Report on Walmart's Influencing Organisational Strategy and Challenges

This report provides a comprehensive analysis of Walmart's influencing organizational strategy. It begins with an executive summary and introduction to the company's global operations, including its various store formats and financial performance. The report delves into Walmart's performance, highlighting its revenue growth and return on equity, and assesses its industry attractiveness through a five-force analysis, examining rivalry, threats of substitutes, supplier power, barriers to entry, and buyer power. The principal functions and activities are explored using value chain analysis, covering inbound and outbound logistics, operations, marketing, sales, and customer service. Furthermore, the report evaluates the sustainability of Walmart's competitive advantages, focusing on its resources and capabilities. It also addresses the challenges faced by Walmart and the measures taken to sustain its performance, such as enhancing product quality, store transformation, and globalization, concluding with insights on its heavy investment and differentiation strategies.

RUNNING HEAD: Influencing Organisational Strategy 0
Walmart
Influencing organisational strategy

Influencing Organisational Strategy 1
Executive summary
Walmart Inc. operates retail stores worldwide. The company operates activities through various
stores like cash and carry, supercenters, discount stores, warehouse clubs, electronic stores, drug
stores and convenience stores. Influencing organizational strategy is the strategy used by
companies to achieve long term goals. This report is going to explain influencing organization
strategy in terms of company’s performance, principal function and activities and sustainability
of competitive advantage. The challenges faced by Walmart are also discussed and measures
taken to sustain performance. These measures are enhancing quality of products and services,
transformation of discount organizations to supercenters, formatting new stores and
globalization. At the end conclusion is given to justify performance by heavy investment and
differentiation.

Influencing Organisational Strategy 2
Contents
Executive summary.....................................................................................................................................1
Introduction.................................................................................................................................................4
Performance of Walmart.............................................................................................................................4
Walmart’s principal functions and activities................................................................................................8
Walmart’s competitive advantage sustainable...........................................................................................11
Challenges faced by Walmart measures taken to sustain its recent performance and defend against
competitive threats....................................................................................................................................13
Conclusion.................................................................................................................................................15
References.................................................................................................................................................17

Influencing Organisational Strategy 3
Table of figures
Figure 1: Performance of Walmart..................................................................................................4
Figure 2: 5 Force analysis of Walmart............................................................................................6
Figure 3: Value chain analysis of Walmart...................................................................................10
Figure 4: VRIO Model...................................................................................................................12

Influencing Organisational Strategy 4
Introduction
Walmart Inc. is an American trade corporation and runs chain of grocery stores, hyper markets,
drug stores, electronic stores, supercentres and discount department stores worldwide. Walmart
drives through three divisions Walmart U.S., Walmart International and Sam’s club. The head
quarter of company is in Bentonville, Arkansas. The company was the world’s biggest company
in terms of revenue. The company has increased revenue in every single year. Walmart’s record
of growth and profitability has been even more challenging but it’s return on equity never fall
below 19%.
Performance of Walmart
Wal-Mart belongs to the service sector in the ‘Discount, Retail’ industry. The performance of the
organisation is outstanding as described by the fact that it was marked as the biggest company of
the world in terms of revenue in the year 2015. It has a remarkable record of growth and
profitability since the year when Wal-Mart went public (Johnson, 2016). Every single year, the
revenue of the company has subsequently increased and the company made sure that its return on
equity never falls below 19%. This was maintained even after war, turmoil of economic
recessions, the rise of e- commerce and political crises.

Influencing Organisational Strategy 5
Figure 1: Performance of Walmart
The performance of Walmart attributable to industry attractiveness can be assessed by the 5 force
analysis:
Rivalry among existing firms: Competition is penetrating among existing firms. Walmart has cut
throat competition from other grocery stores and supermarkets like Dollar Tree, Costco
Wholesale Corporation, Macy’s Inc, Dollar General Corporation and more. The changes in
grocery industry are in the favour of major supermarkets like Walmart, Safeway, Kroger and
Costco from last two decades. The market share of these companies is constantly increasing in
comparison to the small size grocery stores. It is because of the cost advantage grew through the
cost cutting scheme.
Threat of substitute products and services: The company sells products of various categories like
groceries, health and wellness, hardware, home furnishing, apparel, household appliances and
entertainment. Walmart sells abundant range of products so there is no threat of substitute
products for the company. It sells extensive range of products as well as substitute of products.
So, the threat of substitute products is irrelevant for the company.
Bargaining power of Walmart suppliers: The bargaining power of Walmart’s suppliers is
extensive. The company obtains the lowest price from suppliers to sustain it’s cost leadership
strategy. The company paid USD 13.5 billion to it’s suppliers in 2015. The Walmart suppliers

Influencing Organisational Strategy 6
are requisite to meet with the specific requirements related to employees health, safety,
insurance, food safety and others. The company also maintains supplier diversity program which
is a part of corporate social responsibility.
Strong barriers from new entrant barriers: A new can achieve considerable market share by
reaching at minimum efficient scale. The reasons such as composite and wide distribution
network, number of stores to justify delivery network and the data management system
corresponding to supply and demand are responsible for volume selling. So, it is prerequisite to
made high capital expenditure. It is advantage for Walmart as it has already significant market
share and has large economies of scale (Mellahi, et. al. 2016).
The bargaining power of buyers: The bargaining power of company’s buyers is low. But due to
increasing competition in the market the bargaining power of buyers is increasing and forcing
company to keep it’s prices low. The switching cost is low for customers as they can switch to
other companies easily which are providing substitute products at low prices. Walmart should
focus on customer satisfaction to improve it’s market position.
Figure 2: 5 Force analysis of Walmart

Influencing Organisational Strategy 7
Other than the five force analysis there are some other advantages which contribute to the
industry attractiveness:
New sectors of retailing: Walmart has opened branches in new sectors of retailing. It has moved
into dispensary, locomotive repair shop and grocery sales. After expanding physically and
geographically it has expanded in terms of sale and competing with rivalries. The company has
also infringed into pharmaceuticals, jewellery sales, home electronics, photo finishing,
automotive supplies, home horticulture and travel arrangement (Cao, Huo & Zhao, 2015). The
company has recently also started business of grocery store with “Neighbourhood Markets”.
High differentiation: The Company has high differentiation in industry through product
offerings. Walmart innovates products which attracts customers and meet their needs and
requirements. The company focuses on keeping prices low which is clear from one of it’s slogan
that is “Everyday Low Prices”. The company’s famous pricing strategy “roll-back” is developed
to monitor competitor prices and offering low prices. The company stands out by purchasing,
distribution, warehousing and selling (Camisón & Villar-López, 2014).
Acquisition of retailers: Walmart has recently done acquisition of Moosejaw. The company is
buying relatively small and unprofitable retailers such as Moosejaw, Shoebuy.com Inc. and
Jet.com. It can help in product variety or expertise. The company is focussed on developing e-
commerce gradually. The sale of company on 11 e-commerce site has grown by 20.6%. The
goods sold on the e-commerce sites have increased by 16.8%.
Extent to competitive advantage are :
Distribution capabilities: Walmart has efficient distribution system. For instance cross docking,
prevalence of company’s own distribution centres and inside out location strategy. It helps in
lowering price of company which results in more customer satisfaction.
Partnership relationship with distributors: Walmart incorporates distributors via information
technology. It treats well in way of pricing. It has improved supply chain and has lowered
distribution costs (Colbert, Barrick & Bradley, 2014).

Influencing Organisational Strategy 8
Workforce culture: Walmart’s customer oriented workforce has motivated through monetary
participation and belief in work culture. The workforce is not limited to lowering cost and
compromising self-service. It equally focuses on improving loyalty of customers.
Walmart’s principal functions and activities
For the purpose of analysing the sources of competitive advantage in Wal-Mart, especially when
the superior efficiency is concerned, the resources and capabilities re required to be identified
from its principle functions and activities. The company’s function and activities can be
identified from the value chain analysis. The value chain analysis is a systematic outline that
supports in classifying business activities which can form value and competitive advantage for
the company (Chadwick & Raver, 2015). The value chain analysis can be divided in following
activities:
Primary activities:
The primary activities of Walmart in value chain analysis include:
Inbound logistics: The company’s products in US come from the foreign dealers. 75% sales of
walmart.com derived from the non-store inventory. The inbound logistic activities are based on
the following principles:
Minimum amount of contacts in supply chain: From the 1980s Walmart initiated to exclude
dealers in the supply chain of company and started to work with manufacturers directly. After a
few years, this decision put positive impact on the bottom line. The efficiency of company has
improved in a constant manner after such practice.
Establishing strategic relationships with sellers: The company executes restriction on the various
phases of business at the time of negotiation with potential suppliers. Walmart tries to obtain the
lowest prices by practising their bargaining power in order to retain it’s cost leadership
strategy.Thee company offers strategic partnership to the potential suppliers for long term view
and involves in bulk purchases for lower prices.

Influencing Organisational Strategy 9
Using cross docking as an inventory approach: Cross docking refers to the direct allocation of
products from incoming or outbound trucks without extra loading, by receiving items from an
inbound truck and stocking materials directly into outbound trucks with no loading in between
(Shepherd & Rudd, 2014).
Operations
The company operates worldwide with more than 11000 stores in 27 countries. It assists around
260 million customers every week. The series of Walmart includes supermarkets, warehouse
clubs, supercentres, hypermarkets, Sam’s clubs, home improvement, cash and carry, restaurants,
drug stores, electronics and convenience stores (Kramar, 2014). The operations of company are
divided in following segments:
Walmart US: This is the largest operating section. Walmart US includes three main store setups
and digital retail in all states of US, Puerto Rico and Washington D.C. This segment generated
about 60% of total net sales in 2015.
Walmart International: This part involves company’s retail, wholesale and other trade operations
in 26 countries outside US. Walmart International contributed around 28% of total net sales in
2015. This segment raises mainly through acquisition of businesses (Deery & Jago, 2015).
Sam’s club: This segment consists of association only warehouse clubs, Sam’s club functions in
48 states in Puerto Rico and US. In this segment, association income is the largest source of
revenue and it contributes 12% of company’s revenue in the fiscal year of 2015.
Outbound logistics
The company runs complex outbound logistic operations due to the size of company. The
Walmart e-commerce websites have been already launched in 11 countries. The regular size of
four US e-commerce fulfilment centres were also opened in the financial year 2016. Walmart
tries to increase it’s outbound routing and cargo structure procedures in a efficient manner to rise
overall efficiency of operations and attain cost reduction (Selznick, 2014). For instance,
optimization of outbound storage by the execution of ORTEC’s routing and load building
procedures in US actually resulted in saving 4 million gallons of diesel fuel.
Marketing and sales

Influencing Organisational Strategy
10
The marketing strategy of the company tries to associate brand image with ample variety of
products, low prices and easy approach to stores through several channels. Walmart utilises it’s
both online and offline channels in a combined manner for promotions and sales. It shifts
gradually towards online channels to convey marketing message to the target customers. It
facilitates that sales is more cost effective. It adds to the sustainability of company’s cost
leadership strategy (Wu, Straub & Liang, 2015).
Service
Initially, the company had a poor status in terms of customer service due to payment of low
wages to staff to sustain cost leadership strategy. The CEO declared pledge to improve customer
service feature of the company. It was initiated in 2015 by the investment of USD 1 billion in
US to provide higher wages and training.
Figure 3: Value chain analysis of Walmart

Influencing Organisational Strategy
11
Walmart’s competitive advantage sustainable
The resources and capabilities of Wal-Mart provide the competitive advantage and address the
key issues concerned with sustainability.
The resources and capabilities of Wal-Mart are not easy to replicate. The resource of Wal-Mart
which cannot be replicated is its corporate size. Such large corporate size leads to large
purchasing capabilities of Wal-Mart which makes it capable of pressurizing the suppliers for
providing preferential discounts. Other retailers do not stand close to Wal-Mart when
comparison is made in terms of volume. Wal-Mart is also strong in terms of the financial
resources as it has the lowest cost of capital.
The various capabilities such as the general management capabilities, HRM capabilities and in-
store management capabilities are all dependent upon a key resource which is the culture of Wal-
Mart. This culture is unique to Wal-Mart (Mills, 2017). Every aspect of the management
systems and methods and the tangible resources of Wal-Mart might be replicated by the rivals
but the reason behind the success of Wal-Mart is its culture which includes the beliefs, values
and behavioural norms that perform the function of holding all the factors together. The
company has extremely sustainable competitive advantage the way it is able to recognise source
of advantage. It can be assessed by the VRIO analysis. It stands for value, rarity, imitability and
organisation which made Walmart to develop set of rules for evaluating different resources and
capabilities.
Value: Value is what Walmart is doing with it’s resources and capabilities to defuse any threats.
The company stays real to Sam Walton and shows it value it’s customers, employees and drives
low cost. The low cost is the reason which brings customers back to the store. Especially when
the consumer knows that leadership cares about customers they surely like to continue business
with the company. The company shows it’s value by doing business in medium and small
markets. It brings jobs to the company and helps households to save money by it’s cost
leadership competitive advantage which other retailers are not successful in doing so. Walmart
brings low cost in the market and other retailers have to drop price in the market otherwise they
can be put out of industry.