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