Walmart Dissection - Strategic Dissection Paper

Zachary Keene

August 7, 2011

Strategic Dissection Paper

Before analyzing Wal-Mart's corporate strategy, it is important to choose what business Wal-Mart is in. For instance, if Wal-Mart is in the industry of selling consumer merchandise such as TV's, sheets, clothes, etc then it is pursuing a concentric strategy by entering the food industry. However, this changes depending on how you examine what business Wal-Mart is in. Wal-Mart is in the business of selling everything consumers need in their everyday lives. This includes the consumer merchandise listed above as well as food-service items. Even still, Wal-Mart pursues numerous strategies. Unrelated Diversification, Wal-Mart continually finds more consumer merchandise to sell at its stores which can take money from competitors. Additionally, when Wal-Mart entered into the food market, it rapidly consolidated and held to high-quality, saleable products. Wal-Mart never forays too far into a market and only sells what will make it revenue. A dispute can be made that Wal-Mart is also pursuing a forward integration strategy. Wal-Mart has developed its own name brand to sell products called Sam's Choice. This puts Wal-Mart into the business of making things like soda, cereal, and dog food. While they still don't grow their own crops or raise their own farm animals, it is still a form of forward integration. Also, Wal-Mart works heavily with its suppliers. This symbiotic relationship can be seeing as forward integration due to the stage at which Wal-Mart analyzes its suppliers and improves their manufacturing processes, etc.

Wal-Mart absolutely has the business strategy of Low Cost Leadership. They do nothing to really differentiate themselves from competitors and offer no-frills self-service stores that always supply the lowest prices. Wal-Mart has built enough thump with suppliers that they can order the prices and go in and modify suppliers manufacturing processes in order to squeeze out more and more savings for the consumer. Everything that Wal-Mart does from calling suppliers collect to having executives double up in hotel rooms is to save the customer money. While they do try to offer good quality customer service on top of low prices, Wal-Mart's strength is low-prices. No one has such a supplier and distribution network like Wal-Mart that allows such low prices.

One feature of Wal-Mart that sets them apart from other corporations is how they run their relationship with their suppliers. We have determined that Wal-Mart is such a leading force and has become such a significant account for their suppliers that they have managed to do away with Supplier Power. By eliminating Supplier Power, Wal-Mart can chase achieving their goals and focus purely on their Cost Leadership Strategy, which serves the consumer with "Everyday low prices." However, the fact that Wal-Mart is able to ignore Supplier Power begs the question of where exactly does Wal-Mart obtain its power? Additionally, if Wal-Mart has almost eliminated Supplier Power, then what kind of relationship do they have with their suppliers?

Wal-Mart's power is resulting from their size and the pressure that comes with it. A look at Wal-Mart's numbers is the evidence of Wal-Mart's size and power. Some of Wal-Mart's figures contain 23% of Clorox's sales and 20% of Revlon and RJR Tobacco's sales. If these companies decide to walk away from their supplier association with Wal-Mart, then they would lose out on nearly a quarter of their revenue. The fact of the matter is that this same notion extends to all of Wal-Mart's other suppliers like Kraft, Proctor & Gamble, Gillette, Campbell's Soup, and many more. The realism that these suppliers live in is one where they know that their Wal-Mart account is one that they cannot afford to lose. In fact, suppliers are also faced to look at the predictions that, in an estimated five years, Wal-Mart will double in size, which mean Wal-Mart's account with only continue to produce.

As Wal-Mart continues to produce and develop, they should also continue