Mergers and acquisitions are organizational strategies that enable them to expand and improve the business and increase competitiveness in the market. The strategic plan of an organization is vital in determining whether it should implement its growth strategies through mergers, acquisitions or joint ventures. Companies merge to increase their market access and enhance performance. Therefore, this study explores organizational strategies of a multinational organization with mergers and acquisitions and a national organization that has no history of mergers and acquisitions in the retail industry by assessing the strategies of Walmart and the Kroger Company.
Walmart’s Strategic Plan Evaluation
Walmart has grown rapidly over many years to become the largest and one of the most competitive retailers in the world. According to Dernovšek (2017), the organization has three market segments, which include Walmart US, Walmart International and Sam’s Club. Indeed, it is one of the fastest growing companies in the retail industry that currently operates in twenty-eight countries and has over ten thousand retail stores worldwide (Dernovšek, 2017). Since its inception, Walmart has expanded rapidly and increased its share in international markets. Therefore, the company has managed to increase its competitiveness in the global retail market through effective implementation of business and corporate strategies as well as mergers and acquisitions.
Mergers and Acquisitions
Walmart’s multinational business strategy has enabled the organization to successfully enter the global market. The strategy ensures that consumers from different countries are offered products that match their dynamic product preferences. Thanks to its multinational strategy the organization entered different countries in the global market through mergers, acquisitions and joint ventures depending on the ideal entry mode. For instance, Walmart entered the Canada`s retail industry market through an acquisition of Woolco at an economical price since the market was already saturated. Besides, there are substantial income and cultural similarities between the Canadian and United States` retail industry markets. Therefore, Walmart’s decision to enter the market through an acquisition aimed at minimizing the intensity of competition and entry costs. Walmart entered Mexico’s retail industry through a joint venture with Cifra, which was the country’s largest retailer at the time. This decision was based on significant differences in income distribution levels and culture of Mexico and the United States.
Walmart’s use of multinational business strategy to enter different countries through mergers, acquisitions and joint ventures is a wise decision. Global markets have different consumer preferences and, therefore, require unique entry strategies so as to meet the dynamic needs of consumers and give the organization a competitive advantage over its competitors. In addition, Walmart uses acquires corporations that have significant similarities with its business model when the intensity of competition from local companies is very high. It uses mergers and joint ventures in countries that have high entry barriers and in saturated markets so as to minimize its costs and utilize the potential market to increase its competitiveness without intensifying the saturation of the market. Therefore, the effectiveness of Wal-Mart`s multinational business strategy can be indicated by the organization`s minimum transaction costs and low prices of its products, which increases Walmart’s sales volume and profit margins, thereby significantly increasing its competitiveness in the global retail market.
International Business Level Strategy
Walmart Corporation uses product differentiation as one of its international business level strategies. According to Baroto, Abdullah and Wan (2012), this strategy ensures that Walmart differentiates its products from the products offered by its competitors. Thus, Walmart offers a wider variety of unique products than its competitors in the retail industry. Walmart’s product differentiation strategy entails opening of supercenters in remote locations where its competitors cannot venture to act as a one-stop shop for its customers. The organization uses effective supply chain and distribution channels, technology and information asymmetry to differentiate its products from those offered by its competitors in the retail market segment. Therefore, Walmart’s product differentiation international business strategy has been effective in increasing the organization’s competitiveness in the retail industry and making it one of the major retailers in the global market.
Walmart also uses the discount pricing as one of its international business level strategies. The organization offers unique and quality commodities for its customers at discounted prices (Baroto et al., 2012). It focuses on reducing its transaction costs significantly while at the same time maintaining competitive levels of product distinction so at to offer the lowest possible prices to its customers without compromising the quality of its products. Walmart’s effectiveness in managing its supply chain and distribution channels is essential in the implementation of the product distinction strategy in its global markets. Walmart also uses the just-in-time inventory management system to increase its efficiency by reducing its transportation and storage costs. Therefore, technology, economies of scale, and efficient inventory and supply chain management substantially reduce the overall production and transaction costs of Walmart, thereby enabling it to increase its competitiveness in the retail global market by offering unique and high quality products at lower prices than its competitors.
Walmart should also enhance its international business level strategies by implementing the focus strategy. Due to emergence of new markets and dynamic customer preferences in the retail industry, the organization needs to use the focus strategy to enable it meet the dynamic consumer needs. The focus strategy will also enable the organization to increase its competitiveness by producing unique products and venturing into new viable markets. The implementation of the strategy will enable the organization to differentiate its products from competitors and charge a competitive fee that will increase its sales volume and profit margins.
International Corporate Level Strategy
Walmart effectively implemented the product diversification strategy as one of its international corporate level strategies to expand and increase the organization’s growth globally. Due to dynamic consumer preferences in the retail industry, the company effectively diversified its product portfolio through innovation and technological advancements to increase its competitiveness in the global retail industry. The organization has diversified its product portfolio into three segments known as Walmart stores, Sam’s clubs and supercenters. Walmart stores sell apparels, small electronic appliances and other similar products at lower prices than the organization’s competitors. Sam’s clubs offer discounted wholesale prices for members at a cheap annual fee, whereas supercenters are one-stop shops with discounted prices to customers. Effective implementation of the diversification strategy has enabled the organization to increase its sales volume and profit margins in the retail industry. Therefore, the diversification strategy has increased Walmart’s competitiveness in the retail global market.
Walmart’s international corporate level growth strategy also enabled the organization to expand its global market share substantially through mergers and acquisitions. The strategy focusses on its growth and expansion to boost demand for its products, thereby increasing its returns. Thus, the organization needed high growth levels to survive in the retail industry due to discounted prices which it offers to its customers. Walmart’s growth strategy has enabled the organization to increase its sales volume and profit margin, thereby giving it a competitive advantage over its competitors. The organization’s rapid growth also saturated the domestic market due its discounted prices. Therefore, the company implemented the growth strategy to enter other global markets since the United States accounts for only four percent of the world`s potential consumers. In addition, Walmart’s growth strategy has significantly increased its global market share by enabling the organization to own over six thousand stores in twenty countries through mergers and acquisitions. Therefore, Walmart’s growth strategy provides a platform for discount retailing in the emerging markets, which enables the organization maximize its core competencies and increase its competitiveness in the global retail market.
However, Walmart’s single business international corporate level strategy needs improvement. It poses a threat to the organization since all its investments focus on one kind of business, which could be adversely affected by market changes. The organization should adopt a multi-level business strategy to enable it to diversify its business portfolio and thus minimize the risk of being adversely affected by drastic changes in the market. The organization also needs to implement a stability strategy to maintain a stable growth rate in all its markets since some of its international markets perform poorly. Therefore, Walmart needs to create ways that will ensure the organization increases its profit margins while at the same time maintaining stability in its growth rate in all its international markets.
The Kroger Company’s Strategic Plan Recommendation
The Kroger Company is one of the largest food retailers in the United States. The organization owns over two thousand retail stores (The Kroger Co, n.d.). Its core competencies include having a variety of products under different brand names. The Kroger Company operates only in the United States and has no history of mergers or acquisitions. However, the company can increase its competitiveness by entering the international market through mergers and acquisitions and thus needs implementing an effective business and corporate level strategy.
Mergers and Acquisitions
The Carrefour Corporation would be a profitable target for the Kroger Company to merge with and form a joint venture. Carrefour is one of the most competitive retailers in the in the global market. The company was originally established in France, which is a member state of the European Union. Therefore, merger with the organization will enable the Kroger Company to maximize its international presence. In addition, the Carrefour Corporation offers non-food products to its customers, which will provide the Kroger Company with an opportunity to enlarge the market for its products and increase its competitiveness in the retail industry. Moreover, Carrefour has a high sales volume and profit margins despite its pricing strategies. Therefore, a business partnership will be beneficial to the Kroger since it will be able the company to increase its sales volume and returns without offering lower prices as the majority of retail stores do.
Business Level Strategy
The Kroger Company should consider implementing the product differentiation business strategy. Currently, the United States’ retail market is saturated, and product distinction will enable the customers to differentiate the organization’s products from those offered by its competitors. According to Salimian, Khalili, Nazemi, and Alborzi (2012), the product differentiation business strategy enables an organization to produce unique and high quality products. The strategy will enhance the core competencies of the Kroger Company by enabling the organization to establish great value chains, which will give it a competitive advantage over its competitors. The product differentiation strategy will also enable the Company to create quality products that will meet the dynamic preferences of consumers in the retail industry. Therefore, product differentiation is an ideal business level strategy that will ensure that the Kroger Company increases its market share by promoting its competitiveness in the retail market.
Corporate Level Strategy
The Kroger Company should consider implementing the diversification strategy as a part of its corporate level strategy. The implementation of this strategy will boost the performance of the organization’s business units in the market (Daniel, 2015). The diversification strategy will leverage the main competencies of the Kroger Company, thereby significantly increasing its overall performance in the market. Besides, the strategy will enable the company to offer a wide range of unique and high quality products to its customers. Therefore, the diversification strategy will increase competitiveness of the Kroger Company in the market by increasing its customer base since the organization will offer a variety of products.
In conclusion, the evaluation of Walmart’s and the Kroger Company’s strategies indicated that the implementation of effective organizational strategies is critical for the organization to have a competitive advantage over its competitors. Walmart is one of the largest organizations in the retail industry due to its rapid growth since its inception. The organization uses mergers, acquisitions and joint ventures to enter international markets and increase its market share. It also uses price discounting and product differentiation as its business strategies as well as diversification and growth as its corporate strategies. The Kroger Company is a food company that operates solely in the United States. The organization should implement effective strategies that will increase its competitiveness in the market by enabling it to offer unique products.