QUESTION ONE

1.1.1 The term “business strategy” describes a set of competitive moves and actions that a
business uses to attract customers, compete successfully, strengthening performance and
achieve organizational goals. It outlines how business should be carried out to reach the desired
ends.

Whilst, “business model” describes the rationale of how and organization creates, delivers and
captures value, in economic, social, cultural or the contexts. It is an organization’s plan for
making a profit. It identifies the products or services the business will sell, the target market and
the expenses it anticipates.

As for Cash Crusaders, they adopted a “recession proof” business model, a term used to
describe an asset, business, industry or other entity that is believed to be economically resistant
to the effects of a recession.

1.1.2 Cash Crusader’s recession proof business model as a resale franchise, is one that
provides a need. Whether it’s in new goods, second hand trade or its secured financial lending
scheme. Resale stores do particularly well in a recession. Not only do they offer significant
discounts from retail prices of their gently used items, but they pay people in cash or trade for
their items, which benefits customers during hard times.

1.2 The Focus Strategy

Companies that use Focus strategies concentrate on particular niche markets and, by
understanding the dynamics of that market and the unique needs of customers within it, develop
uniquely low-cost or well-specified products for the market. Because they serve customers in
their market uniquely well, they tend to build strong brand loyalty amongst their customers. This
makes their particular market segment less attractive to competitors.

As with broad market strategies, it is still essential to decide whether you will pursue Cost
Leadership or Differentiation once you have selected a Focus strategy as your main approach:
Focus is not normally enough on its own.

But whether you use Cost Focus or Differentiation Focus, the key to making a success of a
generic Focus strategy is to ensure that you are adding something extra as a result of serving
only that market niche. It's simply not enough to focus on only one market segment because
your organization is too small to serve a broader market (if you do, you risk competing against
better-resourced broad market companies' offerings).

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The "something extra" that you add can contribute to reducing costs (perhaps through your
knowledge of specialist suppliers) or to increasing differentiation (though your deep
understanding of customers' needs).

1.3 Strategic leadership refers to a manager’s potential to express a strategic vision for the
organization, or a part of the organization, and to motivate and persuade others to acquire that
vision. Strategic leadership can also be defined as utilizing strategy in the management of
employees. It is the potential to influence organizational members and to execute organizational
change. Strategic leaders create organizational structure, allocate resources and express
strategic vision. Strategic leaders work in an ambiguous environment on very difficult issues that
influence and are influenced by occasions and organizations external to their own.

Strategic leadership requires the potential to foresee and comprehend the work environment. It
requires objectivity and potential to look at the broader picture.

A few main traits / characteristics / features / qualities of effective strategic leaders displayed by
Stegman in the context of growing Cash Crusaders:

Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words
and actions.

Keeping them updated- Efficient and effective leaders keep themselves updated about what is
happening within their organization. They have various formal and informal sources of
information in the organization.

Judicious use of power- Strategic leaders makes a very wise use of their power. They must
play the power game skillfully and try to develop consent for their ideas rather than forcing
their ideas upon others. They must push their ideas gradually.

Have wider perspective/outlook- Strategic leaders just don’t have skills in their narrow
specialty but they have a little knowledge about a lot of things.

Motivation- Strategic leaders must have a zeal for work that goes beyond money and power
and also they should have an inclination to achieve goals with energy and determination.

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 Compassion- Strategic leaders must understand the views and feelings of their subordinates,
and make decisions after considering them.

Social skills- Strategic leaders must be friendly and social.

Self-awareness- Strategic leaders must have the potential to understand their own moods and
emotions, as well as their impact on others.

Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are
well aware of the fact that delegation will avoid overloading of responsibilities on the leaders.
They also recognize the fact that authorizing the subordinates to make decisions will motivate
them a lot.

Articulacy- Strong leaders are articulate enough to communicate the vision (vision of where
the organization should head) to the organizational members in terms that boost those
members.

Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a
component of organizational culture.

To conclude, Strategic leaders can create vision, express vision, passionately possess vision
and persistently drive it to accomplishment.

QUESTION TWO

2.1 African rising is a term coined to explain the rapid economic growth in Sub-Saharan Africa
after 2000 and the inevitability of its continuation. The Financial Times defines African Rising as
a “narrative that improved governance, meaning the continent is almost predestined to enjoy a
long period of mid-to-high single-digit economic growth, rising incomes and an emerging middle
class”. On the contrary, the narrative has dealt with a fair share of skepticism. As seductive as
the narrative is, many seem to find it misleading. It draws the people of Africa into false sense of
promise of “development” and “decent jobs” for all - that can never be delivered by the current
economic growth paradigm. In spite of all the noise surrounding the “African Rising” narrative -
one organization, Massmart, stayed true to its investment strategy.

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CEO Guy Hayward, made a conscious effort to resist pressure from investors to expand at all
costs, followed by a nature of key decisions made, which insulated Massmart from the dramatic
fallout in many oil-dependent African countries.

In 2010, when Walmart took control of Massmart, shareholders expected the take over to spark
a speedy raid into sub-Saharan Africa. They had stars in their eyes thinking African expansion
was one-way bet to huge profits. This resulted in immense pressure from investors to expand
operations across Africa, fast. Again, Hayward made a decision to resist to any pressure.
Stating, Massmart was going to be quite cautious in its endeavors. Which now seems to have
been a wise move.

In 2016, however, the hype of "African expansion" came badly unstuck, as it slammed head-first
into the reality of shoddy governance and poorly diversified economies being battered by a
steep plunge in oil revenues.

Massmart known for its sluggish expansion plan, now, rests on top of its rivals. Hayward made a
key decision as he says, “At no time did we slug the Africa Kool-Aid and demand 10 stores a
year. I think those of us who are still trading well in Africa never did that — we always remained
fairly measured. My impression is that the guys who came unstuck and who have had to
withdraw probably went in a bit hard”.

Hayward was driven by profit, but due diligence had to be considered before expansion could
proceed. Massmart commissioned a study that was undertaken by ConBack, and found that 15
sub-Saharan countries are likely to represent 88% of the retail potential in the region until 2024.

Further, another key decision to spread risk was made, this is to counteract volatility. Hayward
said,” You don’t want to be in two countries only. The risk-diversification approach says you
should be in more than six or eight countries, to spread the risk”. Risk diversification reduces
risk by allocating investments among various financial instruments, industries and other
categories. The aim is to maximize returns by investing in different areas that would each
differently to the same event.

2.2 Massmart’s generic strategy is cost leadership. Michael Porter’s mode defines cost
leadership as a generic competitive strategy that focuses n achieving low cost. As a low-cost
producer of retail service and related business outputs, Massmart is able to compete based on
low selling prices. Low prices are fundamental strategic objective used in the company’s pricing
strategy. Low prices are a main selling point of the retail business.

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QUESTION THREE

3.1 A swot analysis is a study undertaken by an organization to identify its internal strengths and
weakness, as well as its external opportunities and threats.

In the case of Walmart, this SWOT analysis gives insights on the internal and external forces
significant in the company’s strategy development in the retail industry. While these factors vary
over time, the company’s growth depends on its ability to capitalize on its retail operational
effectiveness and strengths. Also, in spite of the company’s weaknesses, its strengths are far
more significant considerations. Walmart can use these strengths to exploit its opportunities in
the retail market. The firm can also use its strengths to counteract the threats to its retail
business, especially its e-commerce operations. Strategic implementations based on the SWOT
factors are important in ensuring Walmart’s competitiveness and continued leadership as the
biggest retailer in the world.

Walmart’s Strengths (Internal Forces) Walmart’s Weaknesses (Internal factors)

1.Brand recognition 1.Employee treatment and working conditions

2.Global expansion 2.Large span of control
3.Global Presence 3.Thin profit margins
4.Every Day Low Prices strategy 4. Gender discrimination
5.Global supply chain and logistics system 5. imitation
6.Human resource management
7.Effective resource management
8.Strong market power over supplier and
competitors

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 Walmart’s Opportunities (External factors) Walmart’s Threats (External Factors)

1.Expansion to other markets 1.A central target of competition

2.Strategic alliances 2.Recessionary market periods.
3.Enhancing human resource practices 3. Rising commodity product prices.
4. Improving quality standards 4.Political and legal issues
5.Small scale online e-commerce companies

3.2 Walmart’s remote environment or macro-environment involves factors that determine the
company’s success. These factors are best presented through the PESTE analysis model. As a
retail industry leader, Walmart continues to withstand the potential negative effects of threats in
the political, economic, sociocultural, technological, ecological and legal PESTE aspects of its
business. However, this success requires continued evaluation of the retail industry
environment.

Currently, it operates more than 11,500 retail units across 28 countries under 63 banners. Its e-
commerce websites are operational in 11 countries. Out of the 2.3 million associates that it
employs globally, around 1.5 million are employed in US alone. Apart from economic, there are
technological and other forces too that impact the businesses and growth of Walmart. All these
forces are important and need to be kept in mind from the point of view of strategy formulation
to be successful. Here is a PESTE analysis which discusses the various forces affecting
Walmart and how they affect its business.

Political:

Political forces are very important for the brands like Walmart that are trying to operate in the
international sphere. The international business landscape is characterized by different political
structures and differing governance models. The governments of all the nations are not equally
open to international trade and business. The Asian economy is seeing fast growth but still
Walmart has been able to open only 20 retail units in India and only 439 total in China. These
figures are quite disappointing compared to the figures from US. The reason is that the political
environment of these countries is not very friendly for brands like Walmart. In India the complex
regulatory set up and Red Tape are big obstacles to foreign investment and foreign businesses.

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Such an environment is not highly welcome for international retailers. The political environment
of every nation and market affects several things. Political stability also reflects economic
stability and a stable business environment where businesses can flourish. In the, other case
when political disruptions are frequent, the businesses are also threatened by regular
disruptions to sales and supply. Political turmoil can disrupt the supply chain. Moreover, political
discord can also translate into potential trouble for businesses. For example, EU has started
targeting the big US brands for past some years. In this way, political forces are an important
factor that have a deep influence on the sales and profitability of businesses. The problem is
that the political environment is not equally open and friendly for all brands globally.

Economic:

For businesses operating globally, nothing is better than a flourishing global economy. During
the recession, people were forced to cut down costs which had affected the revenue and profits
of businesses. Now, that the world economy is back on track people have again started
spending on retail and other items. This is a positive sign for the retail sector which is expected
to grow at a fast rate in the coming years. The situation in the labor market has also improved a
lot and peoples per hour earnings have increased. Now they have more dispensable income to
spend on various items. This all shows that the profitability of the retail sector is going to
increase in the coming years. Economic slowdown had stalled the growth of the retail sector.
Current economic trends will bring more good news for Walmart and other retail brands.
However, competition will also increase. More and more brands are fighting for market share.
Apart from small and big US brands, many non-US brands have also decided to step into the
US market. This will mean more competitive pressure for Walmart.

Social:

Social forces are a very important factor that have an influence on the profitability of
international businesses. Social trends influence the buying behavior of customers which in turn
influences the profitability of the brands. Consumer demographics have undergone a major
change in the last decade. The millennial generation likes to shop online. Increased use of
digital technology and increased smartphone usage have also encouraged online shopping.
This is a threat for physical retailers like Walmart which have not still spread their online
presence globally. Its e-commerce websites are available only in 11 countries. Apart from the
growing use of technology, customer service and customer convenience, customer engagement

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and social media have also become important trends that are affecting the retail sector. Across
the globe the social and cultural structure varies from nation to nation and market to market.
This has an important bearing on how people shop. Overall, socio-cultural factors too have a
special importance in the context of retail business worldwide.

Technological:

Technological factors have grown all the more important for businesses in the 21st century.
Whether it is the online businesses or the traditional brick and mortar stores from marketing to
finance and HR everywhere technology has acquired a central role. It is equally important for
Walmart. From marketing to customer service and HR management as well as supply chain
management everywhere the use of technology has become important for effectiveness.
Whether it is down its supply chain or inside the stores, everywhere Walmart is investing in
technology to serve the customers better and to improve the customers’ shopping experience.
Information technology and Artificial intelligence have also become key to success in retail. A lot
depends upon real time data and analytics. Brands like Walmart are using data and IT in new
ways to drive up sales and profits.

Environmental:

Sustainability has become an important concern for all businesses globally. Even in the retail
sector business need to focus upon waste management, energy consumption, packaging as
well as several other related areas. Apart from these areas, Walmart is also focusing on
responsible sourcing down the supply chain. Apart from that Walmart is also targeting zero
waste and better packaging. “In the U.S., more than 81% of the materials that flow through our
stores, clubs, and distribution centers is being diverted from landfills. Our operations in Japan
and the U.K. lead the way with a diversion rate of more than 90%, while Walmart Canada and
Walmart Mexico divert more than 70%”. Environmental concerns are an important focus
because they are not just helping the brands manage better reputation but also with their energy
consumption and helping them save on sourcing and other areas.

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3.3 Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents
five individual forces that shape the overall extent of competition in the industry. Walmart
Porter’s Five Forces are represented in Figure 1 below:

Bargaining Bargaining
power of power of
buyers suppliers

Threat of
Threat of substitue
new products
entrants or services

Rivalry
among
existing firms

Threats of New Entrants

New entrants in Discount, Variety Stores brings innovation, new ways of doing things and put
pressure on Walmart through lower pricing strategy, reducing costs, and providing new value
propositions to the customers. Walmart has to manage all these challenges and build effective
barriers to safeguard its competitive edge.

How Walmart can tackle the Threats of New Entrants:

 By innovating new products and services. New products not only bring new customers to the
fold but also give old customer a reason to buy Walmart’s products.

 By building economies of scale so that it can lower the fixed cost per unit.

 Building capacities and spending money on research and development. New entrants are
less likely to enter a dynamic industry where the established players such as Walmart keep
defining the standards regularly. It significantly reduces the window of extraordinary profits
for the new firms thus discourage new players in the industry.

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Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price as possible. This put pressure on Walmart profitability in the long run. The
smaller and more powerful the customer base is of Walmart the higher the bargaining power of
the customers and higher their ability to seek increasing discounts and offers.

How Walmart can tackle the Bargaining Power of Buyers

 By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its
sales and production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if Walmart keep on coming up with new products then it can limit
the bargaining power of buyers.
 New products will also reduce the defection of existing customers of Walmart to its
competitors.

Bargaining Power of Suppliers

All most all the companies in the Discount, Variety Stores industry buy their raw material from
numerous suppliers. Suppliers in dominant position can decrease the margins Walmart can
earn in the market. Powerful suppliers in Services sector use their negotiating power to extract
higher prices from the firms in Discount, Variety Stores field. The overall impact of higher
supplier bargaining power is that it lowers the overall profitability of Discount, Variety Stores.

How Walmart can tackle Bargaining Power of the Suppliers

 By building efficient supply chain with multiple suppliers.

 By experimenting with product designs using different materials so that if the prices go up of
one raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm.

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Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example, services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the industry.

How Walmart can tackle the Treat of Substitute Products/Services

 By being service oriented rather than just product oriented.

 By understanding the core need of the customer rather than what the customer is buying.
 By increasing the switching cost for the customers

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. Walmart operates in a very competitive
Discount, Variety Stores industry. This competition does take toll on the overall long-term
profitability of the organization.

How Walmart can tackle Intense Rivalry among the Existing Competitors in Discount, Variety
Stores industry

 By building a sustainable differentiation

 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just competing for
small market.

Implications of Porter Five Forces on Walmart

By using the information in Walmart five forces analysis, strategic planners will be able to
understand how different factors under each of the five forces affect the profitability of the
industry. A stronger force means lower profitability, and a weaker force means greater
profitability. Based on this a judgement of the industry's profitability can be made and used in
strategic planning.

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3.4 Walmart Business Strategy: Cost leadership strategy of Walmart revolves around being
lowest cost company in its domain creating unique products that customers will be ready to pay
at its best price. Focus Strategy is further segmented into cost focus strategy and differentiation
strategy and hence it focuses on targeting a particular segment in their domain by modifying the
products or services according to the need of consumers.

Cost Leadership: Walmart is truly dedicated towards its low-cost strategy. Its evidences could
be noticeable in its supply chain management and operational efficiency from where huge cost
saving is derived through bulk purchasing, stock holding for less than 48 hours etc. These
savings provide funds for growth and low prices for customer giving them easy and better life.

Differentiation: Walmart have created distinctive offerings of goods and services through its
many dimensions such as creating unique products by adding value to it; integrating innovative
ideas into its product development; range of products with distinctive design, features,
technology, fine quality and customer satisfaction. Apart from these dimensions, Walmart enjoys
this differentiation from competitors through its board composition of broad skills sets and
business expertise. Also to sustain the differentiation, its focus is on improving fresh and organic
offerings along with its cost leadership strategy.

Focus Strategy: The focus strategy focuses on a particular segment of people or geographical
location or even particular segment of product line and market to provide an edge to its strategy
from its competitors. To make customers reach to the stores more convenient, the focus
strategy was on locations in radius of few miles which competitors could not gave thought to it.
Walmart is offering seamless shopping experience where customers can scan items as they
shop and then pay using smart phones. The focus is also on E-commerce to improve sales
through growing range of brands and expansion of marketplace.

Conclusion: Strategic management is a continuous process which pervade whether an

organization is going to succeed or not in the long run. Any organization having sufficient
internal resources and external environmental factors will improve its performance and will be
sustainable in the long run. But for successful implementation of strategy any organization must
go for environmental scanning and flexible internal process. However, as we are not aware what
future may unfold thus the formulation, planning and implementation is not sufficient,
organizations must evaluate the process with continuous feedback and take appropriate
decision to fulfill stakeholder interest and improve organization efficiency.

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Walmart have faced challenges and have countered those with continuous improvement and
have reached glory after 50 years of their operational performance. In order to stay ahead of
their competitors, reciprocating the company strategy and achieving their key goals, Walmart is
moving towards digital organization with speed and agility to become lean organization in
coming future. In conjunction with this, the associates of Walmart need to be equipped to deliver
this change. Since Walmart has been successful in sustaining their low-cost strategy through
effective implementation and evaluation process, they must protect their unique intervention as
other retailers may attempt to replicate their supply chain management. Apart from this focus
should be on mitigating challenges such as competitive pressures due to changing environment,
growing technology, changing customers preferences; fluctuation in exchange rates and
policies; Shopping pattern especially seasonal buying pattern etc.

3.5 Competitive advantage exists when a particular company consistently outperforms other
companies in the same industry. A company is considered to be outperforming others if profits
are higher than the competition's profits. The competitive advantage is thought to be stronger
when it lasts for a longer period of time. Those companies who are able to maintain a
competitive advantage for many years are thought to have a sustainable competitive advantage.

If sustainable competitive advantage is dependent on maintaining a higher profit margin than

other companies in the same industry, how does a company set out to develop a strategy to
both achieve and maintain competitive advantage? The two main components of profit are that
customers both value the goods and services and will pay for them and that a company can
keep production costs related to goods and services low, so that there is a higher profit margin.

Competitive advantage can be achieved by either from responsiveness to change or from

innovation. In this case, Walmart achieved a sustainable competitive advantage thanks to high
responsiveness toward outside environment as well as inside environment. Outside
environment includes demand and competition. Inside environment includes distribution and
inventories management as well as the ability to encourage new initiatives.

Walmart’s ability consistently to outperform Kmart and other discount retailers is based on a
business system that responds quickly and effectively to changes in demand and competition.
Using inventory and sales data, the local store manager decides which products to display, and
allocates shelf space for a product category according to the demand of his or her store. In term
of competition, Walmart does not centrally set the price. At places when Walmart and Kmart

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were located next to each other, Walmart’s prices were roughly 1% lower. When Walmart,
Kmart and Target were separated by 4-6 miles, Walmart’s average prices were 10.4% and 7.6%
lower, respectively. In remote locations where there is no direct competition from large
discounters, its price was 6% higher than where it was next to Kmart. Walmart’s flexibility
regarding customers demand and pricing strategy are key elements that sustain Walmart’s
competitiveness.

Walmart’s distribution and purchasing are driven by point-of-sale date, resulting in low
inventories, few stock-outs, and few forced markdowns. Using point-of-sale, A Walmart store
devoted 10% of its square footage to inventory, compared with an industry average of 25%.
This give Walmart cost advantage compared with other competitors in the industry.

Finally, in the heart of Walmart’s fast response capability is the encouragement and rewarding
of initiative at all levels of the company. The “shrink incentive plan” provided associate yearly
bonuses if their store held shrinkage below the company’s goal. Shrinkage cost was estimated
to be approximately 1.7% of Walmart’s discount store sales in 1993, compared with an average
2% of direct competitors.

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CategoriesBUSINESS

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