Walmart Comparitive Strategy Essay Example for Free

Walmart Comparitive St yardgy EssayThis paper looks at Wal-Mart Stores as the subject of try out. This large United States establish organization is know as the worlds leading seller and has extensive global available influence. Wal-Mart has been the object of much research, both by economists, employment organizations and scholars. This company has evolved from genuinely humble beginnings to holding itself as an economic power in its own right. Wal-Mart opened its first store in 1962, in Rogers, Arkansas, ground on its founder, Sam Waltons construe in the selling sector during the 1950s, and a study he conducted prior to opening his first store. In 1972, the Wal-Mart stock was offered on the New York Stock transfer which led to significant capitalization and growth. During the 1980s, Wal-Mart have it awayd rapid growth opening Sams Club members-w arhouse stores and later Supercentres. A recent corpo browse drive release sums up its current status, Today, 10,185 sto res and club locations in 27 countries employ 2.2 million associates, serving more than 176 million customers a year (Wal-Mart Corporate, 2012, p. 1). Understanding the Wal-Mart pedigree standardWal-Marts position as the worlds No. 1 retailer inevitably invites strong competition oecumenic. This in turn has beef up this organizations resolve to maintain their position by utilizing multiple strategies in order to maintain competitive advantage. One of their strategies has incorporated the ability to carcass relationships or partnerships not only in the United States, but excessively at heart the supranational environment. In order to implement its abroad representation, Wal-Mart has embarked on an working out program, seeking to maintain both growth and returnsability. Its primary methodological analysis in securing partnerships with large afield retail operations has been in the main by the erudition of majority shareholdings.Much research has been conducted regardin g the viability of acquisition and potential problems inherent indoors this corporate growth strategy. Effort is order within this study to ascertain the long marches viability of Wal-Marts implementation of modern economic principles. This analysis is conducted regarding opinions derived from researched sources either favoring the implementation of trade and comparative advantage utilizing the acquisition mechanism or perhaps the date of less opportunistic methods. Moreover, the issue of salutes and profit maximisation go away be evaluated relating to the Wal-Mart model in order to establish strategies that can be use in order to achieve optimal efficiency. However, there are conflicting view grades regarding the best methodology needed to enable much(prenominal) efficiency. Finally, attention is direct at the consumers choice, and how it is directed and influenced by strategies implemented within the Wal-Mart corporate business model.Competing viewpointsIn evaluating trade and comparative advantage via the acquisition trail, Hayward (2002) suggests that multinationals tend to invest in foreign start-ups rather than getting existing abroad operations. His argument is based on the premise that for an organizations planned entry into a foreign market, expertise derived from a multinationals existing operational and marketing experience is more relevant to overseas market entry than the benefits derived from acquisition. However, he concedes that expansion by acquisition can be enabled by investing in existing overseas operations which have a similar corporate product and direction function, or by acquiring a more assorted though related business model, which will allow for market changes to be factored into any bump analysis. Hayward and other sources are accessed, so as to provide a balanced viewpoint of an organization such as Wal-Mart regarding its choice of acquisition strategy and its metier in achieving growth and profitability.Costs and p rofit maximization is also looked at by enabling research into previously conducted studies. Wal-Mart has exploited cost and profit strategies by utilizing and capitalizing on its ability to offer products at rock bottom prices due to its enormous buying power and also committing suppliers worldwide contractually to price and cost control agreements. This has enabled this organization to start out advantage of the economic environment in the U.S. and elsewhere within countries in which it has operations. This advantage leverages its buying power, allowing it to offer the best need by focusing on product costs and potential higher volume of sales thereby maximizing its ability to impact global retail markets.Jones and Hill (1988, p. 160) maintain that a transaction requiring cost can be more effectively enabled if facilitated within the organizations corporate infrastructure or internalizing, rather than by enabling such transactions within the marketplace. This paper looks at how Wal-Mart internalized its ability to control costs by facilitating a diversity of acquisitions within overseas markets. Apposing Jones and Hills (1988) findings, Denis, Denis and Sarin (1997, p. 135) point to studies which suggest that the cost of diversification outweigh the benefits. This paper seeks to establish more definitively the viability of costs and profit maximization via the acquisition methodology within the Wal-Mart corporate business model.Further attention will also be directed at consumer choice and how it is impacted by costs and profit strategies incorporated within Wal-Marts operational function. Key to this organizations diversification strategy has been its ability to supply and meet consumer expectations worldwide. fit to research conducted in 1985, it was qualityd that consumers choice was driven by three variable buying habits (Quigley, 1985). Firstly, the consumer tends to select one choice when looking at a product even when offered many alternatives. Se condly, products on offer to the consumer are endowed with a large range of options and variety. Finally, the issue of price is a consideration that ask to be factored into the consumers expectations.Countering Quigley (1985), another source points to evidence suggesting that consumer participation is achieved not only by price instruction, but also by providing non-price information (Degeratu, Rangaswamy Wu, 1999, p. 8). present their hypothesis maintains that allowing the consumer too much choice can compromise the consumers long term participation as a loyal customer. This tends to counter Quigleys point of view, from which in part he suggests that the consumer is motivated by a large range or variety of choice. Furthermore, Degeratu et al. (1999) argues that establishing consumers personal preferences enable choice to be restricted and issues such as price to be focused on specific product choices. This in turn allows the ability to negate competitors influence by diverting the consumers attention from a wide choice to a product personalized to include aspects such as price and brand. One of Wal-Marts discover marketing strategies is to attract the consumer by the offering of rock-bottom priced consumables. This paper endeavors to establish what really drives and captures consumer choice, with save attention allocated to further research sources in order to establish why Wal-Mart focus so much marketing attention on product price .Anticipated EvidenceThis study acknowledges that evidence from research offers many validated opinions related to the abovementioned trade and comparative advantage, costs and profit maximization and consumer choice. Based on evidence obtained relating to Wal-Marts growth and profitability, effort will be focused on accessing credible information from further sources that validates this organizations decision to implement acquisition strategies that are both strategically sound and dear to both the supplier and consumer a like.Moreover, attention will be directed towards obtaining information and data that promotes Wal-Marts costs and profit maximization via strategies including the combining and internalizing of available resources. client choice will be further investigated so as to establish how this organization was enabled to achieve marketplace leadership by focusing on primarily on consumers expectations of price, whilst factoring in crucial considerations relating to brand and quality. While directing effort into the sourcing process, recognition will be given to the diversity of sources available, with viewpoints garnered from those sources perhaps not directly connected with economics or the retail industry.Additional InformationDue to the significance of Wal-Marts dominant position within the planetary retail industry, consideration will be directed at additional factors that may be relevant to its growth and profitability. One factor that perhaps deserves some further researched evidenc e relates to overall management of costs, not only directly related to products (for resale), but also concerning the cost control of issues such as money transfer, rally rate mechanisms and entry into overseas markets that is exposed to encounters presented by cultural diversity and local traditions. Accessing these and other (perhaps secondary factors), may indeed shed light on this papers primary objective which is to establish how trade and comparative advantage, costs and profit maximization and customer choice impact and influence Wal-Mart, based on the variety of information and opinion sourced.DiscussionOverview Three Economic Strategies.Attention is now directed to ascertaining the importance of establishing factors that influence the economic viability of the Wal-Mart business model whilst acknowledging its consistent historical growth pattern enabling it to become the worlds leading retailer. As briefly mentioned earlier, this study looked at various factors add to its critical competitive advantages, leveraged in part by its ability to set up overseas operations by investing in acquisitions. Utilizing the acquisition methodology of growth has raised concerns by previous research regarding if acquisition is the preferred or most efficient way to facilitate growth objectives on an international scale.Moreover, mentioned was allocated earlier to Haywards (2002) claim, in which a multinationals accumulated operational and marketing track record is more influential to successful overseas entry than by enabling the acquisition of another business operation. Further attention will be given later in this study regarding the viability of international growth via acquisition. This study has also verified the implementation of costs and profit maximization by the Wal-Mart management structure thereby allowing this organization to utilize ontogeny fiscal resources in order to maintain its dominant position within the international retail marketplace. Such dominance was facilitated in part by supplement its enormous organizational buying power on a global basis in order to extract the lowest product cost from suppliers thereby increasing the possibility of a higher profit margin.In turn, creating the lowest possible cost retail product range for resale purposes, has allowed effort to be directed to consumer choice, as without the vital component of consumer participation, no business can enjoy financial longevity or long term sustainability. Perhaps it is important to understand that within the law of economics, comparative advantage is enabled by one competitor retaining the ability to produce a product and service at a lower cost than other competitors thereby creating an inequality of competitiveness. It may be argued that comparative advantage can be further exploited by acquiring competitors rather than engaging in an environment of conflict. This raises the question whether the investment needed to effect acquisition is more fi nancially viable than by directing financial resources to combating potential competitors.Another consideration propagating the argument towards favoring an acquisition suggests that this corporate strategy enables the usage of resources from a base of existing suppliers and consumers whereas starting from scratch in an overseas marketplace requires significant resources being allocated to catching up to existing retailers marketplace penetration. Strategy based on the latter option may result not only in over-investment or excessive capital expenditure, but also necessitating additional time to be allocated to effecting a market entry strategy. As has already been noted, previous research has varying viewpoints regarding which route is more financially effective and sustainable.Therefore, the thesis of this study will be to establish that acquisition, effective costs and profit maximization and targeted consumer choice are invariably linked and are perhaps the most effective econo mic way to enable growth and profitability, especially pertaining to a large corporate infrastructure such as Wal-Mart. This idea will be demonstrated utilizing the Wal-Mart operational business model, both from a historical point of view and also from its current operational function. Implementation Viability Three Economic Strategies.As previously noted, this U.S. organization has exploited these three strategies by utilizing the existing infrastructure, consumer base, experience and local knowledge of the acquired company. This has been achieved whilst capitalizing on its own ability to introduce sophisticated management and operating systems, derived and articulateed both in the U.S. and via a number of worldwide partnerships enabling the procurement of products at rock-bottom prices. In addition, significant investment into hardware and software technology has enabled this organization access accurate data and information quickly and efficiently.Perhaps one of its greatest bus iness strategies in developing comparative advantages was the planned penetration of overseas markets, which may not have been so exposed to such a high level of expertise as their Western counterparts. This expertise has been derived from characterisation to the ongoing development of business systems and comprehensive utilization of human resources. Their expertise also incorporated a company and management culture that encouraged the promotion of talent, including enabling the availability of both in-house and external based training.Furthermore, another strategic development facilitating their competitive advantage was the penetration of the Asiatic marketplace, an area of the world which had not been impacted so severely as in Western markets since the onset of the global economic recession in 2008. Furthermore, due to Asias lesser exposure to debt and systemically faulted credit mechanisms, Wal-Mart was able to exploit its penetration of Asian markets due to a higher consume r demand thereby leveraging their enormous internal buying power by trading with economies such as china and India, in order to facilitate growth and profitability. Overall its penetration of international markets has enjoyed remarkable success and is endowed with multiple opportunities. This fact is verified by a recent analysis of the Wal-Mart business model, Over time, the international segment probably has the greatest opportunity to improve sales and operating margin (Forbes.com, 2012, p. 1).Their strategy of sourcing bargain-priced products by utilizing their enormous purchasing power has enabled this organization to pass on the benefits directly to the consumer, thus facilitating their ability as a leading international retail competitor to compete effectively against more established overseas retail chains. Therefore, due to a severe competitive environment in the United States, Wal-Mart will no doubt continue to take advantage of overseas markets, which may allow it to fu rther utilize their sophisticated management and monetary control systems within an easier and less competitive operating environment. To date, this organization has implemented this advantage by employing a corporate culture incorporating in part, international expansion and penetration by means of acquisition. Furthermore, Wal-Mart further developed their advantage over competitors by employing sophisticated exchange control mechanisms that reduced their risk exposure to fluctuations of foreign funds. They achieved this in part, by pricing their revenues and costs utilizing a strategy of securing a fixed or more stable exchange rate on which to base their costings and revenue forecasts.Whilst acknowledging their pellucid success which was enabled in part by their strategic management planning gaining access into global markets, further study from previous research is now directed to the critical evaluation of alternative overseas market penetration strategies. In addition, focus into the feasibility and effectiveness of costs reduction and profit optimization is also included within this investigation. Inevitably this study will also factor in the enhanced ability of the consumer to enjoy options that allow both choice of product, and change magnitude purchasing power due to rock-bottom product pricing.According to a study conducted into organizational fit and acquisition performance, it is argued that acquisitions are known to have a high failure ratenearly half of all acquisitions are rated as being unsatisfactory by managers of acquiring firms (Datta, 1991, p. 281). It is also surprising to note that companies and organizations targeted by acquiring companies have an above average chance (over 50%) of experiencing a fall in profitability. According to Datta (1991), challenges posed by the corporate targets of acquisition include implementing and combining the operational functions of both the acquirer and the acquired. This is indeed challenging in ove rseas markets where cultural differences and corporate practices are perhaps significantly diverse in nature.However, balanced against this argument, Datta (1991) did not constructively conclude that the same profit related challenges are faced by acquiring companies. It can possibly be inferred from Dattas (1991) study that the benefit of acquisition may be more weighted in favor of the company conducting an acquisition. Assuming that this company assumes a majority control over the acquired companys infrastructure and operational function including an existing consumer base and marketplace penetration, further suggests that the trade and comparative advantage lies with an future(prenominal) organization such as Wal-Mart.Supporting this thesis in part, Dussauge, Garrette Mitchell (2000, p. 100) claim that no one business can create all resources needed to prosper and grow, however they continue to maintain that collaboration (p. 100) between competing companies allows each compa ny to possess and leverage complementary resources (p. 100) thereby enabling the exploitation by both participating companies of opportunities within the marketplace. Dussauge et al. (2000, p. 100) further adds that such collaboration facilitates the ability to ensure survival and growth. However, this paper cautions that based on Dattas (1991) research, such exploitation may be more beneficial to the incoming acquiring company.Attention is now focused on the economic aspects regarding the maximization of profits and minimizing costs. Wal-Marts exposure to exchange risk is significant due to capital investment into overseas markets from which it is assumed that subsequent returns of investment (ROI) will in part be transferred pricker to the United States. Furthermore, issues such as incurring debt and ongoing initial overseas expenditure including legal costs are also budgeted necessities that require the enactment of silver control mechanisms.Also assuming the implementation of a larger and more diverse product range made available within the newly acquired overseas marketplace, accumulating procurement expenditure for resale products from overseas suppliers and business partners will be to be factored into the costs analysis. To reduce its risk exposure to fluctuations of foreign currency, Wal-Mart has priced their revenues and costs by securing a fixed or more stable exchange rate on which to base their costings and revenue forecasts. The methodology employed to reduce exchange rate risks was by utilizing interest rate changes as a report studying Cash flow instruments points out, The Company Wal-Mart was party to a cross-currency interest rate swap to hedge the foreign currency risk of certain foreign-denominated debt.The swap was designated as a cash flow hedge of foreign currency exchange risk (Wikinvest 2008, p. 1). This factor incorporating the leveraging of exchange rate mechanisms has continually facilitated maximized profitability and minimized costs. However, on a cautionary note, exchange rate mechanisms are by no means guaranteed to remove potential exchange rate losses, but can be seen to perhaps dilute or lower the risk of foreign currency and exchange rate losses. Furthermore, due to Wal-Marts enormous purchasing power and ability to source the lowest priced products and services from cheaper overseas suppliers, minimal costs are achieved whilst also subsequently allowing the maximization of profits to be realized.Moreover, the benefits attributed by optimizing costs and profits, facilitates passing on to the consumer, both choice and low prices. However, revenue based on price and choice is not necessarily conducive and conclusive to enabling long term consumer loyalty. This was noted earlier in a study conducted by Degeratu et al. (1999), in which they argue that giving a consumer too much choice creates an environment in which competitors can compete on a level footing, whereas by personalizing the marketing away from price and a wider choice negates in part the threat from competitors.ConclusionBased on the aforementioned sourced evidence, this study suggests that enabling trade and comparative advantage is indeed viable by implementing expansion and growth via a strategy of acquisition. Despite evidence some pointing to the high failure rate of acquisitions and the possibility of achieving growth by internalizing expansion, such evidence does not disprove that the proven success already demonstrated by corporate organizations such as Wal-Mart, cannot be continued to be planned and implemented. Perhaps the primary factor allowing this positive viewpoint of acquisition is regarding the significant time needed to build and develop market share in a new overseas market. According to Singh and Montgomery (1987, p. 378), internal development into a new market can take up to eight years in which to achieve accrual of returns. Further supporting acquisition, Singh and Montgomery (1987, p. 379). ma intain that such markets may be characterized by strong barriers to entry, further justifying Wal-Marts strategy of comparative advantage by acquisition.Accepting the relative initial high investment of acquisition, as compared to that of internalized growth, creating mechanisms to allow costs efficiency is of vital necessity in order to create positive cash flow and sustainable growth. These findings have showed that the combination of purchasing power and mechanisms operose the risk of exchange rate losses, have in part led to the success of one of the worlds largest companies. Additionally, acquiring existing overseas operational structures provides a company such as Wal-Mart the opportunity to offer the consumer the best deal due to the collaboration, expertise and infrastructure of two related corporate entities. However, this study would be remiss by not cautioning against the possibility of future areas of conflict between corporate collaborators, in the event of inequality of opportunity between collaborators as highlighted earlier in this paper by Dassa, (1991, p. 13).