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Refocus their strategic vision and positioning, focusing on the highly profitable areas. They mayhave stretched too far and been too greedy with expansion and planning with these differentmarkets and businesses they become involved in.Wal-Mart is encountering limits to growth within their chosen industries, as there are only somany consumers within America. Wal-Mart should consider diversifying into more profit lines,such as whole food stores in order to push back at these limits.For fifteen years(Before Wal-Mart), Sam had been running a chain of independent variety storesin smaller towns. Those stores gave the revenues of $1.4 million by 1960s. Things appeared fine.Page | 13
But Sam felt otherwise. He and his team had been working very hard but the business itselfseems to be of limited growth. He could not push the sales beyond a limit. He felt that he had tofind an idea with a better payoff for all their efforts.Observe, Observe, Empathize — Sam did a detailed research and found out that the futureappeared to be headed towards ‘discounting stores’. He saw how some larger stores were doingrevenues of more than $2 million from each store compared to $1.4 million from Sam’s 15stores. He visited many discounting stores all around the country and studied the concept in-depth. It was clear that discounting would go and dominate the market. “Buy it low, stack it high,sell it cheap” was the guiding principle of discounting.Capabilities — Sam thought a lot about the type of customers he had to target, where thecompetition would be weak and where he would have enough strengths to gain the market share.He had been running variety stores in small towns where the population was around 6000. Samlived like one among his consumers in the small community. His everyday interaction with thepeople of town gave him a sound knowledge of the User behavior, their needs, desires, andwants. His strength was ‘Knowledge’ about the small town users and he was pondering how hecould apply that strength to the most promising opportunity?Weak Market Forces — Kmart and other bigger retailers were not going to towns below 50,000populations. Other medium-size brands like Gibson did not go to towns below 12,000populations. Nobody was ready to provide products at discounted prices to the people living insmall towns. But people in smaller towns were well aware of the ‘discounting stores’ as they hadfriends and relatives in the cities and some of them had even visited those stores. So, theawareness was there. So, Sam Walton was convinced that opening a Wal-Mart store in a smalltown would be a viable business model.Page | 14
Question # 5How much of Wal-Mart’s strategy do you think was planned at the outset andhow much evolved over time in response to circumstances? What does thissuggest to you about the nature of strategy development?