Case Study Description of Wal-Mart China: Sustainable Operations Strategy
A German expatriate had moved to China in 2005 to take up a merchandising position at the Wal-Mart China headquarters in Shenzen. By 2008 he had been promoted to the new position of senior director for sustainability for Wal-Mart China (retail) and Global Procurement. His new position required that he lead the rapidly-approaching inaugural Wal-Mart Sustainability Summit. The senior director must ensure that Wal-Mart China's five Strategic Value Networks (SVNs), which were tasked with leading sustainability change within the organization, continued to engage stakeholders by implementing innovative solutions that not only cut costs but also lead to more sustainable operations. The case describes Wal-Mart China's operations (including purchasing, distribution and retail) in the context of the company's desire to improve sustainability in a manner appropriate to China. The immediate issue is to identify opportunities to improve the sustainability of Wal-Mart China's distribution systems and retail operations.
Authors :: David Robb, Ben Hopwood, Lei Wang, Jun Cheng
Swot Analysis of "Wal-Mart China: Sustainable Operations Strategy" written by David Robb, Ben Hopwood, Lei Wang, Jun Cheng includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Wal Mart facing as an external strategic factors. Some of the topics covered in Wal-Mart China: Sustainable Operations Strategy case study are - Strategic Management Strategies, Supply chain, Sustainability and Global Business.
Some of the macro environment factors that can be used to understand the Wal-Mart China: Sustainable Operations Strategy casestudy better are - – central banks are concerned over increasing inflation, wage bills are increasing, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs,
increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Wal-Mart China: Sustainable Operations Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Wal-Mart China: Sustainable Operations Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wal Mart, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wal Mart operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Wal-Mart China: Sustainable Operations Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Wal-Mart China: Sustainable Operations Strategy case study
2. Improving business portfolio management of Wal Mart
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wal Mart
Strengths Wal-Mart China: Sustainable Operations Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Wal Mart in Wal-Mart China: Sustainable Operations Strategy Harvard Business Review case study are -
Sustainable margins compare to other players in Global Business industry
– Wal-Mart China: Sustainable Operations Strategy firm has clearly differentiated products in the market place. This has enabled Wal Mart to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Wal Mart to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Wal Mart in the sector have low bargaining power. Wal-Mart China: Sustainable Operations Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wal Mart to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Wal Mart digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wal Mart has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Wal Mart is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David Robb, Ben Hopwood, Lei Wang, Jun Cheng can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Wal Mart is one of the most innovative firm in sector. Manager in Wal-Mart China: Sustainable Operations Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Wal Mart is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Wal Mart is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Wal-Mart China: Sustainable Operations Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Wal Mart in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Wal Mart has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Wal-Mart China: Sustainable Operations Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Wal Mart has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Global Business field
– Wal Mart is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Wal Mart in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Wal Mart has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Wal-Mart China: Sustainable Operations Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Wal Mart is present in almost all the verticals within the industry. This has provided firm in Wal-Mart China: Sustainable Operations Strategy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Wal-Mart China: Sustainable Operations Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Wal-Mart China: Sustainable Operations Strategy are -
Interest costs
– Compare to the competition, Wal Mart has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Products dominated business model
– Even though Wal Mart has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Wal-Mart China: Sustainable Operations Strategy should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Wal Mart has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the segment, Wal Mart needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
No frontier risks strategy
– After analyzing the HBR case study Wal-Mart China: Sustainable Operations Strategy, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Skills based hiring
– The stress on hiring functional specialists at Wal Mart has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Wal Mart products
– To increase the profitability and margins on the products, Wal Mart needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Wal Mart, firm in the HBR case study Wal-Mart China: Sustainable Operations Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Wal-Mart China: Sustainable Operations Strategy that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Wal-Mart China: Sustainable Operations Strategy can leverage the sales team experience to cultivate customer relationships as Wal Mart is planning to shift buying processes online.
Need for greater diversity
– Wal Mart has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Wal Mart has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Opportunities Wal-Mart China: Sustainable Operations Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Wal-Mart China: Sustainable Operations Strategy are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Wal Mart is facing challenges because of the dominance of functional experts in the organization. Wal-Mart China: Sustainable Operations Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Wal Mart has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Wal-Mart China: Sustainable Operations Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wal Mart to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wal Mart in the consumer business. Now Wal Mart can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wal Mart to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Wal Mart to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Wal Mart has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Wal Mart can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Wal-Mart China: Sustainable Operations Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Wal Mart has opened avenues for new revenue streams for the organization in the industry. This can help Wal Mart to build a more holistic ecosystem as suggested in the Wal-Mart China: Sustainable Operations Strategy case study. Wal Mart can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Wal Mart can use these opportunities to build new business models that can help the communities that Wal Mart operates in. Secondly it can use opportunities from government spending in Global Business sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Wal Mart can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Wal Mart can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Building a culture of innovation
– managers at Wal Mart can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Wal Mart can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Wal Mart can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Threats Wal-Mart China: Sustainable Operations Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Wal-Mart China: Sustainable Operations Strategy are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Wal Mart has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Wal Mart needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wal Mart can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Wal Mart needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Increasing wage structure of Wal Mart
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Wal Mart.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Wal Mart.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Wal Mart with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Wal Mart demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Wal Mart can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Wal Mart in the Global Business sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Wal Mart in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Wal Mart will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Wal Mart needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Wal-Mart China: Sustainable Operations Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Wal-Mart China: Sustainable Operations Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Wal-Mart China: Sustainable Operations Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Wal-Mart China: Sustainable Operations Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Wal-Mart China: Sustainable Operations Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Wal Mart needs to make to build a sustainable competitive advantage.
