Walmart is one of the major and more famous retailers around the globe operating in more than 11,000 stores in over 25 nations (Hunt, Watts & Bryant, 2018). The company was inaugurated in 1962 and has achieved significant progress due to its effective business strategy (Hunt, Watts & Bryant, 2018). Walmart operates both physical and online stores to enhance convenience for its global consumers.
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The company realized annual revenue of $500 billion in the fiscal year, of 2017 and boasts over 2.1 million employees from different parts of the world (Hunt, Watts & Bryant, 2018). Although Walmart is a leading company, it operates in a highly competitive market and shares its customers with competitors such as Tesco, Costco, Woolworths, Carrefour, IKEA, Amazon, and Target (Hunt, Watts & Bryant, 2018). However, Walmart has been able to maintain its cost leadership strategy that allows the company to retain customers by offering quality goods at affordable prices. Walmart’s slogan, “Everyday low prices,” gives the company a competitive advantage in the retail industry. This low-price strategy allows Walmart to capitalize on its size to realize economies of scale. The company has depended heavily on cost leadership to become a household name across the globe. Walmart’s business strategies have also been centered on sustainability to conserve the environment and minimize indirect costs. In addition, Walmart’s business strategies aimed at establishing a one-stop shopping by providing a broad assortment ranging from grocery to household wares. Walmart has over 60,000 diverse suppliers and it incorporates different negotiation strategies to bargain. Walmart aims at empowering its suppliers thereby establishing great partnership to guarantee the quality of goods.
Walmart has maintained its traditional mission statement,” We save people money, so they can live better” (Hunt, Watts & Bryant, 2018). This mission statement is geared towards lowering the cost of living to enable people to make extra savings to enhance their lives. Walmart’s mission statement appeals mostly to the middle-class consumers who make up a large percentage of the overall customers in the retail industry. Walmart’s vision statement aims at provided quality products at low costs while maintaining sustainable production.
In order to maintain its cost leadership strategy, “Everyday Low Prices,” Walmart is compelled to incorporate various negotiation strategies with its suppliers to purchase large quantities of products at lower prices. The bargaining power of suppliers in the retail industry is relatively lower due to the existence of numerous suppliers (Lianos & Lombardi, 2016). These suppliers also engage each other in stiff competition in order to win the tenders and supply their goods to the retailers. Some of the suppliers are compelled to offer their products on a discount to attract retailers (Lianos & Lombardi, 2016). Thus, this means that a retail company such as Walmart has an advantage over the suppliers and can influence their decisions significantly including their prices. The sheer size of Walmart is another factor that impacts its negotiation strategy with the suppliers (Chatterjee, 2017). Walmart is a leading retail company with over 11,000 stores in different countries and therefore, the company buys goods in bulk. This is quite attractive to suppliers hoping to conduct business with Walmart. Walmart can also switch between suppliers at minimal costs. However, Walmart deals with some large suppliers, and thus, it are important to implement an effective negotiation strategy.
Walmart should capitalize on its relatively strong bargaining power to influence the supplier’s prices. An important aspect of negotiation strategy is to ensure options; Walmart should have a list of its suppliers and conduct research on their history to determine their prices, reliability and the quality of their goods. Having options means that Walmart is not limited to a few suppliers and thus, this helps the company to appear strong instead of needy during its negotiations with suppliers (Wang, 2016). Ensuring diversity of the suppliers is also key in lowering the prices of goods. By having options, Walmart suppliers will most likely lower their prices to avoid losing the business opportunity. Walmart should also look at the bigger picture and instead of focusing on the suppliers aim at controlling the entire supply chain (Allen & Burrell, 2015). Thus, Walmart should use its bargain power to control the costs of transport and reduce its expenses (Stump, Joshi & Kim, 2015). This would allow Walmart to transfer its cost saving to the customers in terms of lower prices thereby enhancing customer loyalty.
Walmart negotiation strategies should align with its mission and vision statement. It is therefore important for the company to develop positive relationships with the suppliers and empower them. Hence, Walmart should deviate from exploiting its suppliers as this can tarnish its reputation and have a negative impact on its business operations. Thus, when negotiating with suppliers, it is necessary for Walmart to bargain reasonably and set a non-exploitative minimum. Walmart should be socially responsible by offering its customers the best quality. Since Walmart has significant bargaining power over its suppliers, it should use it for the benefit of the customers. For instance, Walmart should set rules and regulations meant to control the quality of products supplied by the vendors (Wang, 2016). Thus, the company should conduct investigations on the production techniques used by the suppliers to ensure they are sustainable. By doing so, Walmart will help its suppliers minimize pollution and conserve the environment.
Lastly, Walmart needs to set up a negotiation team with the skills necessary to win over its competitors. Walmart should ensure that it clarifies its objectives to the suppliers (Allen & Burrell, 2015). However, it should have realistic expectations to ensure its objectives are attainable. This would help the company ensure that the suppliers understand its vision and purpose and therefore, provide products that are in alignment with its goals.
Walmart is a powerhouse, and thus, it has the capacity to make calls when dealing with its suppliers. However, effective negotiation strategies are necessary to meet its objectives. The above strategies would help Walmart to buy goods from its suppliers at relatively lower prices and thus, transfer that to the customers in terms of reduced prices. Walmart can also be able to secure goods on credit since it purchases in bulk. Walmart’s negotiation strategies would also ensure that suppliers meet the company standards in terms of quality and timely delivery. Walmart should emphasize sustainable production of goods, especially groceries to safeguard the consumers.
Walmart has strong bargaining power over its suppliers. As such, Walmart can easily switch between suppliers without having to incur losses. However, Walmart usually deals with large companies, and therefore, its bargaining power diminish slightly. Walmart should capitalize on its bargaining power to set explicit rules and regulations and force the suppliers to adhere to them at all times. This includes the need for sustainable production of goods in order to reduce pollution and prevent customers from including indirect costs in terms of effects of climate change. In order to strengthen its bargaining power, Walmart should have options and a negotiation team to make sure its objectives are clarified and communicated to the suppliers. However, although Walmart has considerably strong bargaining power, it should avoid exploiting its suppliers as this can damage its reputation and affects its sales negatively. Walmart goal should be to empower all its shareholders including suppliers and customers. Thus, its negotiation practices should be fair to all the parties. A key element in negotiation strategies is a clear purpose. Therefore, it is vital for Walmart to enhance its relationships with the suppliers. A successful negotiation strategy communicates the values of the organization to ensure all the parties understand what is required of them. However, the focus of Walmart should be control of its overall supply chain in order to reduce costs and transfer the savings to the customers by offering goods at lower prices compared to its competitors. This is crucial in attracting new customers and maintaining customer loyalty.
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