Wal-Mart Strategic Plan Report
Introduction
The junior strategy manager at Wal-Mart writes the following strategic plan report at Wal-Mart. It starts with Wal-Mart’s mission and vision statements, followed by the statements of value. The framework used to analyze the corporation’s macro-environment is the PESTEL analysis. The analysis of the industry within which Wal-Mart operates is done with Porter’s Five Forces model. The strategic plan report also contains a critical evaluation of the impact of expansionary and contractionary fiscal and monetary policy measures on Wal-Mart. The report recommends lean supply management, more attention to global policy compliance, and local-based manufacturing in the strategic plan.
Mission Statement
The mission statement for Wal-Mart is “to save people money so they can live better.” It is clear from the corporation’s mission statement that they use price as a selling point to get more customers (Wal-Mart, 2020). For example, consumers spend less by buying goods from Wal-Mart stores than the prices in high-end and midscale stores in the United States.
Vision Statement
In 2017, Wal-Mart articulated its vision, “be the destination for customers to save money, no matter how they want to shop.” The corporation’s strategy emphasizes business flexibility to accommodate clients (Wal-Mart, 2020). For example, Wal-Mart is committed to becoming the leader in online retail transactions and traditional brick-and-mortar transactions by stating, “no matter how they want to shop.”
Statements of Value
Culture is the cornerstone of Wal-Mart’s values. The corporation has four values, mainly respect for the individual, service to the customer, strive for excellence, and act with integrity (Wal-Mart, 2020). Each of the four values has similar behaviours that, when practised on a daily basis, helps the business to achieve results and crate a culture of inclusion.
PESTEL Analysis Wal-Mart
Political Factors
Wal-Mart must follow many policies due to its operation all over the world. The policies directly influence manufacturers and suppliers. Wal-Mart’s operations in political instable locations cause problems for the corporation. For example, the Chinese government ban in Chongqing, China led to a decline in profitability since Wal-Mart’s products were
from the market. Therefore, the corporation must comply with all policies in different sections of the globe.
Economic Factors
Economic instability affects Wal-Mart which thrives on low prices of goods. Tough economic times push the corporation to raise the price of its products which also affects the customer base. Slightly higher prices imply that the corporation will most unlikely compete with other brands. Other brands can raise higher prices and maintain good margins which Wal-Mart is unable to do.
Social Factors
The corporation is struggling to understand customer preferences in specific countries. Wal-Mart is popular around the globe but it isn’t the most popular place for customers. For example, the corporation failed to market to the German audience due to a lack of interest from the customers in that country (Hunt, Watts & Bryant, 2018). Wal-Mart lost a lot of revenue as a result of not adjusting properly in the German market. Customers have different needs that Wal-Mart must meet to survive in the market.
Technological Factors
The corporation is making use of automation and robotics to achieve its business strategy. Automation is a form of digital transformation that brings efficiency to the business’s processes. Wal-Mart’s technology is capable of streamlining production, fulfilling orders, and helping to keep the stores clean. Automation is expected to take the businesses processes further by handling menial tasks and helping employees to focus on selling products without distraction. At the same time, the adoption of technology enables the business to reach a wider customer base.
Legal Factors
Wal-Mart must adhere to laws and regulations within the countries of operation. Some of the laws which the company must abide with are data protection laws, employment regulations, health and safety laws, and labour laws. The corporation failed in some instances to abide by the rules leading to problems. For instance, in California, Wal-Mart had failed to provide seating accommodations for employees leading to an out of court settlement where the corporation paid $65 Million to compensate employees (Weissener, 2018). Thus, the corporation was quick to reach an agreement with the employees knowing very well that the legal consequences would be dire.
Environmental Factors
Wal-Mart faced criticism from environmentalists regarding the way the company improperly handled the environment. The corporation was found guilty of dumping hazardous fertilizers and pesticides to the sewage pipes. They came up with Project Gigaton to prevent carbon emissions over the next ten years (Wal-Mart, 2017). After its violation of environmental laws, the corporation came up with eco-friendly promises which they are still pursuing up to date. They hope to continue with the project as part of the business strategy plan.
Porter Five Forces Analysis of Wal-Mart
Bargaining Power of Buyers
Buyers have a low bargaining power in Wal-Mart since they do not make big purchases. Also, conveniences and prices of the shopping contribute to the buyers’ bargaining powers (Porter, 2016). Customers have low switching costs irrespective of the fact that they can obtain the same product elsewhere at low prices. Wal-Mart utilizes a pricing strategy that decreases the buyers’ bargaining power. Thus, clients lack influence on the brand. On the other hand, customers can organize themselves into groups so that they exert a pressure on the brand.
Bargaining Power of Suppliers
In the case of Wal-Mart, the bargaining power of the suppliers is very insubstantial due to the size and scope of the business. The corporation tries to obtain the least possible prices from suppliers to gain competitive advantage and achieve cost leadership (Porter, 2016). In addition, Wal-Mart requires the suppliers to comply with a broad range of requirements related to the employees’ food safety, employee health, employee insurance and other factors. The significance of maintaining a good relationship with the suppliers is to maintain the low prices to keep selling low to the customers. The tactics employed to maintain the supplier relationship is different programs like the Supplier Diversity program which has been embedded into the CSR strategy.
Threats of New Entrants
The threat of new entrants is low because of the medium level pressure on the corporation. Wal-Mart is highly ranked because of the good brand which has taken a long time to be built. Other companies must fully focus on a huge amount of capitalization to build a strong brand and achieve a market share above Wal-Mart. Also, the corporation has one of the most efficient and biggest distribution networks in the supply chain. Companies need huge investments, skills, and human resources to maintain and manage such a supply chain. Wal-Mart is mitigated from the new entrants because of the huge financial resources required to succeed in the market. Existing firms are already facing a lot of difficulties as a result of the low prices offered by the corporation.
Threats from the Substitute Products
Threats of substitute products is a weak force that is incapable of taking down Wal-Mart. The corporation deals in thousands of products and offers a wide variety of each item (Porter, 2016). Their portfolio includes hardlines, pharmacy, health, hardware, groceries, entertainment, accessories, apparel, household appliances and home furnishings. Wal-Mart is least affected by the threats of substitute products since they sell a broad range of items. The substitute for products is available in the company. The threat might come from companies which operate like Wal-Mart like Target. Some of these companies pose a threat since they aim to capture the same consumers.
Rivalry of Existing Players
The retail industry has many top players competing for the same customers. The intensity of the rivalry in the industry is very strong since companies are of multiple sizes. Examples of key players in this industry are Sears Holdings Corporation, Target Corporation, and Costco Wholesale Corporation. In such an environment with many top competitors the corporation has to base its strategic plan on the significant external forces. Wal-Mart must consider the many firms in the retail market that make the rivalry strong, and they must look at the high aggressiveness of the retail companies (Porter, 2016). Another key factor to consider is the large volume of the retail firms which makes the force strong. In the retail market, many firms are trying to impose challenges on Wal-Mart by focusing development of cost advantages strategies. Nevertheless, Wal-Mart has been successful to maintain its position in the global market and navigate despite the rivalry from key competitors.
Impact of Expansionary and Contractionary Fiscal and Monetary Policies Measures on Wal-Mart
Wal-Mart relies on imports so expansionary monetary of the U.S. federal government affect the corporation. Expansionary monetary policies directly impact the bond prices and interest rates. Examples of expansionary policies are the decision to lower reserve requirements, lower the Federal Reserve rate or purchase securities in the open market. These decisions greatly affect the interest rates because no matter the method utilized by the federal government to expand the money supply, the bond prices will raise and the interest rates decline. Investors sell their bonds in countries with rising prices leading to an influx of a specific currency in other countries. Consequently, one currency becomes less valuable to another and this affects the prices of goods (Blanchard et al., 2017). For example, an increase in U.S. bond prices may make an investor to sell his bonds to buy Canadian bonds. The result would be an increase of U.S. currency in Canada and a decline in the supply of the Canadian dollar. In addition, the US dollar would be less valuable relative to the Canadian dollar. U.S. goods will be cheap in Canada while Canadian goods expensive in the U.S. Since Wal-Mart relies on low prices in the U.S. high prices of imports affects its customer base.
On the other hand, the contradictory monetary policies increase the interest rates and decrease the bond prices. Investors buy more bonds in countries with rising prices leading to a decrease of a specific currency in other country. Consequently, one currency becomes more available than the other to affect trade. For instance, a decrease in the U.S. bond prices makes the domestic bonds more attractive leading to their rise and foreign bonds fall (Blanchard et al., 2017). The result is an increase in the exchange rate where the domestic currency is highly valued to foreign currencies. Consequently, U.S. exports decreases while there will be an influx of imports. Since Wal-Mart thrives on low prices an influx of imports will decrease its prices to attract many customers.
Recommendations
Wal-Mart needs to improve compliance with regulations, policies and laws in different parts of the world. Employees must be trained regarding the rules, policies and regulations that apply in specific countries. In addition, the corporation could hire an outside consultant to help with the compliance specifically a law firm (Cafaggi, 2019). A law firm with a well versed background of business rules and regulations that apply in different countries is appropriate to help with the task. The process can begin with advertising a tender where the consultants are taken through a competitive process to find the most suitable candidate. Lastly, the middle level and top managers should be trained to enforce the rules, policies and laws in the different stores.
It is time to focus on the supply chain. A switch to the lean supply chain management would be ideal for Wal-Mart. Lean supply chain management involves redesigning the supply chain to operate and deliver goods quickly to the customers with minimal waste of resources (Helmold & Terry, 2017). The best method to achieve this is to form partnerships with suppliers. The corporation needs more distribution centres across the country or liaise with suppliers to enable goods get to the customers within a short period. Partnerships with suppliers should be pursued in different ways and patterns. Frequent meetings with suppliers would be ideal and payment systems can be streamlined. The contract option is ideal for Wal-Mart and all the suppliers must be education regarding the requirements of the company.
Also, it is very important for Wal-Mart to focus on local based manufacturing of a bulk of the products and items. Manufacturing enables the company to get domestic products without the impact of the fiscal monetary policies. It will allow the company to produce locally made products that are cheap for its customer base.
Conclusions
An analysis of Wal-Mart’s business environment shows the corporation must pull up on compliance with the various regulations, rules and policies around the world. Policy has a huge impact on the company’s profitability so this is an area that should be prioritized. In addition, this is a corporation that thrives on offering low prices to stay ahead of its competitors. Thus, Wal-Mart needs to improve the supply chain to deliver products cheaply to the consumers. Partnerships will help the corporation to attain these goals. Finally, the effect of the expansionary and contractionary fiscal policy measures would be mitigated through a focus on local based manufacturing.