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Walmart SWOT Analysis

Walmart SWOT Analysis

Walmart SWOT Analysis

Introduction

Wal-Mart is one of the leading companies on the global retailing market, with an employee base of over two million, which make it virtually the largest private employer in the US and on the global platform. Despite the initial struggle that the company had in the determination of the appropriate form of retail outlet to adopt, Wal-Mart has evolved to occupy one of the most comfortable niches in retail business. A firm existence in the American market and exploitation of every opportunity and space during the initial establishment years has enabled Wal-Mart to enjoy a unique brand name. It was a successful strategic move for Wal-Mart to concentrate with the local US market and establishing a firm ground on the home soil. From the exploits of the home market, Wal-Mart had enough experience and sufficient resources to make investments abroad.

Wal-Mart has coverage for retail business in more than fifteen countries today, with branches in Argentina, Brazil, Canada, Germany, India, Japan, South Africa and the UK among many others (Walmart, n.d.). This presentation highlights the various concepts that can be associated with Wal-Mart as a global player in the retail industry. SWOT analysis is relied in the design with the initial part highlighting general review with strengths and opportunities that an insider at Wal-Mart would quickly give while the second section highlights threats and weaknesses as a critical perspective of the company. General review is a biased outlook on the positives of the company as opposed to the critical review that criticises various business concepts and approaches adopted at the company.

Data Collection

Information on SWOT from primary and secondary sources made the bulk of the research, with explanation and discussion on the main issues making up the presentation. SWOT as the main theme of the paper identifies with the needs of understanding the operations from an internal as well as an external perspective (Broughton, n.d.). The discussion is not exhaustive on the SWOT analysis but only a selected few items picked formed the discussion on which to base the presentation.

General Review (Strengths and Opportunities)

Ownership

Wal-Mart began and remained as a family business as Walton dedicated his entire to the service and development of the company. Such level of commitment for the management of business usually enables the manager to set organisational objectives above any other interest. Evidently, the success of the corporation as one of the main global players in the retail industry owes much to the man-management techniques that Walton applied (Walton and Huey 1993, p32). As an individual, the president of the United States recognised Walton’s contribution to business and awarded him for his achievement just before his death. This is a milestone achievement for an individual leading an important business player as Wal-Mart in the global economy. Walton retained a strong influence on the decision making processes at the company in many aspects, despite the fact that the listing of the company implied that he donated some of the leadership to the shareholders. His contribution to the running of the business is undisputed and perhaps therefore Wal-Mart’s successes owe much to his roles in the company. The demise of Sam Walton in 1992 paved way for another Walton, Robson who took over as chairperson of the Wal-Mart Board a few days later.

Tradition

Since its establishment in 1962, Wal-Mart has kept off temptations of changing the market approach from the initial vision of the pioneer (Frank 2006, para.6). Sam Walton envisioned a retailing business with a unique pricing strategy that would target the lower end markets by initiating price cuts. Targeting the specific market niche in retail business and making it possible to stick to it was perhaps the strongest business ideas adopted by Walton.  In the modern business strategy applied at Wal-Mart, pricing is a uniquely important tool implemented for the initial objective laid down by Walton several decades ago. In all the retail outlets operated by Wal-Mart, the main feature that attracts and retains customers is the price cutting strategies that emerged at Wal-Mart over the years. Discounts for instance are an important price cutting strategy that Wal-Mart has utilized during the years of operation in lower end retail business.

Human Resource

Wal-Mart is the largest single private employer in the US, making its contribution to the US economy in terms of income generation significant before other private employers. By setting up shop in different countries around the world, Wal-Mart takes the success of being a major employer to the other global economies. In terms of national development agenda for various global economies, Wal-Mart’s contribution stands out due to the significant number of employees it engages. During the recent economic problems in the US, the rate of unemployment rose to alarming levels in other industries but Wal-Mart held on to the challenge.

The contribution that the retention of employees at Wal-Mart had to the economy and individual employees was commendable. Sustaining operations globally with the enormous employee figures is a challenge that no organisation would survive, but the success rates at Wal-Mart are commendable. Dealing with issues of human resource management such as motivation and commitment, which effectively and marginally erode away with additional employees, is an enormous balancing act at Wal-Mart. Continued operations and ambitious expansion objectives at the company imply that the company is willing to face the human resource challenge beyond the astronomical two million figure.

Brand

One of the main business assets that a modern company relies on to remain competitive is the brand name. In view of the brand name that Wal-Mart operations hinge upon, the company is a household not only in the US but also at the international retail arena (Lichtenstein 2006, p42). Despite the fact that Wal-Mart enjoys a considerable fraction of the retail market particularly in the US in a strong existence across many states, it was not an easy task. Wal-Mart faced several challenges along the way in order to facilitate and maintain a successful campaign to establish a strong brand name in the market. Taking the opportunity that the local brand created in the market into the international retail platform, Wal-Mart opened new challenges abroad. Transferring success from one country to another is a difficult task due to the challenges of changing the business environment. Wal-Mart ranking by several corporate rating magazines and platforms shows that the brand that it has established over the years is popular among many people. Perhaps this positive rating attracts the best human resources and public relations that add to the company’s profile as an admirable player.

Market Structure

Wal-Mart plays an important role in the retail industry to such an extent that only a few players exist in matching the requirements of the specific market niche that it occupies. In various perspectives, Wal-Mart’s position in the retail market in the US qualifies to be an oligopoly that has a few players. Under the environment of an oligopoly, there is stiff competition among the few players but Wal-Mart is inherently capable to deal with such pressures. Despite the fact that the company deals with retail services targeting the lower end retail consumers interested in lower prices, its profile is appealing to different market ends. In market segmentation aspects at Wal-Mart, it is able to attract low-end and high-end consumers at the same time due to a string brand presence respectable among various levels of income groups. Alternatively, Wal-Mart’s unique features in the retail industry allow the consideration of its position as a pseudo monopoly. The unique brand, employee figures and competitive pricing strategies add certain monopolistic advantage to Wal-Mart.

Operations Divisions

Throughout the evolution of Wal-Mart as a leading retailer in the US and perhaps set sights to lead the global retail market, various shop models emerged as important agencies of operation. Despite the observation that Wal-Mart dropped different retail shop models in preference of others, the current shop portfolio illustrates the continuity of diversity in retail shop models (Birchard & Marquard 2007, p123). The advantage of retaining various models of retail outlets is perhaps to facilitate the distribution of low price policy without necessarily affecting general image of the retail giants as a destination for lower income groups.

Specializing in the low pricing strategy is a difficult balance to achieve without a number of shop options to avoid the market segmentation aspect, which requires that a specific market end is supported as precisely as possible. In terms of targeting the various income groups by the use of various retail outlet models, Wal-Mart expertly captures demand aspects with precision. Some of the commonest retail shop models in use at various Wal-Mart outlets throughout its market coverage include discount stores, super centers, neighborhood markets, super me cardo de Wal Mart, Market side, WalMart Express and Sam’s Club. In these outlets, Wal-Mart captures demand in various categories ensuring that the economic class construction does not appear and consequently affect its operations.

Local and Overseas Acquisitions

Wal-Mart has mastered forging positive synergy and conglomeration strategies in ensuring local expansion attributes. Despite the fact that the majority of the acquisitions in the US targeted retail operators that stood in the way of a competitive presence for Wal-Mart, expansion needs for Wal-Mart, stand out from its acquisitions. This explains the fact that a majority of acquired retail outlets opened shop immediately as Wal-Mart subsidiaries as opposed to closure as would in case of a move only targeting the eliminating competition. Local outlets in the US market were either newly created subsidiaries or acquisition of established retail businesses and their conversion into Wal-Mart outlets.

In its international operations, Wal-Mart mainly acquired already well-established retail businesses. As an illustration, the acquisition of Asda to kick-start operations in the UK and Interspa in Germany is an example of the many acquisitions made outside the US to expand operations globally (Corporate Watch 2004). One of the main advantages of such diversification is perhaps in the distribution of investment projects across economies around the globe. Under such a setting, it is possible to distribute risks, for instance during the economic crisis where low performance in the US did not imply total crisis for Wal-Mart.

Efficient Procurement

In the different operations divisions at the giant retailer, Wal-Mart opened up supply needs for different products and different suppliers fight for the opportunity to supply Wal-Mart with the diverse needs. Since the pricing strategy at Wal-Mart is generally set below what competitor retailers offer, Wal-Mart faces one of the most specific procurement strategies. To ensure that the suppliers’ quotations do not suffer a negative impact by the need to remain on the low pricing strategy, Wal-Mart makes accurate decisions to retain customers and suppliers. Balancing the needs of the suppliers against the organisational policy of sustenance through low prices is strength at work in Wal-Mart. To achieve the balancing, Wal-Mart’s solution lies on the specificity of precise and accurate purchases with extra caution to remain efficient.

Products and Pricing Strategy

The question of the pricing strategy adopted by a retailer seems to raise debate among interested parties due to the diversity of products dealt with by ordinary retail outlets such as Wal-Mart. In the description of the products portfolio that retailers with a capacity such as Wal-Mart’s, various products are considered and diversity becomes the dominant theme. Some of the products sold in a typical retail outlet at Wal-Mart include food, household merchandise, textiles, electronics, drugs and soft drinks among many more other general merchandise and products (Hicks 2007). To run a competitive pricing strategy in such a wide range of products is a hectic task that only a few players would balance appropriately.

In view of the ability of Wal-Mart balancing the pricing strategy, Wal-Mart boasts of success in ensuring that the retail market in which its operations are located perceives its prices as lower than those offered by competitors do. Such an achievement only adds to the retention of acquired consumers as well as attracting prospective consumers. To illustrate the difficulty of lowering prices in a mixed products portfolio, it is not possible to facilitate low prices for all products since it would reduce earnings. Decision making in such pricing challenges involves identification of a perfect balance where certain products remain reasonably priced while others get lower price tags as consumer attraction baits.

Critical Review (Threats and Weaknesses)

Restricted Expansion

Wal-Mart’s expansion policy is biased and limited with a lean on retailing, whose interpretation amounts to a restricted or rigid investment. One of the main objectives for Wal-Mart and for any organisation is to remain competitive and productive. Productivity measure is undoubtedly ability to make sustainable earnings. By sticking to the retail line of business for a long time, Wal-Mart risked missing other opportunities offered in other business sectors such as information technology. Diversification of business from one line of operations enables a business to not only increase earning opportunities, but also distribute risks. From 1962 to 2000s when Wal-Mart indicated an interest to enter into other businesses is a long time in business terms to make such an important decision. Perhaps if such a diversification appeared earlier that done, Wal-Mart brand would be a better household name than it is today. By maintaining the same line of business across the markets, Wal-Mart exposes its resources to limited investment since opportunities outside retail business cannot find entry.

Human Resource Management

As mentioned above, over two million for the human resource is an astronomical figure by any standard (Hicks 2007). Despite the continued growth in numbers, Wal-Mart struggles to maintain the best standards that the modern human resource department requires to observe. In view of the modern organizational requirements for human resource management, employee motivation and satisfaction are mandatory concepts for exceptional performance. Alternatively, within the international market coverage that Wal-Mart has, cross-cultural diversity issues contribute to the increased needs of the human resource management function. Complaints of poor remuneration for employees at Wal-Mart greatly affect the employees’ delivery of their services.

Also Study: Walmart Strategic Human Resource Management Case Soution

Employee motivation highly depends on the effective remuneration that the employer is willing to offer, which should coincide with the type of service delivered. If the organization makes huge earnings and is not willing to extend a sharing hand to the employees on whose contribution the earnings emerged, it affects goodwill and commitment. Cases of public outcry that Wal-Mart does not extend the benefits of its success to the hardworking employees are in public domain. Poor employee welfare affects work-life balance, an organizational attribute that nurtures an all round organization. Part time employment basis and lack of ordinary benefits drags the company into the category of poor employers, which affects its public image.

Competition

Wal-Mart exposes the other retail companies to unfair competition by perhaps by redirecting resources from unlikely sources. By paying employees unreasonably low wages, Wal-Mart directs the remuneration funds to launch unfair challenge to competitors (Spotts 2005, p24). Expansion successes enjoyed at Wal-Mart that apparently struggles to repay employee goodwill amount to unfair competition. Despite the observation that a few players exist in the category of business that Wal-Mart deals in, the real market scenario is similar to a monopoly. This is due to the unfair business practice that Wal-Mart embraces in the US. In view of the choice to operate as retailers at the large-scale level adopted at Wal-Mart, the benefits of operating as a small-scale retailer eludes the company. Alternatively, dealing n many products at the huge capacity as a retailer blocks the benefits of operations as wholesaler. Other beneficial product distribution system considering dedicating different outlets for specific products would perhaps make the company better in business achievements.

Threat to Continued Global Expansion

The size of Wal-Mart in retail business presents a threat to local retail industries and continued expansion faces resistance for protection of local industries. Retail business captures certain business level that naturally has many players targeting every consumer within the population. Logically, there should be fewer producers than the wholesalers, who in turn ought to be fewer than the retailers are. Wal-Mart’s status attempts to disrupt this balance by eliminating the numeric requirement to meet and sustain the consumer needs. Such a disturbance is not welcome among the retailers since locking them out of business creates over-reliance on a few players. Global market opportunities for Wal-Mart face the challenge of resistance on the premise that the introduction of a player with such ability to wipe out retailers will reduce employment.

Ownership

Existence as a family business did harm than benefit to Wal-Mart thereby reducing its growth rate in the initial stages of establishment. Despite the importance of a strong guard from the Walton family, personalized approach in managing business for a long time affects its opportunities in different aspects. The level of business productivity achieved after separation between the family and corporate management illustrates the benefit of professional management. Perhaps maintenance of a close family oversight for the operations of the company to this day would prevent success at the level achieved.

Public Image

The cold approach adopted at Wal-Mart when handling employees probably placed the company in one of its difficult situations with regard to public image. In the already known fact that employees at Wal-Mart struggle in the delivery of their services, gender activism targeted the company for handling of women remuneration and promotions. Several campaigns ensued regarding gender and employee rights violation causing serious damage to the nature of working conditions at Wal-Mart worldwide (Zimmerman 2010). Blocking employees from joining unions at Wal-Mart has attracted the wrath of workers’ unions to discredit the company for its employment policies. Such a troubled past with regard to human resource issues damages the opportunity that the company would enjoy if the negative tags were absent (Featherstone 2005, para.2).

Conclusion

Wal-Mart is a global leader in retail business and has several successes that every business would admire to possess. An expansive presence in the US and across the world explains the firm foundation that the business established by identifying the appropriate retail combination. From retail shop model to exploitation of a strong brand name, Wal-Mart grew using some of the strengths and opportunities offered in the market. However, a few negative attributes and threats, that stood and continue today, deny Wal-Mart a better operation in the market (Hayagreeva, Ingram and Qingyuan 2010, p52). As illustrated above, challenges and successes make up the story of Wal-Mart just as many organisations are.

Also See: Walmart Organization Challenges And Organizational Change Analysis

References;
  • Birchard, B. & Marquard, W. H. (2007) Wal-Mart: What it Really Takes to Profit in a Wal-Mart World, Chicago, IL: Marble Leadership Partners, Inc.  
  • Broughton, R. (n.d.) SWOT analysis of Wal-Mart, [Online] Available from <http://www.quality-assurance-solutions.com/swot-analysis-of-wal-mart.html> [Accessed 24 March 2012].
  • Corporate Watch (2004) ASDA/Wal-Mart: A corporate profile, [Online] Available from < http://www.corporatewatch.org.uk/?lid=800> [Accessed 24 March 2012].
  • Featherstone, L. (2005) Wal-Mart: Rise of the Goliath, [Online] Available <http://www.multinationalmonitor.org/mm2005/012005/featherstone.html> [Accessed 24 March 2012].
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  • Hicks, M. J. (2007) The Local Economic Impact of Wal-Mart, Youngstown, NY: Cambria Press.
  • Ingram, P., Hayagreeva, R., & Qingyuan L. Y. (2010) Trouble in store: probes, protests, and store openings by Wal‐Mart, 1998–2007, American Journal of Sociology vol. 116, no. 1, pp: 53–92.
  • Lichtenstein, N. (2006) Wal-Mart: The Face of Twenty-First Century Capitalism. New York, NY: New Press.
  • Spotts, G. (2005) Wal-Mart the High Cost of Low Price, New York, NY: Disinformation Company Ltd.
  • Walmart, (n.d.) Wal-Mart stores, Inc. history, [Online] <http://www.wal-martchina.com/english/walmart/history.htm> [Accessed 24 March 2012].
  • Walton, S. & Huey, J. (1993) Sam Walton: Made in America: My Story, New York, NY: Bantam Publishers.
  • Zimmerman, A.  (2010)  Rival chains secretly fund opposition to Wal-Mart, The Wall Street Journal.  (2010-06-07).

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