Walmart Inc. is arguably the largest retail company in the United States. Its corporate strategy is premised on its dominance in the retail market, expansion in the US and international markets, and creation of a positive brand that has furthered its company recognition. Due to the company's massive size, it has enormous power which to an extent has proven to be controversial. The incredible power held by Walmart has an immense effect on the suppliers, customers, and competitors in equal measures. Most retailers have consequently been driven out of business with manufacturers applying more efficiency in their work. Suppliers, on the other hand, have moved manufacturing jobs to other countries with many large industries changing the way they conduct business. Evidence has further illustrated how Walmart influences local businesses, especially when venturing into a new market. Due to the asymmetrical relationship its forms with other company, it means that businesses such as pharmacies, groceries, and sporting goods will eventually suffer.
Due to the immense power displayed by the company, Walmart is at times viewed by others as a bully that intends to intimidate the less powerful in the market. "If you are just a bully, it is all about humiliating others in an effort to make yourself feel good” (Kramer, 2006). Therefore, great intimidators do not do so for the sake of it; they do it because they have a vision, and that is what precisely Walmart displays in the market. Research conducted in the US showed that when a new Walmart opens, the potential for three other retailers to close within two and four years remains high. While the incoming Walmart could employ up to 300 new people, another 250 individuals could possibly lose their jobs as those working in the retail areas no longer have the suppliers to sustain their business. Further studies have shown that Walmart's power almost has a life or death decision over most of the consumer goods industries in the US. It is the best supplier-retailer of a majority of the consumer goods including clothes, electronic products, bicycles, sporting goods, and groceries amongst others.
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Shi, Zhang, and Ru (2013) asserted that vendors and suppliers have always cited size as a factor that implicates their working relationships with Walmart. The company has a history of demanding lower prices from the suppliers. As such, these suppliers are in perpetual fear to engage Walmart in a dispute over pricing due to the fear of their brand getting kicked out. Using the analogy of the bully and intimidator, Walmart puts immense pressures on its suppliers to cut their prices so that it can achieve an ultimate goal of competing with its rivals through a strategy of underpricing. Critical to note is that powerful companies such as Walmart use their power to influence such changes which are often rewarded by continued product placement, a factor that is also vital for the existence of the supplier. As such, Walmart relies heavily on the compliance of the suppliers, failure to which the company cannot compete favorably with its competitors. In guaranteeing that the changes occur, Walmart, therefore, bulldozes some of these policies that in the long run have a tool effect on the well-being of the suppliers.
In business, power is an essential part of an organization which is utilized by both the managers and non-managers. An individual's failure or success in using or reaction to power depends on "understanding power, knowing how and when to use it, and being able to anticipate its probable effects” (Kramer, 2006). The reason why Walmart has successfully used its power is that it has managed to determine its probable effects. Walmart has a powerful influence on its competitors in what is normally referred to as the "Walmart Effect." As earlier noted, it is estimated that when Walmart enters a new market, it takes between two to five years for other retail businesses in the region to regress. It, therefore, has powerful market strategies that would mitigate the development of competitors and potential competitors. The low-cost leadership is an essential strategy that has ensured that Walmart remains on top of most of its competitors. It uses a slogan of “save money, live better” which is an underpricing method aimed at outsmarting its competitors. Shi, Zhang, and Ru (2013) noted that according to research conducted in 2010, the company was able to record a 3.6% increase in their net income from the price-cutting strategies.
Part of its power emanates from its leadership position in the market. It is only through leadership that a company can undertake decisions that influence the market in its entirety. According to the leadership theory, all leaders must “provide direction and meaning to followers” (Session 7 Chapters). As such, followers, in this case, present the competitors who are either forced to cut their prices or move out and seek other markets where they can assert their dominance. Part of the power that Walmart holds is down to the big box phenomenon with stores covering more than 50,000 square feet. The big box status has given it leadership qualities enabling its profits to exceed that of other small retailers. In 2013 alone, the big box retailing enabled the company to register an annual revenue of $473 billion, which was a 1.4% increase compared to what they garnered in 2012 (Shi, Zhang, & Ru, 2013).
Thirdly, the third casualty of Walmart's immense power is their customers. Intelligence is a vital aspect, especially when studying the market theories and trends. Two types of intelligence could be used by market leaders such as Walmart including social and political intelligence. "While leaders with social intelligence use empathy and soft power…politically intelligent leaders use intimidation and hard power to exploit the anxieties and vulnerabilities they detect" (Kramer, 2006). Walmart is a typical example of a company that utilizes political intelligence in influencing its customers. First, knowing the difficulties in meeting the prices of many quality commodities in many business organizations, the company compels its suppliers to cut on the prices in a bid to ensure that the affordable costs attract its customers. It is a powerful strategy of attracting customers because it leaves them with no other choice but to join the bandwagon and move to a company that is cognizant of their economic difficulties. The multimillion company has also ensured that it has used its prowess to manipulate the customer by changing the modes of operation with as far as the buying experience is concerned. In showing awareness of the problems experienced in the shopping, the company has focused more on online buying of groceries and delivery services which have attracted more customers.
In conclusion, Walmart remains the largest non-oil corporation in the US and probably one of the largest retailers in the world. Its immense size has enabled it to acquire a market power which controls the suppliers, competitors, and consumers alike. Suppliers are forced to cut their prices for them to continue having a smooth relationship with this mega company, something that they have resented but found difficult to resist. Competitors are forced to cut their prices to meet the low price strategy used by the company which causes such companies lots of struggles and eventually leading to their ultimate demise. Consumers have no option but to attach to a company that control market forces, sets favorable prices, and takes cognizance of their vulnerabilities as consumers.
References
Kramer, R. M. (2006). The great intimidators. Harvard Business Review , 84 (2), 88-96.
Session 7 Chapters: 12: Power, politics, and Empowerment 15: Leadership
Shi, R., Zhang, J., & Ru, J. (2013). Impacts of power structure on supply chains with uncertain demand. Production and Operations Management , 22 (5), 1232-1249.
