Strengths and Weaknesses Analysis of Walmart - Case Study Example

External and Internal Environmental Analysis of Walmart affiliation External and Internal Environmental Analysis of Walmart Introduction An organization’s environment is made up of both the internal and external environments. The routine environmental scanning if fundamental for development of an organization. It provides information necessary for determining factors influencing an organization’s success, at the same time it can be used to determine forecast. This Analysis helps the management to plan on the way forward as they utilize the resource and strengths within their each to gain advantage over their competitors. The first step in environmental scanning includes scrutiny of the internal environment. It provides information on the weakness and strengths of an organizations internal environment. Secondly the external environment too affects the marketing and general operation of the organization. Walmart’s internal strengths and weaknesses One of the major internal strengths of Walmart is its scale of operation. Walmart is the largest retailer globally with revenues amounting to over $400 billion (Brown, 2011). The company has over 10130 stores in the world. This makes it a giant retailer unsurpassable by its competitors. Following the large scale operations, the corporation can utilize the strong buyer power on its suppliers to command the ultimate price of its goods. The lower prices on goods, definitely pull customers to the stores than the others are who a charging much more of the same good and services. Its critical factors in the Walmart success, is the extensive information system that the company has utilized. It has a well-developed an information system department that provides a large pool of information tracking orders, sales, inventory and other information in real time. This information is observed in all of its stores hence increasing the rate at which decision is made to reverse a rather catastrophic situation. Moreover, the fact that the company can provide a large number of goods within one roof pulls a number of customers to its stores since it comes with a lot of convenience. The retail shops provide customers with grocery, entertainment, home related products and health and wellness equipment. Apart from most of its competitors who depend on the United States market, Walmart has explored other parts of the world collecting about $135 billion as revenue with an accelerated growth in other parts of the world (Kelly-Detwiler, 2013). On the other hand, the company is faced with a number of challenges that surmount to the company’s weakness affecting the normal operation of the company. To begin with, the company faces a number of labor related lawsuits in a year. This proceeding, cost the company millions of dollars. Additionally, through the lawsuits, the company is criticized for poor working conditions, unpaid overtime work, low wages and discrimination of the female employees. Apart from increased litigation costs, the company has gained poor reputation among workers and customer’s factor that has led to fewer skilled workers willing to work with Walmart. The customer’s may also shift due to the poor reputation of the company on its workers. In addition, the company has high employee turnover due to poor pay and poor working conditions. Thus the company uses more money in hiring and training new employees frequently. Lastly the company has negative publicity flowing the number of scandals like bribing authorities to protect it from facing the full effect of the laws on its poor wages and working condition at large. External strengths and weaknesses The company is experiencing retail market growth in a number of emerging markets. For instance, there is at least 5% growth of the retail stores around the globe. The company operates in India, China, Brazil and Mexico markets, which provides a large market base (Helms & Nixon, 2010). The current trend whereby people are shifting to eating healthy foods, provides Walmart with an opportunity of expanding its grocery stores which are more sophisticated than those of its competitors. Moreover, Walmart can utilize online shopping to increase it sells. There has been about a 4.7 % increase of the online marketing transaction leading to the collection of $197 billion a year. Thus Wal-Mart has a change of utilizing this form of marketing to increase its sales. Some of the external weakness is perpetuated by the increase competition from mortar and brick online competitors. Other competitors like amazon, Costco, target and the UK’s Tesco are struggling to ensure that they eliminate the price difference Walmart enjoys today. Secondly, Walmart stores are gaining resistance from the local communities. The resistance has come into being following the negative impact that Walmart stores have on the local retailers. In case a Walmart stores is opened up in a local area, most of the other retail shops are forced to close down. This has led to major resistance of these stores in most places since they deprive the locals the opportunity to retail their products (Lu, 2010). The rising costs of commodities, is likely to reduce the margin of profit making within Walmart. Thus reducing the difference between the stores and other small scale retailers. Might affect the expansion and continued profit making of the organization. Walmart’s competitive position and possibilities Walmart being the world’s largest retail company, it has always dwarfed rivals in size. It had a revenue collection of $406 billion, while Target had $65 billion in terms of revenue collection. Target had been at the forefront in growth for over five years, ranging from 2003 to 2007. Target’s sales at the stores grew at an average of 4.6 % while the Walmart’s growth rate was averaged at 2.9%. Over the same period, target also made a profit of about 16 % as Walmart made about 10% profits (Kelly-Detwiler, 2013). However, following the onset of recession in the year 2008, Targets revenues have been going down by over 2.6 % as that of Walmart rose by 3.3%. The continued steady growth and profit making by Walmart is attributed to the fact that the company provides its consumers with basic needs more than home apparels. No matter how the country’s economy changes, people will still have to buy food from the company, hence maintaining its profits making and continued steady growth. The company is likely to develop further if the issues are tackled timely (Anonymous, 2011). Structure of the organization and its effects on performance Walmart uses Sam Walton’s principles in its structure of management. The management system is structured in a way to ensure that the CEO is able to reach the company’s employees and customers so as to enhance the service delivery. Walmart is divided into three sections whereby employees in each group are managed by one person to enhance better management. The divisions include products structure, where the groups of people working in the production section in Walmart. They are managed by a single person who connects them with the management. Secondly, it is made up of market structure, similarly it groups people with the same functions in the company. Lastly, there is the geographic structure which is in charge of managing a large group of people in different geographical areas. This structure of management has been fundamental in the continued growth of the store throughout the world. It promotes care of the students and promotes the revenues of the company at large. Conclusion Walmart has a competitive advantage over its competitors owing to its large market base and pricing of its goods. By dealing with the major weakness in both the internal and external environments, the company is likely to move to a higher level where it cannot be surpassed. Therefore, it is likely to grow even more if the management carries out regular analysis and strategic plans. References Anonymous. (2011). Walmart readies for Target. Edmonton Journal, p. B.8. Brown, J. (2011). Whose Walmart? Our Walmart. Labor Notes, 16. Helms, M. M., & Nixon, J. (2010). Exploring SWOT analysis – where are we now?: A review of academic research from the last decade. Journal of Strategy and Management. doi:10.1108/17554251011064837 Kelly-Detwiler, P. (2013). How Walmart And G.E. Are Leading A Transformation In The Energy Market. Forbes. Lu, W. (2010). Improved SWOT Approach for Conducting Strategic Planning in the Construction Industry. Journal of Construction Engineering and Management. doi:10.1061/(ASCE)CO.1943-7862.0000240  Read More