Walmart’s Strategies for Overcoming Business Risks and Exploiting Business Opportunity

Executive Summary

The retailing industry has in the recently experienced rapid growth fueled by the intensifying competition among the well-situated companies. The retail industry is characterized by the highest growth rate when contrasted with other trading industries. Walmart Inc. is involved in wholesaling and retailing trade in the global market. The company is classified as the leading retailing corporations around the globe based on its financial steadiness, market share, proceeds, and resources. Its success has predominantly been acquired via the utilization of strategic operations and marketing. Walmart operates under a number of challenges particularly the growing competition for market shares which creates the need for expansion to capture the unexploited markets. Walmart’s generic positioning revolves around cost leadership. The company is concentrated on offering quality, convenience, and affordable products while decreasing its operating costs to generate revenue balance. The strategy has supported the company in acquiring an extensive market and consumer loyalty because its mission demonstrates that the firm is consumer-centric. In cost leadership approach the company’s concentration is sustaining lower-priced services and products a move that its competitors have not been able to maintain.

In order to create a firm position in Vietnam Walmart will utilize joint alliance as its legal entry structure. This will help the company in lowering its operational expenses, accessing wider markets as well creating awareness and familiarity. Walmart is prevalent for its low pricing strategy, which is its main selling central point of all its commercial operations. The low prices are maintained via the utilization of cost reduction approaches. Vietnam is potential expansion market because of its economic, legal, social and political opportunities it possesses. However, the market is characterized by competition and political instability threats which necessitates the company to utilize joint venture. Based on the favorable policies regarding trade competition in the market is gradually increasing both from local as well as foreign countries thus necessitating risks mitigation for strategic positioning. In this market, Walmart can gain a wider market through the utilization of Cost leadership strategy. In that, unlike the competitors in the market, Walmart is more attentive on generating value in regard to affordability, accessibility, quality, and variety. Offering goods and services at the least prices taking advantage of its supply chain efficiency would offer the firm a modest positioning. Based on the firm’s advantages and the existing growth and investment opportunities in Vietnam Walmart expansion will be a beneficial one. Walmart as the largest retailer globally can apply SWOT in evaluating the outcome of the market so that it can enhance its performance while focusing on consistent global expansion. While the strengths and faults of the company are established via an internal assessment. Opportunities and threats are normally established from the external and industrial assessment. The focus of this study is to offer a detailed analyzing of the existing external threats and opportunities in Vietnam and propose strategic approaches that Walmart can employ in its strategic international expansion.

Introduction

Walmart Corporation is a global retailer leader, engaged in wholesaling and retailing business (Campbell & Netzer, 2009). The company has acquired the leading position based on its long success in its global commerce, resources, financial stability, revenue generation and market share which has not only provided it with a competitive advantage but categorized it as the economic giant. As the retailing giant Walmart is guided by the philosophy of saving consumer’s money while improving their lives standards. This philosophy, therefore, shows that the firm is a consumer-centric one that is not focused on revenue maximization rather on quality and affordable items and services provision (Campbell & Netzer, 2009). The success of the company has mainly been driven by its cost leadership approach and strategic positioning. In that, the company acknowledges that consumers are becoming highly sensitive to products quality as well as cost and therefore attempts to create a balance. In order to maintain these values, the firm is mainly focused on operating under minimal expenses which words to ensure that its revenue is not affected. The retailing industry is characterized by intense competition particularly from well-established firms along with its progressive growth which creates the need for expansion to increase the company’s stability (Campbell & Netzer, 2009).

The company’s market expansion in Vietnam will particularly focus on an electronic specialty. The electronic specialty will, therefore, be useful for the organization in expanding while targeting the low and medium earning individuals in the market who make the highest populace in Vietnam countries (Latova, 2017). In order for the company to sustain its competitiveness within the industry then it is better to focus on this specialty with little competition and lesser risks in order to establish its self well prior to making additional ventures. Walmart Stores targets the low and medium earners and not particularly the wealthy individuals particularly the early technology adopters. The market size for the targeted population account for about 65 percent of the whole market. This comprises of individuals willing to purchase products of quality but is sensitive to the prices thus focusing on quality and affordability (Latova, 2017). In addition, it is expected that the market will experience a 6% growth by 2020 which creates more opportunities for long-run growth (Latova, 2017). The high-income earners are not excluded given that the company focuses of superiority of goods as well as services (Charles & Anderson, 2016). The target for the company is for the larger populace from the individuals in need of finding low-priced products at convenience as well as quality. This paper will use Walmart’s SWOT matrix to develop strategies needed to overcome business risks and exploiting commercial opportunities in Vietnam.

External Opportunity and Threat factors

Opportunity Factors

Walmart as the retailer leader in the global context is characterized by several economic opportunities as well as threats which therefore necessitates the inclusion of mitigating strategic threats (Charles & Anderson, 2016). Based on research it is apparent that the primary opportunity for Walmart lies on its capability to offer products daily at the least prices which the competitors have been unable to beat (Charles & Anderson, 2016). The firm provides the largest brands selections at the most affordable pricing which attracts the largest portion of consumers both from the low and middle-class classification. Based on the company’s philosophy that seeks to save money for the consumers for more quality living it is evident that the company is a consumer-centric one. In Vietnam the current opportunities for Walmart are that based on its well-recognized and accepted brand globally the firm can merge or even enter the market via the utilization of joint venture contracts. The joint venture will seek to lower its operating expenses while avoiding the associated risks such as criticism, high marketing need and intense competition (Charles & Anderson, 2016).

As a foreign firm Walmart is required to learn and familiarize with the marketing because the operating culture and economic performance in Vietnam are distinct from that of the United States. This, therefore, means that a strategic alliance is needed because additional to learning the firm has no experience regarding the market (Chekwa, Martin & Wells, 2015). The company has its stores situated in very few countries globally and with the increasing competition in the retail industry, an expansion to Vietnam will seek to expand its share. Fresh ventures create more opportunities for exploiting the less exploited but mature markets that are characterized by utmost potential. The utilization of low pricing strategies will be essential in attracting a wider range of consumers within the market particularly when focusing on cost and quality values that the target population is more sensitive in regard. In instances of economic and political go-slow, most consumers are highly interested in bargains because of the necessity to utilize less money in purchases (Chekwa, Martin & Wells, 2015). This tendency will, therefore, benefit the form to enhance its sales even more based on its favorable pricing. In addition, as most of the retail traders are in participation due to the increasing disposable income in Vietnam, Walmart will be able to fight the competition and increasing its consumer base through the provision of high bargaining potential to the consumers (Chekwa, Martin & Wells, 2015).

In Vietnam, products pricing within the retail sector is relatively high based on the high bargaining authority held by the operating organizations. In this context, despite the large market for electronics, it is apparent that the supply chain affects the pricing of most firms (Chekwa, Martin & Wells, 2015). As established the relatively high prices are fueled by high operating expenses which, therefore, implies that if the firms price their products low they are bound to experiencing losses and ultimate closure. In order to remain relevant, there is a necessity to precisely design strategies that mitigate the high costs of operations. Walmart has the strength in this threat because it holds an authoritative supply chain globally which facilitates its brand's variety and minimal pricing. Online sales have become trendy particularly for the retail goods and most Asian markets such as Vietnam have not been exploited fully by foreign and local traders. Walmart targets mainly the low and middle-class persons which comprise of more than 65% of the market (Latova, 2017). This, therefore, implies with a 6% increment anticipation the market will create further opportunities for investment and growth (Chekwa, Martin & Wells, 2015).

Vietnam’s has a high populace that creates further markets for market growth. In this case, it becomes apparent that the market has utmost potential. Vietnam as a developing sector holds a retailing sector that is developing constantly (Chekwa, Martin & Wells, 2015). This trend has created fresh opportunities that can be fully tapped by Walmart in the quest of increasing its share, global presence and increase profit generation. Most firms are focusing on extensive markets expansions within all the fresh economies in the quest of acquiring maximum benefits from the consistently growing retail sector. Internet trading is one of the major strength for Walmart which creates the opportunity for more the firm to serve a larger market. This opportunity will assist the corporation in leveraging its expansion in Vietnam (Chekwa, Martin & Wells, 2015). Via internet retailing the company will have the potential to get into the wider Vietnam market at a high rate particularly in locations where retailing stores are not present or have low expansion opportunities (Chekwa, Martin & Wells, 2015). 

Threats Factors

Walmart as the primary leader in the retailing sector implies that it is the main competition target for all the retailers both locally and internationally. This, therefore, implies that expanding into the Vietnam will not be any different because they competitors are afraid of the threats that the company presents (Frynas, 2015). Its operation in Vietnam also means that the corporation is a primarily subjected to political particularly based on its political instability. The country has favorable policies governing trade but on the other hand with political instability business can be affected. More so, the entire supply and distribution costs for products tend to lessen based on high demands and if the demands changes then the prices are affected which leads to pricing competition a major threat to the company’s capability to generate profits (Frynas, 2015). An international expansion by its own is not cheap which means that the company has the obligation of maintaining low operating expenses not to affect its revenue (Frynas, 2015).

Intense competition amongst the company’s competitors is the primary threat. In that, the competitors are currently involved in an intense competition that is strategically mitigated via cost and differentiation (Grünig & Morschett, 2017). Most of the established firms compete strategically focusing on cost reduction in order to attract more consumers in the respective market. Despite the fact that the pricing strategy is the primary positioning strategy. With the use of differentiation as well as cost leadership the company will ultimately beat the existing competition but this might result in losses if the prices are too low and the operating expenses are high. Competition is mainly intense based on the favorable policies that have been set by the government to encourage high investment (Grünig & Morschett, 2017). The expenses involved in the production of most consumer goods globally has decreased which is due to the associated low production expenses. On the other hand, production costs are lower based on increased outsourcing from those locations that have lower pricing. This has resulted in the rise of pricing competition among major firms and this leads to prices deflation to certain levels. Operating in an environment with intense competition in regard to prices rather than markets, sales and revenue possess major operating threats (Grünig & Morschett, 2017).

Pricing competition is a threat because as the company strives to provide least priced products competition tends to force the pricing even lower which leads to loses since the operating expenses are more when equated to the generated revenue (Grünig & Morschett, 2017). A company cannot run with the presence of more and more losses as the closure is the primary option. This will not only affect Walmart’s brand but its ability to venture and glow in different global markets. As the international retailing leader, Walmart will definitely face political instability in its international expansion particularly Vietnam. Vietnam has made notable changes and development in the last two or so decades but it is very popular globally for its political instability which might affect business productivity (Grünig & Morschett, 2017). This is a major threat for the company as a new venture because more time will be required to attainment establishment and well acceptance in the market. Political instability, affect the willingness of consumers to spend more on purchases thus giving them higher bargaining authority because income generation is also affected (Grünig & Morschett, 2017). The competitive positioning of the company is in this case impacted negatively since sales capacity is reduced thus creating an imbalance in its scales economies, revenue generation, and market share.

Exploiting Strategies for Opportunity, threats and Opportunity Support Factors and Mitigating Strategies for Country and Industry Threats

Walmart major strength lies in its capability to maintain its cost leadership globally. The firm strives to ensure that it effectively operates under minimal expenses in order to support its low pricing (Hacioglu, Dincer & Alayoğlu, 2017). This positioning is mainly supported by the large size of the company that provides high bargaining authority against its global supplies. In addition, the company is focused on high sales capacity because it has the obligation of sustaining the scales economies for sustainability and extensive growth. Another strength is that the company’s brand and services are well accepted in the global context due to guaranteed satisfaction and its unchanging focus on the financial and emotional needs of the consumers in general (Hacioglu, Dincer & Alayoğlu, 2017). Community responsibility and products diversity is an additional advantage for the company. Unlike its competitors, it provides more selecting option based on the needs of every consumer which is highly appreciated by the consumers in general (Hacioglu, Dincer & Alayoğlu, 2017).

Being a well-established that is popular and situated as the global retail leader, Walmart should generally take advantage of this strength in order to permit its consumers to bargain more and switch to its services over those provided by the competitors (Hitt, Ireland & Hoskisson, 2017). In Vietnam, products pricing is relatively high in the retailing industry and consumers are pressured to adhere based on the high switching expenses. However, Walmart has more resources based on its extensive market and high market presence while being compared to its competitors in Vietnam. The company can, therefore, utilize its cost leadership approach to ensure that it equips the competitors with high authority. In addition, Walmart can utilize discounting approaches because its rivals do not often utilize such approaches (Hitt, Ireland & Hoskisson, 2017). This will attract more consumers to the company while focusing on communicating its affordable, convenient and quality values associated with its services and products (Hitt, Ireland & Hoskisson, 2017). Its revenue and financial stability place the firm in a more potential position over the competitors whose operating expenses are a bit high based on the absence of effective supply and operation systems. 

In the economic slowdown period, most of the consumers will definitely opt to reduce their spending (Hitt, Ireland & Hoskisson, 2017). It is during such periods that Walmart should focus on acquiring and retaining loyalty by providing goods and services at affordable prices. The retailing sector is subjected to intense competition despite the increasing and anticipated growth which requires strategic positioning. Given that internet retailing is still progressing nationally and internationally in the recent years, Walmart can ensure that it sustains consistent updates to the target consumers in regard to its values and goods. Vietnam’s market is not fully exploited but it is mature for tapping. This implies that much resources are necessitated (Leondes, 2005). Based on the extensive revenue base for the organization, it should mainly focus on the creation of a wider market by investing in promotions. In that such activities are mainly aimed at creating more awareness and familiarity of the firm’s value and its operations (Leondes, 2005).

Walmart’s global operation is influenced by a strategic philosophy that seeks to offer affordable communities and improve the general life’s quality for the consumers (Leondes, 2005). This slogan, therefore, shows that the firm is mainly guided by the needs of its target populace who are the low and middle-class persons who desire to exist quality lives but are particularly sensitive in regard to costs based on their average disposable income (Leondes, 2005). It is suggested that the company should create a more precise mission objective since there is much potential growth within the retail business in the future and based on the lack of a precise mission statement, Walmart might not acquire success in countries guided by a company’s standards and mission like India. In addition, because the consumer purchasing patterns are equal globally, there is a necessity to consistently update the consumers regarding the company’s operation and ventures (Leondes, 2005). Most of the Europe based and Asian retail markets such as Vietnam are not fully exploited and thus the organization should utilize the opportunity to fully tap this market by proving affordable goods particularly in the periods of economic go-slow (Leondes, 2005).

The retailing competitors in Vietnam are mainly situated in the urban centers that are characterized by high population. Walmart can thus utilize its large workforce and resources to access the rural regions to get even a higher market (Roberts & Berg, 2012). The company has a wide distribution market which has the capability of providing products to all the targeted places rather than being a regional based firm. Walmart is additionally, necessitated to offer more consumption benefits to the consumers in order to motivate them and work towards the achievement of stable and sustainable growth in general (Roberts & Berg, 2012). The primary goal of the firm is to grow its market share, increase revenue, and gain a significant consumer base and stable positioning in the market.

Walmart is associated with one of the strongest and most recognized brand reputation across then. However, this is a major threat for the firm because it is bound to face foreign and local competition in Vietnam because it is considered to be a strong threat. This threat of rivalry by the existing competitors can be mitigated through the provision of diverse and affordable commodities (Roberts & Berg, 2012). In that, unlike the competing firms, it is apparent that Walmart has acquired more stability due to its exposure to income and loyal consumers (Roberts & Berg, 2012). The competitors in Vietnam are not focused on diversification and cost leadership because they enjoy an utmost bargaining authority over the competitors. In this context, it is apparent that when Walmart is focused on the provision of high quality, diverse and low-cost products the competitors will be subjected to more bargaining authority from the consumers. It is through such values that the company can attract the most consumer’s population (Roberts & Berg, 2012). Its cost leadership approach is one that cannot be fought by companies that are mainly focused on lowering their operating expenses (Roberts & Berg, 2012).

Walmart has fully been able to create substantial brand value and this can, therefore, sustain the firm even in the period of economic or political decrease in Vietnam via the introduction of diverse and satisfaction guarantee to the consumers (Roberts & Berg, 2012). In order to mitigate the existing high competition, Walmart should mainly concentrate on the presence of the current products for the company to retain its competitive investment particularly by focusing on marketing to create awareness (Latova, 2017). The company should, therefore, focus mainly on the general investigation of the market. In other words, it should be that it should in particular focus on diverse brands that seek to meet the concerns and demands of the larger consumers ranging from prices, packaging, brand, and images globally. Since the purchasing trend is equal in the global context, Walmart should, in particular, seek to provide details updates in regard to its products. In addition, it should focus on venturing in more countries to grow its brand further. Use Joint venture with an established retailer in Vietnam such as Big-C to leverage competition better. In avoiding intense competition in Vietnam, Walmart should mainly focus on specialized product lines in order to beat competitors and invest more on marketing to ensure that the consumers are fully controlled (Chekwa, Martin & Wells, 2015). In addition, the company should use of affordable pricing to gain consumer loyalty for the long run (Chekwa, Martin & Wells, 2015).

Conclusion

Based on the analysis above it is evident that Walmart should mainly venture into Vietnam with the knowledge of the existing threats and opportunities from the external surrounding. The market is associated with intense competition from both the local and foreign competitors, in this context, the company is supposed to focus on offering diversity and low priced products in general. This is because the competitors in the market are only focused on differentiating and pricing. As the global leader, the firm has the capability of providing products at the least prices since it has the needed resources and a recognized brand. The company has mainly strived to sustain its competitive positing via the provision of affordable, convenient and quality. These values should be upheld in the new market along with brands variety to provide the consumers with more choices which will, in turn, result in competitive positioning. In avoiding intense competition in Vietnam, Walmart should mainly focus on specialized product lines in order to beat competitors and invest more on marketing to ensure that the consumers are fully controlled. The company can also fight the increasing price based competition by focusing on products diversity to distribute the associated threats and opportunities evenly. Walmart owns an authoritative brand image and can, therefore, be subjected to intense competition from its foreign and local rivals. This can thus be avoided via the utilization of differentiated products at minimal prices. Political threats can be avoided via the use of strategic alliance with well-situated firms such as Big-C to overcome and balance the existing issues.

 

 

 

 

 

 

 

 

 

 

References

Campbell, D., Netzer, A., & Center for International Legal Studies. (2009). International joint ventures. Alphen aan den Rijn, The Netherlands: Kluwer Law International.

Charles, G., & Anderson, W. (2016). International marketing: Theory and practice from developing countries. Cambridge.

Chekwa, E., Martin, J., & Wells, K. (2015). Riding On the Waves of Sustained Competitive Advantage: Consumers' Perspectives on Walmart Corporation. International Journal of the Academic Business World, 9(1), 61-73.

Frynas, J. G. (2015). Global strategic management. Oxford University Press.

Grünig, R., Morschett, D., & Springer-Verlag (Berlin). (2017). Developing international strategies. Berlin: Springer-Verlag.

Hacioglu, U., Dincer, H., Alayoğlu, N., & Springer International Publishing AG. (2017). Global business strategies in crisis: Strategic thinking and development. Cham: Springer.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic management: Competitiveness et globalization: concepts and cases. Cengage Learning.

Leondes, C. T. (2005). Intelligent knowledge-based systems: Business and technology in the new millennium. Boston, Mass: Kluwer Academic.

Roberts, B. R., & Berg, N. (2012). Walmart: Key insights and practical lessons from the world's largest retailer. London: Kogan Page.

Trost, T. (2013). Joint ventures: The benefits and perils - why some are successful and others fail. Place of publication not identified: Grin Verlag.

Latova, E. (2017). Electronics Production in Vietnam: A Guide to Emerging Opportunities. Retrieved from http://www.vietnam-briefing.com/news/electronics-production-vietnam-guide-emerging-opportunties.html/

 

 

 

Appendix 1: TWOS Matrix

 

 

 

 

 

 

 

	Opportunities	Threats
	Joint Venture	Local competition
	Recognized brand,  Strong supply chain	Criticism
	Resources and  Cost leadership	Political instability
Strengths	S-O strategies	S-T Strategies
Affordable pricing and a well-established brand globally	Being a popular and widely accepted brand as the retail leader in the globe, Walmart can utilize its main strengths of low pricing to provide its consumers in Vietnam with more bargaining authority and also provide discounts something that is not conducted by its competitors.	Walmart owns an authoritative brand image and can therefore be subjected to intense competition from its foreign and local rivals. This can thus be avoided via the utilization of differentiated products at minimal prices.
Provides consumer centered and diversified products thus developing high consumer satisfaction	Use of affordable pricing to gain consumer loyalty for the long run.	Walmart has consistently been able to create a brand value that has the capability of supporting itself even in cases of political or economic slowdown in Vietnam through the introduction of diverse, differentiated products and guaranteed satisfied initiatives for generating better relationships with the consumers
Weaknesses	W-O Strategies	W-T strategies
Lacks focused competitors because it offers products diversity.	In times of economic or political slowdown Walmart should concentrate on the provision of affordable products	Use Joint venture with an established retailer in Vietnam such as Big-C to leverage competition better.
Minimal global presence because it is situated only in a few countries and this implies that maximum marketing to create awareness and familiarity is required.	Since the purchasing trend are equal in the global context, Walmart should in particular seek to provide details updates in regard to its products. In addition, it should focus on venturing in more countries to grow its brand further.	In avoiding intense competition in Vietnam, Walmart should mainly focus on specialized product lines in order to beat competitors and invest more on marketing to ensure that the consumers are fully controlled.