Essay about Business Strategy

Business strategy

Business strategy is an essential process in establishing new businesses or expanding the existing ones. Companies keen on achieving their short and long-term goals develop strategies that help them project future performance for sustainable growth. Without a well-developed strategy, businesses are bound to fail due to a lack of vision and direction. Vision and direction state clear goals that the organization follows toward success. Strategies also identify opportunities and business trends in the future and examine market changes that may be social, political, and technological. Market changes may also include changes in consumer taste and preferences, demographic and population changes that may affect product demand, necessitating the adoption of tactics that can help the company modify its operations, products, and services to suit the projected changes. Additionally, companies that develop working strategies tend to gain a more competitive advantage than those that do not develop or have poor strategies. Therefore, a good business strategy is critical to minimizing the chances of losing sight of a company’s goals and achieving industry success, here you can find information below in business essay.

Generic Business Strategies

A company can employ different business strategies according to the environment and the industry within which it operates. Michael Porter’s generic competitive strategies provide useful management, growth, and profitability tools that help create a competitive advantage. Registered in Arkansas, United States of America, Walmart Inc., a global corporate retailer, is one of the companies that have successfully adopted Porter’s generic strategies to achieve its strategic goals, including cost leadership that has contributed to its competitive advantage. The company has adopted cost leadership, differentiation, and focus strategies;

Cost leadership involves strategies that lower operating costs while maintaining selling prices (Haque et al., 2021). When a company lowers costs and maintains the same commodity prices as its competitors, it widens its profit margins. There are several ways a company can lower its operating costs. For example, operating on a large scale to take advantage of the economies of scale reduces overhead costs. Retail stores can offer high volumes of essential commodities and limit personalized services to reduce costs. Porter’s model recognizes cost leadership as a competitive strategy focusing on achieving low costs. This enables a company to compete based on low prices. Walmart has succeeded in reducing the supply chain costs by utilizing technology and automation, which ensure that ordering, selling, and advertising costs are streamlined. It has also been operating on a large scale and realizing large sales volumes enabling it to widen its profit margins. While its competitors strive to increase profit margins by increasing commodity prices, the retailer maintains the prices but lowers costs to realize increased profits. Therefore, operating at lower costs than the competitors places a company in cost leadership.

Differentiation strategy enables a business to identify a specific thing and make it unique or different from what the competitors offer (Lortie et al., 2021). It can be achieved through branding or developing specialized products that are more appealing to customers and can only be identified, associated with, or linked to the company and not its competitors. To succeed in differentiation, a company must assess the needs of its customers and be sensitive to their tastes and preferences to tailor its products to their needs. Alternatively, differentiation can be achieved through pricing, whereby commodity prices can be charged at lower rates to attract more buyers. Walmart’s differentiation strategy focuses on pricing. Compared to other retailers, most of its commodities attract low prices. Its pricing strategy is designed to monitor other retailers’ pricing models. Once they establish the prevailing market prices, they adjust these prices downwards to counter the competitors. This differentiates them from the industry prices and makes the retailer stand out as the most affordable in the retail industry.

Additionally, Walmart offers an All-in-one shopping experience to its customers. While customers may struggle to find everything they need from one store under one roof in other retail hypermarkets, the case is different with Walmart. The store offers its customers a shopping experience that allows them to find everything they need under one roof. It sells an assortment of household utility goods, farm inputs, groceries, and apparel, among other varieties. Customers are able to note that the best store to buy from is Walmart since it offers whatever they need from a one-stop shop. This encourages customers and motivates them to save time and energy moving from one store to the other, looking for different items they need.

Focus strategy helps a company develop a niche market by identifying a specific group of customers to sell a particular product. This is done by segmenting the market and narrowing it down to a specific segment that competitors have not fully explored. It helps a company gain a competitive advantage by standing out in that particular market segment, offering a solution to a specific problem. Focus strategy addresses specific customer needs by first letting a company understand the needs of their target customers. Once the potential customers’ needs are understood, the business tailors their products and services to these needs and creates valuable and better products. Companies gain a great deal from focus strategies since customer loyalties are guaranteed. Satisfied customers tend to develop strong affiliations to particular brands or retailers.

In its focus strategy, Walmart ensures that the millennials get what they value from a retailer: convenience, low commodity prices, and high product quality. Convenience is achieved by availing various goods at one place or under one roof. Customers do not need to move around, spending much of their valuable time looking for goods they need. Walmart ensures its customers, especially the millennials keen on time-saving, spend the minimum possible time to buy goods. As a cost leader, Walmart satisfies the needs of the millennials by charging lower prices since, at lower operating costs, reduced prices can still yield substantial profits. Additionally, the retailer’s credible supply chain enables it to offer high-quality products that align with the preferences of the millennials. Therefore, Walmart’s focus strategy has targeted the millennials and succeeded in the market segment.

Walmart uses a market penetration strategy to achieve growth at its business level. A business realizes growth when it can raise substantial revenue to finance its growth prospects. Business growth includes the physical infrastructural expansion and growth related to product and service delivery (Cooley & Prescott, 2021). To increase revenues, a company must increase its product sales by either offering a friendly price or changing the product in the current market. Companies use penetration strategies to expand their business and customer base. Walmart’s market penetration strategy focuses on low pricing achieved through cost leadership. As the company minimizes the cost of operation, it increases its sales by charging lower pieces, attracting more customers. High turnover against low costs increases a company’s liquidity, thereby raising its growth potential. It is able to finance various development projects to enhance business expansion. Pricing market penetration also increases market share, enabling Walmart’s products to reach a wider market due to increased demand. With low prices, Walmart has been able to win a competitive position against major competitors in the retail market. Customers prefer buying from the retail store to others that sell expensively. This makes Walmart stand out as a low-priced retail store. In any competitive environment, low-price retailers always benefit from the competition due to consumers’ spending habits, which always prefer to minimize expenditure. The number of consumers with low incomes is always higher than the high-income groups. Serving a bigger population of middle and low-income individuals requires price regulation and product adjustments to win their loyalty.

Walmart’s Business Model

Business models refer to companies’ plans to make profits (Ritter & Lettl, 2018). Since every business’s ultimate goal is profit-making and growth, companies identify products, target markets, and expenditure plans to maximize profit. It is important to note that business models are essential for both new and established businesses. New companies need to attract investment, employ skills and talents, and motivate staff and managers, while established companies are keen on updating their business plans regularly to keep up with the changing business environments. Business plans help companies to project future challenges and trends. They also help attract investors by letting them evaluate companies whose plans impress them. The components of business models include value proposition, which describes goods and services offered by a company and states why customers prefer them. The description also differentiates the company’s products from a competitor’s products. Differentiation is important in creating the uniqueness of a company’s identity through the products or services. The uniqueness makes a company sell better than others and make profits.

Walmart has a business model that enables it to realize high turnover and make high profits. It draws on a combination of business subjects: products, finance, marketing, economics, entrepreneurship, operation, and strategy. This paper analyzes Walmart’s business model while focusing on its core products, how it makes money, the customer value proposition, and its profit proposition. Walmart deals in a wide product variety, including electronics, music and movies, footwear, clothing, furniture, home décor, pet supplies, health and beauty products, craft supplies, grocery, sporting and fitness goods, toys, and auto supplies. Other products include a variety of household supplies and food items, among others. The store operates in three major segments, including Walmart U.S, Walmart International, and Sam’s club. Walmart U.S is the largest company segment that manages all other stores in the fifty American states, including Washington D.C. The segment controls various necessities such as health, grocery, entertainment, hardlines, and apparel and provides various essential services.

The financial services incorporated in the retailer’s business model include money orders, direct money transfers, prepaid cards, and bill payments used to settle the purchase of goods and services. They also provide customers with physical access to their discount stores, supercenters, and other small stores. Apart from the physical access, there is guaranteed digital access to the store, where customers can transact online business with the company by ordering goods and experiencing a convenient delivery service. Digital access allows customers to reach out to the stores through mobile applications and websites. Customers at remote locations can order goods and pay online through direct cash transfers and other convenient means and deliver their goods at their doorsteps. This attracts many people to the stores, especially those who may not have adequate time to [physically get to the store and buy goods. For example, customers who stay several miles away have these services at their convenience. The elderly and the ailing Americans can also enjoy these services.

Walmart international includes Twenty-Seven countries where the company has its branches. The international segment also has the Walmart wholesale and retail stores and other smaller outlets, operated through joint ventures and subsidiaries. All Walmart stores are connected through the digital system, which integrates physical access. The same services offered to customers at physical stores are identical to the digital platform. The only difference is that physical stores are physically reachable, while digital stores allow online transactions and doorstep delivery. Notably, 156 distribution facilities provide customers with physical access and support digital access with a click and collect facilities and home delivery services. Sam’s club is present in forty-four American states and Puerto Rico. It is the final segment of Walmart’s business model operating by taking care of membership-only warehouse clubs. The model allows the club to provide subscription services to customers and business owners and grants them service privileges that members can conveniently enjoy, such as a household card that involves no extra costs and cash rewards that allow them to use for shopping.

Walmart makes money by selling a variety of commodities. A successful business avails its customers of what they need and the state in which the products can satisfy their needs. Walmart has everything that a customer needs and sells its product at a pocket-friendly price that allows as many people to prefer buying from its stores. Since the retail market consists of many low-income individuals with low purchasing power, they require commodities at lower or affordable prices. Most retailers sell their goods at relatively higher prices than Walmart’s due to the high cost of operation. Walmart beats the pricing dilemma by operating as a cost leader, having modeled its supply chain to minimize the operating costs.

Businesses that sell their products at lower costs attract more customers and contribute to demand creation, increasing turnover. As a result, the company is assured of making more money than its competitors. Walmart also succeeds in spreading its stores all over the fifty states of America. This assists in reaching out to wider markets due to larger populations that are able to shop from the stores. Its presence in many states and other countries outside America captures a wider geographical reach, letting the company enjoy advantages resulting from globalization. The superstores are capable of assessing demand to determine areas with growing demand and direct more resources there to earn more revenue. Multiple stores also allow the company to penetrate various markets to enhance sales.

Notably, Walmart has adopted a strategic fit that has projected it to success by leading on price, investing to achieve access differentiation, being competitive on assortment, and delivering a great experience. Leading on price is made possible by focusing on its strong and largest supply chain. Having numerous suppliers and a strong bargaining power due to the scale of operation works well for the superstore. The company has agreed with the suppliers to supply at reasonable discounts that enable it to extend the same discount to the customers. By selling at a discount, the ultimate price is reduced. This causes the company to maintain low prices and beat its competitors. As many people buy from the retailer, the turnover increases, and it makes more money.

Investing to achieve access differentiation involves a strategy to allow differentiated customer access to the company’s stores. As earlier noted, the company has increased customers’ access to its stores by increasing their physical availability to various parts of the United States and the rest of the world by putting up small stores, mid-size discount stores, and supercenters in different parts of the world. It has also penetrated the geographical market to reach the interior locations where other retailers cannot access to find customers. This allows a wider geographical reach for the company than the competitors.

Apart from the physical presence in most American states and parts of the world, the company has adopted a user-friendly online shopping platform to serve increasing customer demand. Today’s business thrives on remotely functioning activities whereby buyers and sellers are located far apart but can transact using digital platforms over internet connections. Globalization has necessitated this, which has also increased service delivery and wider global reach for people in different countries, breaking geographical boundaries. Due to the growing number of people who buy online and the growing need for convenience, companies need to appreciate the role and adopt technology in business, enhancing growth by improving turnover. Online markets have been unexplored for a long time, causing businesses to fail to tap the opportunity to earn more revenue. By investing in mobile and digital shopping platforms, Walmart has succeeded in capturing the virtual market, thereby making more money from online customers than retailers who have not adopted the technology. Additionally, the store has provided access to high-end services that are difficult to access ordinarily in most retail outlets under one roof. These aspects of Walmart’s access differentiation have played a significant role in making money for the retailer.

Apart from price lead and access differentiation, Walmart has succeeded in being competitive on assortment. It has a variety of commodities that ensure no customer walks into the stores and fails to get a commodity that they need. Other stores may fail to stock a number of items, but Walmart guarantees customers the availability of everything in any quantity needed. Therefore, as other stores miss sales, the store does not. Additionally, Walmart is committed to delivering a great customer experience. The company’s employees are trained on appealing customer service, creating a strong bond between shoppers and the stores. Once customers shop at Walmart, they experience quality services that attract them to maintain the stores as their preferred retailer. Employees are motivated to serve the customers with high dignity through better packages. Once shoppers are attracted to the company, increased sales are assured. Hence, the company makes more money.

Customer value proposition refers to the promise of a potential value delivered by a company or other organization to its customers. From the organization’s viewpoint, value proposition focuses on the creation of an extra value linked to the product as part of the unique selling proposition. On the other hand, the customer’s viewpoint of the extra value that a product represents as a result of responding to the customer’s needs, which prompts them to respond by purchasing the commodity, defines the value proposition. Therefore, companies add or create value by placing customers at the center of their businesses when they respond to their needs.

Being sensitive to customer needs is critical to making a difference in their emotional and physical attachments with the company. Walmart achieves its customer value proposition by providing low price-high quality goods that meet the customer demands and fulfill their tastes and preferences. Its business policy is founded on providing a wide variety of lowest-priced products most conveniently. Having noted that a large population of low and middle-income customers prefer reduced prices, it is evident that this policy fits their needs. Therefore, the model takes care of a bigger population whose well-served interests lead to high business turnover. At the same time, considering the growing world of digital technology, most transactions are done on digital platforms. The millennial generation has adopted the use of digital platforms to ease business engagements. Walmart has provided a value proposition by developing websites, mobile applications, and social media interactions to bridge the gap. Profit proposition for Walmart has been associated with a strategy that reduces costs of operation while maintaining the selling price or reducing slightly below what the competitors offer. This has worked well in widening the profit margin, making the retailer enjoy increased profits.

Walmart’s Corporate Strategy

Corporate strategy focuses on the management of resources, risks, and returns across a business firm or at corporate level. Decision managers must consider proper resource allocation, organizational designs, and strategic tradeoffs to achieve a functional corporate strategy. The types of the corporate strategy include; growth strategies designed to achieve organizational growth, diversification, and stability strategies. Walmart’s corporate strategy considered in this paper focuses on the company’s product, geographical and vertical scope. Walmart has grown over time to what it is today, making it one of the most developed retail companies globally. From what started as a small store in Arkansas that sold a small variety of consumable goods, the store has grown into a bigger retail company with an expanded product line to serve the growing demand for a variety of products under one roof.

Today, Walmart is not limited to household consumable goods but sells pharmaceuticals, farm inputs, and apparel, among other products. This is an indication that the company has developed multiple product lines over the years since it began in 1950. The aspect of business growth is seen in product expansion, which makes it possible for a company to expand from one product line to provide more expanded services. The growth serves the customers and the company itself by earning more revenue. Apart from expanding its product line, Walmart has also broken the geographical boundaries to go beyond Arkansas, reaching global locations and penetrating outside markets. This is a growth aspect that is achievable with well-designed strategies. Today, Walmart has a global presence, having its stores spread across the United States and Asia, and some parts of Africa, with more than 2.1 million employees and 11,300 stores. Regarding whether the company owns any vertically related activities along the value chain for its products, the company has a vertical integration program. It sold its products under its brand name, as Sam’s choice today, including soft drinks, dog food, and drinks. Walmart does not grow its own crops, neither does it raise its own livestock. This is still considered a form of vertical integration.

Walmart’s Overall Corporate Structure

Its organizational structure determines Walmart’s business activities. The company conducts retail business in the retail industry, which restricts its diversification to any outside retail environment. However, it has diversified its products and engages in the sale of a variety of commodities. The corporate structure also creates limits regarding how the company can address its challenges. Walmart’s organizational structure is a hierarchical functional structure with two main features. These features include the hierarchy, defined by the vertical line of authority and command throughout the organization’s structure. Authority flows from the Chief Executive Officer (CEO) to the middle-level managers to the lower-level managers or supervisors before reaching the employees.

On the other hand, functional structure is characterized by groups of employees such as a department, fulfilling specific functions. In the case of Walmart, there are functional departments such as human resource management, sales, marketing, information technology, and customer service, among others. Walmart’s hierarchical functional structure is critical to allowing corporate managers to influence the organization. In this regard, as the company is incorporated as a retail store, its diversification is restricted to the retail business scope. Walmart has diversified within the retail scope by providing a variety of products under retail trade.

Vertical integration is a growth strategy that a business employs to take advantage of the economies of scale that creates power and provide the ability to coordinate pricing (Pouyet & Thomas, 2021). There are several activities involved in production. These activities include growing raw materials, transporting, manufacturing, marketing, and retailing. One firm may be engaged in vertical integration to save on costs of value addition by other firms, such that, instead of buying raw materials from other producers, the firm produces its own. Another scenario is; a firm may use its own transportation means to move its goods from a warehouse to its stores. This is vertical integration. Due to its operating scale, Walmart finds it economical to use its own trucks to transport goods from the suppliers to its stores. It is also convenient since trucks can be scheduled to transport goods within a specific range or distance from the dispersed stores to minimize cost and time. The integration also causes convenience because operating on a large scale requires many transport truck trips. There might not be an adequate number of trucks from an outsource at any time required. Using the company’s means to transport purchases to its stores is a vertical integration to minimize operating costs.

Walmart has made its presence felt by operating beyond physical geographical boundaries to access global markets. The retailer uses digital platforms to reach online markets and establish physical stores in different countries or foreign locations. Globalization has led to the rapid growth of many organizations, especially those doing business. Companies get exposed to different market environments and learn to solve different problems that strengthen their capacities. Globalization also helps companies access external markets to earn foreign exchange. Walmart enjoys the advantages of globalization, such as obtaining goods at cheaper rates where specific products are cheaper and transporting them to stores located in countries where they fetch higher prices, thereby increasing profit margins.

Global alliances are part of corporate strategy. Organizations can diversify to other countries than their parent countries through globalization in today’s contemporary business environment. A company may partner with other corporate organizations to form a stronger force capable of approaching a specific market to achieve certain objectives. Walmart has forged global alliances with technology companies such as Microsoft and Google to enable it to acquire and operate an e-commerce platform to avail its business to the online market. This is one of the importance of global alliances, which is part of business strategies to achieve a given objective.

Finally, the strategic fit between Walmart’s business and corporate strategies is the low-cost leadership. As has been described, this strategic fit delivers low-priced goods to consumers. Once the retailer works on the operating costs through its supply chain, the low cost is transferred to the consumer. Lowering the cost of operation translates to the overall costs being reduced, and the product reaches the market at a cheaper cost. Walmart’s policy is based on providing affordable products to the consumer. Hence, it strives to charge a minimum price while maintaining the profit margin.

Conclusion

Business strategies are essential planning processes for companies in today’s changing business world. There is stiff competition, and companies must plan to counter them. A failing plan can easily cause organizations to fail since many industry players strive to have the available market share. One of the strategies most successful companies use today is differentiation. Every company seeks to make itself stand out with a uniqueness not found in other competitors. Competition becomes stiffer, and businesses that cannot innovate can easily be knocked out of the industry.

References

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Haque, M. G., Munawaroh, M., Sunarsi, D., & Baharuddin, A. (2021). Competitive Advantage in Cost Leadership and Differentiation of SMEs “Bakoel Zee” Marketing Strategy in BSD. PINISI Discretion Review, 4(2), 277-284.

Lortie, J., Cox, K. C., & Sproul, C. (2021). Toward a theory of entrepreneurial differentiation: how entrepreneurial firms compete. International Entrepreneurship and Management Journal, 1-22.

Pouyet, J., & Thomas, T. (2021). The Competitive Effects of Vertical Integration in Platform Markets.

Ritter, T., & Lettl, C. (2018). The wider implications of business-model research. Long range planning, 51(1), 1-8.