The fundamental strategy of Wal-Mart is cost effectiveness in which the weakening of prices is the basic principle. The success of Wal-Mart is based on its favorable internal and external environments. The section evaluates the internal and external environment of Wal-Mart.
Internal Environment
Wal-Mart has a strong brand name with world’s largest revenues since last many years. The brand name makes image of products and services popular. Furthermore strength of the company is its ability to make strategic adjustments whenever there is a need for it. Also Wal-Mart has an effective supply chain system in which the business keeps the products in a safe place until it is required in a certain branch.
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The main weakness of Wal-Mart is the issues with maintaining the promised low prices. Businesses today are shifting towards customization and mass customization since customers want their choices to be reflected in the products and services. Wal-Mart on the other hand promises low prices and not customized products. Also Wal-Mart is facing poor sales in clothing merchandise (Barbaro, 2007). The company does not do well in this kind of product due to the company not being known as a reseller of such product.
External Environment
An opportunity for the business is to find out more means to provide a unique look and types to their stores and branches. Doing so, it will have competitive advantage over other stores. The website and web based marketing is another opportunity that may attract more customers. Wal-Mart can continue to grasp newer areas where it can offer its products and services.
Besides the opportunities, there are some threats faced by business as well. These include the competitors at first place.
The main threat to the Wal-Mart is the competitors. Two major competitors Tesco and Carre-Four attempt numerous tactics to overwhelm the standing of the company in industry. The tariffs and taxes are also a challenge in the industry that the business has in different countries, each countries has its rate of taxes and tariff that makes added expenses for the company (Li, 2011). The culture of some clients in other countries is another threat since not being able to suit other cultures means losing markets and spoiling the investments made.
Internal and external environments of Toyota
The core philosophies of Toyota are continuous improvement quality management. This philosophy is effectively translated into strategy that makes Toyota one of the leading automobile players of the world. The factors in internal and external environment that support Toyota’s success are discussed below.
Internal Environment
Toyota has developed its lean production system so marvelously that other players in the industry find it hard to reduce costs up to the level achieved by Toyota. This lean-manufacturing is strength of Toyota that provides it with a competitive edge over competitors. Also Toyota has globalized their business and has extended its business to more than 170 countries. The management team of Toyota and its culture of continuous learning and improvement is its strength as well. He customers know that Toyota will never compromise on its quality since the company has recalled back the defective product many times in past as well.
Innovation is strength of Toyota where administration plans for innovation when they initiate their projects. The innovative ideas help Toyota enrich brand name and increase revenues and enter new territories with suitable strategies.
Diversity is another factor contributing to company’s strong internal environment. Management focuses on diversity when forming training for employees (The Hufftington Post).
Toyota’s weakness is however weak links in its supply chain due to which it faced technical issues in its even famous models like Prius. These technical issues caused a number of accidents and Toyota has to recall millions of vehicles even today. Furthermore it is also said that Toyota could not handle its vast global expansion.
External Environment
Toyota is right now focusing on global expansions and working towards developing economies like BRIC. This has opened up new opportunities for Toyota with in the emerging markets. Further there is an increase in environmental concern due to which demand for environmental friendly cars like electric and hybrid has risen. So this is a great opportunity for Toyota to focus on its modern technological integration in environmental friendly cars manufacturing.
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Competitors like General Motors and Honda are the biggest threat for Toyota as they tend to give it an intense competition. In addition political forces like the ones Toyota faced in America during 2011 can also pose a threat to its stability. Other factors such as import duties and trade tariffs are also likely to affect the sale of Toyota vehicles in other countries.
Competitive advantages
Each business running successfully has some competitive edge specially the big players of the industry. The competitive advantage of Wal-Mart is its low prices and that of Toyota is lean manufacturing and quality improvement. These competitive advantages have let both the organizations grow in size, volume and revenues. Both the organizations are operating worldwide and are expanding each year.
Maintaining the competitive advantage requires a supportive organizational culture and management and employees that make the mission achievable through combined efforts. Both the organizations have kept the processes simple and focused that help concentrate efforts in achieving mass production and climbing revenue curves. Low prices in Wal-Mart and quality in Toyota is made the part of every process so that every step the business takes helps it step towards success.
Creating value and sustaining competitive advantage
The value creation and sustainability of Business Models of Toyota and Wal-Mart depend on their ability to adapt within the varying environment, continuously satisfying buyers’ needs and catching the biggest value. Both the organizations revise its strategies continuously and evaluate in other to assure that the organization is heading towards the right direction. For measuring the performance, not only the revenues, growth, expansion is counted but also they make sure employees are satisfied and motivated to make possible what business aims to achieve.
The most successful businesses comprehend that purpose of their existence is to create value for clients, employees, and investors, and all the stake holders. Therefore, maintainable value cannot be shaped for one group unless it is created for all of them. The first focus is to create value for the customer, and this is achieved when the employee aim aligns with the organizational aim of growth, quality management and cost effectiveness. The alignment of individual and organizational goal requires the effective role of human recourse department so that the right people are attracted, selected, developed, trained and rewarded. This right team also helps in attracting the investors that believe the employees will put all the efforts in maximizing the worth of their investment. Wal-Mart and Toyota also focus on hiring and selection of its employees so that it helps in achieving quality and value creation.
MEASUREMENT GUIDELINES
Toyota uses the Six Sigma as a quality measurement and control tool to measure its strategic effectiveness. The Six Sigma tool is used to measure defects per million of the output and the company tries to increase the quality while increasing the level of Six Sigma. This technique helps Toyota to continuously improve its business processes. Further, this methodology has been quite successful in measuring the quality level of the manufactured products.
As Wal-Mart depends mainly on the support of its suppliers it has developed a scorecard for their suppliers, which helps to evaluate them on the basis of innovation, environmental standards, energy efficiencies and use of material. This packaging scorecard helps Wal-Mart to run its business operations more efficiently. Wal-Mart has also formed a Strategic Planning and Finance committee to assess the formulated strategies and evaluate whether they are meeting company’s strategic objectives or not. Methods like financial ratios, balanced score card and other statistical techniques are used for this task.
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