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 - – wage bills are increasing, technology disruption, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices,
digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, 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 -
Organizational Resilience of Wal Mart
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Wal Mart does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Wal Mart are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in 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.
High brand equity
– Wal Mart has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wal Mart to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Wal Mart is one of the leading recruiters in the industry. Managers in the Wal-Mart China: Sustainable Operations Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Wal Mart has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Wal Mart has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the Wal-Mart China: Sustainable Operations Strategy Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
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.
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 -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Wal-Mart China: Sustainable Operations Strategy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Wal Mart has relatively successful track record of launching new products.
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.
Slow to strategic competitive environment developments
– As Wal-Mart China: Sustainable Operations Strategy HBR case study mentions - Wal Mart takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Increasing silos among functional specialists
– The organizational structure of Wal Mart is dominated by functional specialists. It is not different from other players in the Global Business segment. Wal Mart needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wal Mart to focus more on services rather than just following the product oriented approach.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Wal-Mart China: Sustainable Operations Strategy, is just above the industry average. Wal Mart needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners
– Because of the regulatory requirements, David Robb, Ben Hopwood, Lei Wang, Jun Cheng suggests that, Wal Mart is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Wal-Mart China: Sustainable Operations Strategy, in the dynamic environment Wal Mart has struggled to respond to the nimble upstart competition. Wal Mart has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Wal-Mart China: Sustainable Operations Strategy, it seems that the employees of Wal Mart don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
Leveraging digital technologies
– Wal Mart can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Manufacturing automation
– Wal Mart can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Wal Mart can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Wal Mart can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Wal-Mart China: Sustainable Operations Strategy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Wal Mart to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Wal Mart to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
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.
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 -
Shortening product life cycle
– it is one of the major threat that Wal Mart is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
High dependence on third party suppliers
– Wal Mart high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
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.
Environmental challenges
– Wal Mart needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Wal Mart can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Wal-Mart China: Sustainable Operations Strategy, Wal Mart may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Wal Mart business can come under increasing regulations regarding data privacy, data security, etc.
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.