Methodology and Procedure of Wal-Mart - Case Study Example

? A COMPREHENSIVE SWOT ANALYSIS OF WAL-MART A COMPREHENSIVE SWOT ANALYSIS OF WAL-MART Contents Introduction and Overview…………………………………………………….3 2. Methodology and Procedure of Analysis………………………………………3 3. SWOT Analysis of Wal-Mart…………………………………………………..4 4. Recommendations and Conclusion………………………………......................8 5. Bibliography…………………………………………………………………….9 1. Introduction and Overview In this paper, I will focus upon a strategic and comprehensive analysis of the business tactics, market trends and economic trajectories of Wal-Mart, by attempting a SWOT analysis of the company’s pros and cons. Every successful business has their upsides as well negative aspects. A qualitatively superior standard of operation and well-sustained market shares can only be maintained through a balanced adaptation of both to suit particular business issues and requirements. As a leading brand, Wal-Mart has been the center of several business economic, socio-economic and political economic studies and research. An updated analysis of the company’s market strategies, trends and business highlights will be the primary focus of my paper. While Wal-Mart still retains an amount of prestige and holds a position in the market, it cannot be denied that it is no longer the sole retail giant in America. In a global age, the rapid increase of consumer demand has given rise to numerous small, medium and large retail corporations to provide products and customer services with the required speed ad ease to cause serious business threats to Wal-Mart. For more than 45 years, Wal-Mart has been able to remain successfully in the running against stringent rivalry and rising competing foreign market retailers. Its growth has suffered in the past years. Recent figures and statistics are not reassuring. While assessing the company’s varied and diverse business aspects, I will attempt to provide a detailed reading of the same by utilizing the simple but effective SWOT model of business analysis. 2. Methodology and Procedure As stated in the Introduction, the SWOT method of business analysis is simple but highly effective in producing a detailed, comprehensive and objective research on the four major aspects of any, small or big, business: the Strengths, Weaknesses, Opportunities and Threats. With this methodology, I will attempt a study and analysis of the inner workings and the relevant problems in the operations of Wal-Mart. The effectiveness of the SWOT method lies in its operational dynamics. It penetrates inward into the basic working and process involved in running the companies, ranging from the production to public relations to retail. I intend to apply this procedural business analytic model because I believe every little aspect of a business can be summed up under the four general headings that are the purview of the SWOT model, as mentioned above. In context of Wal-Mart, this method is particularly pertinent as a comparative study of the strengths and weaknesses of a business yields a greater economic and strategic perspective of current market trends. (Pahl & Richter 7) The company gains from an analysis of competitive advantage that is directly relatable to a firm’s performance in the market. A well-balanced and well-thought theoretical methodology ultimately has the capacity to lead to greater productivity and client satisfaction, all resulting in more generation of revenue. (Hao 15) 3. SWOT Analysis of Wal-Mart: A Comprehensive Business Study Before attempting an application of the SWOT model, I will briefly give an overview of the company’s past and present profile. Figure 1. Company Overview (2012) Name Wal-Mart Stores Inc. Industries served Retail Geographic areas served Worldwide Headquarters Bentonville, US Current CEO Mike Duke Revenue $ 466.950 billion (2012) Profit $ 15.699 billion (2012) Employees 2.2 million (2012) Main Competitors Costco Wholesale Corporation, Dollar General Corporation, Dollar Tree, Inc., Kohl's Corporation, Macy's Inc, Sears Holdings Corporation, Target Corporation Established in 1962 by its founder Sam Walton, it began a small retail business venture in Arkansas, Wal-Mart currently boasts of more than 7000 retail chains across the world and staggering shares in the global market, employing around 1.9 million people in different countries. (Pahl & Richter 19) Strengths The main strength of Wal-Mart lies in the sustained capacity for growth and adaptability shown by the company over almost five decades. The company slogan pithily says - “Save money. Live better.” (Pahl & Richter 19) This is the mantra of every middleclass household. Wal-Mart has managed to reach to a wide potential target consumer pool through out the world. Customer satisfaction is the main thrust of the company’s business strategy. It thrives on positive reviews and responses that help to maintain the customer pool and balance out the competition in the cutthroat and tight retail market. (Kneer 2) The entire idea of the modern family store under one roof was achieved by Wal-Mart before any other retail chain. It took a diverse of variety of products and placed it under one roof to enable easy and efficient access for the potential consumers. Much of the retail profitability can be attributed to the emphasis on consumer satisfaction as well as a well-integrated blend of carefully planned corporate tactics. This has led to Wal-Mart’s continued dominance of the retail market in the United States and a rapidly expanding business overseas. (Kneer 2) Current statistics indicate that Wal-Mart is undoubtedly the largest retailer in business. Its huge scale of operations is certainly a point in favor of its market shares. By dominating a large portion of the market, Wal-Mart automatically ensures high economic returns and profits. Wal-Mart information generation system is efficient and smoothly run. The balanced tracking and efficient response to customers’ orders generates cost-savings as well as high revenues. Thoroughly maintained inventories, accounts and sales reports are also crucial in the smooth operations of the company. The acquiring of large overseas shares and recent international expansions has been a positive business move for Wal-Mart. In fact, it boasts of a record sales return of $135 billions from its international markets in 2013. Foreign markets provide lucrative opportunities for growth and profitability that Wal-Mart has been smart enough to seize and utilize. Wal-Mart low cost product supplying strategy has also immensely contributed to the company’s growth and general good faith among buyers. It sells a diverse and lucrative range of products at their lowest price without adding in frivolous interests and rate increments that have gone a long way towards establishing Wal-Mart’s market dominance. Figure 2.Wal-Mart’s SWOT Analysis (2013) Strengths Weaknesses 1.Scale of operations 2.Competence in information systems 3.Wide range of products 4.Cost leadership strategy 5.International operations 1.Labor related lawsuits 2.High employee turnover 3.Little differentiation 4.Negative publicity Opportunities Threats 1.Retail market growth in emerging markets 2.Rising acceptance of own label products 3.Trend toward healthy eating 4.Online shopping growth 1.Increasing competition from brick and mortar and online competitors 2.Increasing resistance from local communities 3.Rising commodity prices Weaknesses Wal-Mart has suffered from several drawbacks and setbacks in the recent years. Questions regarding its ability to sustain continued growth have been raised in several current business and economic studies and analyses. The main concern of the market researchers seem to point at whether Wal-Mart has reached its maximum saturation point in terms of market shares and the evolving trends of the global retail business. A large corporate business like the Wal-Mart is sure to incur litigations and lawsuits from dissatisfied vendors, customers and other private business interests. In fact, the rising number of legal disputes involving Wal-Mart is becoming a major hindrance to its business interests and revenue returns. The cost of fighting these multiple cases is causing a big hole in the company’s profits as well as smirching the brand name. The high employability rates of Wal-Mart, while retains certain positive aspects, is, nevertheless, extremely costly and requires intricate management and maintenance. With the expanding foreign market, a sizeable population of global employee pool under Wal-Mart is causing significant drainage of the turnover rates. Due to the company’s huge size, management across the globe is becoming tricky and more expensive by the day. Opportunities The retail market is one of the fastest growing industries in the current business world. It has recorded an average growth of 5% last year. This is an excellent opportunity for Wal-Mart to expand and adapt its reach to the developing parts of the world. With the new retail chains and entrepreneurs coming into existence everyday and securing significant shares, Wal-Mart must strategize carefully to integrate this opportunity into their business and improve their relational dynamics globally. Wal-Mart must also think of launching innovative products and fast consumer group products under their own, private label. This will create a whole new line of operational and financial venture, securing a steady inflow of revenue. The optimized costs of the prospective goods can help to solidify their position in the market and empower their brand name as well. With the rise of technological innovations in the last five years, a new form of retail chain and market has come into prominence. Online retailers are now competing globally with large corporate and privatized retail chains. Wal-Mart can seize this new mode of business and expand its reach globally in the more cost effective way of launching an online supply chain. It will not only appeal to a more diverse target group of consumers, but also contribute significantly to hiking the sales. Threats The main threat to the economy of the business for companies like Wal-Mart, that cash in on the promise of low prices is the rising cost of living. In a global setup, markets are becoming crowded with a varied range of retailers who claim to offer competitive edge in generating low cost goods of quality. The alarming rise in prices of certain products and services are posing a serious threat to the stability of Wal-Mart’s business. Other threats include the emergence of online retail chains and their increasing dominance over market shares. Companies with online order and delivery systems are gaining preference over walk-in shops and retail chains like Wal-Mart. The public image of Wal-Mart has also suffered in the recent years. The large consolidated interests of corporate giants like the Wal-Mart tend to exert a negative influence on small and local business ventures. The socio-economic impact of Wal-Mart on small business interests is destructive. It has been the cause of friction between Wal-Mart and local communities and shops for several years. Negative publicity generated by lawsuits, and resistance from small business groups are also a concern. Several injurious rumors involving Wal-Mart regarding backhanded and illegal business policies like bribing and forceful overtaking of small shops are circulating the market that can cause serious damage to the reputation and profitability of the company. An effective and positive Public Relations strategy is required urgently. 4. Recommendations and Conclusion Times are changing and in order to survive a highly competitive market Wal-Mart must evolve and change as well to adapt to the economic uncertainty of these recent years. By overcoming its few weaknesses and seizing the opportunities provided by the financial climate of our time, Wal-Mart can come to dominate the market as the leading and most powerful global retail chain. The crash in the market has led to an increase in the potential consumer pool. Not only lower and middle class groups, but high income customers are also frequenting the Wal-Mart given the poor condition of the world’s economy. However, in order to combat the bane of rising prices, the company must update its sales and business approach and strategy. The ‘everyday low prices’ bait, while an effective hook for the clients, needs upgrade in terms of PR and advertising. A positive contextualization with the current socio-economic trends with the company brand image will help solidify the customer base. The negativity of Wal-Mart past poor publicity, embroilment with litigations and protests from local business groups must be urgently countered by launching a positive campaign. Strategically issued PR press and reinvention of the brand can do wonders to the declining popularity of Wal-Mart. Equal work environment for women and an improved overall employee policy can help the company’s reputation. While, the strict anti-employee policies have a source of major discontent and been strictly criticized by labor rights groups, it is time for a renovation in the company’s human resource approach. A better management for Wal-Mart is the immediate requirement of the day. It will, I believe, be of both long term as well as short-term benefit. References Kneer, Chritian. The Wal-Mart Success Story. GRIN Verlag, 2005. Ma, Hao. "Competitive advantage and firm performance." Competitiveness Review: An International Business Journal incorporating Journal of Global Competitiveness. 10.2 (2000): 15-32. Pahl, Nadine, and Anne Richter. SWOT Analysis Idea, Methodology and a Practical Approach. GRIN Verlag, 2009. Read More