Case Study on "Walmart Stores, Inc. Under Attack 2006"

Case Study 8 pages (2563 words) Sources: 3

[EXCERPT] . . . .

Wal Mart, Inc.: Under Attack

This analysis focuses on the intricacies of the Wal-Mart business model. The aggressive nature of the company's dominance when it moves into a new market is analyzed in terms of the negative causation that it represents. The overall corporate culture is viewed through the framework of overall attitudes groups and individuals have directed towards Wal-Mart. Specifically, this discussion reviews the core competencies and principles that drive Wal-Mart's corporate culture and the determining factors that have driven Wal-Mart for the past several years.

Additionally, this analysis discusses the problems that Wal-Mart's culture, towards its employees and competition has created and the increasingly negative attention these problems are bringing for Wal-Mart. As a result, this discussion presents several solutions that Wal-Mart could implement. First, Wal-Mart could re-examine its aggressive corporate strategy in terms of forcing smaller, more local shops out of business; second Wal-Mart could retool their charitable giving strategy and lastly the company could alter its current position on allowing employees to unionize. All of these solutions, when adopted in tandem could greatly improve Wal-Mart's standing both in the domestic market and international stage as well.

The Situation

To its fans, Wal-Mart exemplifies pure Capitalism-giving consumers the products they demand at a price lower than the competition. Unfortunately, it is this practice that has condemned Wal-Mart to be hated by a large subset of American society. Wal-Mart is viewed by many as being the penultimate in destroying the "Mom & Pop" stores that so many of a certain generation had grown accustomed to. To this group, Wal-Mart is seen as the antithesis to everything that a small, upstart business in a local community, furthermore, Wal-Mart represents, on some level, the corporate bully moving in, throwing their weight around, undercutting the competition which ultimately drives the smaller shops out of business.

In order to understand the "Wal-Mart Problem" the environment that gave impetus to such a corporate behemoth must be analyzed. What were the main factors leading to Wal-Mart's rise to domestic corporate dominance and what, if anything, can the organization do to remove the stigma attached to its organization. The roots of Wal-Mart's growth can be traced to the economic recessionary period of the 1970's. As individual income and personal spending declined, customers were looking for retail outlets that sold consumer products at lower prices. Sears was the largest retailer in the nation, however due to the sluggish environment they attempted to cater to lower and middle class families. This altercation in the business model, lead to an increase in overhead.

Wal-Mart's philosophy was to compete for the same group of consumers, however their prices would be significantly lower and their overhead would be reduced beyond that of the competitions. As a result, Wal-Mart would be ascertaining the same customer base but would be able to offer comparable products at lower prices. As Wal-Mart grew in size, the company began to diversify its business model. Wal-Mart recognized that as consumers began to search for low cost products, consumers began to travel to the more rural areas and suburbs-getting away from the urban centers that many larger retailers had target. As a result of this demographic shift, Wal-Mart began to integrate their stores into the more rural and suburban area. This integration has ultimately lead to the negative impression and attitude many individuals have toward Wal-Mart. But is Wal-Mart totally to blame or is the company simply mastering the art of Capitalistic business models? The next section will analyze, Wal-Mart more in depth, its present situation and the factors associated with the negative attitudes and what Wal-Mart can do to rectify this scenario.

Analysis

Analysis of the Situation

Accurate analysis of Wal-Mart from a financial, business cycle and strategic platforms must be conducted to arrive at an accurate explanation of the internal workings of Wal-Mart in order to completely understand the position Wal-Mart finds itself in. Wal-Mart's product lines range across the entire spectrum of consumer products. It is this diversification of the overall business model that enables Wal-Mart to compete in a variety of market sectors. In addition to this diversification, the goals of management, strategies and overall mission are powerful elements that make up the Wal-Mart model.

There are four core corporate strategies relevant to the Wal-Mart. The strategies that form the backbone of the Wal-Mart corporate culture are: (1) Dominate the Retail market wherever Wal-Mart has a presence; (2) Growth by expansion in the U.S. And Internationally; (3) Create and faster widespread brand recognition wherever Wal-Mart has a presence and (4) Branching out into new sectors of retailing such as pharmacy automotive and the recent addition of grocery stores within the new "Super-Walmart" (Comerius & Hunger, 2006).

Sam Walton had a vision that Wal-Mart would compete in nearly all markets from the main urban sectors to the more rural and suburban markets. To this end, Wal-Mart still follows this core principle. Wal-Mart maintains the philosophy of lowering the mark-up on products as possible while working customer volume to maximize bottom-line revenue. Every Wal-Mart store is prodded to engage in ruthless competition until, the local competition is rendered meaningless and Wal-Mart asserts domination among the local market.

Wal-Mart has demonstrated exponential growth both domestically and internationally over the past several years. Wal-Mart's expansion throughout the United States and across Europe is yet another component of their corporate culture; a culture that seeks to not only increase their dominance but ensure this dominance is maintained by essentially buying up the competition and increasing the base network of Wal-Mart stores. Currently, Wal-Mart has approximately 1.3 million employees throughout the entire organization. Out of this total, over 1 million are employed within the United States market. Furthermore, Wal-Mart operates over 4,000 stores worldwide with over 1200 stores operating internationally (McGahn, 2004). Logically, domestically, Wal-Mart is the largest consumer retailer.

This presence both domestically and internationally lend themselves to Wal-Mart's ability to exercise its dominance over the U.S. retail market. This retail market expansion is not only limited to the United States. Wal-Mart has exhibited the same dominance internationally. Wal-Mart has engaged in the same dominance of the international market as they have domestically. In 1994, Wal-Mart purchased 1200 WoolCo stores in Canada, as a result there are 196 Wal-Mart stores throughout Canada. Additionally, in 1998, Wal-Mart bought the Wertfauk chain in Germany consequently, Wal-Mart now operates close to 100 stores in Germany. Finally, in 1999, Wal-Mart bought the ASDA chain in the UK and operates 229 Wal-Mart stores in Britain (McGahn, 2004).

The purchase of these local chains underscores the Wal-Mart corporate culture that is carried out and implemented in order to attain dominance within a market. As a result of this organizational culture, Wal-Mart places itself in a comparative advantage position to take over a new market once Wal-Mart enters this market. Wal-Mart is able to, in one sweeping step, Wal-Mart can overcome market barriers, Wal-Mart can capture a significant market sector of consumers and most importantly, Wal-Mart eliminates the competition and therefore can exert near complete control of an entire retail market within a given market area. Associated with this principle of total market domination, the logical flow out of this domination is the creation and maintenance of brand management wherever Wal-Mart has a presence. Given the analysis thus far, Wal-Mart has brand management capabilities on an international scale.

Wal-Mart is one of the best organizations in the modern era to work on creating and maintaining positive brand management. For Wal-Mart to maintain its cutting edge brand management, even in areas where the story is dominant, Wal-Mart relies on several core competencies. These principles involve respecting the individual, enhanced service to the customer and a constant strive for excellence. These principles are prevalent within the Wal-Mart business model and are part of the paradigm that allows Wal-Mart to establish its stature within various retail markets and compete against well established companies such as Target, Inc.

Wal-Mart's business model possess several strengths, weaknesses, opportunities to improve its image within the community and threats against it's model. Wal-Mart's key strengths include the cost advantage of its model, including lower overhead which in turn allows Wal-Mart to reduce the general overhead leading to an undercutting of product costs to consumers. Furthermore, Wal-Mart has a strong supply chain management apparatuses that allow for constant flow from vendors to Wal-Mart stores. Wal-Mart also has several weaknesses that are among some of the most common complaints that customers of Wal-Mart tend to express (Van, 2008).

First among these weaknesses is that Wal-Mart ignores store decorations in creating an environment that is welcoming for customers to experience. Also, Wal-Mart's size and multidisciplinary approach to their business model may in and of itself be a weakness. In today's environment, flexibility is key in navigating the treacherous business environment. Therefore, Wal-Mart may find that it is not as flexible as some of its more focused competitors. Finally, there are threats to Wal-Mart, even though the company is the largest retailer in the United States. Wal-Mart… READ MORE

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