Walmart Strategy

This section will examine Wal-Mart's company strategy in several sections. Three elements of successful strategy formulation and a fourth element, which exemplifies the implementation process of company strategy, will be looked at. Followed by this, an analysis of key factors contributing to this strategy will be detailed. These include looking at Wal-Mart's competitive strategy, the CEO's leadership, and company strategy strengths and weakness assessment.

The material used to analyze Wal-Mart strategy consists of the company's annual reports, its Fact Sheets and other information found on the company Internet site. Other information is obtained from outside sources such as Fortune Magazine, and from outside groups who are critical of the corporation. The focus of this analysis will be placed on identifying the resources of the firm, its weaknesses and strengths in terms of its competitive environment. The sections examined will highlight the leadership style of Wal-Mart CEO H. Lee Scott, who inherited the corporate legacy of Wal-Mart founder Sam Walton. Other elements such as the culture, the corporate organization and values of the company come to play.

1. Strategic Goals

This section looks at three successful elements of strategy formulation and a fourth element, where the strategy is implemented successfully. These are as follows:

* Dominate the Retail Market wherever Wal-Mart has a presence.

* Growth by expansion in the US and Internationally.

* Create widespread name recognition and customer satisfaction with the Wal-Mart brand, and associate the retailer with the reputation of offering the best prices.

* Branching out into new sectors of retailing such as pharmacies, automotive repair, and grocery sales.

a. Dominate the Retail Market Everywhere

A key strategy of Wal-Mart is to dominate the retail market. Company founder Sam Walton put in place a retail philosophy the company still follows. Wal-Mart is primarily a discount retailer because they sell their products at the lowest possible prices. By selling at the "lowest price." Walton outlines that the essence of successful discount retailing to cut the price on an item as much as possible, lowering the markup, and earn profit on the increased volume of sales. (Wal-Mart pricing philosophy document, www.walmart.com).

Another subset of this strategy is the competitiveness of every unit. Each store is encouraged to ferociously compete against all other stores in its customer base until the Wal-Mart store gains dominance over its local competitors (Quinn, 2, 115). Wal-Mart is currently ranked as the world's number one retailer and the number one company in the world in terms of sales (over $200 billion) on the Fortune 500 list (www.walmart.com) (www.fortune.com) The key strategy is to dominate a market. Using its size and volume buying power, the company effectively implements its strategy.

b. Growth by expansion in the US and Internationally.

A strategic goal of Wal-Mart is to expand. It has done so successfully. Looking at the facts and figures clearly shows the corporations dominance and power. Currently the corporation employs over 1.3 million employees, one million in the US alone. The company owns over 4000 stores worldwide. Over 1,200 units (stores) are in operation internationally. Domestically, Wal-Mart is the largest US retailer, employing around 1 million people. It has over 3,000 stores and outlets, and 77 distribution centers. The company serves more than 100 million customers weekly in all 50 states, Puerto Rico, and several nations around the world. (www.walmart.com, Fact Sheet - Wal-Mart at a Glance, 2002).

Internationally, the retailer operates in Mexico, Canada, Argentina, Brazil, China, Korea, Germany, and the United Kingdom. Its expansion strategy internationally has been aggressive and powerful. The latest expansion strategy is for the company to gain entry into a nation by corporate takeover of a national retailer. Once the company is bought,

Wal-Mart converts the stores into Wal-Mart stores. Three countries, all with no previous Wal-Mart stores, became part of the corporation's international presence when domestic retail chains were overtaken. In 1994, Wal-Mart bought 122 Woolco stores in Canada; today there are 196 units in Canada. In 1998 Wal-Mart bought the Wertkauf store with 21 units, now there are 94 Wal-Mart's in Germany. In 1999, Wal-Mart acquired the ASDA chain with 229 units in the UK. Today, the UK has 252 Wal-Mart stores. (www.walmart.com, Fact Sheet on International Operations, 2002)

This particular strategy, of corporate takeover, puts the company at an advantage when it enters into a new market. In one stroke, a large competitor is eliminated, and at once, Wal-Mart has real estate and employees, and a massive presence in its targeted location. This is an effective use of the company's size and wealth, as few if any competitors are able to do this effectively. The company builds up brand familiarity, while retaining the old familiar outlets. Gradually, as the local Wal-Mart stores begin to make money, and local management assess their competition environment, the company begins to redesign the acquired stores to look like "Wal-Mart's, it then begins to build new and larger stores in that new market. Wal-Mart is now the largest retailer in Canada and the UK.

c. Create Positive Brand and Name Recognition

The company aims to create positive impression of customer satisfaction with the Wal-Mart brand. Their goal is to have the customer associate the retailer with the reputation of offering the best prices. The company accomplishes this through television advertising campaigns and newspaper adverts. Characteristic of Wal-Mart advertising is the use of actual Wal-Mart stores and employees in its commercials. Key themes, such as "Low Prices Always" are featured. The company engages in partnerships and co-branding. For example, many Wal-Mart stores have a McDonalds restaurant inside them. Due to the size of the retailer, certain exclusive promotions are made with Hollywood movie companies and music companies, for exclusive in Wal-Mart promotions and distribution (www.walmart.com, 2001 Annual Report, and Quinn 115).