Wal-Mart: Strategic Initiatives for a Changing Market

MGT 521

Wal-Mart: Strategic Initiatives for a Changing Market Local, state, and national economic trends play a large part in the success and failure of businesses. When the economy experiences a downturn, consumers spend less and seek more for the money they do choose to spend; this puts companies in a unique situation. Many companies must choose between increasing prices and letting employees go in order to keep themselves in business. The United States recession of 2008 put employers in the same situation; in fact, this recession put employers in an even more difficult position. The recession saw a decrease in employment of over 6 percent—double that of all previous postwar recessions (Auguste, Lund, & Manyika, 2011). The retail sector lost 1 million jobs during the most recent economic recession. Since then the industry has added over 90,000 jobs, but this still results in job losses offsetting job gains due to this rough economic time (McCall, 2011). Wal-Mart, like any other retail business, feels the effects of recent economic trends. Unfortunately, Wal-Mart has had to resort to eliminating health insurance coverage for part-time employees and increasing premiums for other workers in an effort to cut costs (Wright, 2011). This strategy, though unfortunate, allowed the company to cut costs during the recession without eliminating positions or increasing prices. Wal-Mart also implemented strategies to increase profits even before the economic downturn. In 2005, the company implemented a plan to target wealthier consumers—outside of their normal blue collar clientele—with a more modern marketing campaign (Kabel, 2006). The company also began stocking more high-end merchandise to cater to this group of consumers (Kabel, 2006). In order to stay in business, a company must work to increase business during good economic times as well as bad. The juxtaposition of the two strategies Wal-Mart has used (eliminating health coverage and targeting a wealthier customer base) shows that the company knows how to adapt to changing markets; they have awareness of what strategies to implement during economic upswings as well as downturns. In addition to managing a changing market through business strategies, Wal-Mart also focuses on meeting strategic goals to increase the bottom line for the company. One tactic the company started implementing involves opening stores in more urban areas. However, the stores will be much smaller than the typical 150,000 square foot “big box” model (Massey, 2010). These “Smallmart” stores will allow the company to enter areas where large open areas are few and far between (Massey, 2010). This strategy allows the company to access a previously unobtainable customer base as well as bring jobs to places with high unemployment and fresh food options where not many exist. The store plans to implement the smaller store format in Chicago, San Francisco, Detroit, and New York ("Wal-Mart Plans to Take Another Shot at Convenience," 2010). Another strategy that Wal-Mart implemented to meet strategic goals involves bringing products back to the shelves. Over 8,000 products were returned to stores—many in grocery and consumable categories—and positive results followed soon after (Springer, 2011). Wal-Mart’s US CEO Bill Simon explained the strategy and results simply, “Our customers can't buy it if we don't sell it. And if we don't sell it they will go somewhere else to buy it. Even in a small category like air fresheners, where we added an opening-price-point item, sales are up 88%.” This also allows the company to remain a “one-stop shop” for consumers (Springer, 2011). People come to Wal-Mart in hopes of getting everything they need at once, and increasing the number of available products can only help in that endeavor. Human resource management plays a very important role in allowing a company to meet its business goals. Without hard-working, talented employees to support it a company can struggle with obtaining the level of success it hopes to achieve. If Wal-Mart has struggled in any area related to achieving their business goals, it is human resource management. In fact, Wal-Mart faced off against some of their female employees to dispute allegations of gender discrimination in the Supreme Court (Moran, 2011). Wal-Mart recognizes that human capitol can dramatically affect market value and strives to increase competitive advantage by focusing on performance; the company hopes to advance business goals by creating a good workplace culture and performance management process (Reed-Woodard, 2010). This ideology has spread to Wal-Mart’s international businesses as well. Wal-Mart Canada has one of the 10 most admired corporate cultures in Canada and was voted one of Canada’s best companies to work for by Hewitt Associates many times over the past decade ("Wal-Mart is Committed to Being a Great Place to Work," 2011). Clever business owners know employees that feel appreciated by their company want to make that company succeed; carefully selecting employees and investing in them by training for success can help employers cultivate this attitude among their staff. By carefully evaluating prospective employees during the hiring process and training them to perform well, Wal-Mart Canada has reduced new hire turnover by 10% ("Wal-Mart is Committed to Being a Great Place to Work," 2011). Many factors, including those mentioned here, must be considered by mutual fund managers when determining whether or not to invest in a company. Wal-Mart’s ability to weather tough economic situations, implement strategies to meet business goals, and focus on employees as a means to make the business more successful prove that they would be a strong company for a mutual fund manager to invest in. I would willingly invest in this company due to their longevity, creativity, and projected success in the retail sector. An overall business analysis for Wal-Mart comes out in the company’s favor. A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis on Wal-Mart shows that the company should focus on increasing Internet sales while maintaining the appeal of the “one-stop shop”. A benchmarking analysis between Wal-Mart and competitor Target indicates that Wal-Mart should rebrand their Great Value private label to make it more appealing to consumers and less like a “bargain brand.” Wal-Mart should continue to implement tactics to achieve strategic goals, such as bringing products back to the shelves. Though the company has weaknesses and areas to grow in, they also boast many successes and have a very bright future.

References
Auguste, B., Lund, S., & Manyika, J. (2011). The Changing Shape of US Recessions. Mckinsey Quarterly (4), 100-101.
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Massey, D. (2010). Here Comes Wal-Mart. Crain’s New York Business, 26(45), 1.
McCall, M. D. (2011). Deep Drop in Retail Trade Employment During the 2007-09 Recession. Monthly Labor Review, 134(4), 45-48.
Moran, T. (2011). Women Versus Wal-Mart. World News with Diane Sawyer, 1.
Reed-Woodard, M. A. (2010). Maximizing Employee Value. Black Enterprise, 41(2), 56.
Springer, J. (2011). A Giant Fix. SN: Supermarket News, 59(26), 14-34.
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Wal-Mart is Committed to Being a Great Place to Work. (2011). MMR, 28(15), 8.
Wright, D. (2011). CUTTING BACK. World News with Diane Sawyer, 1.