The retail industry is one of the most competitive industries in the world. This has led to many mergers that are formed to expand the competitive advantages of individual companies. Moreover, some companies have remained on their own. This paper seeks to explore examples of companies that have formed acquisitions and those that have not. It also explores the reason behind their decisions and establishes whether those decisions were wise or not. Further, the paper makes two propositions for the company that has not yet formed a merger. The first one has to do with the best target for forming a merger and strategies, business-level and corporate level, that the company can use for its operations and public relations. Furthermore, the paper identifies the strategies that the international merger uses for its operations and public relations as well as possible areas of improvement.
Wal-Mart’s Acquisition of VUDU
Wal-Mart is the largest retailer in the U.S. as well as in the world. The retailer has remained at the top because of its perennial inventions and reinventions in terms of its business model and strategy. The focus of the company has been to offer the most affordable products under one roof for its customers. Cost-leadership and variety has been at the top of the list. Moreover, the company has recently expanded its scope of market by starting to sell cars and penetrating the movies segment. This was realized in March 2010 when the company acquired VUDU (Wal-Mart, 2013), a technology company that deals with live streaming of movies; a competitor of Netflix.
There are many speculations as to why Wal-Mart acquired VUDU. Some sources indicate that one of Wal-Mart’s competitors, Best-Buy had publicly announced to go into the business of selling movies. However, it is not expected that a giant like Wal-Mart would make any uncalculated move to buy another company in the wake of tough economic times. After the acquisition, the Vice-Chairman, Eduardo Castro, said that the move would provide customers with unprecedented benefits in watching live streams of entertainment on TV in a purely digital environment (Walmart, 2013). In this regard, if the acquisition was made in a bid to expand the market, this was a wise decision by the company. Further, it appears that Wal-Mart was also countering the already existent competition from Netflix, Amazon and Apple.
The other reason for the purchase of VUDU was a way of promoting the sales of flat-panel TVs whose sale had been declining. Additionally, Wal-Mart would not only boost the declining sale of DVD’s but also get access to those clients that are interested in online media. Since Wal-Mart was the greatest seller of TV’s, it would be more profitable if such TV’s are compatible with internet for film streaming solutions. In general, the strategy by Wal-Mart to acquire VUDU was a wise decision because of the following: to widen the variety of products, to spread the risk, to increase the sales of TV’s and to counter the competition from technology leaders such as Apple and Netflix.
Raley’s Supermarkets and Suggested Merger
Raley’s Supermarkets are a chain of privately owned chain stores mostly in Northern California and Nevada. The business has about 130 stores in which most of them are in the Sacramento area. Surveys have shown that the stores have a greater market share in Sacramento than any other bigger retailers (Kelly, 2012). However, in the recent past, the company has faced a lot of challenges due to the state of the economy as well as pressure from the big retailers. In order for the company to optimize its profits and revenues, it may consider merging with other privately-owned stores in the U.S. This would give the business a higher competitive advantage in the wake of challenging economic times. Mergers are recommended and not acquisition because of the cost that comes with an acquisition. However, by merging efforts with another small but successful retailer, the two companies are able to be more competitive as opposed to individual family businesses. So far, the company is reported to be the most successful private business in the Western Coast of the United States (Kelly, 2012). However, it has a unique history that was highly influenced by the Second World War but remained steadfast. In the 1980’s, the company branched out into dairy process as a way of spreading risks as well as serving a new segment of customers. Most importantly, it also went into pharmaceutical business segment that was very success through the 1990’s.
One of the best positioned candidates for formation of a merger with Raley’s is Stater Bros. Markets. This is also a California-based privately owned chain of stores with about 170 stores. Formed almost the same time as Raley’s, in the 1930’s, the business has ever been listed as one of the Fortune 500 companies of the world. Moreover, the company has had its own fair share of challenges. The most recent and significant challenge has been the strike by its workers. In spite of these challenges, the company has struggled to remain in the list of the leading chain stores in the U.S. Notably; its meat segment has really propelled it into profitability. It has continued to stand out as a unique product; the company has had some customers for over two decades indicating how the company’s products are reliable.
The first reason why the two companies can make a good merger is because they are not only in the same industry but also in the same State, California. If they combine forces, it means they are likely to have a wider base of clients. They will also be able to gain additional competitive advantage against the giants that always prevent smaller businesses from coming up.
Wal-Mart Business-Level and Corporate-Level Strategies
Wal-Mart has several strategies at business level. The many business-level strategies that Wal-Mart employs could be categorized into three broad categories: overall cost leadership, focus strategies and differentiation strategies. It appears that Wal-Mart focuses mainly on a larger segment comprising mainly of the middle class (Ireland, Hoskisson & Hitt, 2010). Further, business differentiation strategies focus on offering of a wide variety as well as unique types of products in the market. In this regard, Wal-Mart has had had highly proliferated product lines. Thirdly, the company uses cost leadership as a business-level strategy. This is the most important strategy as demonstrated below.
Cost leadership involves offering very high quality products at the lowest prices possible (Ireland, Hoskisson & Hitt, 2010). The prices of Wal-Mart’s products are usually lower than those offered by the competitors. This business strategy has been possible because the company has an efficient Supply Chain Management system. In other words, Wal-Mart dictates what prices suppliers should sell the products. To do that, the company influences the manufacturing processes of the suppliers so that reduced manufacturing costs lead to less prices that are translated to the final consumer. Other than low-priced and high quality products, Wal-Mart offers high customer service. Additionally, cost leadership is the most important strategy because there is an increasing global economic meltdown in which the purchasing power of people everywhere (Kneer, 2010). Therefore, prices become an important element in determining the number of customers it attracts as opposed to its competitors. However, this cannot solely determine customer’s preference of the company’s products if there were no elements of high product quality, good customer service and efficient branding. Wal-Mart has popular brands such as Metro 7 and George among others.
At the corporate level, the company also has a proliferation of strategies that make it a global leader. Some of the strategies include: creation of strong brands, branching into other product categories, dominance in the retail market and expansion (Ireland, Hoskisson & Hitt, 2008). The company has deliberately resolved to dominate the retail market through diversification. This is done through opening stores across the U.S. and also internationally. Therefore, the last two strategies are inter-related. Dominance of market, as a corporate strategy, is related to expansion to international markets. The other strategy is diversification into other products. Specifically, the retailer has recently started to sell cars. This is in an effort to offer all the products that the consumers need under same roof which leads to a stronger source of revenue.
However, among all these corporate strategies, branding seems to be the most important. This is because branding leads to product recognition from which customers make purchase decisions. In its reports, Wal-Mart continues to indicate that strong branding has led to increasing number of sales (Walmart, 2013).
Raley’s Supermarkets Proposed Business-level and Corporate-level Strategies
With regard to the current competition, there are many strategies at the level of the business that could be proposed for Raley’s. However, with the emerging trends in the last decade, the most important business-level strategy is innovation. Innovation has led to proliferation of profits for companies in the present age. As was see the case with Wal-Mart, they have recognized the role of technology in designing the products that the clients need. Although Raley-Stater merger may not need to buy a technology company, they are able to come up with innovative products in the field of grocery, foodstuffs, pharmaceutical products and the like. One of the most practical ways is to commission a research that would lead to development of drugs that would be helpful in curing lifestyle diseases that are ailing Americans. They would perhaps shift a good number of shoppers to their trusted drugs. Through innovation, it would also be possible for the company to sell its products through the social media.
In the same way, there are many possible corporate-level strategies that the company is able to implement. Moreover, in the present situation, there is a need to focus more on product differentiation. A wide variety of products is a sure way of attracting customers because they are able to find most of the products under one roof. This strategy has been used by some of the most successful retailers such as Target, Kmart among others. In the effort of diversifying the range of products, the company may integrate its business strategies in creating and introducing new products. However, for all these to happen, there is a need for the company to works closely with its suppliers. This implies that there must be a strong supply chain management in which the company works hand in hand with suppliers to cut down their costs of production and increase the time of production for the benefit of the company.
There is no doubt that the retail industry in the U.S. is the most proliferated in the world. There are both big and small retailers serving the same customers. This calls for a great deal of innovativeness as well as market apprehension. Over the years, different companies have applied different strategies to win their clients. For Wal-Mart, cost leadership has been the most significant business-level strategy. This was boosted when the company recently bought VUDU, a technology company dealing with online movies through Television. For other smaller companies such as Raley’s and Stater Brothers, innovation must be the most applied strategy at the level of the business. For both big and small companies, branding and product differentiation must be part of the corporate strategies. In the final analysis, there needs to be a vibrant strategy that serves customers’ needs for cheap products and quality service.