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... ed. Another weakness is that there are few females in top management and there are few minorities employed. With such a societal demand for equality, Wal-Mart is lacking in this category. This is not a very good ethical decision for Wal-Mart to be making. They are really hurting their corporate image by maintaining this position.
The other area that Wal-Mart lacks in is with unions. Currently, Wal-Mart does not have any union involvement. This is a problem because of the perception of treating employees poorly. Unions are created to provide bargaining power to employees on issues that involve their compensation, benefits, and working conditions. This is also a weakness because of job security. With unions, job security is not as much of a concern.
Marketing The biggest source of marketing weakness stems from Wal-Mart lobbying to expand into new markets. There are thousands of towns across the United States that have tried to block the introduction of Wal-Mart because of the economic impact that it has on small-town stores and shops. Wal-Mart has a damaged reputation because when they move into a location they end up "forcing" these types of businesses out of business. Finance/Accounting Weaknesses in Wal-Mart's finances are seen in three of its ratios. The fixed asset turnover, earnings per share, and average collection period ratios are not very good. The fixed asset turnover ratio is telling us that they have made a lot of investments, but that they are not being fully used at this point in time.
The earnings per share ratio is not good because when compared to the industry, they are not earning as much money for each shareholder. However, this is most likely due to the sheer number of outstanding shares. The average collection period is a cause for concern because it means that they are allowing their debtors to carry accounts with Wal-Mart for an above average period of time. This is not good because it increases the likelihood of non-payment. (These ratios can be found in Figure 3 of the appendix) Production/Operations The largest source of concern for this functional area is the slowing speed of checkout lines. This is simply a product of Wal-Mart's success. Because more and more people are going to Wal-Mart, and the number of checkout lines is staying constant, the only way to compensate is for the time to checkout increase.
This is a problem because it can and will cause people to choose other stores that are less congested. They are basically losing sales due to this fact. Research and Development This is a weakness because they do not actively engage in any research and development. Specifically, they do not do any prior site research before opening a store. They simply approach a local government and build. Computer Information Systems We did not find any weaknesses in Wal-Mart's computer information systems.
Internal Factor Evaluation The internal factor evaluation is used to evaluate the major strengths and weaknesses of a company. There are weights assigned to strengths and weaknesses based on how the company responds to them. The ratings are: 1 = poor response, 2 = average response, 3 = above average response, and 4 = superior response. (Figure 5 in the appendix) The key strengths we identified were financial position, employees, customer oriented, one-stop shopping, satisfaction guaranteed programs, employee stock ownership and profit-sharing, well-rounded business, ease of website, good reputation, and favorable access to distribution networks. Along with key strengths of Wal-Mart, we also identified key weaknesses. The key weaknesses are some ratios are not sufficient, non-unionization, no formal mission statement, few women and minorities in top management, undifferentiated products and services, site research, slow speed of checkout service, and finally a damaged reputation. The strengths were weighted: . 04 for financial position, . 07 for employees, . 07 for customer orientation, . 14 for one-stop shopping, . 05 for satisfaction guaranteed programs, . 05 for stock ownership and profit-sharing, . 03 for well-rounded business, . 04 for ease of website, . 04 for good reputation, and. 04 for favorable access to distribution networks.
The weaknesses have also been weighted. The weaknesses weighted scores were. 03 for insufficient ratios, . 15 for non-unionization, . 05 for no formal mission statement, . 05 for few women and minorities in top management, . 03 for undifferentiated products and services, . 05 for site research, . 04 for slowing speed of checkout service, and. 03 for a damaged reputation. These weights show the importance of each strength and weakness of Wal-Mart. They are determined by how important that quality is to Wal-Mart and how hard of an impact each has against other businesses. We felt that the most important factors were one-stop shopping and non-unionization. These two factors are very important to Wal-Mart's structure and well being as a whole.
If these factors are not evaluated regularly, they could put a start to its potential downfall. We rated each strength and weakness based on how Wal-Mart seems to be positioning itself against its competitors. Wal-Mart's employees, customer orientation, one-stop shopping, satisfaction guaranteed programs, stock ownership and profit sharing, ease of website, good reputation and favorable access to distribution networks all have been very successful strengths for the company. These are so successful we rated each with a 4. The financial position of Wal-Mart and the well-rounded business that it is has made Wal-Mart what it is today. Because of this success we rated these factors with a 3.
In their weaknesses, we thought that minor weaknesses included: non-unionization, no formal mission statement, few women and minorities in top management, undifferentiated products and services, site research, and the slowing speed of checkout service. Since these were only minor we gave them a score of 2. We also rated some major weaknesses. These included insufficient ratios and their damaged reputation, which we rated as a 1. By using these scores in the internal factor evaluation matrix, we came to a total score for Wal-Mart being a 3. 01, which is above average.
They are above the average company when it comes down to its strengths and weaknesses and how they deal with them. (This is Figure 5 in the appendix) Existing/Potential Problems There are three potential problems for the organization. They are customer and employee theft, slow checkout service, and non-unionization. Ranked in the order of importance, customer and employee theft comes out first. This is a major problem not for just Wal-Mart but for the whole industry as well. The employees start to become very creative in the way the steal merchandise or even money. One example could be when the cashier is checking someone out; the cashier doesn't give the receipt to the customer, then when the customer leaves the employee will cancel the transaction and take the money.
Along with employee theft customer theft is another big issue. No matter what technology Wal-Mart has, someone will figure out how to get around it. The next potential that is of importance, ranking second, is slow checkout service. When people go to Wal-Mart, they may go for the low prices, but when they go to leave some people may say forget it. Some Wal-Mart's have the slowest checkouts around. It may take fifteen minutes for someone to buy one thing because of how many people are in line waiting.
This really discourages people from going to Wal-Mart and may encourage them to go to a competitor. Finally the last potential problem Wal-Mart has is non-unionization. This is because in the industry the competitors have unions while Wal-Mart doesn't. The workforce for Wal-Mart had been lobbying to unionize for the distinct advantage that unions provide to their members. This is important because union membership allows employees to increase their value to the employer and to themselves through collective bargaining.
As this pressure increases, Wal-Mart will either have to create unions or they will have to increase its compensation and benefits to employees. Internal-External Matrix The internal-external matrix is also known as a portfolio matrix because it involves plotting organization divisions in a schematic diagram. It is based on two key dimensions: the internal factor evaluation total weighted score on the x-axis and the external factor evaluation total weighted scores on the y-axis. On the x-axis of the internal-external matrix, an internal factor evaluation total weighted score of 1. 0 to 1. 99 represents a weak internal position, a score of 2. 0 to 2. 99 is considered average, and a 3. 0 to 4. 0 is considered strong.
Similarly, on the y-axis, an external factor evaluation total weighted score of 1. 0 to 1. 99 is considered low, a score of 2. 0 to 2. 99 is medium, and a score of 3. 0 to 4. 0 is high. The internal-external matrix is divided into three different regions. The first region is described as grow and build and can use intensive or integrative strategies. The second region is described as hold and maintain. This region can use market penetration and product development strategies. The third and final region is described as harvest or divest and this is where successful organizations are able to achieve portfolio of businesses.
Wal-Mart is part of grow and build strategies and the three strategies appropriate for the company are market penetration, market development, and product development. This is because the internal factor evaluation total weighted score is 3. 01 and the external factor evaluation total weighted score is 2. 95 causing the to fall into the medium range in strong position, quadrant IV. (This is figure 6 in the appendix) Strategies As determined by the IE Matrix, Wal-Mart fits into the category of grow and build strategies. Thus, the aforementioned strategies would fit Wal-Mart very well. All three of the strategies that we decided on are grow and build types. The three strategies that Wal-Mart would benefit most from are: market penetration, market development, and product development. Market Penetration The market penetration strategy is when a company is seeking to increase the market share for present products or services in present markets through greater marketing efforts.
This is also an appropriate strategy for Wal-Mart to implement because they can take advantage of the bankruptcy of K-Mart. Through the increase of Wal-Mart's marketing campaigns, they can attract and retain most of K-Mart's customers. Also, because K-Mart has been closing hundreds of stores, Wal-Mart has a distinct advantage of controlling markets where both Wal-Mart and K-Mart are located. Also, because of Wal-Mart's economies of scale against its rivals, they have the power to influence markets in their direction.
The company culture is also well suited for this type of strategy. The management of Wal-Mart has ingrained in the employees the core values needed to excel at increasing their market penetration. Again, their EDLP and Rollback campaigns can readily be diffused into markets where they do not have as much of a market share as they want. This will also have a positive impact on the company culture because of the increased opportunities available to current employees. As their market share increases, they would also probably begin to add to their product offerings in that area. This will, in turn, allow employees the ability to grow with the company and be promoted into higher positions.
The costs involved with market penetration are not nearly as great as with market development. Wal-Mart only needs to increase its marketing campaigns in the target areas. And again, with K-Mart's unfortunate exit in many of the same markets as Wal-Mart, they have an even better chance of success simply because they will be the only large discount retailer in the area. They may not even have to increase any costs in this type of situation simply because of the natural reaction of consumers needs.
If they were going to K-Mart for products and K-Mart is closed, their natural reaction would be to simply go to Wal-Mart. The length of time for this type of strategy implementation can be measured in days. This is because Wal-Mart already has a very large, established marketing campaign. All that they would need to do is realign or increase their marketing in the target area. This is a very simple process of contacting the local television stations and purchasing advertising space. It can also be accomplished through circular ads and the newspaper.
The running length of time for this strategy can be measured in weeks, as Wal-Mart would probably change their campaigns periodically. This is a good strategy for Wal-Mart because of the relative ease of success that Wal-Mart can garner simply from advertising in areas where K-Mart stores have closed. This is also a good strategy because it will have a positive impact on Wal-Mart's bottom line without a very large increase in costs. The only bad aspect of this campaign is that other competitors will probably be doing the same. Every single business in that area will have to respond to Wal-Mart's drive to increase its customer base. The advantages of this strategy are almost immediate results, increased market share, increased sales, and increased consumer recognition.
Disadvantages of this strategy are possible failure and increase competition. Market Development The market development strategy is simply the introduction of present products or services into new geographic areas. This is a very good strategy for Wal-Mart because it is in line with its core values. Wal-Mart has many areas of opportunity to excel with this strategy, both at home and abroad. The have the needed capital and human resources to expand, they are very successful in their industry, and there are several untapped and unsaturated markets still available. This is also an appropriate strategy because of the increased competition that the retail / discount industry is facing.
While Wal-Mart is at the top, they are increasingly seeing their competition move closer to dethroning their position. The company's culture already is receptive to this type of strategy. They have been expanding their reach in all facets of their business for...
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