Strategies to Sustain Wal-Mart’s Growth Domestically and Internationally

Topics: Retailing, Operating expense, Management occupations Pages: 5 (1283 words) Published: September 22, 2013
Strategies to Sustain Wal-Mart’s Growth Domestically and Internationally

CRITICAL ISSUES

Although the net sale of Wal-Mart keeps a growth rate each year, most investors believe it has reached to a point of saturation with its stores that it will slow down the growth. With the increase rate of more and more stores opening domestically, one of the most critical issues for Wal-Mart is to sustain its remarkable record of growth. More stores and supercenter may bring an increase of total business turnover, however; new stores means more input and costs. Moreover the 24/7-operation model makes it even costly with so many stores across the nation. Wal-Mart has several competitive advantages and the most dominant is its unbeatable price. The current pricing strategy Wal-Mart implements is its everyday low prices (EDLP) to compete with its competitors, which will only attract most of the price-sensitive and low-income customers. The external environment also restricts its economic grow. Despite the fact that it is still the leading discount retailer in the market, Wal-Mart still faces a lot of competitors, which also have impacts on its growth, especially specialty stores that focus on a relatively narrow range of goods such electronics and office supplies. Best Buy and Office Depot have taken quite a lot from the market share in electronics and office supplies. Even some B2C stores such as Amazon has also become a popular discount retailor to compete with Wal-Mart. Another critical issue with Wal-Mart is its international operations. In 2010, 31 percent of Wal-Mart's capital expenditures were spent on international operations. However, the entry into another country requires different strategies and Wal-Mart faces a variety of challenges. According to the data from Worldcrunch (2013), Wal-Mart shut down 4 stores in 2013 and another 3 in this year including an old one, which had been open for 10 year in China. There was one closed in April this year in my hometown, Wuxi, China. Ironically the new store replaced the Wal-Mart was Carrefour—another leading supermarket retailor in the world from France and there was one opened for 13 years only 1.5 miles away from the new Carrefour. According the research in China, the radius of a supermarket should be 3 kilometers covering 20,000-30,000. The closed Wal-Mart has met the criteria, which indicates the closing should be related to its strategies rather than the location. The closing was due to its great loss and could not continue any more. When operating in other countries, some competitive advantage may become less obvious and localization is essential to success.

STRATEGY
The following recommended strategies are to sustain its domestic and internal growth. One solution to keep the growth of net sales domestically is to reduce operation costs, although it is already an industry leader of cutting costs. Opening too many stores is not a good option for a large company like Wal-Mart since there is little market share left to capture domestically. Therefore, building more stores may simply cannibalize existing store sales and leave net sales unchanged. In can also enhance the Internet sale through Wal-Mart.com. B2C is prevalent nowadays and more and more people choose to shop online because of its convenience. From a global perspective, localization is essential for Wal-Mart’s entry. In order to sustain growth overseas, Wal-Mart need to adapt to the strategy to the local economic culture, consumer’s behavior, and different laws and regulations.

Strategy #1: Limit the Number and Size of New Store Opening to Reduce Cost Based on current data, Wal-Mart is already 384% larger than its closet competitor, which left Wal-Mart has mainly the most of the market share. Therefore, it is not necessary to open too many stores, especially supercenters domestically. The latest financial data of Wal-Mart shows that the total operating expenses for 3 months ending July 2013 is $110, 152...
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