Walmart is one of the leading retailers around the globe operating with more than 11,000 stores in over 25 nations (Hunt, Watts & Bryant, 2018). The company was established in 1962 and has achieved significant success due to its effective business strategy (Hunt, Watts & Bryant, 2018). Walmart operates both physical and online stores to enhance convenience for their global consumers.
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The company reached an annual revenue of $500 billion in the fiscal year of 2017 and boasts of over 2.1 million employees from different parts of the world (Hunt, Watts & Bryant, 2018). Although Walmart is a leading company, it operates in a highly competitive market and shares its customers with competitors such as Tesco, Costco, Woolworths, Carrefour, IKEA, Amazon, and Target (Hunt, Watts & Bryant, 2018). However, Walmart has been able to maintain its cost leadership strategy that allows the company to retain customers by offering quality goods at affordable prices. Walmart’s slogan, “Everyday low prices,” gives the company a competitive advantage in the retail industry. This low price strategy allows Walmart to capitalize on its size to realize economies of scale. The company has depended heavily on cost leadership to become a household name across the globe. Walmart’s business strategies have also been centered on sustainability to conserve the environment and minimize the indirect costs. In addition, Walmart’s business strategies aimed at establishing a one-stop shopping by providing a broad assortment ranging from grocery to household wares.
Walmart has maintained its traditional mission statement,” We save people money so they can live better” (Hunt, Watts & Bryant, 2018). This mission statement is geared towards lowering the cost of living to enable people to make extra savings to enhance their lives. Walmart’s mission statement appeals mostly to the middle-class consumers who make up a large percentage of the overall customers in the retail industry. Walmart’s vision statement aims at provided quality products at low costs while maintaining sustainable production.
The international retail industry is experiencing an upward trajectory; this is as a result of the expansion of the middle-income class, especially among the emerging and developing economies. At the same time, the retail industry has experienced entrance of new competitors, most of which are online based such as Amazon, Alibaba, and eBay (Chatterjee, 2017). These companies offer a wide range of assortments over online platforms and delivery services. The preference of global customers has shifted, and thus, most customers prefer online shopping. The retail industry does not require huge capital to start up and run, and therefore, this has created stiff competition as new retain companies enter the market. The competition in the retail industry is quite high due to the existence of many small indirect retail outlets that take away a significant number of consumers (Hunt, Watts & Bryant, 2018). As a result, the market share for Walmart has shrunk considerably. Also, Walmart is facing a significant challenge in maintaining its cost leadership strategy due to the increase in production costs, primarily due to an upsurge of oil prices and inputs. Therefore, an increase in the costs of producing goods and services lower the profit margin and overall revenues. The food industry has experienced deflation due to shortages, and therefore, Walmart is not able to provide a variety of food products leading to a decline in sales (Hunt, Watts & Bryant, 2018).
Walmart’s strategy to lead on price may be ineffective given the dynamics in the global retail company. The cost leadership strategy may prevent Walmart from adjusting to the global financial situation. Walmart has mainly experienced significant challenges in some of its biggest markets such as the UK, Brazil, and China. In the UK, new retail companies have emerged offering goods and services at discounts. Thus, Walmart has continued to lose its market share since customers are tremendously attracted by low prices (DaSilva & Trkman, 2014). Also, in case Walmart increase the prices of its goods and services it’s likely to lose customer loyalty and loss a segment of its market share. Walmart will be compelled to adjust its activities to counter the various challenges (Chatterjee, 2017). This includes enhancing efficiency in operations, supply chain management and logistics, and an increase in its bargaining power. Walmart has also invested heavily in innovation and technology to help maintain its competitive advantage (Hunt, Watts & Bryant, 2018). The company has automated most of its processes to bring down costs and improve efficiency. Walmart needs to adjust its pricing strategy to accommodate the global financial situation and events such as oil prices and new competitors (DaSilva & Trkman, 2014). At the same time, Walmart should improve its internal processes to enhance efficiency and cut costs.
The stock price will increase when Walmart decides to adjust its pricing strategy. However, Walmart should aim at putting the price of goods and services slightly lower than its competitors in order to attract new customers and maintain consumer loyalty. Secondly, Walmart needs to integrate its digital platform with the physical stores to enhance the customers’ shopping experience (DaSilva & Trkman, 2014). Walmart should also abandon its traditional store strategy and instead focus on enhancing shoppers’ accessibility (Chatterjee, 2017). Thus, instead of setting up big retail outlets, the company should focus on establishing small outlets in multiple places to enhance accessibility. It is evident that the retail industry has undergone a massive transformation whereby most consumers prefer shopping online (DaSilva & Trkman, 2014). Thus, Walmart should invest heavily in establishing “click and collect” online platforms to attract online customers and boost its sales.
The company should also aim at being competitive by providing a wide range of assortment to meet the needs of global companies (Hunt, Watts & Bryant, 2018). This strategy will help it counter competition from its direct and indirect competitors including the small retail outlets. This business strategy is highly effective in the global market whereby tastes and preferences vary significantly. In addition, Walmart should aim at providing efficiency in the supply chain and logistics for cutting down the overall costs. By maintaining effective internal controls, Walmart will be able to create a barrier for new competitors who cannot keep up (Hunt, Watts & Bryant, 2018). This is because efficient processes help lower the operational costs allowing the company to register an increase in profits (DaSilva & Trkman, 2014). Lastly Walmart should invest heavily in researching cultural elements in different regions. This would allow the company to provide unique goods and services that reflect the tastes and preferences of the customers from different locations. Walmart had initially experience failures in Germany due to a lack of cultural awareness, and thus, it should consider analyzing the cultural elements and beliefs of different populations (Hunt, Watts & Bryant, 2018).
The global retail market is experiencing new dynamics, which affects the operations of retail companies. Since its inception, Walmart has maintained a low price strategy whereby it offers goods and services at competitive prices compared to its competitors. This has allowed the company to experience significant growth in the retail market and also counter the growing competition. However, the costs of production have continued to increase due to a strong currency and fluctuation in oil prices. Thus, Walmart should adjust its business strategies to accommodate these changes. The first change will be a slight increase in the price of goods and services. This strategy would work as long as Walmart’s prices remain slightly lower compared to its competitors. The second change would require Walmart to integrate its digital platform with the physical stores to enhance consistency in pricing and delivery. Also, Walmart should deviate from establishing big shopping outlets and instead focus on expanding multiple retail outlets to improve shoppers’ accessibility. This would help increase store visibility and accessibility thereby countering the stiff competition from direct and indirect competitors.
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