All organizations regardless of the size have some kind of a structure based on the existing pattern of relationship among the different groups and individuals in that particular organization. A structure is the basis of strategy in any organization. There are two types of structures: vertical structure and a horizontal structure. Strategies help organizations achieve their set goals and objectives by giving the company some sort of purpose and direction and enabling it to have a competitive power from rival firms. Generally, a strategy is defined as a future plan of action that is undertaken by senior managers at a high level of thought (Petit, 2012). In this paper, I will critically compare the strategic management of two giants in the global market: Walmart and Nordstrom.
The retail industry is dominated by a few giants, with Walmart being on top in several categories. In fact Walmart is the largest retailer in the world in regard to revenue and the number of employees. It is also considered the world’s largest private employer and among the most valuable companies on a global basis (Stankevičiūtė et al, 2012). It was founded in 2nd July 1962 by Sam Walton. Its main inventory include furniture, electronics, hope appliances, health and beauty, sporting goods, groceries, pets, and toys.
Nordstrom is also a leading retailer but has specialized on fashion. It considered the largest fashion retailer in Western U.S. it was founded by john W. Nordstrom and Calr F. Wallin in the year 1901. When it started, Nordstrom only retailed shoes but it has since expanded its services to become a full-house fashion retailer. Its inventory include: shoes, cosmetics, clothing, jewelry, handbags, and other accessories.
A mission statement is a very important aspect of an organization as it clearly describes the purpose of the existence of that particular organization. The mission statement for Walmart is “saving people money so they can live better.” Apparently, this is a customer-oriented statement. Walmart’s mission clearly tells people that if they want to save money they should go and shop there. In fact, this is the major competitive advantage they have over other retailers. They give the impression of a cheap store that has everything that customers want. Most people when they think of shopping, they look for a store where they can save as much as possible (Hwang & Park, 2016).
Nordstrom’s mission statement is significantly different from that of Walmart. Nordstrom’s mission statement is “In store or online, wherever new opportunities arise, Nordstrom works relentlessly to give customers the most compelling shopping experience possible. The one constant John W. Nordstrom's founding philosophy: offer the customer the best possible service, selection, quality and value.” Nordstrom’s mission statement clearly shows that they really look after their customers especially when it comes to delivery of services. Unlike other companies where customer service is just a department set aside to mostly to listen to customers’ grievances, Nordstrom uses it to gain a competitive advantage.
The companies have different but two strong mission statements that clearly show the people what they do best. Strong mission statements create lasting images on customers’ brain, and at the same time give them an idea of what to expect from the organization. When customers’ expectations are met as per the mission statement, they become loyal to the business giving it a competitive advantage over others.
Price points and positioning
Good strategic positioning plays a vital role in separating an organization from its competitors; it is also a major component in determining the overall success of the entire business strategy.
The core feature of Walmart’s pricing strategy is the overall low-cost leadership. This strategy attracts a broad spectrum of customers by giving them a wide selection of the lowest-priced merchandise (Hwang & Park, 2016). However, Walmart has a poor reputation when it comes to customer service and treatment of their employees. In fact, they have never at any time included the issue of customer service as one of their brand promises and therefore, customers would not expect a good customer service from them.
Nordstrom on the other hand positions itself as an upscale fashion retailer and a leading film in customer service. Additionally, Nordstrom has implemented a multi-channel strategy which allows their salespeople to assist customers locate a specific product that is otherwise located in that particular store from another location altogether. Their multi-channel system include: full price stores (Nordstrom), full price online stores (Nordstrom.com), off price stores (Nordstrom Rack), and off price online store (HauteLook.com).
The main competitive strategy used by Walmart is their low-cost leadership which they have successfully been known for quite a long time now. However, for them to maintain the low prices they have to keep making high volume sales, and carry out large-scale operations with limited operational costs.
To further strengthen their competitiveness, Walmart maintains close collaborations with leading suppliers with strong brand names and full product lines, and finally those who can bring new and better products to their retail shelves. To further expand their geographical coverage, Walmart uses the backward expansion strategy. This strategy involves opening stores in small towns surrounding a targeted metropolitan where they make sure they saturate each and every area before deciding to move to the next one. Walmart also employs simultaneous offensive initiatives where they carry out experiments in their store layouts. They try out different display styles, different color schemes in their stores, and the never ending promotions (Johnsen, 2015).
Nordstrom’s core competitive advantages are based on the quality of its products and the high level of consumer service. Another strategy is multichannel selling which allows Nordstrom to make sales even to far-flung customers. In fact, customers can make orders online and pick them up at the stores, or even return them. The firm has also invested heavily on technology and further connected it to the excellent consumer experience. Nordstrom has incorporated a lot of technology further creating an amazing user experience and integrate the multiple channels.
Long-term strategies for growth and sustainability
Currently, Walmart has closed several it the outlets deemed less popular and adjusted their strategy to opening several community-based supercenters instead. Walmart’s competitive advantage as we all know is their low-pricing mechanism. However, we have also heard of its numerous legal issues, high recall rate on their products, and several relation problems both with its employees and the community. In my opinion, Walmart should slow down on its expansion and pay attention on dealing with its weaknesses; something which would help them maintain a positive brand which would make them a much stronger force and hard to compete with.
Nordstrom has done well in maintaining a positive brand. Their global expansion strategies are strong and well advised. For the past five years Nordstrom has expanded to Canada by opening several stores and further expanding their online retailing presence. I think a more long-term sustainability strategy that would be best for Nordstrom would be to target new customers and expend more by opening new shops globally.
Walmart has several competitive advantages and strengths that need to be turned into sustainable competitive advantages. It must also address its threats so as to maintain a strong foothold in the ever-changing retail industry. Walmart should also aim at projecting a more consumer friendly, community friendly, and employee friendly environment (Johnsen, 2015).
For Nordstrom being a global store would give them a better chance of offering a much better and bigger variety of products and further enable it to have a stronger sustainable competitive advantage.
Hwang, M., & Park, S. (2016). The Impact of Walmart Supercenter Conversion on Consumer Shopping Behavior. Management Science, 62(3), 817-828. http://dx.doi.org/10.1287/mnsc.2014.2143
Johnsen, Å. (2015). Strategic Management Thinking and Practice in the Public Sector: A Strategic Planning for All Seasons?. Financial Accountability & Management, 31(3), 243-268. http://dx.doi.org/10.1111/faam.12056
Petit, Y. (2012). Advancing project and portfolio management research: applying strategic management theories. Strategic Direction, 28(9). http://dx.doi.org/10.1108/sd.2012.05628iaa.004
Stankevičiūtė, E., Grunda, R., & Bartkus, E. (2012). PURSUING A COST LEADERSHIP STRATEGY AND BUSINESS SUSTAINABILITY OBJECTIVES: WALMART CASE STUDY. ECONOMICS AND MANAGEMENT, 17(3). http://dx.doi.org/10.5755/j01.em.17.3.2143