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Wal-Mart is an American public corporation running a chain of large discount departmental stores that operate in different formats around the world. Founded in 1962, Wal-Mart acquired a philosophy of offering consumers a wide variety of goods at discounted rates. The initial company’s location strategies based on small towns where residents faced limited options for retail shopping.
A business model explains the rationale of how a firm captures, creates and deliver values to their esteemed customers. Wal-Mart has a successful business model that has links to its strategies, external and internal environments, management, value chain and corporate technologies. The company’s model bases on its mission statement, “saving peoples money so that we can have a better life”. It’s said to be the largest retail business in the world and the biggest employer in the US. Over the years, Wal-Mart has grown in the US and connected itself strategically to adopt the American ideologies. Low pricing strategies has catapulted to a leading grocery chain successfully in the US. Wal-Mart business model have nine building blocks.
Value proposition bases on a daily offer of low price as the core of Wal-Mart business. It means that customers are not kept waiting for the best deal possible. The distribution channels determine the value proportion as communicated with the customer segments within the distribution channel which directly bring higher margins. The company also establishes a customer relationship based on the customer’s self service and automation to co-create other products where possible. The key activities needed to run Wal-Mart business include purchasing, delivery and total cost control. Other activities of the firm base on the needs of giving satisfaction to customer segment in order to maintain their brand market. Key partnership maintained by the company is a strong buyer supplier relationship since it considers them as close partners. The key revenue of the company comes from its core business of retail sale. Wal-Mart has three key resources whose basis is on physical, human resources and the organization’s culture. The whole structure is cost-driven which focus on minimization of costs wherever possible as characterized by the economies of scale.
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Importance of the model to the local community
Based on the wholesale cost leadership business, the company continues to demonstrate huge commitment to formation of partnership with its key suppliers to becoming business partners. This enables the company to technical and business risks as well as company proceeds in terms of discounts. Although, there’s an economy of scale as a competitive advantage, consumers express disenchantment over the so called Wal-Mart effect. The company mobilized all its resources to create an artificial monopoly that implied loss of jobs due to unfair competition in the markets.
Wal-Mart identified the customer segment in which to deliver the value proportion which can not apply to the whole market. This leaves the organization with the only option to approach the segment that they already serve. Another problem faced by the organization is the relationship between employees and their managers. In order to achieve the value in which the company perceives to avail to customers, workers are under compulsion to work hard and for longer hours inside the stores. The group management goes an extra mile to block formation of non formal groups and labor unions.
The future of Wal-Mart
The success of Wal-Mart usually rotates around their customer satisfaction principle, market leadership and low pricing strategy. However, due to the ever changing operating environment, the competitors can easily imitate this business model which forces the directors to strategize on more developments to the model. Wal-Mart continues to grow around the world by utilizing a number of opportunities like entering and serving new markets, integrating online services, and developing new and innovative techniques to provide customers satisfaction.
Based on new ideas and adaptation to the ever changing business environment, Wal-Mart continues to develop changes in the labor force. To change the perception and the organization view of responsibility, all the workers in the business are known as ‘associates’. This makes everyone receive a substantial autonomy and continuously keep business communication updated. This is a secret strategy to workers motivation. The organization also enjoys a strong pool of recruitment of people with proper skills, competence and working experience.
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Decision on constructing a Wal-Mart super center in the local community
After a clear analysis of the benefits and costs that establishment of Wal-Mart retail stores brought to the community, the town council has a concern on whether to allow the introduction of the stores. The council needs to look into the needs of the society at hand before concluding on the actions to be taken.
First, allowing Wal-Mart Corporation to set up super stores in the tow implies that many jobless but qualified individuals will secure jobs with the company. The town council will also add up to the revenue collection. Consumers, on the other hand, will enjoy a variety of high quality and cheap products that are readily available. In addition, there will be a requirement that the existing businesses streamline their business strategies in order to remain relevant in the industry. Thus, it will be possible to avoid unfair pricing by the local traders.
However, having made considerations of the business model that Wal-Mart has been operating, there is a sense of danger in allowing the set stores in the town. First, due to the high level of capitalization of the firm, the management can engage in a cut throat competition which can lender them out of business. This often leads to an artificial monopoly that may find the people working in the existing firms’ lose jobs and the town council losing revenue. Therefore, allowing the firm to open a super store in the town can only be reached upon setting some conditions that will not negatively affect the local community.