Strategic Initiatiative

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Strategic Initiative Whether the example is a sports team, small convenience store or major franchise, organizations generally adhere to several common practices in an effort to succeed. The first of these actions usually starts with a game plan for the future. The game plan is named differently depending on the organization establishing it. However, in the end, it is a strategic plan initiative that identifies how the organization plans to achieve its goals in the future. These goals not only include financial but also community, environmental, and charitable goals. The following data will cover Wal-Mart’s latest strategic initiative while answering several key questions concerning the initiative, which include: 1. How the initiative affects the organizations financial plan 2. How the initiative affects costs and sales 3. Risks and affects associated with the initiative
Strategic Planning Initiative for Wal-Mart and Initiative Identified in Annual Report A strategic planning initiative Wal-Mart implemented to help grow the company is the “Save Money, Live Better” initiative. To ensure the initiative was a success, the company identified several components that needed to be addressed. For example, one of the “Save Money, Live Better” initiative’s objectives is to achieve price leadership for Wal-Mart. The company’s plan to achieve price leadership is to do everything in its power to offer its products at a greater value than other competitors in the market while not hindering the company’s growth objective (Murray, 2012). In response to the price leadership component of the initiative, Wal-Mart determined its private label products can both help increase the company’s revenue and aid in achieving the initiative’s objective. As a result of the economy’s current condition, many consumers deem it prudent to purchase products of equal quality to the name brand products they usually purchase but at more cost-effective prices (Murray, 2012). Therefore, by expanding the type of products Wal-Mart offers in its private label, the company will also increase its revenue. An initiative discussed in Wal-Mart’s 2012 annual report is the “Powered by Wal-Mart” initiative. This initiative’s primary focus is to improve the company’s “returns through increased profitability” (Wal-Mart, 2012, p. 5) by strengthening Wal-Mart’s productivity and reducing its expenses (Wal-Mart, 2012).
Effects of the Initiative on the Organization’s Financial Planning The “Save Money, Live Better” initiative affects the costs Wal-Mart will incur. Wal-Mart must keep its direct product costs low to maintain a profit to keep its prices low, which the company did when it opted to reduce the number of plastic storage bags to two from four, (Murray, 2012). The organization’s decision to renegotiate its contracts with its vendors resulted in the terminations of two vendor contracts that saved the company money in the long-run. The “Save Money, Live Better” initiative seems to provide an increase of capital because the company passes their savings along to their customers. The price leadership within Wal-Mart allows the initiative to lower the prices of its goods thereby reducing the company’s competition. For example, if a consumer brings in an ad from a competitor, the Wal-Mart associate will adjust the price of the good according to the advertisement as long as the consumer purchases the exact item offered in the flyer (Wal-Mart Corporate, 2012). This shows the company’s willingness to go the extra mile in order to have the customer return for future sales and in turn, eventually increasing the future worth of the company as well. Wal-Mart, like other companies, develops its strategic initiatives to help the company reach its growth objectives. However, during its strategic planning process, Wal-Mart’s executives and management must also contemplate the effects the initiatives will have on the organization’s costs and sales.
Initiative’s Effect on Costs The “Save Money, Live Better” initiative is an aggressive campaign with various focus areas. There are always significant costs associated with initiatives as large in scope as this one. This initiative not only focuses on continued financial growth as an organization but also as a responsible, charitable member of the community. Examples of the initiative range from continued low prices, and improving e-commerce to developing associates and continued investment in community charities. Wal-Mart has a successful track record of being able to incorporate both goals in a manner that helps both aspects of the business. An example of this is the 2006 four-dollar generic drug initiative (Wal-Mart, 2012). This initiative has assisted many members in the community by providing affordable prescription drugs at a nominal cost. At the time many industry pundits questioned the financial impact that the program would have on Wal-Mart. Financial performance and growth since 2006 has not suffered despite this aggressive prescription drug initiative (Wal-Mart, 2012).
Initiative’s Effect on Sales If done correctly, the save money live better initiative should have a significant positive effect on sales. As mentioned earlier, Wal-Mart has a great industry reputation for implementing an initiative that not only benefits the community and customer but also reaps great financial rewards. Once again, a review of the 2006 prescription drug program provides the public with such an example. In this case, the argument one can make legitimately is that a positive impact on sales was realized from the initiative by increasing the amount of individuals walking through the store. Increasing store traffic is always a positive, especially in the retail industry.
Risks Associated with Initiative and Its Financial Effects Wal-Mart has embarked on a three strategy initiative to improve profits and customer relationships. The first strategy focuses on providing consumers with goods at the best price every day whereas the second strategy encourages suppliers to reduce their price, cut unnecessary fees, and decreases the number of products offered (Murray, 2012). The third initiative focuses on improving interaction with the customers, creating and establishing green policies, and creating a better supply chain (Murray, 2012). Wal-Mart's Strategic Initiatives appears to be a good plan to expand its customer base, cleanup its reputation, increase profits. There is, however, possible risk that could affect the organization both internally and financially. As stated before, Wal-Mart’s strategic initiatives focus on providing a better, more affordable product without cutting into its own profits (Murray, 2012). The risk of maintaining low prices may lead to loss of profit, low employees wages, and no health care benefits (Kimmel, Weygandt, & Kieso, 2009). The situation of the economy affects businesses regardless of changes to the prices of products and services (Investopedia, 2012). Competitors such as Target and the Dollar Store are also a risk to Wal-Mart’s strategic goals. Wal-Mart incentives are to keep prices low and offer more quality products whereas Target’s incentive, which appeals to the upper middle class, is to offer a better quality product. Dollar stores, such as Family Dollar stores, Dollar General and Dollar Tree focus on the ultra low costing items and are a threat to Wal-Mart because the customers may be more attracted to purchasing a similar product at a fraction of the cost at a dollar store when they are financially constricted. In conclusion, Wal-Mart has come up with a solid strategic plan in place to not only save the customer money with their “Save More, Live Better” campaign, but at the same time make a profit. Covering both bases is a very difficult task, and Wal-Mart has proven that such a model can be successful.

References

Investopedia. (2012). Economic Indicators. Retrieved from

http://www.investopedia.com/university/releases/retailsales.asp#axzz2DtNRneGP
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Financial accounting: Tools for business decision making (5th ed.). Hoboken, NJ: John Wiley & Sons
Murray, M. (2012). Wal-Mart's Strategic Initiatives. Retrieved from http://logistics.about.com/od/industryfocus/a/Wal-Mart.htm
Wal-Mart. (2012). 2012 Annual Report. Retrieved from http://stock.walmart.com/annual-reports
Wal-Mart Corporate. (2012). Our Ad-Match Guarantee. Retrieved from http://corporate.walmart.com/ad-match-guarantee