Analysis of Local and Global Competitive Strategies
The selection of a strategy for achieving and sustaining a competitive advantage is crucial for a company in the contemporary, highly competitive business world. In this regard, the strategic direction selected by Wal-Mart for its local and international expansion plays an essential role in predetermining its future outcomes. When identifying and assessing a growth strategy for Wal-Mart, one should evaluate its strengths and weaknesses that would inform the appropriateness of the selected strategic decisions. Diagnosis of the true nature of the problem will be derived after examining internal and external Wal-Mart’s decrease in sales. Further on, the diagnosis will be used to decide if the strategy used by the company was good but poorly executed or a poor strategy.
Assessment of Internal and External Factors
The strategic approach used by Wal-Mart had some strengths that were capable of helping its growth. The first strength was refocusing on the everyday prices strategy of fixed cost for thousands of products because it uses economies of scale. Secondly, opening smaller stores in urban markets helped ensure their products were available to more customers. Finally, expanding to international markets prevented the company from relying on revenues from the U.S. only (Clauss et al., 2021). On the other hand, the approach had a weakness of thin profit margins due to focusing on the cost leadership style. Further, extending its stores internationally can make it weak in some areas. Another weakness the company faces is overdependence on the U.S. market.
Additionally, the growth strategy by Wal-Mart has provided it with some opportunities. Moving to international markets has allowed the company to expand its business, which it has not reached. Another opportunity is strategic alliances through acquisitions and mergers with small companies to become more profitable. On the other hand, Wal-Mart faces the threat of political and legal issues that can hinder operations in some countries. Another threat is the entrance of small companies into eCommerce offering similar products.
Wal-Mart Strategy Analysis
The strategy selected by Wal-Mart was multifaceted and rather aggressive in terms of its extensive and deliberate performance aimed at using the weaknesses of the competitors. The company used offensive initiatives that targeted rivals’ weaknesses, such as high prices and small markets (Thompson et al., 2018). The exclusion of small businesses owned by local entrepreneurs from the market to eliminate the competition was one of the core characteristics of Wal-Mart’s strategy. Although it allowed for attracting more customers, the long-term outcome of such an approach was destructive to the company’s image and the public’s perception. In particular, the strategy of lowering prices was not successfully implemented due to the inconsistency of setting the lowest price, which led to losing customers over time to dollar stores. Moreover, the unsafe human resource strategies related to the company’s unfair employee treatment contributed to the general public’s negative perception of Wal-Mart.
In this regard, it is relevant to apply the institutional theory to analyze the quality of the selected strategy. Indeed, this theoretical framework holds that organizations function as social stakeholders dependent on external factors in general and public perception in particular (Dubey et al., 2019). Wal-Mart failed to consider the social relevance of its decision-making in a long-term perspective, which led to its negative reputation and deteriorated image. On the other hand, the focus on international markets was a relevant strategic decision validated by the globalization trends and the availability of the global competitive market.
Wal-Mart failed to solve its problems, including a negative reputation, stiff competition, business acquisitions, joint venture constraints, and stringent cultural values in foreign markets. The stiff competition was from other retail stores that adopted a low-price strategy. For example, Wal-Mart faced stiff competition in Canada and Mexico because small grocery and retail stores have established a niche in the two countries. The company faced a negative reputation caused by low wages, employee exploitation, and low prices. Due to these diagnoses, the company’s growth rate in the U.S. and international markets was jeopardized.
Decision and Recommendations
To determine if EDLP, new smaller stores, and aggressive push in the international markets was a bad or good strategy poorly executed is important. The strategy was meant to drive Wal-Mart to its initial success. Additionally, the strategy involved programs that would help the company achieve its goals. Since the approach involved lowering prices and expanding the company’s territories, it was wise. However, it failed because the company faced challenges such as a negative reputation and stiff competition from other retail stores. For the executives to ensure that the company regains and sustains its competitive advantage, it is recommended to plan and implement feasible initiatives with a less aggressive agenda. Moreover, public opinion should be considered when launching a competitive strategy. Given the implications of the institutional theory, the anticipated long-term benefits for the company’s competitive advantage should be based on the contribution to corporate responsibility and value generation.
Clauss, T., Kraus, S., Kallinger, F., Bican, P., Brem, A., & Kailer, N. (2021). Organizational ambidexterity and competitive advantage: The role of strategic agility in the exploration-exploitation paradox. Journal of Innovation & Amp; Knowledge, 6(4), 203-213. Web.
Dubey, R., Gunasekaran, A., Childe, S. J., Blome, C., & Papadopoulos, T. (2019). Big data and predictive analytics and manufacturing performance: Integrating institutional theory, resource‐based view and big data culture. British Journal of Management, 30(2), 341-361.
Thompson, A., Peteraf, M., Gamble, J. & Strickland, A.J. (2018). Crafting & executing strategy: The quest for competitive advantage: Concepts and cases (21st ed.). McGraw-Hill Education.