Wal-Mart

Abstract

Wal-Marthas being operating in the U.S. retail industry since itsestablishment, back in the year 1962. However, Forbes has ranked theretail store as the leading in the retail industry ahead of SuperTarget, Tesco, Costco Wholesale Group, BJ Wholesale Club and MeijerInc. among other competitors. Operating in the cutthroat industry hasforced Wal-Mart to devise new ways of retaining and attracting,existing and new customers, especially the “Every Day Low Price”strategy. The fact that the retail store sells various products, suchgroceries, household appliances, hardware, entertainment, hardware,health and wellness and pharmacy, apparel, hardlines (accessories,auto spares and stationery) and home furnishings, includingsubstitutes helps retain consumers. Moreover, the success of Wal-Martcan be credited to the internal and external stakeholders who playtheir role in making sure that the store has the necessary productsand services. The external stakeholder comprises of competitors,customers, industry, government entities, communities and retailers.The internal competitor comprises of shareholders, management, theboard of directors and employees.

Wal-Mart

Wal-Martis an American organization that operates retail stores and severalmerchandise stores, discount warehouse clubs and grocery stores(Holmes,2011). The organization has three segments, namely Sam’s club, U.S.segment and the international segment. Its current president andchief executive officer is Dough McMillon. Nevertheless, Wal-Mart wasfounded by Sam Walton in Arkansas in 1962 after a string of successbusinesses. The mission statement of Wal-Mart is “Tohelppeople save money sothey canlive better.”However,Wal-Mart received 58.89% total sales from its U.S. segment, 12.11%from Sam’s Club and about 29% from Wal-Mart International duringthe financial year 2013 (Fishman, 2006).

Wal-Martsales come from different items, such as jewelry, groceries, toys,kids &amp baby clothing, electronics, fitness and sportsinstruments, and video games among other items. Studies indicate thatthe Wal-Mart’s annual proceeds exceed the Gross Domestic Product ofSwitzerland. Moreover, DeMarco (2011) ranks the store as the secondbiggest company worldwide based on its revenues ($469.2 million). Thesuccess of Wal-Mart can be attributed to its “Every Day Low Price”strategy that differentiates the company from other competitors.Nevertheless, the company’s success can also be attributed to theexternal and internal shareholders. The external stakeholdercomprises of competitors, vendors, industry, government entities,customers and communities, while the internal stakeholders includeshareholders, management, the board of directors, and employees. Thispaper will evaluate the various stakeholders in Wal-Mart.

ExternalStakeholder’s Analysis

  1. Competitors

Wal-Martfalls under the Warehouse Club and Super-Center Industry, whichconsists of a big store that mainly sell merchandise and a generalline of grocery products (Fishman, 2006). Moreover, warehouse clubsprovide consumers with a broad collection of products at reducedcosts in exchange for a membership subscription for every consumer.On the other hand, super-centers include big discounted departmentstores retailing fresh produce. However, super-centers lackeligibility conditions for clients.

Wal-Martboasts of a huge presence in the Super Industry and Warehouse Clubwhereby it contends with other major organizations, such as SuperTarget, Tesco, Costco Wholesale Group, BJ Wholesale Club and MeijerInc. among other competitors. The diagram below portrays theWal-Mart’s contemporary market share and development in the UnitedStates.

Itis evident from the pie chart that Wal-Mart leads in the market with63.6% followed by Costco (17.50%), Meijer (3.6%) and BJ Wholesale(2.7%) (Hausman and Leibtag, 2007). The majority market share held byWal-Mart, as indicated in the statistical data above, is a goodindication that Wal-Mart has a potential to increase its revenuesfurther. Nevertheless, Wal-Mart can augment its profit, as itcontains a pool skillful leaders and employees with knowledge in costdiscounts.

Despitethe increased competition, Wal-Mart has maintained competitiveadvantage as identified in the SWOT (strengths, weaknesses,opportunities and threats) analysis below.

  1. Strengths

    • Scale of operations: Wal-Mart enjoys a robust market position with over $400 billion revenue and around 11,000, stores globally, including a customer’s trust that differentiate the store from competitors. Its big size and robust buyer influence on suppliers reduce the costs, hence achieving more profits than the competitors.

    • Information systems competence: The effective Supply Chain and Logistics management of Wal-Mart guarantees cost savings through proper management of information at inventory level, sales, orders, and further information

    • Varied assortment of products: The store provide a lot of own label and branded products to attract more consumers.

    • Cost leadership strategy: Sells quality products at reduced prices, hence having a competitive benefit against its competitors

  2. Weaknesses

    • Labor-related complaints: The store’s corporate goodwill was dented because of its inability to offer improved workplace for its workers. Critics maintain that Wal-Mart has pitiable working conditions, litigation expenses, gender discrimination and voluntary overtime work.

    • High employee turnover: The store’s employee turnover expenses remain high because of increased employee turnover. It incurs additional costs on recruitment and on-the-job training

    • Negative publicity: Wal-Mart faces criticism for its deprived practices like poor employee working conditions and inducement.

  3. Opportunities

    • Retail market development in the developing markets

    • Growth in online shopping

    • Increased acceptance of the respective label products

  4. Threats

    • Increased competition from online stores

    • Rising product prices

    • Increased resistance from retailers and communities that makes it challenging for the store to open new ones.

  1. Industry

Wal-Martoperates in a very competitive industry. However, the company hasheld the leading position for several years. However, some of thefive forces of the store include: the power of suppliers, the threatof competitors, the threat of new entrants, the threat of substituteproducts and services, as well as the power of buyers.

  1. Threat of Competitors

Asearlier mentioned, Wal-Mart operates in a cutthroat Grocery/DiscountRetailer Industry in the United States. Particularly, the majorcompetitors include Super Target, Costco Wholesale Group, Meijer Inc.and BJ Wholesale Club (Holmes,2011). Outside the United States, Wal-Mart also competes with onlinestores, such as Amazon.com, K-mart and Target. The other competitorsin the market include Sears Holdings, Kohl’s Corporation, DollarGeneral Corporation, Macy’s Inc. and Dollar Tree, Inc. amongothers.

Moreover,the changing patterns of the grocery industry concentration has formany years favored key market players like Safeway, Costco, Krogerand Wal-Mart. Therefore, their market share has consistentlyincreased than other smaller grocery stores because of the costbenefit obtained through economies of scale.

  1. Threat of Substitute Services or Products

Wal-Martretails many products under these categories: groceries, householdappliances, hardware, entertainment, hardware, health and wellnessand pharmacy, apparel, hardlines (accessories, auto spares andstationery) and home furnishings (Hausmanand Leibtag, 2007). However, one may argue that Wal-Mart does nothave anything to worry about the threat of substitute productsbecause of the vast collection of products it sells. The retailersells an extensive range of merchandise, including substitutes tothis merchandise hence, the effect of the threat may be irrelevant.Regardless, modern technology and the innovativeness of the differentcompanies in the retail industry keep introducing new products in themarket. For this reason, Wal-Mart should understand the market andknow the different types of new products in the changing marketrealm.

  1. The Bargaining Power of Suppliers

Thebargaining of suppliers remains insubstantial for Wal-Mart because ofthe scope and size of its business. The store possesses the lowestprices from suppliers, hence, capacity to maintain its costleadership the competitive benefit. Moreover, Wal-Mart provided $13.5billion to its suppliers in 2015 alone (Hausmanand Leibtag, 2007). Alongside vending their products at reducedprices, Wal-Mart requires its suppliers to observe an extensive rangeof explicit requirements associated with food safety and employeesafe, health and insurance. Furthermore, Wal-Mart sustains SupplierDiversity Program as part of its corporate social responsibilityapproach.

  1. Threat of New Entrants

Thethreat of new entrants in the Grocery/Discount Retailer Industryremains low (Hausmanand Leibtag, 2007). New organizations face major challenges in aneffort to beat the discounted prices provided by wholesale giantsimmediately upon entry. For example, the economies of scale, variousproducts, service and brand recognition enjoyed by Wal-Mart, SuperTarget and Costco among others improve daily, therefore making itdifficult for new firms to penetrate the market.

  1. The Bargaining Power of Buyers

Buyersremain influential in the American Grocery/Discount RetailerIndustry. Wal-Mart handles different types of buyers, such as thehighly-motivated, the serious, the bargain hunter and casual lookerbuyers (Holmes,2011). Highly-motivated buyers are prepared to buy productsimmediately. They are mostly informed and tend to perform extensiveresearch on products as well. They are conversant, willing andcapable of making the purchase. The serious buyer includes a buyerwho wants to purchase an item, although they are not haste to dothat. On the other hand, the bargain hunter looks to purchase anitem(s), but requires finding a better deal to be convinced tocontinue with the purchase. Moreover, it is unclear whether they canmake a complete priced, purchase or whether they enjoy bargaining.Lastly, causal lookers include customers with the pattern of lookingor browsing despite lacking the means to make the purchase or they donot require the product at that moment. However, they may decide toconsider their options. Regardless of these buyers, Wal-Martconsumers have restrained power over the firm’s decisions. Thereduced costs and convenience given by the store indicates thatpurchasers will not effortlessly shift to a substitute (Hausmanand Leibtag, 2007). Therefore, the company decides on the pricingapproaches with reduced input from the ultimate client. However,customers may claim particular products or brands that may decreaseWal-Mart’s influence over the suppliers. Consumer advocateorganizations have criticized the store concerning its pricingapproach. Such attention may reduce the store’s market share if nottaken seriously. This may also make consumers to buy who providescomparable merchandise at similar prices, although the conveniencemay be lost.

  1. Vendors

Vendorsplay a significant role in the success of Wal-Mart despite havingless bargaining power (Holmes,2011). The network of loyal vendors helps the firm satisfy therequirements of many consumers on a weekly basis with correctlymanufactured services and products. The store allows potentialvendors apply using its website(http://corporate.walmart.com/suppliers). Potential vendors must havethe TIN (Federal Taxpayer Identification Number), especially for theAmerican-based vendors while the non-American vendors should presenta modern W-8 tax certificate during the vendor set-up process.Secondly, Wal-Mart expects all vendors and their facilities, such aspackaging and subcontracting facilities to maintain the Standard forSuppliers. Thirdly, the store prohibits vendors from retailing items,such as offensive products, such as derogatory, obscene and explicititems among others. The store also prohibits vendors from sellingrestricted products that are police or military related,government-issued, gambling or adult-oriented.

Wal-Martrequires all approved product vendors to possess product liabilityinsurance. Insurance handles legal overheads and other problems thatcould originate from lawsuits or claims associated with theirproducts. The store asks vendors to possess sufficient insurance whenit decided to carry their products.

Nevertheless,the firm gave vendors $13.5 billion last year alone (Hausmanand Leibtag, 2007). The vendors are however required to observe abroad range of explicit requirements associated with food safety andemployee safe, health and insurance. Furthermore, Wal-Mart sustainsSupplier Diversity Program as part of its corporate socialresponsibility approach. The fact that Wal-Mart shows concernregarding the type of products and services retailed by its vendorsprotects consumers from contamination or health problems. For thisreason, the store should continue to ensure that the vendors provideconsumers with healthy and adequate products and services.

  1. Customers

Consumersare the most important people in Wal-Mart. The store uses varioussources of media to attract a wide range of consumers (Holmes,2011).It also attracts consumers from different ages, gender, race, countryof origin, religion and social economic status. These customers wantdiscounted prices or affordable products, which have high quality.American customers settle with retailers that offer reduced prices,including Wal-Mart. For this reason, Wal-Mart handles consumerinterests as stakeholder. The store sustains its cost leadershipapproach that entails providing the lowest imaginable prices. As amatter of fact, Americans identify Wal-Mart with reduced prices.Therefore, the store is successful and effective in handling theseconsumer interests as a stakeholder group.

  1. Communities

Wal-Marthas taken action and helped communities live better by retailingfresh produce. These communities include Maryland, New EnglandWashington D.C., San Diego and the latest being Chicago. The companyunderstands that its success originates from the people living inthese communities. For this reason, the company has embraced peoplefrom different races within the United States. Besides, Wal-Martguarantees job opportunities for veterans, especially in Maryland.Moreover, it has opened neighborhood markets that fit in thesecommunities.

Thecompany offers grants that support young leaders in thesecommunities. At the same time, the store provides scholarshipprograms that support students until their preferred level ofeducation. Wal-Mart has also created significant jobs for the locals.For example, the store presently employs 700 individuals at their twoDC locations with 65 percent of 700 associates from Washington, DC(Hausmanand Leibtag, 2007). The two stores support 810 jobs through directemployment and multiplier jobs. Moreover, these jobs will increaseafter the completion of the third location at Fort Totten.

Wal-Marthelps families in these communities save money. The store can help ahousehold of four members, especially in Washington D.C. save around$1,300 annually. These communities have access to healthy food asWal-Mart positions its stores near a USDA identified food desert,whereby healthy food choices constitute less than ten percent ofregional retail offerings. At the same time, Wal-Mart benefits fromthe sale of groceries as they account for 41 percent of the store’stotal sale.

Wal-Martis amongst one of the few retail stores that have invested huge sumsof money in its respective communities. For example, the store andits foundation (Wal-Mart foundation) have granted $14 million to over200 non-profit organizations in Washington D.C. alone. Theircharitable aids support 185 jobs and $197,000 and $16.5 million intax revenue and total compensation respectively (Holmes,2011). Additionally, Wal-Mart improves the economic growth of thecommunities in which it operates. For example, the store attracts newretail stores and new housing that open adjacent or within Wal-Mart.

InternalStakeholder’s Analysis

  1. Shareholders

Shareholdersare the stakeholders with the highest priority in Wal-Mart. The groupis mostly focused on profits because they obtain increased earningsor dividends per share in return. In relation, shareholders alsofocus on reducing the operational outlays of the firm. Reduced costsmainly result in increased profits that are valuable to investors.

Wal-Martprioritizes shareholders in its approaches, hence minimizing costs,for example, through wage minimization (Hausmanand Leibtag, 2007).Besides, businesses exist to produce profits and lack of thoseprofits could damage them. Therefore, prioritizing on the majorstakeholders allows Wal-Mart to fulfill this theoretical goal ofbusinesses.

  1. Board of Directors

Robustcorporate government remains crucial for a prosperous business, andWal-Mart’s board of members makes sure that the store operates withaccountability and integrity. Board members are comprised of GregoryB. Penner, who is the chairman, Tom Horton, Jr., Pamela J. Craig,Marissa, A. Mayer, James I. Cash, Steuart Walton, Doug McMillon,Timothy P. Flynn, Kevin Systrom, Steven S. Reinemund, S. RobinsonWalton and Linda S. Wolf. Working with such integrity andaccountability will help Wal-Mart maintain its leading position andprovide quality products at discounted prices.

  1. Management

Mostpeople attribute Wal-Mart’s in-store benefits or discounts to SamWalton. However, the open door policy management style has allowedthe retail store to succeed (Hausmanand Leibtag, 2007).The management style allows people, such as employees and customersto give their opinions regarding the company. The policy is also aform of participative leadership although the store has a settingwith leaders from the front and behind. Top management makes thedecision regarding the operations of the store before allowing othersto assume the pole position. The strategy helps involved individualsprove their leadership.

TheWal-Mart management style concentrates less on management and fullyembraces freedom, hence leadership (Holmes, 2011). Management entailsengaging in stuff done by workers while leadership entails instillingvalues, offering sufficient support and training and allowingindividuals to perform. Additionally, leadership gives adequate roomfor innovation.

  1. Employees

Wal-Martemployees play a major role in ensuring its success. However, thestore fails to mention them in its statement of purpose and missionstatement, but it has dedicated numerous pages to the employeerelation subject. The page portrays an affirmative employment culturethat values and respect the associate as a team member(www.walmartstores.com). According to the site, workers can rely onan open door policy that will treat them respectfully and pay them afair wage (Fishman, 2006). The website also provides details of thenumerous benefits, such as health care, given to the retail store’semployees.

Thesestipulated policies resembles what average employees would consideraligning with their individual objectives and goals better wage,fair treatment in the workplace and better benefits. Being a growingand stake store means that Wal-Mart can offer secure growth andemployment opportunities that many workers pursue.

References

DeMarco,A. (2011). America’s Top Retailers. Forbes. Accessed on July15, 2016 fromhttp://www.forbes.com/sites/anthonydemarco/2011/07/18/americas-top-retailers/

Fishman,C. (2006). TheWal-Mart effect.New York: The Penguin Press.

Hausman,J., &amp Leibtag, E. (2007). Consumer Benefits from IncreasedCompetition in Shopping Outlets: Measuring the Effect of Wal-Mart.Journalof Applied Econometrics,22(7),1157-1177.

Holmes,T. J. (2011). The Diffusion of Wal-Mart and Economies of Density.Journalof the Econometric Society, 79(1):253-302.