Analysis of Strategic Management Processes
According to Parnell and Lester, the central tenet of industrial organization theory is the notion that the financial performance of a firm is primarily determined by the success of the industry in which it competes as the firm must adapt to influences in its industry (2008, p. 16). Hence, it is vital to constantly monitor the strategic external and internal environment of a company. This paper will review the challenge of developing and implementing strategy models for Wal-Mart. Using the example of Wal-Mart, this paper defines strategic management as the process of formulating and achieving company’s goals and objectives by managing resources and auditing the internal and external strategic environment.
The external audit should be considered as independent as external auditors do not work within the organization. This type of audit can provide shareholders with significant insights on operational activities of the organization. Being the world’s largest retail operation, Wal-Mart has 4,645 stores in the United States, and 6,273 stores overseas (Wal-Mart Stores, Inc., 2016). Wal-Mart is the highest-volume retailer in the U.S. since it has a 21 percent share of the retail market, with nearly $500 billion in annual sales (Wal-Mart Stores, Inc., 2016). However, in 2016 the company’s revenues, assets, equity, and income, has decreased compared to the previous year (Wal-Mart Stores, Inc., 2016). The company has been experiencing some issues with the diluted public image since 2000, defending itself against allegations of underpaid and underinsured workers, Clean Water Act violations, and corruption (Parnell & Lester, 2008, p. 16). In 2004, the company was sued for violating the Clean Water Act. It has gained a reputation for destroying the feasibility of local business in many neighborhoods (Parnell & Lester, 2008, p. 17). To tackle this issue, in 2008 Wal-Mart pledged a commitment to sustainable principles, and since then has adopted new food safety standards (Parnell & Lester, 2008, p. 21).
An audit of the company’s internal and external strategic environment can be carried off by means of SWOT analysis (Porter, 1996, p. 3). In terms of the internal environment, one should look at strengths and weaknesses of the company. Regarding the strengths, it should be noted that, first, Wal-Mart can apply pressure to suppliers and, second, alter the mix of shopping alternatives for consumers. That is because Wal-Mart, a discount retailer
whose stores exceed 50,000 feet, can be considered as a big-box retailer that can trim costs (Zhang & Largay, 2009, p. 98). This means that the company can profit from high volume via low markups. Another strength is
global supply chain. Thanks to its powerful supply management tactics, Wal-Mart can compete at the lowest price point (Parnell & Lester, 2008, p. 15). The weaknesses of Wal-Mart are, first, low profit margins and, second, competitive convergence – operational activities can be easily copied by competitors. Being a proponent of cost leadership strategy, the company experience minimal …