Introduction
The strategy of an organization forms a comprehensive master plan that outlines how the organization seeks to achieve its objectives and mission. Typically, there are three levels of strategy that a business firm can have include a corporate strategy, business strategy and functional strategy ( Karami, 2012). The highest and broadest level is the corporate-level strategy. It serves the purpose of defining an entity's main goal. It entails deciding the businesses that an entity should be in, and how the overall group of activities should be structured and managed. Business strategy is the second level of firm strategy, and it is concerned establishing and maintaining a competitive advantage in the different areas of a business organization. A functional strategy is the third level of firm strategy, and its primary concern is the functional areas of an entity including marketing, human resources as well as research and development (Karami, 2012). The current paper focusses on two firms namely Walmart and Redner's Markets, Inc. One of the firms has a history of mergers and acquisition, and the other has no history of mergers and acquisition. The primary objective is to identify the different levels and types of strategy utilized by the two firms.
Walmart’s Acquisition of Jet.com
Walmart is an American retail corporation whose headquarters are in Bentonville, Arkansas. Established in 1962 by Sam Walton, the company operates as a chain of hypermarkets, grocery stores, and discount department stores across the US and other regions of the world including Europe, South America, and Asia. As of 2016, Walmart was the biggest company in the world regarding revenue, employing approximately 2.3 million people. It is the biggest grocery retailer in the US and one of the most valuable companies in terms of market value in the world. The company has shown great determination to maintain its position as one of the leading companies in the world. One way it has tried to maintain its position is through the acquisition of other retailers and startup. Walmart has many objectives, but its recent acquisitions, including that of Jet. Com, indicate that the company aims at strengthening its e-commerce reach as well as assortment. Walmart also aims at improving in-store pick-up and delivery options. Additionally, the company is bringing in premium brands under its portfolio in a bid to attract higher-income customers (McMillon, 2016).
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According to McMillon (2016), Walmart’s acquisition of Jet.com was informed by the rapidly changing retail landscape in the US. Online stores such as Amazon have emerged as a significant threat to the traditional brick and mortar companies such as Walmart. At the time of its acquisition by Walmart in 2016, Jet.com was an e-commerce startup. It was established by Marc Lore, with the objective of coming up with a club-type membership model within the e-commerce realm. This model had millennials as the specific target customers, and this was done through aggressive marketing campaigns that promised a pricing model that was dynamic and which passed product-driven savings back to consumers. For Walmart, Jet.com availed a possible solution to the challenge of increased competition from non-brick and mortar competitors such as Amazon. According to Walmart, its acquisition of Jet.com was motivated by the new ways that the company was bringing as far as serving customers and reaching new customers online was concerned.
Jet.com was acquired by Walmart for a total of $3.3 billion, a figure that stood out as the biggest ever purchase of an e-commerce start-up in the US. Despite being expensive, the acquisition was justified as it makes it possible for Walmart to build on its e-commerce foundation and drive growth. Over the past few years, the company has been able to push up Walmart.com to become the second biggest online retailer in the US in terms of profit. The firm has also been able to increase the number of items consumers can purchase of Walmart.com. The acquisition of Jet.com offers a great opportunity to further increase customer traffic and the number of products available to customers. The acquisition of Jet.com is also justified because the two companies are complementary. Jet.com is quite popular among millennials living in urban areas. The company also strives to continue delivering premium customer experiences and brands. Similarly, Walmart.com is showing great determination as far as gaining value-conscious customers is concerned. This is further enhanced by a greater assortment and store pick-up options that are convenient. Having Walmart.com and Jet.com in the same mix will make it possible for the two companies to leverage the assets that each owns, and to enhance the ways customers are served. The acquisition of Jet.com is also justified since the company has incredible talent. When this talent is brought together with that already available at Walmart, it significantly improves the entity's competitive advantage ( McMillon, 2016).
Many experts in the retail sector faulted Walmart’s acquisition of Jet.com. Many were of the opinion that Walmart had overpaid for an e-commerce firm that was still unproven and profitless. However, Walmart's recent performance indicates that the acquisition was worthwhile. The company's e-commerce sales in the US for the year 2017 improved by about 63%, with its stocks gaining 10% within the previous one year. The acquisition of Jet.com has also seen Walmart move to the same level as its biggest competitor, Amazon. The company's online inventory has expanded to 67 million items from 10 million pieces in 2016 (Bownman, 2017).
Walmart’s International Business-level Strategy and International Corporate-level Strategy
Despite being established in 1962, it was not until 1991 that Walmart went international. The firm went international by opening a Sam's Club near Mexico City. Walmart international was established two years later and has ever since then undergone tremendous development. At the corporate level, Walmart's primary strategy has been establishing dominance in the retail market, expanding in the US and international markets as well as branching out into new retail sectors. Regarding the retail market domination, Walmart's primary focus has been on selling products at very competitive prices. The company's, management firmly believes that through discount retailing, Walmart will be able to offer the lowest prices as possible thereby attracting more customers, who will, in turn, push up the sales volume. At the moment, Walmart is the world's leading retailer. The company is focused on dominating the retail market by utilizing its size as well as volume buying power. Regarding expansion in the US and the international market, Walmart has been able open many stores in the US and other parts of the world and currently operates more than 4000 stores in the world where it employs over 2 million people. International destinations in which Walmart has operations include Canada, Mexico, Brazil, Argentina, Korea and Germany. In expanding internationally, the company's strategy has been aggressive and dominant. When it comes to branching into new sectors of retailing, Walmart has been expanding into other areas such as pharmacy, automotive, grocery sales and even e-commerce. Diversifying into other areas of retailing will go a great way in ensuring that Walmart remains a dominant player in retailing ( Karami, 2016) .
According to Karami (2016), a t the business level, the philosophy that has been guiding Walmart's strategy is "every day low prices." This implies that the company follows a cost leadership strategy that is made possible by the economies of scale derived from the firm's massive size. To further enhance the cost efficiency of retail-operations, Walmart has also directed its efforts towards efficient utilization of online sales channels such as Walmart.com and Jet.com. Apart from price, other hallmarks of the Walmart's business strategy include improvement of access and improvement of assortment. To further enhance both its corporate level and business level strategies, it is recommended that Walmart increases its focus on customer services, improves the flexibility of shopping experiences and enhancing the range of fresh produce as well as organic options.
A profitable candidate for Redner's Markets, Inc to acquire or merge with
Redner's Markets, Inc. is a supermarket chain that only operates in the US. The firm runs a total of 13 Redner’s Quick Shoppe convenience stores and 39 Warehouse Markets in several locations within the US including New York, Maryland, Delaware, New Jersey, and Pennsylvania ( Rednersmarkets, 2018). Headquartered in Reading, PA, the company employs approximately 4000 people. This is quite a small figure compared to the over 2 million Walmart employs. Since its establishment in 1970, the company has been able to undergo significant development, opening between three to four stores each year. Apart from the grocery, the company also sells frozen foods, dairy produce, meat, and deli as well as bakery products. The firm’s quick shops and warehouse markets also feature pharmacies (Rednersmarkets, 2018). Redner's Markets, Inc. is employee owned. Its small size means that it cannot compete regarding finances with large entities such as Walmart. The company's limited financial muscles also imply that it cannot undertake large acquisitions. The most profitable thing for the company to do would be to acquire a startup.
Given the increased popularity of e-commerce, it would be very profitable if Redner's Markets, Inc. ventures into this segment of the retail. It can do this by acquiring a small start-up, the ideal one being Boxed. Established in August 2013, Boxed is an online and mobile wholesale retailer that provides customers with direct delivery of packages that are bulk-sized using website or the Boxed app (Boxed, 2018). The idea behind the establishment of Boxed was to make it more comfortable, fun and convenient for customers to carry out bulk shopping. This way, it will be possible for customers to pay attention to other issues that also matter in their lives (Boxed, 2018). This concept augers well with the millennial generation that is quite busy with work, education and even family engagements. By acquiring Boxed, Redner's Markets, Inc. will be able to successfully enter the e-commerce domain, and even enhance its focus on mobile commerce which specifically targets the millennial generation. It will also be worthwhile to acquire Boxed given its presence all-over the US and the fact that it sells leading brands such as Kellogg’s , Charmin and Kraft Heinz to name but a few. The startup is also quite active when it comes to coming up with new technologies aimed at supporting logistical operations. The techniques include integration of robots, automation of warehousing and utilization of big data. All these technologies will go a great way in helping Redner's Markets, Inc. enhance its position in the retail industry.
One Business-level strategy and one Corporate-level Strategy for Redner's Markets, Inc.
As mentioned earlier, business level strategies are those that aid a firm in establishing a competitive advantage over other firms. The plans include differentiation, cost-leadership, focused differentiation and an integrated low-cost/ differentiation strategy. Because the retail industry in the US has many players competing for the same customers, the ideal business-level strategy for Redner's Markets, Inc. to adopt is a cost leadership strategy. This simply refers to an integrated set of actions created in such a way that they deliver or produce goods and services with acceptable features for customers but at a relatively lower cost compared to that offered by competitors ( Nabyla, 2014). There are several ways that Redner's Markets, Inc. can successfully pursue a cost-leadership strategy, the first one being selling standardized goods and services that provide features and qualities which are acceptable to customers. The second way is the utilization of value-chain analysis to identify ways of bringing down costs of activities within the value chain while retaining essential features (Nabyla, 2014). Additionally, the company can ensure effective adoption of the cost leadership by lowering the costs of research and development as well as costs of sales and establishing state of the art facilities that are more efficient.
The corporate level strategy entails deciding the businesses that an entity should be in, and how the overall group of activities should be structured and managed. They include stability strategy, growth strategy and diversification strategy (Nabyla, 2014). For Redner's Markets, Inc., the ideal strategy would be diversification. Firms utilize this corporate strategy to expand their operations by adding activities or markets to the existing business (Kenny, 2009). Pursuing this strategy comes with some benefits, one of them being that it helps minimize the risk of loss especially when one business area underperforms. Additionally, diversification allows for the increased generation of returns and enhances growth in the long run.
References
Bowman. J. (2017). 1 Year Later, Wal-Mart's Jet.com Acquisition Is an Undeniable Success . Retrieved from https://www.fool.com/investing/2017/10/03/1-year-later-wal-marts-jetcom-acquisition-is-an-un.aspx
Boxed (2018). The Story of Boxed . Retrieved from https://www.boxed.com/about-us/
Daidj, N. (Ed.). (2014). Developing strategic business models and competitive advantage in the digital sector . IGI Global.
Karami, A. (2016). Strategy formulation in entrepreneurial firms . Routledge.
Kenny, G. (2009). Diversification Strategy: How to grow a business by diversifying successfully . Kogan Page Publishers.
McMillon, D. (2016). Five Big Reasons Walmart Bought Jet.com . Retrieved from https://blog.walmart.com/business/20160919/five-big-reasons-walmart-bought-jetcom
Rednersmarkets (2018). Redner’s Warehouse Markets History. Retrieved from https://www.rednersmarkets.com/redners-warehouse-markets-history.html
