Impact of Globalization and Technology
Walmart was established by Sam Walton in the year 1962 as a small retail outlet in Arkansas. The main idea on which Walton started operations was on providing the greatest possible variety of consumer goods to people under one roof at the lowest possible prices. Since Walmart’s opening, the company has established itself as the highest revenue generating company in the world as per the data collected in 2016 by Fortune Global 500. Despite the company’s expansion in more than 28 countries, operating 63 different banners at 11,633 store locations, it remains a family owned business with the Walton family maintaining control of over 50 percent of the share holdings (Mourdoukoutas, 2016, p. 3).
The reason why Walmart has been able to become a global giant in the category of grocery retailers is because the founder’s vision of keeping the customer as the top priority was never lost of forgotten. As Walmart spread out to other parts of the United States from Arkansas, the company relied on making the maximum possible use of the latest technology that was available in order to globalize its business model (Wij, 2015, p. 7).
It was during the 1980s, that Walmart made the first important technological change to its business. By this time, Walmart had setup operations across Arkansas, Kansas, Louisiana, Missouri and Oklahoma, spreading later to Tennessee, Kentucky, Mississippi and Texas. It was therefore considered important to have a consolidated database of inventory and sales to which all 1200 of its different outlets had instantaneous access. In order to achieve this, a satellite network costing $24 million was completed which allowed data and voice transmission as well as a feature that allowed the head office to keep a track of the current inventory and the sales figures in real time (Mourdoukoutas, 2016, p. 5).
The various services that Walmart has added to its portfolio since then, all rely on the use of the latest technology to provide more convenient access to customers. A classic example of this are the extensive online features that the company’s website offers. This includes online payment solutions such as credit cards and money transfers, as well as the option for customers to place orders online and pick them up from the store in person later. This edition of E-commerce solutions and the development of mobile applications have allowed Walmart to the leader as a digital retailer and its services such as Walmart pickup and Pickup Today are used extensively by customers across the United States.
Application of Industrial Organization and the Resource Based Models
The Resource Based View is a strategic management concept that is utilized to help organizations achieve a sustainable competitive advantage. It is an inside/outside view of management in which the key internal resources of the company are the most integral in order to assume and maintain a market leadership position. The internal resources can be both tangible and intangible (Wij, 2015, p. 7).
In the case of Walmart as well, there are considerable resources that can be utilized to maximize the retailer’s profitability. The tangible assets in this case include the giant physical warehouses of Walmart, the thousands of Walmart stores located across the world as well as the internal layout of its discount stores that maximizes a shopper’s access to the largest assortment of brands and product categories. The online shopping options that Walmart has established in partnership with various tech farms from the Silicon Valley also form an integral part of its tangible resources. The intangible assets in this case are Walmart’s highly recognizable logo, its credibility and reputation in the market as well as the customer engagement and trust that the retailer has managed to earn since its establishment.
Another important element of the Resource Based View is that the resources of a company must be unique, and not easily transferable to competitors. The business model of Walmart plays the most important role in this regard. The most integral element is the company’s strategy of cost leadership that competitors have so far been unable to copy. Called “Lead on Price”, the company’s supply chain is the most extensive in the world and has been built upon the single minded focus on supplier relationships. The company’s strategy of buying in bulk allows it to achieve economies of scale by buying at the lowest possible price from suppliers. Furthermore Walmart’s strategy of “delivering a great experience”, through a highly skilled and trained workforce of almost 2.2 million employees means that its customer service representatives are polite, courteous and helpful to the thousands of visitors to the stores (Mourdoukoutas, 2016, p. 4).
The Industrial Organization Model, unlike the Resource Based Model adopts an outside-inside approach to achieve competitive advantage. According to this theory, it is the external environment of a business that creates opportunities as well as threats that determine the possible strategies that a business can adopt to maximize its business potential. The model also assumes that competitors operating within the same industry have more or less the same set of resources at their disposal. This model goes completely against the resource based view in that it assumes that the internal tangible and intangible assets can be easily transferable amongst different organizations (Mourdoukoutas, 2016, p. 5).
In my view, the industrial organization does not justify Walmart’s leadership in the retail industry despite the extensive competition that it faces on a day to day basis. Organizations such as Amazon, Best Buy and Target pose a significant competitive threat to Walmart that have been unable to overtake its customer base or market share. If the logic of this model holds true, then it would suggest that Walmart, Amazon and Target all operate within the same external framework and therefore almost similar business strategies, with their internal resources not playing a substantial role in their sales figures (Wij, 2015, p. 8).
As evidence and retail audits suggest this is not true at all.
Mission and Vision Statements and the Role of Stakeholders
The vision and mission statements of Walmart are perfectly encapsulated in the following words of the founder of this business, Sam Walton:
“THE SECRET OF SUCCESSFUL RETAILING IS TO GIVE YOUR CUSTOMERS WHAT THEY WANT. AND REALLY, IF YOU THINK ABOUT IT FROM YOUR POINT OF VIEW AS A CUSTOMER, YOU WANT EVERYTHING: A WIDE ASSORTMENT OF GOOD QUALITY MERCHANDISE; THE LOWEST POSSIBLE PRICES; GUARANTEED SATISFACTION WITH WHAT YOU BUY; FRIENDLY, KNOWLEDGEABLE SERVICE; CONVENIENT HOURS; FREE PARKING; A PLEASANT SHOPPING EXPERIENCE.”
Decades after Sam Walton started Walmart, the values mentioned above have still been maintained in the strategic business strategies of the company. The cost leadership formula, event today, remains the basis of Walmart’s billions of dollars of revenue. It is also important to note that the company pays particular attention to all of its stakeholders. Customers are the primary focus which is why Walmart claims to provide the greatest variety of merchandise, the best quality of customer service and an efficient and effective returns policy to keep its customers happy. Its front end and back end employees are the backbone of Walmart’s successful operations. This is why considerable investment has been made in human resource training for its employees so they stay motivated and loyal. A share of profits, higher salaries and sales commissions are some of the strategies that have been used to keep the workforce content. Equally important is Walmart’s relationships with its suppliers across the globe, which is why the company is able to buy at the lowest costs when compared to any of its competitors (Mourdoukoutas, 2016, p. 6).
References
Mourdoukoutas, P. (2016, January 16). Who Killed Walmart's Business Model. Forbes, pp. 3-6.
Wij, R. (2015, November 6). Understanding Walmart's Business Model. R&P, pp. 7-9.
