart will have to sell its own brand rather than provide consumers with a variety of brands from

which to choose. In this case, Wal-Mart will have to balance between the need to differentiate its

product and the need to provide diversity and options. Wal-Mart may have to offer the Wal-Mart

37

branded commodities along with other brands for customers to choose. It may also opt to use

other avenues of differentiating itself such as providing unique customer experiences.

Analyzing the Company Strategy Type -Part II

The process of organizational analysis should not be an end in itself but should assist the

firm to select the best strategy. This section analyzes existing strategies with the intent of

creating and implementing the best strategy for Wal-Mart. Specifically, the paper offers a

discussion of the strategy type and supporting argument.

Strategy Type

There are three general strategies for making a company attractive within its industry;

cost leadership, differentiation, and focus. Wal-Mart is likely pursuing the cost leadership

strategy. This strategy entails minimizing the costs of doing business so as to deliver the lowest

prices to consumers. Wal-Mart implements this strategy by creating a large scale of operation so

as to benefit from economies of scale and to enhance the efficiency of its operations. Over the

past years, Wal-Mart has employed aggressive growth and internationalization strategies. The

firm has increased the numbers of stores, products, and geographical regions in which it

operates. These growth and internationalization strategies have helped the firm to enhance its

scope of operations hence profit from economies of scale. The firm has also invested in

initiatives such as development information systems and supplier development so as to enhance

the efficient of its operations. The cost saving made through economy of scale and operational

efficient are transferred to consumers in the form of low prices. This strategy is consistent with

the values and interest of most stakeholders. The strategy has led to increased returns for

investors, generated more taxes for the government and created numerous employment

38

opportunities, provided markets for suppliers and low prices to consumers. The only stakeholder

that does not benefit from this strategy is the employee. Wal-Mart employees are subjected to

deplorable working conditions in the name of saving money. The strategy is also not consistent

with some of the SWOT and SCOT strategies such as branding, hiring more workers and

increasing wages.

Supporting Argument

Wal-Mart should not place a lot of emphasis on cost leadership as this strategy does not

give the firm a sustainable source of competitive advantage. An advantage that is based on

pricing alone cannot sustain the firm’s competitiveness as this advantage can be easily eroded

when competitors find other ways of lowering prices (Ning, 2012). The strategy also exposes

Wal-Mart to prices wars that are likely to affect the firm’s profitability. Wal-Mart should

integrate the cost leadership strategy with some element of differentiation. Specifically, Wal-

Mart needs to change its approach of managing its human resource. The firm can develop a

competitive edge by developing human resources practices that are favorable to employees.

These practices will lead to high employee satisfaction, low employee turnover, high

performance, enhanced company image, superior customer service and enhanced customer

satisfaction. This strategy move is in line with interests of all stakeholders. It is also consistent

with outcomes of the SWOT analysis.

Analyzing the Company Strategy Moves

This section presents a discussion of the best strategic move for Wal-Mart. Specifically,

the section discusses the relevant strategy moves for Wal-Mart and offers supporting arguments.

39

Relevant Strategy Moves

In addition to identifying generic strategy, a firm needs additional methods in order to

enhance competitiveness. These methods include capturing contested space through joint

ventures, acquisition, and mergers; using innovation to overcome barriers to entry; utilizing the

judo principles and creating additional markets. The best strategy for Wal-Mart is to capture

contested market space through acquisition and beachhead.

Supporting Argument

The acquisition strategy entail taking over the operations of competitors while beachhead

strategy entails invading the territory of competitors. Wal-Mart should acquire small retailers and

initiate strategies for invading the territory of other large retailers such as Costco. A significant

strategy would entail improving customer service so as to be at par with these large competitors.

Capturing contested market space is the most appropriate strategy for Wal-Mart because the

retail market has a high concentration of players. The only way to grow the business is by taking

over competitors and invading their space. This strategy is in line with finding of the SWOT

analysis as capturing additional market space will enable the firm to increase economy of scale,

manage competition and tap into the opportunities. This strategy will also enable Wal-Mart to

fulfill the interest of all stakeholders.

Alignment and Goals Analysis (Due in Week 4)

This section analyzes the alignment between Wal-Mart’s strategy move and the goals of

the firm. Specifically, the section offers an alignment checklist and unit goals, as well as, the

supporting argument.

40

Alignment Checklist and Unit Goals

Yes No

People Wal-Mart have the necessary skills to make the strategy

work

They support the strategy

Their attitudes are aligned with the strategy

They have the resources needed to be successful

√

Incentives Our reward systems are aligned with the strategy

Everyone has performance goals aligned with the strategy

√

Structure Units are optimally organized to support strategy √

Supportive

activities

The firms operations, technology, infrastructure and other

activities support the strategy

√

Culture Wal-Mart culture matches the strategy √

Wal-Mart’s structure, supportive activities, and culture are aligned with the proposed

strategy. However, the firm’s people and incentives are not aligned with strategy. Wal-Mart’s

has a thinly spread workforce that is has a low level of motivation. The firm needs to increase

employees’ motivation by hiring adequate employees and providing fair and reasonable reward

programs.

Supporting Argument

Wal-Mart needs a highly motivated workforce in order to implement the hybrid strategy

successfully. The level of employee motivation will determine the quality of service that the firm

will deliver to customers. Consequently, the quality of service will impact Wal-Mart capacity to

invade and capture competitors’ market share. This conclusion is congruent with the SWOT,

Stakeholder, and KSF analysis.

41

Action Plan Analysis (Due in Week 4)

This section presents an analysis of the actions that Wal-Mart needs to execute in order to

realize the proposed strategy. Specifically, the section offers a discussion of relevant actions and

the supporting argument.

Relevant Action Plan

Actions plans seek to actualize the organization strategies by converting the broad

strategies into implementable actions. Wal-Mart first action plans entail increasing the staffing

level, giving long-term contracts to employees, and revising the company’s compensation

structure. The analysis identified customer service and poor human resource practices as the

most striking weaknesses in Wal-Mart. These action plans are designed to address this weakness.

The firm should also increase marketing activities such as the level of advertisement and

publicity.

Supporting Argument

Implementing the human resource actions plan will enable Wal-Mart to improve on the

quality of its services; hence, compete effectively with other retailers such as Costco. The

strategy will also help Wal-Mart to enhance cost efficiency by reducing costs linked to high

employee attrition rate. Increasing marketing activities will help Wal-Mart to capture

competitors’ market share and attract new markets that will be created by the growth of the

economy.

Fitness Landscape Analysis

Firms need to conduct a fitness landscape analysis in order to determine how the firm is

faring against competitors. This section presents the fitness landscape analysis of Wal-Mart. The

42

paper offers a description of fitness landscape and analysis, as well as, a discussion of the

implications of the analysis.

Description of Fitness Landscape and Analysis

The fitness landscape is a heuristic model that gauges the ability of the firm to adapt and

fit its environment (Foster, 2010). It is a metaphor for describing the long-term survival

environment for organizations. According to the theory, only the fittest, diverse and adaptable

firms can survive their business environment in the long run. The goal of organizations is often

to move across the landscape gradually and efficiency until it reaches the highest peak. Wal-Mart

is the largest retailer in the world and in the U.S. The company has locations in all states and

most major cities within the country. The firm recorded revenues amounting to $ $476.294

billion, in 29014, making it the largest private firm on the globe in terms of revenues. Wal-Mart

also earned 16.02 billion in net profits during the same period. Wal-Mart had a market

capitalization of $ 4.02 trillion, which is 75% of the total capitalization of the retail industry

(Yahoo.com, 2012). The industry landscape is characterized by high uncertainty due to

demographic shifts, technological development, and increased rivalry within the industry.

Customer’s trends are also changing with more customers demanding customized products and

personal relationships with organizations. Proliferation of smartphones and other computing

technologies has led to the emergence of the online distribution channel that threatens to

eliminate retailers.

Implications of Analysis

Wal-Mart depicts a high level of fitness when compared to its competitors. The firm

seems to be in control of the retail landscape. However, the firm has to deal with more than a few

43

challenges in order to guarantee long-term survival. First, Wal-Mart has to respond to the

changing needs of consumers. Today, consumers want unique experiences and personal attention

from businesses. Therefore, Wal-Mart cannot afford to compete on costs alone. The firm has to

improve its customer service so as to respond to the needs of the modern consumers. A

significant way of responding to these needs entails changing the firm human resource practices.

The firm can also use its skills in technology development to develop effective customer

relationship management systems. Wal-Mart also needs to respond to the threats presented by

advancement in the technological environment. The firm needs to popularize its online retail

platform so as to tap into the opportunities presented by the proliferation of Smartphones and

other computing technology. This strategy will also help Wal-Mart to manage competition that is

emerging from the online retailers such as Amazon.

Boid Analysis (Due in Week 7)

This section presents the Boids analysis of Wal-Mart. The section offers a discussion of

the concept of Boid analysis and analysis of Wal-Mart using this concept. The section also

discusses the implication of the analysis.

“Boid Analysis” Systems Description and Analysis

Boids are homogenous agents that interact with other agents so as to create a system of

patterns. These agents are autonomous and engage in unplanned interactions with other agents

while adhering to three fundamental rules attraction, avoidance, and alignment. Wal-Mart tends

to adhere to the attraction rule when interacting within other agents within the industry. In the

attraction rule, a given agent tends to be attracted to locations where other agents are or have

been. This trait is characteristic of Wal-Mart. Wal-Mart has an aggressive culture of being

44

attracted into other players’ market niches. The firm acts aggressively in acquiring small and

independent retailers and opens up outlets in all major urban centers.

Implications of Analysis

The analysis indicates that Wal-Mart is following the attraction rule. Wal-Mart needs to

continue applying this rule in order to grow and increase its profitability. The U.S. retail market

has already reached the maturity stage. The only way to grow profits is to venture into other

players markets. This concept supports the proposed strategy move of capturing contested

market area.

Industry Evolution Modeling

This section focuses on analyzing Wal-Mart strategies using the Industry Evolution

Modeling. The section offers a model’s description and analysis and a discussion of the

implications of the analysis.

Industry Evolution Modeling Description and Analysis

Industry Evolution Modeling (IEM) is a technique for analyzing the changing dimension

of the industry and how they affect the behaviors of firm. The model suggests that, sometimes,

firm react to external events; hence, the external events determine the course of action taken by

industry players (Kunc, 2003). Consequently, the external events influence the evolution of the

industry. IEM focuses on examining how the dynamic interaction of companies and the

evolution of the market. The IEM borrows from the Allen’s Fishing Experiment and Rays

Computer Experiment. The Rays Computer Experiment suggests that industry evolution

originates from the interaction of heterogeneous agents based on diverse sets of rules to compete

and cooperatively shape the whole system. The Allen’s Fishing Experiment suggests a model that

45

incorporates complex behaviors exhibited by agents and optimal utilization of information to

inform behaviors and shape the industry.

The retail industries have numerous changing dimensions. Products, consumer

preferences and technologies are continuously evolving. These changing dimensions elicit

different reactions from industry players leading to the development of a fluid competitive space.

For instance, when there is a new development in the technological industry, firms react to this

innovation in different ways. These reactions shape the competitive space in the industry. Wal-

Mart is a proactive behavioral type as the firm seeks to create its own information based on

examination of the market. The firm seeks to manage the evolution of the market rather than

react to market external pressure.

Implication of the Analysis

The analysis shows that Wal-Mart tends to create its own environment rather than react to

external forces. Wal-Mart needs to contribute to the development and long-term sustainability of

the industry by innovating and developing new technologies. The firm should also promote

sustainable business practices by acting responsibility towards the environment, local

communities, employees and other stakeholders. This concept supports Wal-Mart current

strategies regarding the management of suppliers and the environment. However, the concept

challenges Wal-Mart to change its human resources practices.

Life Cycle Assessment

The focus of this section is to present a lifecycle assessment (LCA) of Wal-Mart. The

paper offers LCA modeling description and analysis and a discussion of the implications of the

analysis.

46

LCA Modeling Description and Analysis

LCA is management tools that seek to analyze the environment impact of the stages of a

product or service life. Senge (2008) argues that businesses can no longer ignore the effect of

their activities on the environment. They need to take responsibility of the degradations that their

operations cause on the environment. The LCA modeling assists organization to become more

responsible of the action by creating an understanding of how these actions affect the

environment. Wal-Mart products go through a number of stages before reaching the final

consumers. These stages include inbound logistics, distribution centers, outbound logistics, and

Wal-Mart stores. At the inbound and outbound logistics stages, Wal-Mart contributes to

environment degradation through emission of carbon by their vehicles. However, Wal-Mart tries

to minimize its carbon footprint by optimizing its transport systems so as to ensure that the

vehicles make a minimal number of trips. At the distribution centers and stores, Wal-Mart

contributes to environment degradation through the consumption of energy. Wal-Mart has over

11,000 stores; hence, consume a significant quantity of energy.

Implication of Analysis

Wal-Mart environmental footprint mainly comes from it transportation activities and

energy consumption. Although the firm has done a lot to optimize its transportation system, the

firm can reduce it carbon footprint further by developing and adopting new transport

technologies that electric tracks. Other corporations such as FedEx have led the way in this

regard. Wal-Mart can also reduce its carbon footprint by adopting sustainable use of energy in its

stores and distribution centers. This concept supports Wal-Mart’s current strategy as adopting the

47

use of electric vehicles, and sustainable energy use practices will help Wal-Mart to make further

reductions of costs.

Compliance to Innovation Analysis

This section analyzes the extent to which Wal-Mart has embraced sustainability practices

using the Compliance to Innovation Analysis. The section offers a discussion of the concept of

Compliance to Innovation Analysis, an analysis of Wal-Mart using this concept, and a discussion

of the implications of the analysis.

Compliance to Innovation Description and Analysis

Compliance to Innovation is a tool that analyzes the level to which a firm embraces

sustainability practices. The tool categorizes firms’ practices into five stages: non-compliance,

compliance, reaching beyond compliance, integrating sustainable practices into strategic

planning and aligning company mission and values to sustainability. The first two stages reflect

firms that adopt reactionary measures when it comes to sustainability. The final three stages

reflect organizations that take a proactive step in promoting sustainability.

Wal-Mart falls in the final three stages of the Compliance to Innovation spectrum.

Specifically, Wal-Mart belongs to the third stage that entail reaching beyond compliance so as to

strengthen the reputation and social legitimacy of the firm. Wal-Mart has made proactive steps

towards promoting sustainability including conducting audits on suppliers’ environment records

and investing in conversation initiative. However, sustainability values are yet to be inculcated in

the firm’s strategic process and its mission.

Implication to Practice

48

Sustainability has become an important value for modern businesses. Wal-Mart needs to

strengthen this value by incorporating it in its strategic planning and aligning it with the firm’s

mission and core values. The theory supports current strategies by encouraging Wal-Mart to act

responsibly towards all stakeholders including employees.

Sustainable Value Framework

This section analyzes Wal-Mart sustainability practices using the Sustainable Value

Framework. The paper offer a discussion of the concept of Sustainable Value Framework,

analysis of Wal-Mart using the framework, argument in support of the conclusion, and

implications of the analysis.

Detailed Analysis of the Four Quadrants

The Sustainable Value Framework is a four-quadrant model that assists firms to analyze

their sustainability practices. The lower left quadrant analyzes and recommends ways in which

firms can modify internal activities so as to reduce adverse effects on the environment. The

lower right quadrant analyzes how the firm interacts with stakeholders and proposes ways for

assisting firms to enhance its perceived legitimacy among stakeholders. The upper left quadrant

identify sustainability opportunities and challenges that exist within the industry and how the

firm exploit opportunities and overcome challenges. The upper-right quadrant analyzes the

growth trajectory of the firm.

Sustainable Value Framework

Tomorrow Today

External Strategy: advancement in

transport technology,

Strategy: Vendor-Managed

Inventory, Sustainably

49

development of Greenhouse

Reduction Program

Payoff: Long-term

profitability

Sourced Materials; Fund

Conservation Programs

Payoff: Increased reputation

among stakeholders

Internal Strategy: clean energy, electric

vehicle, sustainable use of

energy, green packaging

Payoff: reduced cost and

enhanced image

Strategy: Audit of suppliers

environmental practices,

recycling programs, and

pollution prevention

Payoff: low legal risks and

enhance company image

Implications of the analysis

The analysis shows that Wal-Mart’s stakeholders have a relatively positive perception

about the company sustainability practices. The firm has taken various sustainability initiatives

including the introduction of the vendor managed inventory systems that optimize the process of

transporting goods from suppliers to the Wal-Mart stores. The cross-docking strategy also

optimizes the transport system thus reducing carbon emission. Wal-Mart can further its

sustainability record by switching to clean lighting technology in all its stores and using electric

vehicles for transportation. The firm should also adopt green packaging practices.

Conclusion

The SSP paper has analyzed the internal and external environment of Wal-Mart

Corporation. The analysis revealed that Wal-Mart has a number of strengths including strong

50

partnerships with suppliers and technology development abilities. Weaknesses include low

quality of customer service and poor human resource practices. The external environment

analysis reveals that low product differentiation, low switching costs among suppliers, and the

aging of the nation’s population are the most significant that Wal-Mart is facing. Opportunities

include growth in the economy and high level of economies of scale within the retail industry.

The SSP recommends that the firm adopt a hybrid strategy that entails combining elements of

cost leadership and differentiation. This strategy should be supported by a move that entail

capturing contested market space. This strategy implies that Wal-Mart will have to change some

of it practices such as low-level of staffing, over-working of employees, and payment of low

wages to employees in order to execute this strategy.

51

References

Adkins, M., (2007). Operational excellence begins here. Chemical Engineering. 2 (1), 52- 55

Ahmadi, S., Salamzadeh, Y., Daraei, M., & Akbari, J., (2012). Relationship between

organizational culture and strategy implementation. Global Business and Management

Research. 4 (3), 286- 299

Azad, N., Zarifi, S. & Hozouri, S., (2013). A factor analysis to examine the critical success fator

in retail brands. Management Science Letters. 3 (1), 827- 832

Boroto, M., Abdullah, M., & Wan, H., (2012). Hybrid strategy for new competitive advantage.

International Journal of Management and Business. 7 (20), 120- 133

Brea-Solis, H. Masanell, R. & Tatje, E. (2012). Quantifying Wal-Mart sources of advantage.

Harvard Business Review. 1-46

Bryson, J. (2004). What to do when stakeholders matter; stakeholder identification and analysis

techniques. Public Management Review. 6 (1), 21- 53

Casadesus-Masanell, R., & Ricart, J., (2009). From strategy to business models and to tactics.

Harvard Business Review. Retrieved from http://www.hbs.edu/faculty/Publication

%20Files/10-036.pdf

Davidson, P. (2014). Economy surges forward in Quarter three. Retrieved from

http://www.usatoday.com/story/money/business/2014/10/30/third-quarter-gdp/18149429/

Dudley, R. (2013). Customers flee Wal-Mart empty shelves for Costco and Target. Retrieved

from www.bloomberg.com/news/2013-03-26/customers-flee-wal-mart-empty-shelves-

for-target-costco.html

52

Foster, G., (2010). The analysis of business fitness landscape. Southern Cross University.

Retrieved from http://epubs.scu.edu.au/cgi/viewcontent.cgi?article=1147&context=theses

Grant Thornton (2008). An Analysis of the Retail Industry. Retrieved from

http://www.grantthornton.com.au/files/iiu_retail_august2008.pdf

Greenwald, B. & Kahn, J. (2005). All strategy is local. Harvard Business Review. 10 (1), 1-11

Harrison, M. (2014). Entering the US Retail Market. Retrieved from

http://www.hugeinc.com/ideas/report/entering-the-us-retail-market

Khan, S., (2012). Concentric diversification is a new product offering or cannibalization.

International Review of Management and Business Research. 1 (1), 18-25

Kotter, J. (2010). Companies that have built a reputation around their corporate cultures.

Retrieved from

http://www.prenhall.com/behindthebook/013185495X/pdf/Andre_Feature2_It

%27s_A_Good_Read,_Really.pdf

Kunc, M., (2003). Industry evolution: A dynamic behavioral model. Retrieved from

http://www.systemdynamics.org/conferences/2003/proceed/PAPERS/170.pdf

Leonard-Barton, D., (1992). Core capabilities and core rigidities in the management of new

product development. Strategic Management Journal. 13 (1), 111- 125

Malhotra, Y., (2005). Integrating knowledge management technologies in the firm’s business

processes. Journal of Knowledge Management. 9 (1), 7- 28

Ning, H. (2012). How to maintain sustainable competitive advantage. Journal of Business

Administration. 3 (5), 45- 51

53

Ojo, O., (2009). Corporate diversification and firm performance: an Empirical Study. Current

Economic Crisis. 9 (1), 39- 52

Porter, M. (2008). The five competitive forces that molds strategy. Harvard Business Review.

78- 93

Saroja, S., (2012). Information technology as a key succeed factor in retail. Gian Jyotie-Journal.

1 (2),

Sekulic, V. (2009). Corporate strategy development and competitive advantage of an enterprise.

Economics and Organization. 6 (3), 269- 279

Senge, P., (2008). The necessary revolution. USA, Crown Business

Toossi, M., (2012). Workforce projection to 2020: a more slowly growing labor force. Monthly

Labor Review. (January) 43- 64

Torlak, G., (2005). Learning organizations. Journal of Economic and Social Research. 6 (2), 87-

116

Wal-Mart (2014). Wal-Mart annual report 2014. Retrieved from

http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-

report.pdf

Wal-Mart (2014). Wal-Mart annual report 2014. Retrieved from

http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-

report.pdf

Yahoo.com (2012). Industry Browser-Services-Discount. Retrieved from

http://biz.yahoo.com/p/732mktu.html