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A STRATEGIC ANALYSIS
EXPLORING THE SUSTAINABILITY OF WAL-MART’S INTERNATIONAL STRATEGY
By Try L. Muller
What is Wal-Mart’s Strategic Threshold?
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Major Strategic Components
Strategic Position
StrategicCapabilities
Core Competences
• Positioned in a niche role in which cost-efficiencies create low production costs and capital retention capabilities such that it can undercut competitor prices and achieve global expansion to populous regions.
• Market presence and saturation • Proven business model• Proven financial and marketing
capabilities
• Achieving cost-efficiencies on all levels • Strategic marketing for brand
awareness • Supply Chain Management (SCM)
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Core Competences as Competitive Advantages
Niche = Unable to be imitated = Competitive Advantage
SCM
Cost-Efficiencies
Strategic Marketing
Low prices from suppliers, low agency costs, low overhead costs due to employee compensation model, low production costs
Strong brand awareness, proven EDLP strategy, awareness of customer value proposition
Strong buyer influence, efficient distribution due to warehouse location
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Maximizing Strategic Capabilities for Sustainable Competitive Advantage
Maximizing Strategic
Capabilities
Global HR Strategy
Allow business model to interface with unions
Strengthen foreign SCM
More dynamic marketing strategy
China, like many other countries has a strong union presence and or mandatory unions. Adaptive planning is necessary to address this issue
Must familiarize itself with cultural labor practices, close communication gaps, integrate foreign (Chinese) managers into HR strategy, create transparency in employment model
Incorporate domestic (Chinese) suppliers and produces , adjust to foreign regulatory framework such that supply chain can work around poor foreign IT networks
Engage in intensive research of the foreign consumer as well as society and culture, understand the socioeconomic framework for consumers
Wal-Mart’s Competitive Advantages and Barriers in Customer Countries
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Customer Country Features
Do the socioeconomic and regulatory frameworks of Wal-Mart’s customer countries provide the corporation with a competitive advantage?
What will Wal-Mart need to do in order to improve on to sustain or augment these global competitive advantages?
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Great Britain
COMPETITIVE ADVANTAGES• Achieving cost-efficiencies at every level of operations.
• Enhancing internet and mobile-based customer touch points to match the trend for the customer that does not need the in-store experience.
AREAS FOR IMPROVEMENT• Must communicate product “value”— not “cheap products”— to customers who are willing to pay extra for quality products
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Canada
COMPETITIVE ADVANTAGES• EDLP marketing strategy capitalizes on the consumer’s desire for low prices.
• The integration of financial services products in the store help the Canadian consumer as they enjoy the “one stop shop” store feature of being able to bank and shop in one place.
AREAS FOR IMPROVEMENT• It is imperative to stay away from expanding business to areas with a strong presence of unionized workers. One store has been closed due to this country feature.
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Mexico
COMPETITIVE ADVANTAGES• Continue aggressive competitive tactics since product substitution is irrelevant
•Blasting the trusting society with price promotion and rollback advertising
•Tailored marketing methods and strategies that appeal to families and people under the age of 30AREAS FOR IMPROVEMENT• As mentioned before, Wal-Mart’s tactics have worked well to sustain its competitive advantage. Thus, there is no explicit strategic area that it needs to improve.
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Japan
COMPETITIVE ADVANTAGES• Redefine marketing strategy to advertise product quality while raising prices to capitalize on the customer who is willing to pay a premium for quality.
AREAS FOR IMPROVEMENT• Explore new global HR strategies: employ domestic (Japanese) managers to run operations in order to eliminate cultural and communication gap
•Vertically integrate domestic (Japanese) producers into the supply chain to appease the desire for domestically-produced goods.
•Incorporate density planning into expansion strategies
Overcoming Internal and External Barriers to
Executing Strategy in China
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Key Challenges in Fulfilling Strategy In China
Consumer Preference IT Network Protectionism
Ed = 0, Es > 1
INEFFECTIVE STRATEGY
FULFILLMENT
Inability to comprehend
consumer preference or
behavior, purchasing
patterns, societal makeup
No IT infrastructure in
China which results in poor communication in supply chain
Tolls on foreign transportation of
products, regulations in
place to prevent expansion
High level of competition,
differentiation almost
irrelevant, easily substitutable
products, EDLP is nullified since
elasticity of demand is approx. 0
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Discontinuities in International Strategy
No Contingency Planning for Regulatory Framework
No Contingency Planning for Expansion Strategy
Does not account for variances in consumer
behavior
Overly centralized HR approach
Void of strategy to address density issues in foreign market, no dynamic research on expansion vs. land use policies and laws
Does not effectively address costs associated with protectionism or value chain effects, poor economic evaluation of foreign markets
Strategy not easily adaptable to foreign markets, doesn’t grasp cultural/societal differences, does not account for socioeconomic contingenciesNo foreign managers in HR approach, poorly formulated and non-transparent HR strategy, pursuing labor practices that are not applicable to foreign society
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Conclusion: Achieving Sustainability
Wal-Mart does a poor job of adjusting for foreign consumer practices in its international strategy
Globally, Wal-Mart is losing a grip on its competitive upper hand Leveraging EDLP is no longer enough to SUSTAIN its competitive
advantage There is a necessity for adaptive planning/contingency
planning – this is critical to the vitality of the international strategy
The implementation of a more transparent global HR strategy and employment model that account for cultural/communication gaps
Wal-Mart must understand how EDLP is translated across multiple landscapes and adapt strategic marketing practices such that the desires of consumers (value vs. quality vs. price) are communicated accurately.
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References
An, F. (2009) “China Business Strategy: Wal-Mart and Chinese Culture”. Fili’s World, A Different Look at ChineseCulture. Retrieved August 7, 2010, http://www.filination.com/blog/2009/03/14/china-business-strategy-walmart-chinese-culture/
Bhatnagar, P. (2006) “Wal-Mart’s Challenge in China”. Retrieved August 1, 2010, http://money.cnn.com/2006/01/12
Farhoomand, A. (2005) “Wal-Mart Stores: ‘Every Day Low Prices in China’. Asian Case Research Center, 1-27
Huang, K. and Gale, F.(2008) “Demand for Food Quality and Quantity in China”. Retrieved August 1, 2010http://www.us.usda.gov/publications
Rigby, D. K. and Haas, D. (2004) “Outsmarting Wal-Mart”. Harvard Business Review, December 2004
Winston, A. (2008) “Wal-Mart’s new Sustainability Mandate in China”. Business Week, October 28, 2008
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