August 15, 2007
The trouble with growth
OK, so Wal-Mart has a problem. They are number 1 world-wide and now growth has stalled. So they are surprised? A family company grows out of Arkansas with a strategy: target the majors with better prices, keep prices low with a streamlined, minimalist approach to stocking, put stores in lower-cost, less predictable locations and market as a family company with a modern approach to retailing. It worked. Great. They can grow revenues and profits at first simply by opening new stores. They hurt the incumbents, they keep growing their niche until it becomes the lion’s share. They then move off-shore, where they find some more growth but also more competition, and competition with different cultures and values that are harder to match.
It simply gets harder to grow the business when you are already huge in your chosen field and number 1 world wide. But the corporate capitalist culture and mantra is to constantly strive to be number 1 or 2 in each market and to sustain growth, or be overtaken by someone else and lose value. Examples abound of companies like IBM who have grown to dominate, grew complacent, lost ground, shifted focus, regained growth. But how does Wal-Mart do that? Do they refresh and re-brand? Diversify out of retailing? Take on products that they don’t handle now? Take on markets that they aren’t winning in countries that don’t currently have a Wal-Mart equivalent? Swallow the opposition with strategic acquisitions?
Or maybe do a mix of these things. The likelihood though is that someone or something is coming sideways at Wal-Mart and will blindside them with a new approach or new technology; or perhaps another sort of threat will emerge that undermines their business model. Something like global warming and the end of cheap fuel…
BNet.com has a discussion how to fix Wal-Mart here.
