Key Challenges Facing Wal-Mart in Reaching Consumers
Walmart open its doors in 1962 with Sam Walton as the founder. The multinational retail operates warehouse stores and chains of large discount department stores. In accordance to the slogan “save money and live better”, Walmart focuses on providing customers and communities products at lower prices(Dibb, & Simkin, 2013). Despite the milestone the company have made in the past decades, it faces key challenges as it expands to other countries. Some of the key challenges Walmart faces include cultural difference, general economic conditions, globalization and technology.
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The practical challenge associated with cultural difference was observed when Walmart sold all the 85 stores in Germany to Metro. Similarly, Walmart was forced to close up all the 16 stores in South Korea(Banjo, 2013). The cultural difference existing in the geographical location as well as competitive business environment made Walmart to withdraw from these countries. Previously, Walmart has faced the same challenges in other countries such as Mexico, Brazil and China due to cultural difference.
General economic conditions
Considering the business environment the company operates in, slight decrease in economic growth would have negative impacts on the performance of the retail stores. Similarly, the fluctuating foreign exchange affects the growth of revenue(Hasim Dear, 2013). Although during recession, Walmart was not affected significantly, long-term effect was felt in the long run.
The reality of globalization affects the company from the aspect of operations, supply chain and target consumers. As the company expands to the international market, it means that getting suppliers in these countries would be challenging based on business environment(Qualman, 2010). Also, the company would have to deal with suppliers’ relationship and understanding culture in which the company operates in.
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Although technology have proven to break the barriers associated with location and geographical limitation, studies have shown that fast pace of technological changes have significant effect on the operations of Walmart.
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How to overcome the key challenges
- Increase revenue and maintain market share: Studies have shown that despite the continuous increase in revenue, the revenue growth rate has declined significantly. This was evident in the fiscal year 2010 and 2011 when Sam’s Club revenue declined(Smith, & Ze Zook, 2011). The Walmart should focus on international segment since they have continually registered positive growth.
- Expand in the Global Market: Although 59.5 % of the total revenue generated by Walmart comes from U.S. market, the Walmart should continue to venture into the international market(Smith, & Ze Zook, 2011). In some countries, Walmart have recorded strong revenue growth and therefore, the company should open stores in those countries that have similar business segment as that of the U.S.
- Maintain price leadership position among competitors: Some competitors have imitated price leadership strategy which was unique to Walmart and the studies have shown that the company is losing to these competitors. Therefore, the company should refocus and re-strategize in this approach in order to maintain its ground by dominating the market.
- Introduce a cost leadership position in global e-commerce: Studies have shown that consumers prefer to shop online rather than physically going to pick products in the stores shelf. Therefore, the company needs to maximize the use of ecommerce in order to place itself in the completive position.