At the beginning of 2009, Wal-Mart top management faces the question of whether the same strategy that it has been adopting in the past can be used to maintain the company’s remarkable performance and growth in the next decade.
In the last 10 years, Wal-Mart has achieved strong and constant growth in sales and net income. It has maintained the leading position in the U.S. discount retail industry and has become the largest retailer in the world. With the maturity of the industry, coupled with the intense competition from rivalry companies, maintaining the current level of high performance becomes very challenging.
The Porter’s Five Forces ...view middle of the document...
In Latin America, it should focus on Mexico and a few key markets that it previously achieves success. In Europe, it can target regions that lack the presence of large retailers such as Tesco and Carrefoure. Although Wal-Mart’s common practice of acquiring existing small local chains to enter a market has helped Wal-Mart lower its market penetration costs and quickly adapt to local market demands and culture, this practice also raises the issues of diluting corporate culture and weakening the company’s ability to reinforce coherent management practices and strategy. Therefore, international expansion should be implemented patiently and carefully.
Over the last four decades, Wal-Mart has achieved significant successes to become the world’s largest retailer. The company has maintained sustainable growth in a fiercely competitive U.S. retail market environment. It has been continuously expanding both in the range of goods and services, and in the number of stores in the U.S. and worldwide. While this expansion has generated handsome profits for its stakeholders and put the company in a strong financial position, it has also presented significant challenges for sustaining growth and performance, and managing a company that is incessantly becoming larger. Top management now is trying to address whether the same strategy that the company has been pursuing is suitable for maintaining and strengthening its current growth rate and market position, as well as for leading the company into the next decade.
This report will present: 1) an analysis of the external environment of the company; 2) a discussion of the company’s internal resources and capabilities; 3) a diagnosis of the external and internal factors; and 4) recommendations of how the company should move forward.
1. External Environment
In this section, an analysis of the Porter’s five forces of the discount retail industry and Wal-Mart is presented. For each force, the discussion first provides a general overview of the industry in the U.S., and then focuses on Wal-Mart.
- Potential entrants: the threat of potential entrants is considered low due to the following reasons:
▪ Discount retail industry is a highly competitive environment with mostly big players competing for market shares.
▪ Price is mainly the key factor for competition.
▪ Existing companies have established strong and stable supplier networks.
▪ Wal-Mart has a superior logistics and distribution system, cutting edge technology to support all phases of its operation, a well-established brand name, a large number of stores nationwide, and a deep financial resource.
▪ Wal-Mart also has cost advantage over its competitors due to its large purchase volume.
Wal-Mart can deter potential entrants.
- Substitutes: the threat of substitute is low.
▪ Consumers can buy from small mom-and-pop stores or specialty stores, but these stores do not offer a wide...