Discussion of Walmart’s New Capabilities

Critically analyse the role and function of formal and informal institutions and evaluate how global companies may best respond to different regional settings in their strategy development and implementation processes.

Critically discuss how successful companies can achieve global competitive advantage through creating and exploiting entirely new capabilities that go beyond those of competitors’. How should this process be managed effectively?

Critically analyse the strategic motives which explain why multinational companies engage in Foreign Direct Investment and contrast the range of different methods available for this purpose.

Evaluate the specific challenges facing start-up and SME companies in their desire to expand globally and discuss the extent to which you agree with the rationale of growth models such as the Uppsala model.

Evaluate the process of global competitive dynamics and explain the various tactics and strategies that global companies may adopt in order to outperform their rivals.

With the progress of time, the Multinational Companies (MNC) and such organizations are becoming more and more competitive, and thus, success is not limited to one particular destined point. With the increase in technology, innovative demand of target markets and strategic alliances, organizations are building their empire to be even more active and concrete. Some of the most successful companies are Apple Inc., Google Inc., Microsoft Corporation, Tesco, Telstra, Walmart, Toyota, Daimer Chrysler, Coles and Woolworths (Hwang and Park 2015). Each of these organizations has their strategic movements with respect to target market satisfaction and by utilizing market survey tools. However still they lag due to the improper market distribution channel, demand analysis, sales strategy, and leadership problems. Without differences in corporate strategies, organizations cannot capture larger market segment.

In order to determine, how successful companies can achieve the global competitive advantage through creating and exploiting entirely new capabilities, the most successful retail giant Walmart has been chosen. Walmart falls under the retail chain industry founded fifty-four years ago in the year 1962 by Rogers in Arkansas, U.S. At present, the organization is having 11,620 employees and is serving both developed and developing countries (Abdullah Saif 2015). he range of products of Walmart is electronics, movies, music, home and furniture, clothing, home improvements, jewelry, footwear, shoes, pet supplies, health and beauty, fitness and sporting goods, auto and photo finishing, party supplies, craft supplies and grocery (Walmart.com 2016). In the year 2015, the revenue earned by Walmart was US$485.651 billion (Walmart.com 2016) The organization even has a lot of subsidiaries such as Asda, Vudu, Seiyu Group, Walmart e-commerce, Amigo Supermarkets, Massmart, and Lider. Thus, from here it can be understood how far Walmart has raised up its business across all nations including all types of product categories.

In this essay, Walmart retail organization will be taken as the base of the study and the possible exploitation of new capabilities will be discussed.

Walmart has been able to achieve most of the market share just by product differentiation. The number of products ranges from various categories and thereby enabling Walmart to reach all major types of target markets. According to Abdullah Saif (2015), if an organization has been able to target all customer segments with a few ranges of products then it has surely achieved highest market share. This is the same for Walmart. On the other hand, Agnihotri (2015) pointed out that along with highest product range, the organization is giving huge discounts. Thus, in future, in order to stay in the most successful position in the market, the organization has to sustain its discount giving capacity. Debt must not be raised and for that bulk supplies are to be gained from manufacturers. In the developing countries, the suppliers charge less amount for bulk supplies, but products are rich in quality. Thus, Walmart has the opportunity to raise the market demand by allowing discounts in other developing countries where similar products are more in price. In this way, supplier’s loyalty will be raised and will sustain the win-win situation for both the stakeholders.

According to Bang, Joshi and Singh (2015), sustainable competitive advantage can be received by developing the inventory management. Thus, Walmart has to use the POP data collection strategy so that inventory management can be controlled. On the other hand, Dickey et al. (2015) pointed out that long-term relationship with vendors help in increasing the organization’s value. Walmart has started to operate in the fastest developing country, India and thus has the opportunity to get supplies from such nations and explore the tradition to all over the world. Fodness (2015) opined that in order to make competitive advantage, mixing and matching of tradition has often proved to be fruitful. Thus, Walmart can buy in bulk from the vendors from developing countries at low cost and sell those products across the globe with highest discounts.

According to Friedman (2013), an organization may not sustain in competition if surrounded by a high amount of substitutions. Walmart has a good hold in South America, China, and Canada but it has failed to operate in Germany and South Korea. This has only happened because the number of substitutes was too much high. Strategic alliances are required for Walmart to sustain in such developed countries in future. On the other hand, Han (2015) pointed out that automated inventory management technology helps in reducing the overtime costs and complications of warehouse management. Walmart has already started to reduce the intermediaries in its supply chain and has established the cordial relationship with the manufacturers directly. In this way, the organization has been able to reduce the cost of inventory.

Walmart has the distribution channel in different parts of the US. According to Hwang and Park (2015), Walmart’s own warehouse provides 87% of inventory and whereas its competitors provide just 55% to 60%. On the other hand, Kang, Song, and Cha (2015) pointed out that Walmart successfully replenishes its warehouse just within two days, whereas its competitors are able to replenish warehouses only after five days. This has been only possible because Walmart directly deals with the manufacturers. Thus, the time of replenishment is reduced as the number of intermediaries is very less as compared to its competitors. This has proved to the competitive advantage for Walmart. On the other hand, Mayer and Noiseux (2015) pointed out that with automated technology for warehouse replenishment, Walmart has not only been able to reduce the time but has also reduced the price of its products. Furthermore, Miotto and Barki (2011) opined that shipping cost of Walmart is just 3%, whereas for its competitors it is 5%. As Walmart has able to maintain the top class relationship with its distribution centers, consistent flow of products supports the supply chain of Walmart.

Nugroho et al. (2015) opined that barcode system of technology helps in integrated inventory management. Walmart has maintained the rapid flow of information to all its employees regarding inventory replenishment. Each of the product categories has an individual unique barcode hand. Employees receive notification automatically whenever there is a requirement of product replenishment.. This reduced the chaos and helped in faster delivery of products. Its competitors take more time in inventory management and thus, time taken for shipping of goods is increased. Information regarding packaging, delivery, storage and shipping is done in the most integrated way reducing unnecessary paperwork. On the other hand, Olotewo (2015) pointed out that cross docking system of warehouse management has been the most effective factor for Walmart. Cross docking is the process where suppliers directly reach the warehouse and the employees select appropriate products, packages them, and sends them for shipping. This process has led the organization to market its products by 85% directly from its warehouse and thereby reducing the cost of products (Olotewo 2015).

According to Persky and Merriman (2012), competitive advantage is reached by sustained economics where Walmart has able to reduce its cost of sales by 2% to 35 compared with kits industry average. Such amount of cost difference helps in reducing the price of products. On the other hand, Matusitz and Reyers (2010) argued that cost of sales can be reduced if the time for transportation of products from warehouse to stores is reduced. Walmart has its factory-owned trucks that transport products from warehouses to retail stores just within 48 hours. According to Rehme et al. (2015), by reducing stock-outs and excess inventory, the price of products is made stable. This reduces the cost of promotion, which aids in higher product discount. Walmart has been able to raise the discount for all its product range, which its competitors have not able to undertake. This has proved to be the competitive advantage for Walmart as price reduction helps in more unit sales.

On the other hand, StankeviÄÂiÅ«tÄ—, Grunda and Bartkus (2012) argued that cross docking is extremely difficult to manage as an organization needs to make strategic investments in multiple “interlocking support systems”, which is far beyond justification by simple ROI criteria. Sun (2015) pointed out that Walmart is always under communication with its distribution centers, suppliers and with its every store point of sale units in order to get the idea of order flows, and consolidation of order execution so that smooth flow of products can take place. For such an integrated communication system, Walmart operates the private owned “Satellite Communication System”, which sends point-of-sale data directly to 4000 Walmart vendors. According to Varadarajan (2015), investment in a top class integrated communication system, which is not always feasible for all successful organizations. The organizations feel that with integrated technology, the cost of sales may be reduced, but the price of products will eventually rise in the initial stages, which may affect customer retention. On the other hand, Wang (2015) argued that successful organizations have already taken all types of sustainability steps so that reduction in prices of products is possible and therefore, any further step, which can be taken, involves expanding technology involvement.

Thus, from the discussion, it is evident that exploitation of new opportunity involves technology enlargement and inventory management that will limit the price of products and stabilize price changes, which will eventually increase e product awareness. Successful companies will be able to achieve global competitive advantage only if all types of market segments are reached, which will lead to sales maximization with least advertisements and promotional activities (Yuen Lam 2015). Walmart has reached out to most of its consumers just by limiting price changes and increasing discounts, thereby gaining consumer loyalty.

According to Pastin (2015), technological improvement creates new capabilities for an organization, which includes online means of marketing. Lucrative offering and provocative marketing medium helps in identifying the new opportunities of market expansion. On the other hand, Christensen (2013) pointed out that online means of marketing have been the very common medium of sales at present for all successful companies. Hence, an organization needs to create unique sales strategy through online medium. Walmart has left no stone unturned in this respect. The process included Shipping Pass technology. Walmart introduced a new type of technology through which consumers can generate orders via online and would get automatic Shipping Passes for the next one year. Through Shipping Pass, registered customers would get free shipping for the next one year (Chesbrough 2013). Initially, many customers were able to create their accounts for Shipping Pass but later the link was removed. Walmart apologized about the process and pointed out that it was the test medium of the technology, and the practical version will be updated soon on their official website. On the other hand, this strategy was an intentional strategy by Walmart, through which it came to understand the demand of consumers regarding such discount system. Such strategy acquired customer’s interest and thus the organization was able to catch hold its consumers for a long time after they have successfully implemented the system, which indicates new capabilities for business. From here it can be understood that organizations must not limit themselves to the traditional method of marketing but use innovative ways of online marketing so that both casual and premium customers are exclusively entertained.

According to Johnston and Bate (2013), successful companies have the opportunity of improving the buying system of consumers that includes technological innovation. If the consumers are given new feelings while buying same products from supermarkets, they can be retained. Coles supermarket has installed the Blue-Sky Technology for automated buying experience enhancement for its consumers. The supermarket is huge enough and is quite similar to Walmart but not as big as the later. With Blue-Sky Technology, consumers are able to select their products through touch-screen menus and push-up buttons, which has been highly appreciated by the consumers (Cai, Hughes and Yin 2014). Thus, the organization was able to reduce their cost of employees, reduced their workers, and simultaneously engages more Australian Consumers. On the other hand, Jiang, Mavondo and Matanda (2015) pointed out that Walmart is following the same buying experience for its consumers all over the world. This organization has cut down any over expense and allocated those to discount system. Thus, the new capability is different for all organizations, where one organization tries to enhance the buying experience, and the other tries to increase discounts.

According to Zawislak et al. (2012), new capabilities for corporate expansion ensure human resource management. Walmart had a tremendous expansion in the last decade and thus it was not able to manage all its business units through private airways. Therefore, it had installed the video conference technology so that all the units can be centralized under one network in real time basis. On the other hand, Ng, Ding and Yip (2013) argued that most of the successful organizations such as Kmart follow the classic textbook approach. Product oriented strategic business units are the primary focus for this organization. A strong centralized line management is supported by most of the supermarkets and thus most of the senior management spends their time in making line decisions that support infrastructure. According to Achtenhagen, Melin and Naldi (2013), the best outcome of Walmart was just because of retaining its suppliers and distributors, whereas other companies such as Kmart is constantly engaged in changing suppliers in search price reduction. On the other hand, Tsai, Chang, and Peng (2016) were of the opinion that successful organizations need to stratify their official business within the infrastructure, but not modify their infrastructure.

According to Willard (2012), the building blocks of corporate strategy are not markets or products but actually the business processes. On the other hand, Christin Jurisch et al. (2014) pointed out that competitive success depends on company’s key process transformation into strategic capabilities, which provides continuous superior value to the customer. Hilb (2012) opined that the companies allocate capabilities by allocating them to strategic investments to support infrastructure that links SBUs and functions. On the other hand, Maponya (2015) pointed out that capabilities necessarily cross function; the champion of a capabilities-based strategy is the CEO. The core business capabilities for an organization consisted of five parameters, which are speed, consistency, acuity, agility, and innovativeness. Walmart has successfully maintained all these parameters and thus has been able to far exceed its competitors. The organization has been able to transform its capabilities into strategy by involving better management rather than diversifying its target segments and thus it has able to retain its stakeholders.

According to Chakravarty (2014), a shift in the strategic framework for achieving aggressive goals helps an organization in making potential business capabilities. Successful organizations need to abandon their traditional function cost, profit-center orientation by managing and identifying capabilities to link customer needs to customer satisfaction. On the other hand, Mishra, Devaraj and Vaidyanathan (2013) argued that successful organizations need to choose capabilities and make sure of the fact that the existing employees have enough skill and knowledge to achieve new capabilities. In this respect, Walmart has always engaged its consumers with the best service from its employees. Employees are always trained and are given the best knowledge of future capabilities for engaging customers. On the other hand, if Coles Australia is considered, then it can be said that with the installation of Blue-Sky technology, the employees are not well aware of the existing products in the supermarket and hence the employees do not entertain any query raised by the consumer.

According to Koca-Helvaci (2015), successful organizations need to value its employees and thus, must reward them while they achieve business capabilities. In this way, employee motivation is extended. Walmart hikes the salaries of its employees after every six months and thus engages them. On the other hand, Mukoyama and Dawson (2013) pointed out that evaluation of employees is too much important for an organization but for its sustained success, the leadership must not be delegated. Cross-functional strategies are quite prone to happen when an organization changes with adaptability. Thus, the leadership must be restored within the CEO and directors so that business process is not derailed. This has been the same case for Walmart. The organization has maintained its strategic movement within its CEO and thus uniform decisions are followed throughout all the business units. Thus, it can be said that there are a lot of ways beyond traditional product diversification and situational analysis for an organization for its expansion.

Conclusion

From the above discussion, it is evident that organizations will be able to enhance their competitive advantage only by technological developments and relationships with suppliers. With the progress of time, the corporate expansion will surely extend in overseas countries, but new relations have to be created. From the discussion, it has been found that Walmart has been the most successful retail organization as it has followed product diversification, largest market segmentation, excellent relationship building and top class communication channel. Global competitive advantage can only be created if there are differences in operation among the different organizations. Differences will create opportunities for successful organizations in better catching hold of the market. From the discussion it has been found that organizations will surely be able to extend its market base if new capabilities such as inventory and warehouse management are taken care. The organizations spend much of the capital in developing their inventories. It may be difficult for organizations to fulfill cross-docking but if particular suppliers are retained then surely top class products can be selected by a successful organization.

On the other hand, it must be kept in mind that marketing dimensions are changing, and consumer perception and expectation is continuously evolving.  Successful organizations have to predict the demand and forecast the future opportunities by extending their R&D team so that resource allocation and risk management can be thought of as early as possible. Consumer demand is continuously changing, and therefore, marketing channels require proper integration so that overseas demands are exchanged between the organization’s headquarters. If organization’s infrastructure requires  change, then in that case it must be ascertained whether its employees are fit or not for the new framework. Technological innovation has to be well communicated to the employees so that service is maintained at the top class in future.

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