Wal-mart Swot Analysis
Everyone’s favorite big box store, Wal-Mart is the world’s largest retail corporation that sells everything from groceries to musical instruments. More than 270 million customers visit Walmart for their purchases every week while many make online purchases through its websites. Wa-Mart started as a single small discounted store in 1962 in Arkansas. Over the last 50 years, it has now grown into if the largest one of the largest retailers with over 11,200 stores across 27 countries and websites (e-commerce) in 10 countries. The current CEO of Walmart is Doug McMillon.
The global operation of Wal-Mart was marked by the establishment of its first international store in 1991 at Mexico City. Currently, Wal-Mart has also opened stores in other countries including Brazil, Canada and Britain. Because of its huge scale of operations, the business is divided into three main segments: Wal-Mart Stores, Sam’s Club and International Stores. The Wal-Mart stores are further subdivided into Discount Stores, Supercenters and Neighborhood Markets. Wal-Mart’s style of management has proved effective, resulting in unprecedented business success to include its shortfalls. This paper analyzes Wal-Mart’s strengths and weaknesses factors as well as the opportunities and threats the company is faced with.
Strengths of Wal-Mart – Internal Factors
Highly skilled workforce through successful training and learning programs. Wal-Mart invests into the training and development of its employees and staff resulting in a workforce that is not only highly skilled but also motivated to accomplish more.
Wal-Mart has a high level of customer satisfaction. With Wal-Mart’s dedicated customer relationship management department, they have been able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers. Through its associates, the company has developed the one-stop shopping policy emulated by other retail stores worldwide. This strength enhances their ability to attract new customers and maintain customer loyalty.
The company employs an elaborate system of Information Technology that supports its local as well as global operations. Through this system, it is possible to monitor the performance of its stores country-wide, on a real-time basis to include supporting Wal-Mart’s efficient procurement.
Over the years Wal-Mart has invested in building a strong brand portfolio. This brand portfolio can be extremely useful if the company wants to expand into new product categories. Managing brands in a coordinated way helps Wal-Mart to avoid confusing its consumers, investing in overlapping product-development and marketing efforts and multiplying its brands at its own rather than its competitor’s expense.
Weakness of Wal-Mart – Internal Factors
Wal-Mart buys in large quantities to keep its pricing down which can lead to unreliable inventory. This means that a customer may not always be able to find certain items that are normally bought. Or, Wal-Mart will have it but the customer will need to buy products at a much larger size then desired.
Wal-Mart has diversified its products across many sectors (such as clothing, food, or furniture). This does not give them the flexibility enjoyed by some of its more focused competitors. In addition, the company deals with a large number of suppliers making its supply chain more complicated.
Wal-Mart has a high attrition rate in the workforce and has to spend a lot more compared to its competitors on the training and development of its employees due to the size of its operations and the number of employees.
Wal-Mart is considered one of the largest retailers in the world as it not only manages a massive number of product lines but also serves a considerable consumer population both locally and internationally. These results in a huge span of control and despite its Information Technology advantages and tools that can handle and address its internal needs, it is not possible to monitor all of its operations. To this end the company is forced to rely on the goodwill of its store managers and staff in ensuring smooth operation.
Opportunities for Wal-Mart – External Factors
Government green drive also opens an opportunity for procurement of Walmart products by the state as well as federal government contractors.
Attaining new customers from the online channel. Over the past few years the company has invested a vast sum of money into the online platform. This investment has opened new sale channels for Wal-Mart. This will allow them to leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Wal-Mart’s products thus providing an opportunity to the company. That being to either to boost its profitability or pass on the benefits to the customers to gain market share.
New trends in the consumer behavior can open up a new market for Wal-Mart. It provides a great opportunity for the company to build new revenue streams and diversify into new product categories.
The market development will lead to dilution of competitor’s advantages and enable Wal-Mart to increase its competitiveness compared to the other competitors.
The new technology provides an opportunity to Wal-Mart to practice different pricing strategies in the new market. It will enable the company to maintain its loyal customers with great service and lure new customers through other value-oriented propositions. Additionally, this is rapidly evolving as a viable option of enlarging Wal-Mart’s customer base. The company has an opportunity to exploit this option to serve more customers and promote shopping convenience. This helps to enhance convenience for customers whose residence is too far from local Wal-Mart branches.
The new taxation policy can significantly impact the way of doing business and can open new opportunities for established players such as Wal-Mart to increase its profitability.
With its vast resources, Wal-Mart has the opportunity to take over, merge with, or form strategic alliances with other global retailers. The Wal-Mart stores are currently in a relatively small number of countries. There are therefore huge opportunities for future business in expanding consumer markets in emerging economic powerhouses including developing countries.
Threats Wal-Mart Facing – External Factors
No regular supply of innovative products. Over the years the company has developed numerous products but those are often responses to the development by other players.
New or more advanced technologies developed by the competitor or market disruptors could be a serious threat to Wal-Mart in the medium to long term future.
Small-scale and large online sellers are a threat to the company’s retail business. Through the Internet, small sellers or individuals are able to compete and bypass the company’s presence by using their own websites to sell products to online consumers.
Growing strengths of local distributors also present a threat in some markets as the competition is paying higher margins to the local distributors.
Imitation of counterfeit and low-quality products is also a threat to Walmart’s products especially in the emerging markets and low-income markets.
Despite its huge scale of operations and customer loyalty, Wal-Mart is also the target of competition, locally and globally. This puts intense pressure on the company particularly in terms of maintaining its consumers as well as developing new and better business strategies.
Wal-Mart’s entrance into the global market exposes it to political problems in the countries they operate in. Wal-Mart is a global retailer that needs to adapt to foreign regulations and standards to penetrate in the global market. The company is vulnerable to the issues that would affect the country it operates in, particularly political and economic issues. Competitors in these countries may use their influence in the government to counter Wal-Mart’s penetration. They may also result to malpractices under government protection to fight off competition.
The cost of producing many consumer products has fallen because of lower manufacturing costs as a result of outsourcing to low-cost regions of the World. This has to lead to price competition, resulting in price deflation. Intense price competition is a threat as Wal-Mart may be forced to purchase cheaper substandard goods in order to beat the competition. This may lower Wal-Mart’s standards leading to a loss of key customers.
Aggressive competition is a threat because other large retailers could use aggressive marketing strategies to capture Walmart’s customers.
The healthy lifestyle trend is a threat and an opportunity. It threatens Walmart’s business because many of the company’s goods are perceived as not healthful, not organic, or not natural.
References / Citations & Bibliography
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- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)