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INFLUENCING ORGANISATIONAL STRATEGY (WAL-MART: CASE STUDY) I

Technical Report · June 2017

DOI: 10.13140/RG.2.2.29974.57922

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 UNIVERSITY OF THE WEST OF SCOTLAND

(WAL-MART: CASE STUDY)

AMRO RADEEF
B00317578

INFLUENCING ORGANISATIONAL STRATEGY

DR RAJENDRA KUMAR
 Table of Contents

Question One : .......................................................................................................................... 1

1.1 Balanced Score Card of Wal-Mart: ..................................................................... 1

1.1.1 The Financial perspective of Wal-Mart ............................................................... 2

1.1.2 The Customer Perspective of Wal-Mart: ............................................................ 3

1.1.3 The Internal Process Perspective of Wal-Mart: ................................................. 3

1.1.4 The Learning and Growth Perspective ............................................................... 4

1.2 Porter’s Five Forces framework– Wal-Mart: ............................................................. 5

Question-Two: .......................................................................................................................... 7

2.1 Purchasing and vendor relationship: ........................................................................... 7

2.3 In Store Operations: ...................................................................................................... 8

2.4 Marketing: ...................................................................................................................... 9

2.5 Information technology (IT): ........................................................................................ 9

2.6 Human Resource Management: ................................................................................. 10

2.7 organization and management systems/style: ........................................................... 10

Question-Three: ..................................................................................................................... 11

Question Four: ....................................................................................................................... 13

References:.............................................................................................................................. 17
Question One :

Measuring the organisation performance represents a critical method that used to

describe how much the company is successful and what areas of the company should be
developed to achieve and maintain the success (Kaplan & Norton, 1995). Anyway, measuring
the company performance can be in terms of the competitive advantage or in terms of industry
attractiveness. On one hand, the competitive advantage is a source of profitability which can
be derived from developing and enhancing the resources and capabilities that the company has.
On the other hand, industry attractiveness is a source for profitability which is derived from
owning a strategic resource and capabilities that have already existed in the industry such as
barriers for entry (Grant, 2011). Therefore, Balanced Scored Card (BSC) framework will be
used in this part as a performance measurement tool to measure Wal-Mart performance in terms
of competitive advantage (Landin and Nilsson, 2001). Likewise, Porter’s Five Forces
framework will be used to measure the Wal-Mart performance in terms of industry
attractiveness (E. Dobbs,2014).

1.1 Balanced Score Card of Wal-Mart:

BSC has been introduced by Kaplan and Norton (1992) as an evaluation system tool
which goes beyond just measuring the tangible assets (measuring financial terms) to measure
the intangible assets such as the vision and mission. Besides the traditional financial
perspective, BSC has introduced three new perspectives: the customer perspective, the internal
process perspective and learning and growth perspective.

Figure-one: The Balanced Scorecard Generic Strategy Map

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 Each perspective has a strategy-derived objective and these perspectives work as a hierarchy;
which means that achieving the objectives of each perspective will automatically support the
achieving of the next perspective objectives (Moller and schaltegger, 2005).

1.1.1 The Financial perspective of Wal-Mart

Satisfying the shareholders is the main object from the financial perspective and to
achieve that, the company usually follows two strategies: revenue growth strategy and
productivity strategy. First, the revenue growth strategy could be measured by gross margin
percentage, operating income and revenue growth (Moller and schaltegger, 2005). A closer
look at table one we can see that the gross margin percentage of Wal-Mart increased in the last
year. But by comparing it with the competitors in the same industry, we realise that each of
Target Crop and Dollar General has a high gross margin than Wal-Mart. This means that Target
Crop and Dollar General are better than Wal-Mart in controlling their production costs relating
to revenues. However, when it comes to the revenue growth, Wal-Mart has achieved a decrease
in 2016 by 0.73%, while each of Target Crop, Dollar General and Costco achieved an increase.
Finally, even though Wal-Mart operating income decreased in the last year to reach $24 billion,
it’s still way better than competitors, for example, Target Crop company just achieved around
$5 billion in 2016.

the productivity strategy as the second strategy can be measured through two ways: the
cost of revenue and asset turnover (efficiency). Wal-Mart lied in the third place amongst the
major four companies in the industry in terms of the cost of revenue (75.18% in 2016). This
means that Wal-Mart producing and distributing costs are high comparing to competitors. In
the other hand, in 2016 Wal-Mart asset turnover was 2.44 % in the second place after Costco
3.56%, which means that Costco generating more revenue per dollar of its assets than Wal-
Mart.

Table One- the financial perspective of main corporations in the retail industry
The financial perspective

Key ratio Revenue growth % Operating income $Mil Gross margin % Cost of revenue % Asset turnover %

Years 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016

Wal-Mart 1.52 1.96 -0.73 26,872 27,147 24,105 24.8 24.8 25.1 75.18 75.18 75.18 2.34 2.38 2.44

Target Crop -0.96 0.03 1.61 4,779 4,535 4,910 29.8 29.4 29.5 70.47 70.61 70.47 1.57 1.69 1.80

Dollar General 9.25 8.03 7.72 1,736 1,769 1,940 31.1 30.7 31.0 68.95 69.31 69.04 1.65 1.71 1.81

Costco 7.12 3.16 2.17 220 3,624 3,672 12.6 13.0 13.3 87.41 86.98 86.68 3.56 3.50 3.56

Source: Wal-Mart Stores Inc (2017), Target Corp. (2017), Dollar General Corp (2017), Costco wholesale Corp (2016)

2
1.1.2 The Customer Perspective of Wal-Mart:

The customer perspective always tries to figure what customers objectives should be
followed to achieve the financial success. This perspective mainly depends on analysing the
customer strategy which includes analysing the both areas: the customer retention and
customer acquisition. The customer retention program usually helps companies to reduce the
customers’ defection by improving the relationship with the customers, the brand image and
the customer loyalty. Wal-Mart relation with the customer represents a competitive advantage
because it based on three concepts: respect for the individual, providing the highest level of
service for everyone and striving for excellence (Hennig‐Thurau and Klee, 1997). Likewise,
Wal-Mart brand image has produced as a traditional American brand that refers to hard work,
opportunities, community and individualism. This brand image has given Wal-Mart a
competitive advantage in terms of customers’ loyalty; the American customers always prefer
the national and patriotic values which indeed Wal-Mart values has provided since it begun
(Grant, 2011).

Secondly, the customer acquisition as a concept can be defined as the strategy that
companies follow to convince consumers (potential customers) to buy the provided product or
service and turn into a loyal customer. For Wal-Mart, the customer acquisition has been always
connected with the marketing strategy, especially, the advertising strategy (Thomas, 2001).
Wal-Mart has derived its marketing strategy from its slogan “everyday low prices”, so adopting
the low-price strategy has allowed Wal-Mart to avoid spending too much on the advertising
campaigns such as the promotional discount events. In fact, Wal-Mart has a low
advertising/sales ratio comparing to its competitors. For example, Wal-Mart advertising/sales
ratio was 0.55% in 2012, while its competitors’ ratios were between 1.5 % and 3%, which in
turn gave Wal-Mart a competitive advantage in the customer acquisition level (Grant, 2011).

1.1.3 The Internal Process Perspective of Wal-Mart:

to reach the customer satisfaction, the Internal process should be linked with the
customer objectives which are outlined in the “customer perspective”. So, companies always
try to identify and measure the key processes that must be excelled to keep adding value for
customers. Likewise, internal process perspective tries to achieve the asset utilization
(Financial perspective) which in turn will increase the shareholders’ satisfaction by increasing
the company profit (Moller and schaltegger, 2005). However, in Wal-Mart situation,
innovation process, management process, operational process and environmental process
represents the main key processes.

Firstly, the innovation process in Wal-Mart showed up in using information and

communication technology as a base for decision making, which brought the efficiency and
3
customer responsiveness. In the beginning of eighties, Wal-Mart became the first retailer in the
world developing and using its own bar code scanning, Electronic Data Interchange (EDI)
system, credit card authorization and bar code scanning in order to take control of inventory.
By now, this innovation processes give Wal-Mart a competitive advantage by having a massive
database of purchasing information that allows Wal-Mat management to efficiently set the right
item in the right store at the right price. Secondly, the management strategy that Wal-Mart
follow is characterized by offering a wide range of national branded and private-label products
and not just concentrate on its own- brand products. Furthermore, Wal-Mart depends on the
decentralization of store management, which means that the department managers of each
stores are not following the same ideas in terms of increasing sales and reducing cost. This
style of management gave Wal-Mart the competitive advantage to offering the products in low
prices and cut costs (Grant, 2011).

Thirdly, the operational process in Wal-Mart appears in the distribution logistic; Wal-
Mart has been world number one in logistic distribution since 1980. What special about Wal-
Mart distribution system that Wal-Mart doesn’t rely on the suppliers or third party distributors
such as most of other discount retailers. Instead, most of Wal-Mart shipping processes rely on
its own trucks and its distribution centers (the hubs). Fourthly, for the environmental process,
Wal-Mart has not paid too much attention as much as it has paid for other processes. As a
multinational company, Wal-Mart doesn’t have a strong and high level of social responsibility
comparing with other multinational companies such as H&M. Anyway, in 2008, the company
tried to improve its social responsibility and its relationship with the society by changing the
corporate logo, redesign its stores and change its logo to "Save Money. Live Better” (Grant,
2011).

1.1.4 The Learning and Growth Perspective

In this perspective, the companies usually identify what ways can the company adopt
to learn and innovate. In other words, this perspective focuses on the required capabilities that
the company should have to achieve the internal processes objectives(Moller and schaltegger,
2005). For Wal-Mart, there are two main areas that helped in excelling the internal processes
objectives: IT and human resources management. Wal-Mart management has paid too much
attention to the IT department and believed that the IT and information system is the most
appropriate area to innovate and capture the competitive advantage in the market. For example,
between 1984 and 1990, Wal-Mart management invested around $24 million in its own satellite
system which was one of the important reasons of superiority of the company’s communication
and information system(Grant, 2011).

4
 HRM is a two-edged sword for Wal-Mart, on one hand, it was one of the essential keys
for innovative and success by hiring the perfect employees for the perfect positions at the
perfect time. On the other hand, HRM strategy towards the employees’ wages has driven the
company to much troubles and challenges, which in turn affects the company relationship with
the society (Grant, 2011).

1.2 Porter’s Five Forces framework– Wal-Mart:

In general, this framework try to measure the profitability of the industry by analysing
five sources of competitive pressure. Each one of these competitive forces has several variables
that determine the strength of the competitive force in the industry (see figure Two). However,
by applying this framework on Wal-Mart retail industry we get the displayed results in table
Two.

Figure-Two: Porter’s Five Forces Framework

Adapted from Grant, 2011. Figure 3.3 page 60

5
 Table Two- Porter’s Five Forces Framework of Wal-Mart
The competitive force strength
Buyers power is high
Supplier power is low
Threat of new entry is low
Threat of substitutions is high
Industry rivalry is high
Source: Yeng and Yazdanifard (2015).
The force competitive variables
 Buyers are price sensitivity; buyers usually seeking for low price.
 Buyers’ switching cost is low.
 Buyers are high educated about the products.
 Products are undifferentiated
 Substitutes are available.
 Switching costs from supplier to another is low.
 The company(buyer) is price sensitive, seeking for best deal.
 The company(buyer) has much information about the products.
 Consumer switching cost is low.
 The products and services are undifferentiated.
 Initial capital investment is high.
 Proprietary materials are very important.
 Accessing distribution channels is very difficult.
 Proprietary technology is very important.
 Government policy (legal barriers) is not an issue.
 Buyer propensity to substitute is high.
 Consumer switching cost is low.
 Substituted quality is equal or superior to Wal-Mart product quality.
 Substitutes performance is equal or superior to industry product performance.
 Competitors are numerous.
 Brand loyalty is insignificant.
 Consumer switching costs are low.
 Products and services are undifferentiated.
 There is excess production capacity
 Exit barriers are easy to overcome.
6
Question-Two:

As was mentioned above in question one, there are two sources for the superior
profitability: the industry attractiveness and the competitive advantage. These days, most of
the successful companies depend on internal capabilities and resources as a source of
competitive advantage. Anyway, it’s so important to understand the difference between
resources and capabilities. Resources represent what assets the company own and use in its
productivity processes; in general, resources are classified as tangible resources, intangible
resources and human resources. Meanwhile, the capabilities represent what the company
capable of doing in order to reach its strategic objectives. however, it should be noticed that
resources and capabilities always go hand in hand to create the company’s competitive
advantage (Grant, 2011). Accordingly, the resources and capabilities of each of Walmart’s
principal functions and activities will be identified by using M. Porter’s Value Chain (see figure
three). And based on that it will be explained which functions and activates are the main source
for Wal-Mart competitive advantage (Porter, 1985).

Figure- Three: Porter’s value chain

Adapted from Grant, 2011. Figure 5.3 page 114

2.1 Purchasing and vendor relationship:

 Purchasing tangible resources: based on the financial summary, the sales revenue of
Wal-Mart in 2016 was $ 482 billion. By comparing this number with Wal-Mart’s main
competitor -Costcso which achieved $119 billion in 2016, we can say that Wal-Mat
has the greatest purchasing power in the industry (Wal-Mart Stores Inc, 2017).

 Purchasing intangible resources: The Electronic Data Interchange (EDI); which

represents an information system that links Wal-Mart suppliers with Wal-Mart database
of sales and inventory information (Grant, 2011).

7
  Purchasing capabilities: having the most purchasing power in the industry highly
increased the Wal-Mart bargaining power during the deals negotiations with the
suppliers. This bargaining power gives Wal-Mart a competitive advantage by
increasing the cost saving. On the other hand, having the EDI system allows the
manufacturers and suppliers to expect and analyse the Wal-Marts demand on their
inventory. This, in turn, gives Wal-Mart another competitive advantage which is
increasing the company ability of products replenishment and making the products mix
more close to the customer needs(Grant, 2011).

2.2 Distribution and Warehousing (inbound logistics):

 Distribution tangible resources: Wal-Mart has a large base of its own distribution
trucks. Likewise, Wal-Mart has a distribution centres (the hub) which are around 100
million square feet. Moreover, Wal-Mart has global distribution centers in Shenzhen
and Shanghai(Grant, 2011).
 Distribution intangible resources: Wal-Mart using advanced technology which
called radio frequency identification (RFID) to manage its logistics and inventory
control. The second intangible resource is “remix” system link Wal-Mart with third-
party logistic companies. Also, Wal-Mart has international procurement system which
allows direct purchasing from overseas suppliers(Grant, 2011).
 Distribution Capabilities: the first capability is the large base of trucks that allows
Wal-Mart to ship 82% of its purchases by its distribution logistics. Another capability
is the distribution centers (the hubs) that operate 24/7 give Wal-Mart ability to serve
between 75-110 stores within 200-mile radius. Also, the RFID system and remix system
that allows Wal-Mart to order from suppliers five-day rather than four-day a week.
Finally, the international procurement system gives Wal-Mart the ability to fully control
its logistics imports. In conclusion, the competitive advantage here that all these
distribution resources and capabilities make Wal-Mart the world number one in
distribution logistics(Grant, 2011).

2.3 In Store Operations:

 In store operations, tangible resources: Wal-Mart has a massive range of nationally

branded products and a wide range of private label products beside its own brands.
However, the latest statistics in 2015 shows that Wal-Marts has 5173 US stores and
6290 international units(Grant, 2011).

8
  In store operations, intangible resources: First, Wal-Mart employees have a high-
engage skill (smile at them and offer greeting). Secondly, the decentralization of store
management, which means that the store manager has a high decision making authority
in terms of product positioning, product prices and relation to merchandise(Grant,
2011).
 In store operations, capabilities: the combination between these tangible and
intangible resources gave Wal-Mart the ability to satisfy the customers by providing a
pleasing shopping experience, great range of desired products and low prices(Grant,
2011).

2.4 Marketing:

 Marketing, tangible resources: Wal-Mart has a huge advertising budget which was
around $2 billion in 2012. This advertising budget is more than any other retailer.
 Marketing intangible resources: the Wal-Mart brand image which has been placed in
the customer mind as a traditional American brand that refers to hard work,
opportunities, community, individualism and low prices ("Everyday Low Prices").
 Marketing capabilities: Wal-Mart has the ability to gain the customer loyalty by using
its strong brand image; the American customers always prefer the national and patriotic
values. Moreover, Wal-Mart has a low advertising/sales ratio comparing to its
competitors. For example, Wal-Mart advertising/sales ratio was 0.55% in 2012, while
its competitors’ ratios were between 1.5 % and 3%. So, the high ability to gain customer
loyalty and low advertising/sales ratio give Wal-Mart the competitive advantage in the
marketing field.

2.5 Information technology (IT):

 IT intangible resources: Wal-Mart has a very advanced code scanning system, private
satellite system, Electronic Data Interchange (EDI) system, credit card authorization
system and very advanced web site system.
 IT human resources: Wal-Mart IT human resources are divided into two groups,
firstly, the Wal-Mart technology group which are at the company headquarter and they
are responsible for manage technology for the stores. Secondly, the IT professionals
group which contains various professionals from many technology companies and they
are responsible for Wal-Mart website.
 IT capabilities: Wal-Mart has a massive database of purchasing information, so by
analysing the data, the company has the ability to set the right item in the right store at
the right price Likewise, the company has the ability to forecast, replenish, and
merchandise its inventory product-by-product and store-by-store level.
9
 The combination of the IT resources and distribution logistics gave Wal-Mart its main
competitive advantage that can be concluded as follows:

 High and fast ability for response for the customer needs by projecting and
studying the consumers purchasing data. Especially, that retail industry these
days highly depends on the speed as factor of success.
 Mixing the value chain with point-of-sale data forming which represents the
base for top management decision making, replenishment and suppliers
deliveries.
 Increase the operations efficiency and increase the company ability to control
its costs and that represents the main factor in increasing the company’s
profitability.

2.6 Human Resource Management:

 Human resources: in 2015, Wal-Mart has 2.2 million employees who work in US
stores and international units(Grant, 2011).
 Intangible resources: first, recruitment system which includes the external and
internal recruitment resources. Secondly, human resource planning program which
includes using special software system which used to analysing the change in
workforce. Thirdly, employee training program which includes designing a training
plans that fit with Wal-Mart’s performance gap and need (Thompson, 2016).
 HRM capabilities: hiring the perfect employees for the perfect positions at the perfect
time. For example, between 2010 and 2015, HRM hired around 2000 developers and
engineers who developed the customer-focused technologies. This was the major
reason for the success of mobile payments through Wal-Mart apps.

2.7 organization and management systems/style:

 Management system human resources: each one of Wal-Mart US’s regional vice
presidents represents a supervisor for 10 to 15 district managers who, in turn are
responsible for supervising 8 to 12 stores.
 Management system Capabilities: Wal- Mart has hierarchical functional organizational
structure, this style has two main features: the hierarchy feature and the function-based
structure feature. The hierarchy feature means that the authority and commands flow in a
vertical way from the headquarter in Bentonville (CEO) to the vice presidents (middle
managers) then to the district managers who are in turn translate them to the stores’
employees. On the other hand, the function- based feature means that group of employees
are responsible for fulfilling a specific function in the company. For example, accounting

10
 and finance department, marketing and customer insights department and project and
program management department. Anyway, the fact that the nature of communication and
network links between Bentonville headquarters and individual stores is so close and
personal was the main reason for creating a fast-response management system in terms of
decision making which, in turn, give Wal-Mart the competitive advantage in the
management system field.

Question-Three:

As was mentioned in question two, Wal-Mart competitive advantage is derived from

its own resources and capabilities across the different functions and activities. So, to determine
the degree of sustainability of Wal-Mart competitive advantage, there are three characters of
the competitive advantage (resources and capabilities) should be measured: Durability,
Transferability and Replicability. The first attribute Durability represents the ability to be
durable in the long-term. Therefore, the resources and capabilities that characterized by high
durability have the more ability to support the competitive advantage in long-term (high
sustainability degree), and vice versa. Transferability is the ability of resources and capabilities
to be transferred by being bought or sold. Accordingly, the competitive advantage that derived
from resources and capabilities that have a high transferability degree (easy to be sold or
bought) usually has a low degree of sustainability, and vice versa. Thirdly, Replicability here
refers to the competitors’ ability to gain the same competitive advantage by duplicating the
resources and capabilities that cause the competitive advantage. Therefore, the resources and
capabilities that characterised by high replicability degree can’t give a sustainable competitive
advantage in the long term (low sustainability degree) and vice versa (Grant, 2011).

11
 Table Three- The sustainability degree of Wal-Mart competitive advantage
Function/
Competitive Advantage Sustainability in long term
Activity
Durability Transferability Replicability
Resources:
 The greatest purchasing power in the industry.
 Electronic Data Interchange (EDI); information system that links High High High
Purchasing Wal-Mart suppliers with Wal-Mart.
and vendor
relationship Capabilities:
 High bargaining power during the deals negotiations with
suppliers.
High Low Low
 High ability and fast response for products replenishment.
Resources:
 Large base of its own distribution trucks(hubs) & global
distribution centres. Low Low Low
 Radio frequency identification (RFID) and the remix” system
Distribution / that links Wal-Mart with third-party logistic companies.
Warehousing Capabilities-Wal-Mart is world number one in distribution logistics
by having:
 Ability to ship 82% of its purchases by its distribution logistics. High Low Low
 Ability to fully control its logistics imports.

Resources:
 Huge advertising budget which is larger than any other retailer.
 The brand image as a traditional American brand that refers to High Low Low
hard work, opportunities, community, individualism and low
Marketing prices ("Everyday Low Prices").

Capabilities:
 High ability to gain the customer loyalty by using its strong
brand image.
High High High
 Low advertising/sales ratio comparing to its competitors.
Resources:
 Very advanced code scanning system, private satellite system,
Electronic Data Interchange (EDI) system, credit card
authorization system and very advanced web site system.
 IT professionals group which contains various professionals Low High High
from many technology companies and Wal-Mart technology
group which are at the company headquarter and they are
responsible for manage technology for the stores
Information
technology Capabilities:
(IT):  High and fast ability for response for the customer needs by
projecting and studying the consumers purchasing data
 Mixing the value chain with point-of-sale data forming which
represents the base for top management decision making, High Low Low
replenishment and suppliers deliveries.
 Increase the operations efficiency and increase the company
ability to control its costs which is the main factor in increasing
the company’s profitability
Human Resources:
 Each one of Wal-Mart US’s regional vice presidents represents a
supervisor for 10 to 15 district managers who, in turn are Low High High
Management responsible for supervising 8 to 12 stores.
style Capabilities:
 Hierarchical functional organizational structure
 Fast-response management system in terms of decision making Low High High

12
Question Four:

How could Wal-Mart as one of the best companies in the world sustain its performance?
This is the main question that comes to mind when you looking at the extraordinary growth
and profitability that Wal-Mart performing these days. Thus, it’s easy to say that the major
challenge Wal-Mart face currently is sustaining its supernatural performance against the high
competition in and outside USA. However, there are also some minor challenges that Wal-
Mart currently faces, which in turn, are linked to the major challenge. The first challenge has
popped out because of Wal-Mart keep expanding its products and services range. Besides the
regular competition that Wal-Mart face in terms of price, this expansion forces Wal-Mart to
compete with more stylish competitor (T.J. Maxx), more service oriented (Best Buy) and more
quality-focused (Wholefoods) competitors in terms of the product and service range(Grant,
2011).

Another challenge looms large on the horizon which is the massive increase of Wal-
Mart size. This increase in size is affecting the close relation between the different management
levels and the short chain of commands. (e.g. Wal-Marts Saturday-morning meeting in
Bentonville). Thus, Wal-Mart ability of fast responsiveness for the market changes (changes
in the customer needs, change in the decision-making requirements) is diminishing. As well,
the huge increase in Wal-Mart size has grabbed the attention of the labour unions, anti-
globalization activists, and women and children’s rights advocates. These parties claim that
Wal-Mart employees are suffering from bad work conditions such as low wages. So, this
external pressure by these parties has created a new challenge for Wal-Mart by affecting its
image in the customer’s eyes. Finally, and as a multinational company, Wal-Mart faces
international challenges too. The first international challenge is that Wal-Mart doesn’t follow
a standard strategy to treat the different international markets, in contrast, Wal-Mart follows a
different strategy in each country which affects the company ability to differentiate itself from
the competitors. As well, Wal-Mart performance is quite different from country to another, for
example, the international profitability indicators show low results comparing to USA
indicators (Grant, 2011).

To overcome these challenges, Wal-Mart should apply appropriate measures which will
help the company to sustain its performance. Thus, and based on the current performance of
Wal-Mart, the most appropriate way is applying the framework for appraising resources and
capabilities which was introduced by Grant (2011). In general, this framework aims to appraise
the resources and capabilities in terms of the relevant strength and strategic importance.

13
 Figure-Four: The framework for appraising resources and capabilities

Adapted from Grant, 2011. Figure 5.7 page 121

In figure four the key strengths area represents the source for the company competitive
advantage. It includes the resources and capabilities that characterized by high strategic
importance in the industry and high relative strength. By identifying and measuring the key
strengths, the company become more capable of employing the key strengths more effectively.
The second area is the key weaknesses which are so important in terms of the strategic
importance but its low in terms of relative strengths. By identifying this area, the company can
discover which of its resources and capabilities it should upgrade and improve to correct the
weaknesses and enhance its competitive advantage. Finally, the superfluous strengths area
includes resources and capabilities that have high relative strength but they are not important
as a source of competitive advantage. To sustain its performance, the company can response to
these resources and capabilities in two ways; the first way is turning them into key strengths
by developing innovative strategies. Another way is reducing the amount of investment in these
resources and capabilities which will lead to save costs and use these for investment for more
important purposes (Grant, 2011).

However, based on Wal-Mart resources and capabilities that we identified in question

two and three, and based on the strategic importance of resources and capabilities in retailing
industry which have been introduced by Finne and Sivonen (2008), the framework for
appraising resources and capabilities of Wal- Mart is illustrated in figure five and table four
below
14
 10
Finance
the relationship IT
with suppliers,
Location
Relative Strength

Brand

HRM

Marketing

0 Strategic Importance 10

Figure-Five: The appraising of Wal-Mart resources and capabilities

Table-Four: The appraising of Wal-Mart resources and capabilities

Strategic importance Wal-Mart’s relative strength

Resources

Fundamental to upgrade and enhance Huge financial resources with remarkable

Finance the resources and capabilities (10) financial performance (10)

Advanced and efficient information very advanced information systems and

IT system that increase the operating technologies such as RFID system, EDI
efficiency and decrease the costs (10) system, private satellite system, IT
professional groups (9)
Very important to gain the customer Very strong brand image in USA (low
Brand image loyalty and enhance the expansion price), but a not constant style and brand
strategy around the world (9) image in other markets (6)

15
Table- Four (COUNTINUED) The appraising of Wal-Mart resources and capabilities

Human resources essential to do the Huge human resources around 2 million

HRM basic operations such as distribution, employees, but poor work conditions and
customer service and in store operation, wages (4)
engineering (8)
Critical to connect with suppliers and A huge private distribution infrastructure
Distribution critical to reach the buyers and customer with advanced network with the suppliers
service (9) and buyers (9)

Has many advantages such as easy of A massive number of stores in USA (5163)
accessibility by the customers and high and 11453 stores in general. (8)
Location
demand in high populated areas, but the
future of retailing depending on delivery
and online services (4)
Capabilities

The key source four increase the cost innovative and efficient value chain with
operational
saving and provide the best price (9) great allocative of resources (8)
efficiency
Important to increase the customer Great advertising and marketing strategy
acquisition and enter new markets (low price), but lack of constant and stable
Marketing through promotions and advertising but marketing strategy through the different
marketing capability in the retailing international markets (3)
industry is not rare (7)
Critical key to decrease the costs and incredible bargaining power which lead to
Relations with increase the operational efficiency by get a very great deal with suppliers (9)
suppliers gaining the best deals (7)

Management structure is fundamental in Strong hierarchical functional structure, but

Management decision making and performance slow response rate in terms of decision
style control and supervising (8) making because of the huge increase in size
(4)
Important to sustain the future Low social responsibility performance
Social performance of the company and comparing to competitors, especially, in
responsibility enhance the brand image (6) terms of relation with the employees (2)

16
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