Strategic Management

Strategic Management
By
Ajay Joshi

Ajay Joshi L0481RBRB0201

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Table of Contents
1. Foreword....................................................................................................................3
2. Overview on the company..........................................................................................3
3. Reason of Existence...................................................................................................4
4. Economic Opportunity ..............................................................................................4
4.1. ‘‘What does ‘Wal-Mart’, do to the world?’’.......................................................4
5. Business Model..........................................................................................................4
6. Wal-Mart’s Approach and School- Henry Mintzberg................................................5
7. Managerial roles by Mintzberg, in regards to Mr. Michael Duke’s role in Wal-Mart
5
7.1. Interpersonal skills:.............................................................................................5
7.2. Information processing skills:.............................................................................6
7.3. Decision Making Skill:........................................................................................6
8. Competition and business position.............................................................................6
9. Wal-Mart business strategy- In accordance to Richard Whittington.........................6
10. PEST analysis of Wal-Mart......................................................................................7
11. SLEPT Analysis ......................................................................................................9
12. PESTEL or PESTLE Analysis ................................................................................9
13. ‘Porter’s five force’ model on Wal-Mart.................................................................9
14. SWOT analysis of Wal-Mart Stores:.....................................................................11
15. 7S model for Wal-Mart..........................................................................................12
16. BCG matrix for Wal-Mart......................................................................................14
17. My suggestion for Wal-Mart..................................................................................15
18. Bibliography & References....................................................................................16

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1. Foreword
Considering, the board of directors approaching me to advise them on the likelihood
of Wal-Mart stores (my chosen company) participating more effectively in national
and global arena.

I would advise the company quoting Med Yones quote:

‘‘Sustaining high business performance is a product of continuous strategic
alignment’’
Wal-Mart, a mega-retailer, in order to consistently achieve high performance in
business need to analyze regularly, decide effectively and execute efficiently to create
and sustain competitive advantage. It has to formulate and implement strategies
frequently to compete with its local and global counterparts.
(Business week, FT & Wal-Mart annual reports)
Wal-Mart has been around for a long time and has achieved many milestones and has
many more to achieve. A retailer operating only in America became a successful
global-player, in around 5 decades. It has achieved this with sheer-blend of excellent
merchandising and focused supply chain and human capital management.
Around 90’s, Wal-Mart was operating in 50 states in America and found US market
getting saturated by then. It expanded its horizon and plunged into global market. Its
first global venture started with a joint venture with Mexican largest retailer, Cafera.
But Wal-Mart suffered a great loss in this alliance as it was not backed by sound
strategic planning. Company learnt it hard way but learnt it fast. Henceforth, after this
debacle Wal-Mart adapted itself well next time before entering new market and did
their ‘strategic’ homework perfectly.
That was year 1991, Wal-Mart ever since then changed and adapted different styles of
management strategies, in 2000 they come up with global expansion plan to make a
re-entry in global market and has remained on top rung in the list of Fortune 100
companies in the world in terms of ‘annual revenue’.

2. Overview on the company

(Fortune Magazine & Sam Walton: Made in America, John Huey)
In year 1962, Sam Walton’s Wal-Mart opened with few ‘other’ discount retailing
stores, popular during those times. Kmart and Target opened in America around the
same time. Earlier regional discount stores had given stiff competition to Walton’s
variety stores in 50s. Walton opened this time with a mission to fulfill his philosophy
of ‘Low pricing’ and his Global ‘big dream’.
He said: ‘‘If we work together , we’ll lower the cost of living for everyone…we’ll
give the world as opportunity to see what it’s like to save and have a better life’’.
He did what he said, his envision of providing saving in every shopping for customers
made Wal-Mart not only the top retailing company but also Numero Uno Company
this year, again (Wal-Mart was #2, company in 2009). Last year Exxon Mobil was top
on the charts, but CEO Michael Duke managed to lift the sale by whopping 7% more
than the revenue Wal-Mart did in 2008 and regain its position with annual sales in
tune of $14.3 billion.

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3. Reason of Existence
Wal-Mart’s purpose is to provide a saving in very purchase for its customer in its
stores and clubs across the globe. They focus on this, in everything they do; in-fact
‘Low’ is the buzz-word, which is ‘highly’ regarded in Wal-Mart.

4. Economic Opportunity
(Business week,2010)
Wal-Mart’s Present, CEO and President, Michael Duke Wal-Mart has revolutionized
retail industry and has changed the way business is conducted and done, all for the
benefit of its customers and to capture national and international market.

4.1. ‘‘What does ‘Wal-Mart’, do to the world?’’

• Community Economic opportunity- Its economical impact is phenomenal.
According to researcher Wal-Mart is beneficial for the community. It not only
help customer save money but also create jobs and raise tax revenue.
• Price leadership- Company emphasize on being low-price leader on all its
commodities. By being so, it make the competition tough in Retail business
for its competitor, end of the day, customer gets the benefit of this. Everyday
low price help customer save money so that they can spend these saving in
improving their standard of living.
• Manage customers finance- Wal-Mart has partnered with Visa to provide
financial tools, to help American people take control of their financial needs
by rolling out ‘‘Operation main street: money management’’. Wal-Mart by
doing this is trying to benefit its customer not only in retail but also taking
care of their financial needs.

5. Business Model
(Wal-Mart annual reports)
Wal-Mart business model is based on ‘everyday low price’ it operate with wide-
variety of general merchandising, discount stores, supermarkets, neighborhood
markets and Sam’s club, categorized as ‘a Retail industry’. To achieve this it leverage
economies of scale, enhance supply chain, and upgrade IT based inventory and shelf
management. On average Wal-Mart sells its goods in 7 day and pay supplier back in
90 days.
Wal-Mart has always strived hard to strengthen its supply chain. Now it has to
improve its demand side to exceed its sales further. Company has forayed in
providing range of financial services. It can be company’s new growth sector.
According to current CEO- To improve revenue it has to either sell more to same
customer, or sell same to more customer- which can be a daunting task as it has
already captured wide-market. Wal-Mart has opted to sell more to same customer and
thus moved to financial sector. Wal-Mart has got a good response from the market (its
pilot-venture is operational in USA).

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(Business Week)
‘In a decade Gen Y might think that Wal-Mart is as much a bank as Bank of America’
Younger generation is comfortable carrying out financial transaction with companies
that are not ‘Bank’. Wal-Mart has better chances of growing, if it can provide its
excellent service in financial sector to its already loyal customer and improve its
revenue further.
Wal-Mart’s vision and mission statement can be enhanced with its plunge in financial
services. ‘Financing’ can be added in Vision statement- with ‘retailing’, which is its
forte.
Wal-Mart stores’ slogan- ‘Wal-Mart. Always low price. Always.’
Vision Statement- ‘To become the worldwide leader in retailing’
Mission statement- ‘Saving people money so they can live better’

6. Wal-Mart’s Approach and School- Henry Mintzberg

(Strategy Safari FT Prentice Hall, 2002)
Wal- Mart’s approach is descriptive; as its external environment is ever so changing,
fast and dynamic. Its supplier is from all over the world, wide global market and
intense global competition. Had external environment been relatively stable
prescriptive approach would have been fine. According to Henry Mintzberg, concept
of 10 strategic schools, Wal-Mart belongs to- The Entrepreneurial School. Company’s
strategic formation was a visionary process of its founder Sam Walton. It was Mr.
Walton’s idea to earn profit by making people save money. It was Sam Walton vision
and leadership that has provided Wal-Mart it current position and enormous success.
Mr. Sam’s values and vision is taken care by its current president and CEO, Michael
T. Duke. Mr. Duke has a vision to growth as a company, leverage to create
competitive advantage and high-return for shareholder. In, The Entrepreneurial
School a good CEO can benefit its organization with his vision and can overcome all
its shortcomings. Wal-Mart when lost its number one position in 2009, Mr. Michael
Duke with his leadership helped Wal-Mart knock-out Exxon Mobil to be #1 again.

7. Managerial roles by Mintzberg, in regards to Mr. Michael Duke’s

role in Wal-Mart
(Strategy Safari FT Prentice Hall, 2002 & Wal-Mart annual report, 09-10)

7.1. Interpersonal skills:

1. Figurehead- CEO’s decades of exposure in retail industry help him perform
his duties perfectly. He is role-model for his employee and is ‘Captain of the
ship’.
2. Leader- His vast experience in executive leadership help him in operating
multiple locations of Wal-Mart stores. His leadership helped Wal-Mart reach
#1 position in Fortune 100 companies in less than a year as CEO.
3. Liaison- He is good at maintaining and developing external contacts to expand
business in different countries.

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7.2. Information processing skills:

4. Monitor- Michael is a keen observer which helps him gather internal and
external information for business.
5. Disseminator-CEO cascade relevant information to individuals to facilitate
smooth functioning in business. He possesses full operating responsibilities in
national and global markets.
6. Spokesperson- He communicates to outside world about the performance and
the policy of Wal-Mart. Annual report of Wal-Mart is addressed by him,
where he communicates company’s new plans and strategies.

7.3. Decision Making Skill:

7. Entrepreneur-Mr. Duke is the one who designs and initiates change at Wal-
Mart. He has over 23 years of experience in retail with Federated Department
stores and May department stores. CEO means business, in every venture he
undertakes.
8. Disturbance Handler- He deals with roadblocks or any adverse occurrences in
operations. Recently CEO decided to close Wal-Mart’s Russian operation as
Wal-Mart was unable to find ‘suitable’ partner to work with in Russia.
9. Resource Allocator- CEO Handles and control business resources as he is
expert in corporate strategy, development and execution with available
resources.
10. Negotiator- Mr. Michael Duke is an excellent negotiator with other
organization and individuals.

8. Competition and business position

(Fortune Magazine)
Wal-Mart has competition from many companies inside and outside US. It is
undoubtedly number one company in Retailing and has a strong market position in
America, where it earns more than 75% of its revenue. Target, Costco and Sears
holding is it immediate competitor, rank-wise Target is at 30 and Sears holding at 48
position in annual revenue. Merger of Sears and Kmart got it to the position of
number 3 in America, although Wal-Mart is way ahead in competition nationally and
globally.

9. Wal-Mart business strategy- In accordance to Richard

Whittington
(What is strategy-and does it Matter, 2002)
The theories of strategy in organization are the basic of action. It is formed to
determine the result, to understand what is expected. Adopting a strategy has four
different view and perspectives. ‘‘Theories of action’’ -
• Planning-This classic approach, emphasize on the profitability, through
rational long-term planning. Return on capital has to be to maximize profit.
According to Alfred Sloan if strategy doesn’t work-out there is no point being

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in the business. Wal-Mart is very good at it every investment it does is backed

with strategic planning.
• Evolutionary-Is an efficiency driven approach, business rely on market for
profit maximization, top management role act as a second fiddle in the
approach. As best performer evolves as a winner in the market.
• Processual- It is craft-like approach. This method does not believe in Rational-
strategy of planning or depending on market for profit maximization. However
is depends on it available resources and conditions. This approach simplifies
complex processes to make profit.
• Systemic- An internationally-systemic approach, that believes in efficient
planning and effective execution in business. In this method social activity is
as important as economic. Business is made of social groups, thus this strategy
depend majorly on social environment of company, to attain goal.

Wal-Mart implements its business strategies on the classic approach. It does rational
planning to capture market-share or entering in new country. Wal-Mart has been
actively planning to get into Indian market for a long time. It has started a joint-
venture with Indian telecom giant, Bharti Enterprise to transform retail industry in
India. It is part of their long term planning for profit-maximization; and has done
good market research.

10.PEST analysis of Wal-Mart

(Planning and managing public relations campaigns, 2000)
PEST analysis is the external analysis of Macro-environmental factors, which
facilitate the internal drive of the business by understanding the business environment
or doing environmental scanning. Some analyst include two extra factors in this
‘legal’ (SLEPT analysis) and ‘Environmental’ (PESTEL or PESTLE analysis)
popular done in United Kingdom.
This framework would help Wal-Mart do external analysis to do the market research.
It is vital in determine market potential, business position, forming and implementing
operational strategies for its business. PEST framework would be essential in doing
green business which will help Wal-Mart, have no negative impact on local and
international environment, economy and society.

Four components/Factors
• Political- Would help Wal-Mart understand government and its impact on the
economy of the country. Company has to analyze law and order like tax
policy, trade law, tariffs, labor law and what influence does government have
on the country’s infrastructure, education and health. Stability of government
is also very important for the business; hence need to understand before
starting any new venture.
• Economic- Wal-Mart has to understand economic condition of market before
starting a new project. What is the interest rate on the cost of capital? What is
the inflation rate of the country? Should be thoroughly checked. Wal-Mart’s
business highly depends on supply chaining, exchange rate is important aspect
to consider as higher the exchange rate lower the profit, there are lots of

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goods Wal-Mart import-export to different countries and has stores operating

at different countries, thus a good study is mandatory.
• Social- Social factor is also very important for Wal-Mart. Each factor has its
importance in every business, but few factors are more important in a
particular business than other, like with Wal-Mart or any retail business or
B2B, social factor is one of the important factor. Wal-Mart need to consider
culture of the country, health of the people, and its population distribution- it
will help Wal-Mart in future planning like opening a new store or changing
business strategy. Education-factor to understand the job market, safety
measures required should be studied well. Transport of goods is also important
for Wal-Mart to balance the demand and supply of its customer’s need. Wal-
Mart has to carefully scrutinize all the reasons that influence social factor.
• Technological- This aspect is very vital as Wal-Mart rely heavily on its IT
based supply chain system. Wal-Mart’s R&D and automation that improves
the goods and services has to be considered more and relevant technology is to
be regularly upgraded and updated. Technology factor is vital in lowering cost,
improving quality and leading innovation at Wal-Mart.

PEST Analysis Diagram

Political
Product

Technological Price Strategy Promotion Economic

Place

Social

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11.SLEPT Analysis
(‘Legal’ in one extra factor added in PEST Analysis):
• Legal- Wal-Mart stores also need to evaluate the legal aspect before entering
market. Laws like Consumer law, labor law, employment law, health and
safety law has to be foreseen thoroughly to reduce any legal issue and
company can abide to all the rules and regulation of country/state.

12.PESTEL or PESTLE Analysis

(‘Environmental’ an addition in SLEPT Analysis):
• Environmental- Wal-Mart can consider weather condition; climate changes
basically ecological and environmental aspects of its market before entering
any new market. Wal-Mart has recently ventured in financial services, this
factor can be important if Wal-Mart start providing insurance as well to its
customer.
This analysis would help Wal-Mart plan its strategies and identify threats. It would
help business to exploit opportunity and explore new avenues. This framework is very
simple but requires time in research. It is vital, helps in anticipating future hassles and
minimizes them by systematic planning. Further planning can be done by doing
SWOT analysis on Wal-Mart.

To do business strategy development Wal-Mart can use five competitive forces.

13.‘Porter’s five force’ model on Wal-Mart

(Strategy Safari FT Prentice Hall, 2002)
It can also be done to analyze business competitiveness and attractiveness in market
through ‘outside-in’ business unit tool. It is frequently used business strategy tool. It
has five fundamental competitive forces, which are close to company and that affect
Wal-Mart’s earning/profit. It will help Wal-Mart identify the dependence that can
hamper company’s prospect in its earning:
Threat of new entrants depends on
• Brand loyalty
• Customer switching cost
• Economic of scale
• Subsidies to all new entrant
• Return on investment
Threat of substitutes depends on
• Quality
• Buyer’s preference
• Cost of switching
• Performance and benefit
Bargain power of buyers depends on
• Few buyers and many sellers

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• More supply, less demand

• Switching supplier easy
• Quality and service not important
• Substitute available
Bargain power of suppliers depends on
• More buyers and fewer sellers
• Profitability of supplier
• Strong- brand of supplier
• Easy to find new customer
Business rivalry depends on
• More competition when there is no market leader
• If degree of product-differences is high, competition is tough
• Low switching cost, high rivalry
• Competitive advantage through innovation and technology
Five competitive forces are best to assess the balance of power or dependency in
general term. It is an effective tool for competitive analysis and doing SWOT
analysis.

Porter five competitive forces diagram

Potential Entrants

Threat of new
entrants

IndustryCompetetors
Bargainingpower of
suppliers
Suppliers Buyers
Bargainingpower of
the buyers
Rivalryamongexisting
firms

Threat of substitute
providers

Substitutes

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14.SWOT analysis of Wal-Mart Stores:

(Planning and managing public relations campaigns, 2000)

Wal-Mart can do strategic planning by using SWOT analysis, which would help
company to do pre-crisis planning by evaluating its strength, weakness, opportunity
and threat. SWOT analysis can be done based on the objective of Wal-Mart’s project
or its venture. It could help business understand its ‘favorable’ and ‘unfavorable’ by
evaluating company’s internal factors- strengths and weaknesses and external factors-
opportunities and threats. Based on the outcome, grey-area in the business can be
rectified and area of improvement can be highlighted and corrected.

Wal-Mart’s Strength: All the advantage that business has above its competitor.

• Good market position- top in retailing.

• Great range of brands- Host of choices for customer.
• Aggressive marketing and expansion plan- Capturing global market.
• Excellent supply chain management- Best in the industry
• Good market in Brazil, China & Mexico- Doing better than local/home
companies.

Wal-Mart’s Weakness: its intrinsic characteristic that is its disadvantage.

• Legal issue- Lots of labor, supplier and health and safety related issues.
• Exit from South Korea and Germany- Due to political and adverse strategy
planning.
• Closing down of Moscow Wal-Mart office- According to Doug McMillon,
head of international business it could not find potential partner, thus was
forced to close down its operation in December, 2010.

Company’s Opportunities: External condition that are favorable for Wal-Mart.

• Own-brand product- Private product has good demand & high margin
• Capturing US healthcare and financial market- Apart from Retail it has good
future in this by catering to more to same customer.
• Increase in online sales and number of stores opening in different locations.
• Growth opportunity in Brazil, China & India, as these big countries will have
big sale for Wal-Mart.

It’s Threat: elements that are its obstacles in achieving objective

• Stiff competition from local and Home companies, Wal-Mart’s UK subsidiary,

ASDA is #2, after Tesco PLC.
• Opposition from different groups/communities- Many companies and small
time retailer are opposing its entry in their country. In India, there was strict
opposition by retailers to stop Wal-Mart from entering.

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SWOT analysis can thus help Wal-Mart in planning. It can also help business in
matching its strengths with the opportunities and converting its weakness or threat to
strength and opportunities.
SWOT Analysis Diagram

15.7S model for Wal-Mart

(Strategy Safari FT Prentice Hall, 2002)

The Mckinsey 7S framework would help Wal-Mart in its operational activities by

helping it achieve organizational goal. It has seven internal aspects which are to be
aligned and reinforced to improve performance, manage changes, and synchronize
department and its responsibility. 7S model is very beneficial in identify gaps and
inconsistencies in business.

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7S has two elements:

‘Hard-elements’ which has three internal aspects which are easier to define and
identify. These aspects can be influenced by management.

1. Strategy- Wal-Mart needs to plan strategy to get an edge in competition and

gain competitive advantage. Determine its objective, confront competition and
deal with customer demand. Its strategy has to focuses on market and
competition.
2. Structure- The hierarchy of Wal-Mart should be clear and easily associable to
avoid any lapses. Coordination between departments should be smooth and
align to attain common goal.
3. System- Job-responsibility should be concise and should get the work done
effectively across the board. Controlling, monitoring and internal rules should
be good and effective.

‘Soft element’ has four internal aspects and is hard to describe, less tangible in nature
and more culturally influenced.

1. Shared value- Wal-Mart should take care of its corporate culture and work
ethic. This aspect is centre to development of all the other six aspects or super-
ordinate goal. Team culture, work culture should be strengthened and should
achieve high results.
2. Skills- Individual skill and the job profile should match to the tee, skill gaps
should be curtailed and regular feedback should be given to enhance
performance.
3. Style – Business like Wal-Mart should frequently identify and develop the
management and leadership style adopted in operation. It should be effective
and should encourage team-work.
4. Staff- Wal-Mart employee and their assigned job responsibilities should be
competent. Staffing gaps should be taken care regularly for smooth
functioning of operational.

These entire elements are interdependent and a change in one aspect can influence
other as well. 7S model can help Wal-Mart in organizational change, resolve
ineffectiveness in business and sustain competition.

7S Model Diagram

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Structure

Strategy System

Shared
Values

Skills Style

Staff

16.BCG matrix for Wal-Mart

(Strategy Safari FT Prentice Hall, 2002)
It is Portfolio management tool, to determine product market share and market
growth. Wal-Mart has better chances of success if its product has bigger market share
and faster market-share growth. High-growth products need more investment and
low-growth products incur more cost. Thus, it is necessary for Wal-Mart to evaluate
all these segment in long-term to succeed.
Four segment of BCG Matrix
• Stars- All that product/project that has high growth and high market share for
Wal-Mart would require large investment and would generate large revenue. It
is the leader in business. For Wal-Mart its ‘Star’ is private-product as it has
high demand and earn high margin. Wal-Mart should invest more and increase
the range of own-brand products to earn more profit.
• Cash cows- Product that has low growth for Wal-Mart but has high market
share will have low investment, but would earn high profit. It is yesterday’s

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‘Star’, Today’s ‘Cash cow’. Chinese products were one of the highest selling
products at Wal-Mart but have now low growth due to low-durability.
• Dogs- Those products that Wal-Mart has low growth and has low share,
should be avoided and minimized. Company should opt for rescue plan if
certain product/project is not delivering cash. The best practice is to liquidate
and invest in profitable ventures.
• Question mark- Wal-Mart product that has low growth, but high share is worst
cash characteristics of all segments. It has high cash demand with low return.
If market share don’t change it can be a loss for the business. Best thing for
Wal-Mart would be to earn as much as it can without investing and get rid of
it.

BCG Matrix Diagram

BCG Matrix is a simple and effective management tool for large companies like Wal-
Mart. Wal-Mart can use experience curve to best of its benefit and get successful.
BCG Matrix can help managers in balancing current business profile and future
planning at Wal-Mart.

17.My suggestion for Wal-Mart.

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Wal-Mart would benefit from the above mentioned models, tools and frameworks. It
would provide Wal-Mart get proactive approach in ever-changing, global-scenario of
business. These tools would help in executive building and development in its entire
operation units. These models will serve in cross-functioning, goal-defining,
measuring success and creating competitive advantage for Wal-Mart.
According to Thomas Friedman, Author of international Business book of the year,
The World Is Flat, ‘‘Wal-Mart is the largest company of America, but it does not do
the single manufacturing of its product all is does is excellent supply chaining to the
last atom of perfection’’, according to me that is fabulous, no other retail business
thought about this before Wal-Mart. All this it has achieved is with excellent strategic
management and planning. So I would advise them to keep up the good work and
achieve more and more milestones for the business and for the benefit of the society.
As periodic review is must for the business, reviewing and revisiting these models is
high recommended for a large business like Wal-Mart.
Wal-Mart’s good strategic management system and these models would reduce
conflict in organization by setting clear guidelines for the business for national and
global operation and help it participate more actively in local, national and global
market. It would also speed-up formation and implementation of core strategies, by
empowering manager and focusing all in same framework of business-Like a ONE-
BIG-WINNING-TEAM.

18.Bibliography & References

Books
Sam Walton: Made in America, John Huey,1996
Strategy Safari FT Prentice Hall, 2002
What is strategy-and does it Matter, Richard Whittington, Ahlstrand & Lampel 2002
Planning and managing public relations campaigns, Anne Gregory, 2000
Wal-Mart annual report 1996-2010
Magazine & Newspapers
Business week,2010
Financial Times,2010
Fortune Magazine,2010
Websites accessed between- 8th Dec - 20th Dec 2010
Fortune.com
12manage.com
Mindtools.com
Books.books.com
Investors.Walmartstore.com

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