How could Wal-Mart continue its extraordinary growth?
Wal-Mart is for no doubt, one of the largest retailing chains North America. The company has its existence in more than 10 economies. Wal-Mart has substantially done well in increasing its sales with its sales increasing by margin of 10 per cent every year. The company is making handsome growth and has opened more than 1500 showroom various markets. Now the way in which the company can continue its extraordinary growth can be understood by analyzing the 4 Ps of the company.
Wal-Mart has three types of retail stores which provide things of daily necessities to the people. These stores deal in products like grocery, lubricants, pharmacies, photo studios, and etc. With these items, these stores also provide space for other brands like Mc Donald's, Dunkin Donuts, etc. So in terms of products, the store seams saturated and just need to ensure that products are in accordance with the need latest need of the customers and of good quality.
Wal-Mart store and too frequently located and there is a store at a distance of every 50 km. The stores are placed near warehouses and manufacturing plants of the company to save money. It is true that the company maintains its store location at most reachable place and store design is also attractive, efforts are needed in bringing freshness in the environment and to avoid obsolescence.
Prices of the products in the United States fall in the higher range but the per capita income is also high. In the countries like Germany and Korea the store will have to cut down on the prices. For maintaining the growth in foreign market too, the company needs to reduce its prices in foreign markets to capture greater market share.
Wal-Mart looks at every aspect of promotion including usage of banner, newspaper promotion to internet promotion. This promotion needs to be maintained for sustaining the extraordinary growth.
What would be the limits to that growth?
Few of the factors that would be limit to the growth of the company are:
A chief factor that too frequently limits the development of the company is constant technological advancements. In real life, there is plenty of technological development every day and any new innovation can delimit the growth of chain stores like Wal-Mart. The reason is networked structure of Wal-Mart, in which if any new technology is to be considered, entire set of stores of the company are needed to be modified including cost of technology, new human resource and training of old workers.
Another important issue is availability of human resource at required price by the company. Wal-Mart has a brand name and has to follow a standard. So it recruits qualified people for jobs but with the increase in inflation in wide diversity of markets, it is increasingly becoming tough for Wal-Mart to maintain same level of human resource across borders at reasonable price.
With increasing the footsteps in variety of markets, the new problem faced by the chain store is to preserve the same level of service standard in all the stores irrespective of social culture of the foreign market in which the company is functioning in.
Another important factor that is a major delimiter for company's growth is finance available for investment. Except U.S., the company has made only decent growth which makes it clear that investors may not be equally willing to invest in Wal-Mart as in United States. So this deficiency of funds makes it more difficult for increasing capital requirement for growth.
One of the foremost reasons for limited growth of Wal-Mart is increased competition faced by the company in various markets and number of multinational hyper markets like Mark & Spencer etc which too often limits the market share of the company.
Did Asia and Europe offer Wal-Mart real opportunities for international market dominance?
Wal-Mart has been very successful in Unites States and now with the saturation, is trying to enter its footstep in foreign markets too. Asia and Europe are the tow new options available for the company for expansion purpose.
Let us talk about European market and its opportunities first.
- Most of the countries in Europe are developed and the company can place higher prices for its products and services which mean higher profit margin.
- The standard of living in Europe is quite high and is similar to those of American level that mean Wal-Mart can operate new range of luxury products in the European countries.
- The company has already entered Germany and this presence will facilitate its future endeavors in Europe. There are plenty of such operators in the European continent which can provide a streamline and study way to cover Europe as a market.
Now moving our attention towards Asian market, few highlights of the market and its opportunities are:
- There are plenty of new economies in the continent which can prove a boon to the company. Particularly mentioning about Korea, the corporation made significant progress in its little span of existence in the nation. In Korea, the company had skilled Human Resource quota of over 3000. This indicates that the company is performing well and Korea can be superior market for the Wal-Mart to grow.
- Talking about China, the company entered China by collaborating with a local firm. This local firm provides a way to enter in the Chinese market to the company. China has shown a steady advancement in the sector. China is again, the most promising market in terms of size too. All these make China a better market to invest.
The shareholder's wealth in these markets has been above a reasonable thresholds and this means that investor support is with the company in these markets. This mean that so far, the expansion of the company in European and Asian market is been fruitful for the retail giant and that the market of Europe and Asia can be a good place to the company to invest.
How could the company take advantage of its global reach to propel itself through the years to come?
Wal-Mart has to learn a lot from its failure in Japan and Germany. The problem of suppliers in Germany is needed to be taken care in other markets too. Another experience was issue of trade union which was also learned from the case of Germany. German customers are worried about prices more than the quality of commodities which make it important to analyze the social aspect of the market before entering. It became second largest retailer in UK by overtaking Sainsbury. Business climate of China also suited Wal-Mart and they started making money over there.
Putting a more emphasis on Wal-Mart in international market, it is growing in double figures annually. There was an augmentation of 16.6 % in the role of the international market in net sales in year 2004 and made $2 billion in operating profit in the first three quarters of the fiscal year 2005 from International Operations. If we look at the net sales of the company in the starting of 2004, it was $ 256,329 with an increase of 12% from the prior fiscal year's net sales. In comparison to other stores, this increase was 8% more than there increase. The Net income was $ 9,054 at the starting of 2008 experiencing a gain from 7955$ in previous year. Thus we can see an increasing trend in the progressing rate of the company. This increase with a consolidated financial position in 2004 is the result of its global reach. Globally, Wal-Mart has achieved great heights by acquiring the most promising retailer firm in foreign land. The net international sales in 2004 were $ 47,572 with an operating income generation of $2370 which is a hike of 18.6% from previous year's income. Thus we can see that the global reach of the company is pushing the company to run in more profits. In 2005 company is having sales of around 260 billion dollars, has opened 5000 stores in 10 countries and gave 1.5 million people a source of employment. So on the basis of all of these arguments, it can be said that the company can rely on countries with increasing sales figure and better profit. Wal-Mart can also enter strategic partnership like it did in China for entering new markets.