Capstone Project Report 1
Wal-Mart Stores Inc. is a multinational company based in the United States, with its headquarters at Bentonville, Arkansas. Sam Walton founded the retail giant in 1962 and later incorporated in 1969 in Delaware. Wal-Mart is currently the leading retail brand in the country and around the world through internationalization. Currently, the company serves its customers in 27countries in more than 11,300 stores under 69 different banners (corporate.walmart.com, 2018). Amazon, Costco, and Kroger are the three leading competitors for the company. However, through its competitive strategy, based on cost leadership, the company has managed to remain competitive. The firm capitalizes on house brands or store brands (or private brands). Carl Douglas McMillon is the CEO and president of Wal-Mart, a position he assumed in 2014. Regardless of the competition and changing economic times, Wal-Mart has remained successful in the retail market because it keeps changing its strategy to adapt to changes in the market.
Mission
Wal-Mart’s mission defines the basic guiding principles of the company because its success emanates from the ability to fulfill the mission. The firm’s mission is “to save people money so they can live better” (Prieto, Phipps, & Addae, 2014). The company’s strategic objectives include the use of a generic strategy aimed at achieving a competitive advantage. Founded on the fundamental principles of Sam Walton, its founder, the low-cost strategy enables the business to sell its products at relatively low prices to overcome the increasing competition in the market.
Product and Market
Wal-Mart sells various products in almost all categories and brings to the market what their customers want. Their products include groceries, health goods, furniture, appliances, hardware, wellness, and entertainment products (Ferguson, 2019). The company’s target market is low- and middle-income earners, with strategically-located outlets to meet the needs of the target market. Wal-Mart’s market share in the US is 66%, while internationally, it has a market share of 23% (Share of Walmart’s net sales worldwide in 2020, 2020). Therefore, regardless of competition, the company retains a considerably high market share in the country and internationally.
Industry Summary
Retail markets are ancient because humans have always needed consumer goods to survive. Furthermore, it is one of the biggest industries in the US and globally, but top companies control the largest percentage of the market. For example, besides Walmart, Amazon.com Inc., and Costco Wholesale control a large percentage of the retail market share. However, Walmart still takes the leading share of the market, nationally and internationally.
Industry Environment
The global retail industry is one of the oldest because people have always demanded consumer products for basic consumption. Thus, Walmart selected the most critical sector in the market to venture. The global retail industry has been growing over the years, and experts anticipate that it will continue to grow into the future. The forecast for 2020 was 4.1% growth rate, which would be a slight decline from 4.5% in 2019 and 5.8% in 2017 (Global Retail Industry Growth Rate, 2020). The unwillingness of consumers to spend amid economic uncertainty is the leading factor behind the negative changes in the retail industry globally. Regardless, the future of the industry remains solid and among the most successful because people will always consume consumer goods. The leading competitors in the market, besides Wal-Mart, Amazon, and Costco are Whole Foods Market, eBay Inc., and Home Depot. The industry is old and mature, and although companies can still enter and succeed, they face considerable competition. However, they can still explore the potential of emerging markets and create business strategies to venture into the new markets. Wal-Mart has employed an expansion strategy to succeed in emerging markets.
Industry Challenges, Competition, Change
Although the retail industry is growing, it continues to experience numerous challenges, regionally, and globally. The enormous transformations in the industry have left many people wondering what the future holds. Regardless of the changes, any argument that the industry is struggling or dying is baseless because it will continue to change over the years, and businesses that can adapt to the changes will thrive. The current retail industry experience two major challenges, rapid technological changes that demand innovation and increased competition because more firms enter the market using technological frameworks. (Global Retail Industry Growth Rate, 2020). Consequently, the industry is under increasing pressure to consolidate or risk decline. It experiences slow brick and mortar growth and increasing demand to compete aggressively. Consolidation, thus, enables companies to expand and venture into new markets around the world. Besides consolidation, through strategies such as mergers and acquisitions, companies in the industry seek ways to reduce the cost to insure the affordability of their products in the market.
The retail industry in the US and globally also experiences other changes and pressures for companies in it to adapt and change their operating strategies. For example, the increase in the use of technology within the industry and related changes in regulations demand companies change the way they interact with their customers. Besides, changes, such as the growing use of social media, has changed the needs and demands of customers. Consumer tastes have changed, including the increased need for convenient shopping. Consequently, companies, such as Wal-Mart and other retailers are forced to change their strategies to adopt the use of technology (Global Retail Industry Growth Rate, 2020). For instance, it is the only way the firm can compete with e-commerce giants, such as Amazon. Wal-Mart and other countries should implement considerable changes in their operating strategies and approaches to succeed, such as increasing the use of technology and new media to appeal to customers.
Porters 5 Forces
The model helps companies to determine the appropriateness of the industry and the potential for growth. The retail industry in the US and around the world is considerably fierce and intense, which means that companies entering the industry should have an intense competitive strategy. The threat of new entrants is also high because of the ease of entry through technological platforms or e-business models. Besides technology, the industry has a very high threat from substitutes because of numerous changes, such as online shopping, new payment modes, and home delivery services. The bargaining power of the buyers and suppliers is high because they can easily switch to competitors to purchase or sell their supplies (Management Study Guide, 2020). Therefore, companies operating in the market should understand the current state of competition and adapt accordingly.
Markets
The retail market is increasingly changing because of new models, such as technological platforms where new companies can operate outside of the brick and mortar model. However, companies can take advantage of emerging markets, such as in Asia (China, Japan, and India). Therefore, their opportunity for growth is in the emerging markets because current markets, such as in the US, are saturated. Besides, through consolidation, significant companies, such as Wal-Mart, can expand and grow.