Capstone Experience in Integration and Strategy

Question: Provide a high-level analysis of the companys business strategy and operating performance. Be sure to complete the following: o Analysis of the company value proposition, market position, and competitive advantage o External environmental scan/five forces analysis o Internal environmental scan/organizational assessment o SWOT Analysis o Balanced scorecard/strategy scorecard Answer: Introduction Capstone experience in integration and strategy is the sole concept of this particular report. The purpose of the study is to provide a clear idea about the business strategies along with their operating performances. In order to enlighten the topic, the study has considered the company Walmart Stores Inc; a well known multinational retail company of America. The organization operates their business through a market chain that includes grocery stores, discount department stores, and hypermarket (Breaà ¢Ã¢â€š ¬Ã‚ Sols, Casadesusà ¢Ã¢â€š ¬Ã‚ Masanell Grifellà ¢Ã¢â€š ¬Ã‚ Tatj, 2015). The paper presents the strategy audit report of the company to analyze their issues that they face in the present market. Strategy Audit Report In this study, the researcher has been appointed as a strategic consultant in the respective organization. Being a strategic consultant, the researcher analyzes the current market position along with the issues they confront. This would help the researcher to lead the executive officers of the organization towards the right direction in order to obtain sustainable growth. In this particular section, the researcher goes through the external and internal environment analyzing process. Moreover, the SWOT analyzing process would help the researcher to bring some recommendation that would be effective for the strategic growth of the organization. Business strategy and operating performances of Walmart Position in business market The prime purpose of Walmart is to increase their investments as well as provide high possible satisfaction to its customers through selling their products at lower possible prices. Rapid changes of the retail industry across the world bring a challenge to this company in leading their business with continuous growth. As per the record of 2015, it is in the 20th position in the Forbes List in terms of their product quality and brands. Moreover, it has acquired the 1st position in sales, 18th position in profit making, and 12th position as per the market value. Currently 2,200,000 (approx) employees are employed in this organization. Walmart Stores Inc operates their business in three specific segments that include Walmart International, Walmart US, and Sams Club (Walmartstores.com., 2016). The last three years financial data of Walmart helps to determine their market position in the global market. The below table displays the total revenue, gross profit, operating income, and net income of the organization: 2015 2014 2013 Total Revenue $485,651,000 $476,294,000 $468,651,000 Gross Profit $120,565,000 $118,225,000 $116,354,000 Operating Income $27,147,000 $26,872,000 $27,725,000 Net Income $16,363,000 $16,022,000 $16,999,000 Table 1: Financial Data of last 3 years (Source: Walmartstores.com., 2016) The above table determines that total revenue and gross profit were increased in the past three years. Here, it s important to mention that the increase in the total revenue and gross profit maintains the same increasing level. The operating income was declined in the year of 2014 and then increased in the next year again. Though, it has not reached the previous level of income where it was in the year of 2013. It clears that the expense was increased and that resulted decrease in the operating income. However, the net income has been increased over the past years. The company could have generated more income as well as profit if they reduce their expenses. At the present market, the company confronts challenges in obtaining the competitive advantages over its major competitors. Changing demand and purchasing behavior of the customers force the producers to change the price of their products. Low price strategy is one of the core strategies of the organization to retain their customers. However, they face extensive competition in product price, store size, technology and innovation, layout and environment. External Environment analysis Rigby Bilodeau (2015) opined that environmental analysis is one of the major strategic tools that help an organization to address the external as well as internal elements that affect the business activity. Being engaged as strategic consultant in Walmart, the researcher analyzes the external environment of the organization. Here, the researcher has considered Porters 5 forces analysis technique to analyze Walmarts external environment. Threats of the entry of new competitors: In todays highly competitive global market, the existing firms confront high competition in making a place in the business market (Grnig Khn, 2015). It has been found that Walmarts cost advantages helped them to obtain competitive advantages over its existing competitors. However, being a high productive as well as high profitability firm, Walmart attracts new firms. Though, the brand name and popularity of Walmart put high barriers to the new entrants. Competitive rivalry: The major competitors of the Walmart stand in strong position in the global market. K-Mart, Target, Tesco, Career-Four, and Sears are the major competitors of the respective organization in the current market. Among these, the organization faces high competition from the company Target. After analyzing the customer relationship of Walmart, it has been found that they are staying in the edge. The company would fail to retain and attract customers if they lose their cost advantage. Power of the consumers: In the highly competitive market, the consumers have more option in purchasing both the necessities and luxury products (Woerner Wixom, 2015). The consumers have the high bargaining power that results changes in the prices of the Walmart products. Power of the suppliers: As Walmart holds maximum market shares, they have the power of threatening its suppliers of switching over to the other ones. However, it is important to mention that only small suppliers have the low bargaining power. The large suppliers of Walmart are Coca-Cola, and Proctor Gamble. Thus Walmart face high bargaining power issues from its large suppliers. Threats of substitute products: Most of the consumers are attracted by the products that are offered high quality against low price (Higgins, Omer Phillips, 2015). Walmart has low threat from the substitute products as they deliver good quality products at lower possible prices. Internal Environment analysis As opined by Buckley Ghauri (2015), the internal environment analyses defines the organizational assessments that helps the organization in risk management. The researcher has analyzed the internal environment of Walmart in order to improve the performances and effectiveness of their business. Corporate Structure: Walmart has strong corporate structure along with strong culture. However, the Walton family members hold the most part of the stock. Corporate Culture: Walmart values their employees and their cultures as well. They motivate the employees to pursue the common goal of the organization. Their primary concern covers low cost and better quality products. Management functions: The management function is centralized in Arkansas, headquarter of Walmart. The staffs deliver the submit reports and updates of the inventory to the store manager. Through maintaining proper management process, they hold their business in a sustainable position. Research and Development: Walmart confronts challenges in terms of research and development. They require producing more products on their private label brand. As they have high margin in this private label brand, they can increase their sales and also help their bottom line. The competitors take high advantages from the weak points of the Walmart and thus it creates more challenges in developing their business. Human Resources: The researcher has found that they have poor history of staff integration. They have restricted the benefit packages of the employees to reduce their expenses. It results downward curve of employee performances. Furthermore, the customer rating for the staffs is also declined, and it raises a red flag of staffing problem. Customer rating of staff friendliness has been declining since 1999 and it stays below the average at present. Operations: At the present market, Walmart has more 2000 suppliers across the world. Thus, they do not face surplus or shortages in their inventory. Furthermore, they face decrease in the comparative store sales growth. It has been analyzed that the Walmart stores need upgrading their operations. SWOT analysis of the organization According to Mukherjee, Ramirez Cuthbertson (2016), the SWOT analysis helps an organization to identify their current strength, weakness along with their opportunity and threats. The strategic consultant of the organization analyzes these areas of Walmart to bring out some recommendations. Strength: Walmarts brand name is itself a strength point of that organization. Through analyzing the external environment, it has been found that they have high bargaining power over most of their suppliers. Proper supply chain management process is pursued by the management body to maintain the flow of their goods and services. Strong supply chain process is the prime reason behind their inventory management. Furthermore, strong cultural environment helps them in maintaining good employee relationship as well as effective team performances (Lloret, 2016). The low pricing strategy is centre point of their high sales and increasing revenue. Walmarts major strategy is to offer high quality products at lower possible prices and thus they can successfully retain its customers. Besides, they have achieved advantages in the areas of financial and information technology resources. Weakness: The low price strategy is effective only for the price sensitive customers. Some customers are there who expects high quality products at higher prices (Vlachos, 2016). Therefore, people might assume by their lower price that the products are of low quality. Walmart attracts only price sensitive consumers; that is one of the weak points in their pricing strategy. As they are engaged in both the national and international market, huge expansion is needed. Improper management of expenses increases the expenditure and restricts their revenue and profit as well. Furthermore, it has been seen that they have fewer market across the globe in comparison to the competitors. Opportunity: Apart from the strengths and weaknesses, they have some opportunities to deal with the present issues and improve the business performances. Through enhancing the digital marketing, they can increase their online sales. They have grabbed the market of Canada and Latin America. Besides these regions, they have the opportunity to spread their business across Europe and Asia. Threat: The major threat comes from its competitors such as Tesco, Target etc. This prevents Walmart to acquire the sustainable market leader position in the world business market. Beside the existing competitors, large number of foreign competitors entries in the market where Walmart is present. As the company has the market in different nations, the changes in the taxes and tariffs creates threats of additional expenses. Besides, huge involvement creates cultural and practice differences among the employees of different nations. Balanced Strategy Scorecard As stated by Doh et al. (2016), balanced scorecard defines strategic planning and management system of organization to align the business activities towards their ultimate goal. Being the strategic consultant of the organization, the researcher outlines the balance strategy scorecard as the performance metrics of the organization. The balanced strategy scorecard of Walmart looks over four main sections that include financial perspective, internal business process, innovation, and customer service. These four sections consider objective of the business, measurement, ultimate goal, and actions required to be taken. Financial Perspective: Objective: In context of financial perspective, their present objective is to increase the total revenue, total assets, and number of employees. Further, they focus on increasing return from investments. Measurement: Currently, they have constant range of increase in revenue. Large number of employees is engaged in their business globally. Ultimate goal: Being the strategic consultant, the researcher targets to increase the total revenue more than its current range. The researcher set the target at 8% increase in the total revenue and 5% in number of employees, in the next year. Moreover, set the target at 2% on return on investment for the next 3 years. Required actions: Using more assets in proper way would increase the total revenue. In this context, the executive officers should keep in mind that they have to balance their expenditure well so that they can increase the profit as well. Furthermore, through bulk purchases, they would able to restrict operating cost and obtain economies of scale. Customer service: Objective: The current objective of the business is to increase their average customer size. Along with that, they target to reduce the customer complaints. Measurement: Presently, they face issues of customer complaints regarding staff services. This might cause decrease in customer size. Ultimate goal: The researchers prime goal is to determine the staff issues, increase the customer size 6% every year. Further, the researcher also states that the company needs to reduce the number of complaint by 5% in every year. The targets are set for the next three years. Required actions: In order to resolve the staff issues and reduce the customer complaints, the employees would get training programs. Through the training programs, they would able to motivate their staffs to provide better service. Internal business process: Objective: Walmarts major goal is to reduce the administrative expenses. Besides, they aim to reduce the customer waiting time both in the online and offline stores. Measurement: They have outlined their current administrative expenses and average time of customer waiting. Ultimate goal: The researcher aims to reduce the administrative cost by 3% every year for the next 3 years. Furthermore, the target of reducing the customer waiting time set at 10%. Required actions: The organization would provide training to the employees expecting to improve their efficiency. In context of online stores, they would use updated handling technology to sped up their service. Innovation: Objective: Walmarts objective is to increase the training hours and consider the viewpoint of the individuals. Moreover, they target to decrease the employee turnover rate. Measurement: The average training hours and current employee turnover rate is addressed. Ultimate goal: The researcher aims to increase the training hours by 4% every year for the next three years. Moreover, the employee turnover rate will be declined by 3% every year for the next 3 years. Required actions: Outside trainers would be hired to provide extra training time. They would provide training on the technical skills only. Besides, the executive officers motivate the employees to participate in decision making process. Table 2: Balanced Strategy Scorecard of Walmart (Source: Created by Author) Recommendation In the above sections, the researcher has analyzed the business scenarios of Walmart in the present business market. It has been found that the organization has faced issues in obtaining more operating income. Poor customer relationship of the organization might result decrease in the future sales. In order to reduce the expenses, they have restricted the benefit packages of the employees and it is the prime reason behind of employee grievances. As the staffing problem arises, they receive more and more customer complaints. Lack of staff friendliness caused fail in retaining its existing customers. The respective organization confronts these issues due to improper strategic management. Further, the researcher has analyzed that the strategic arises because of the mismatch between their internal capabilities and external trends. Besides, the threats that they face in present or might face in future are not addressed properly by the executive officers before. They fail to identify their opportunities and hence fail to pursue growth. This is the reason that the researcher has been appointed as the strategic consultant in this organization. Being the strategic consultant, the researcher brings out some recommendations that would help the organization to utilize their strength and opportunities, as well as reduce their weakness and threats. The researcher pays heed on some of the specific areas to deal with the above mentioned issues. Product Portfolio: It has been stated before that the organization has fewer market across the globe, comparing to its competitors. In this context, the researcher suggests to increase the number of stores by 5% within next 3 years to grab more market and obtain competitive advantages. Further, market segmentation can be effective to increase the product sales (Mackay Zundel, 2016). They can set their product price by segmenting their market. Business structure: It has been analyzed that the individuals are not engaged in the decision making process. Thus, confusion level increases among the staffs in respect of their roles and responsibilities. The researcher recommends the organization to utilize their internal capabilities along with their external opportunities. Organizational Culture and Behavior: The issues in obtaining operating income and issues of customer relationship are correlated with each other (Gumusluoglu Acur, 2016). Walmart should focus on improving their customer relationship by reducing the staffing problem. Through the communication strategy, they would able to address the issues behind employee grievance. Besides, they should increase the employee benefit packages. Value Chain Management: As opined by Thom Medeiros (2016), value chain management process defines the entire range of activities of an organization that include design, development, production, marketing and distribution. The researcher suggests restructuring their value chain management process to improve the business activities. Performance Measurement: Apart from this, performance measurement is the most crucial part of growth and development (Ocasio Radoynovska, 2016). The organization should involve a team to track the record of the progress in business activities on weekly basis. This would help them to resolve the strategy implementation related issues. Scope, strategic growth, and expected impact The above mentioned recommendations would help the organization to achieve their vision and mission as well. Their vision is to become the best retailer company in the global market of 21st century. As per their mission statement, they aim to be in the hearts and minds of their customers and employees. They try to provide best quality products against lower possible prices. The strategy scorecard of the organization helps to create new targets and achieve them along with the existing ones. The researcher expects that these strategies would help them in maintain the range of their increasing revenue. Resolving the staffing issues and customer complaints, they can acquire more customers an increase their sales as well. Their Key Performance Indicators (KPIs) include comparable store sales, operating income growth, sales growth, and return on the average assets. After providing the recommendations, the researcher expects that comparable store sales would increase above the average. The operating income is expected to be increased above their net sales growth. Besides, their key measure of efficiency is less inventory growth comparing to the net sales growth. The researcher expects large return on their average assets that would help them to achieve sustainable growth. Companion Presentation (Refer to PPT) Conclusion The paper concludes that Walmart is facing a number of issues in the present business scenario. Being the strategic consultant, the researcher identifies those issues and provides some recommendations in order to resolve those problems. 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