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Wal-Marts organizational structure consists of a divisional structure. A divisional structure has three different categories in which are product structure, market structure, and geographic structure. Wal-Mart falls under market structure. This is where groups function by types of customers so that each division contains the functions it needs to service a specific segment of the market (p.514, George, Jones).
man, Sam not only satisfied with the present operation but also tried any possibilities to bring his business into another level, discount retailing. He eventually withdrew from Ben Franklin’s franchising and opened his own store incorporated with his new idea, Wal-Mart Discount City in Rogers, Arkansas, July 2 1962. Sam’s brilliant ideal and successful operation allows Wal-Mart expanded from one store to thirty-eight store cross-states within eight year. Wal-Mart went to public in 1970, and it became the first company to reach 1 billion within 9 years. Up to 2004 Wal-Mart has 4,906 store world-wild, and 9 billion in profit. Despite some of controversial issues about its operation approaches, Wal-Mart’s dramatic rapidly growth is phenomenal in business community, and its successful business model has been eulogized world-wild.
There are several key competitive edges that keep Wal-Mart successfully maintaining its leading position in the industry. First of all, Wal-Mart’ multiple store formats allows Wal-Mart to extend their customer base. Since Wal-Mart opened its first store in Rogers, Arkansas, July 2 1962, it has extended its store number from 9 stores to a total 4,906 throughout the four types of store: (Discount stores, Supercenters, Sam’s club, and neighborhood markets) Wal-Mart is able to embrace more customers to fulfill all kinds of demand such as live supplies, groceries, pharmaceuticals, and entertainments. As a result, Wal-Mart’s sales and profit increase significantly. Backward expansion strategy is another key for its success. Unlike other retail stores, Wal-Mart opens its stores in small town first before entering into metropolitan area.
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Wal-Mart is well known as the world’s largest private employer and the nation’s largest retailer. Wal-Mart serves as a company resources and capabilities to form competencies that allow a firm to offer increased value to the marketplace. In addition to gathering and retaining employees with needed expertise including retailing, marketing, distribution, finance and human resources, Wal-Mart designs its operations to minimize costs. For example, its inventory management and distribution systems reduce costs by the placement of its regional distribution centers to locations that offered lower labor and transportation costs. Centralized locations are another attractiveness Wal-Mart has in their competitive advantage. Besides, by linking all operating units and corporate offices via the largest private satellite communication system in the U.S, it allowed Wal-Mart transferring data, voice and video communication among each other in different geographical location. Among its varied uses, this system speeds and streamlines inventory replenishment. Wal-Mart also builds its organizational capabilities by in-creasing its expertise in various relevant functional areas including retailing, marketing, distribution and finance. These competencies are focused on accomplishing the selected unmet opportunity that Wal-Mart customers deserve to always find the lowest prices with excellent customer service.
Global expansion will be another factor of the effectiveness of Walton’s brand name. Wal-Mart’s international expansion enable Wal-Mart obtain more market share globally. There are total 1,288 Wal-Mart stores worldwide and it contributes 16.7% of total sales in fiscal year 2003. Due to the culture differences, Wal-Mart operates different types of stores in different countries accordingly after carefully studying the local culture. In addition, instead of setting up a whole new operation oversea Wal-Mart has acquired some of local supermarket chain companies and employed and promote natives into management level to run the operation. These international management approaches provides the key elements for Wal-Mart’s global success.
Moreover, Wal-Mart uses cutting-edge technology and bargain power with its suppliers to achieve low-price strategy which has always been company’s strongest competitive edge. First of all, Wal-Mart uses bar code system and now electronic product code (EPC) to control its inventory. By doing so, Wal-Mart is able to improve checkout time for the customers and trace its inventories on stock. Therefore, it is more efficient on the working site. In addition, the variety of store type and large number of stores gives Wal-Mart a high market share in many different kinds of product categories because of Wal-Mart’s high volume purchase, it has tremendous power to receive as low price as possible from its suppliers. To apply these two strategies, Wal-Mart is able to lower its cost of good sold, and it has positive effect on its gross profit margin.
Furthermore, Wal-Mart has efficiently invested their money. Wal-Mart’s return on assets has been remaining above 8% since 1993. This ratio represents every one dollar that Wal-Mart invests into its assets can generate over 8 cents of profit. As a retailer, Wal-Mart uses its assets effectively. Besides, Wal-Mart has a very good capability to generate more values for its stockholder. According to return on equity (ROE), Wal-Mart’s stockholders are able to receive over 20 cents for each dollar they invest in Wal-Mart for return in last ten years.
Wal-Mart always has the system that most of the retailer would like to follow, but it seems to fail all the time. Just-in-Time Inventory (JIT) is the method that Wal-Mart applied throughout their store. Wal-Mart used it as a management system to control their inventory from their warehouse. JIT system was used as a tool to minimize inventory investment and materials arrive at the time they are needed. However, inventory turnover can be increased which will result in a higher profit margin for Wal-Mart. This eliminates the need for safety stocks, and reduces inventory on hand. Thus, there must be extensive coordination between Wal-Mart, supplier and logistics to meet schedules for the inventory dateline.
Wal-Mart has opportunities in international market and e-commerce. Wal-Mart can carry its business model into the international market. Although, Wal-Mart has already expanded its business outside of the United States for years, there are still more chances for Wal-Mart to explore. For example, Wal-Mart’s business in the most of foreign countries has only one or two types of store; however, Wal-Mart’s experience and existing resources enable Wal-Mart to operate the four types of store that they have been successful in the U.S. Therefore, successfully integrating its experiences and resources will create more opportunities for Wal-Mart in international market. Moreover, Wal-Mart should explore to e-commerce more. As people’s live style have been changed dramatically due to the existence of inter net, Wal-Mart should be more aware of this market and be more aggressive to occupy the market share. Wal-Mart has existing upstream sources and efficient distribution channel. They now only need to discover more downstream market to extend its business model which the on-line shopping a great opportunity for them.
Wal-Mart was not the first U.S. chain store retailer in the first place, but because of its successful and innovative business model leads the company to the number one position in the retail industry. Wal-Mart’s success contributes by its innovative strategies: different type of stores to fulfill wilder range of customer base, backward expansion to make the operation runs more efficient, and international extension to gain more market share and more sales volume. However, the fast and rapid growth causes Wal-Mart encountering a liquidation issue. Wal-Mart’s current liability has exceeded its current assets since 2000, and it might endanger Wal-Mart to finance its on-going operation since the creditors might be affair of Wal-Mart cannot fulfill its short-term obligation. Moreover, e-commerce and huge amount of law suits threaten Wal-Mart’s business. It is like to have prickles down the back-ill at ease for Wal-Mart, and Wal-Mart gradually losses its grounds. In conclusion, Wal-Mart’s future is in international market and e-commerce. As long as Wal-Mart is capable of incorporating its existing resources and efficient operation into international market and e-commerce, Wal-Mart phenomenon will continue for another forty years.
There are always alternative that Wal-Mart supposed to manage to keep on their competitive. Firstly, Wal-Mart should remain its business model to keep its competitive advantages. Secondly is the horizontal integration. This means many retailers are losing ground in the domestic market, Wal-Mart can acquire those financially unhealthy companies to gain more market share. Next is the vertical integration. Wal-mart should acquire some suppliers to lower its cost of sales to compete with other retailers. Lastly is the global and e-commerce expansion to extend its market towards world wide.
My recommendation for Wal-Mart would be more global and e-commerce expansion. The domestic retail market will be sooner or later be saturated if Wal-Mart continues its growing pace. Afterward, Wal-Mart needs to find another battle field to remain its growth. Yet, Wal-Mart has successfully entered some international market already. Still, not all four types of Wal-Mart’s store are being introduced to every region. In addition, on-line shopping is another market that Wal-Mart should focus on. Nowadays, more people are getting used to shop on line due to the changing of our lifestyle; thus, Wal-Mart should be aware of the change and catch up to the trend in order to not be eliminated through the new competition. In conclusion, I think global and e-commerce is Wal-Mart’s future, and capturing customers’ attention from these two markets can bring Wal-Mart into next level.