Wal-Mart SWOT Analysis - Case Study Example

Wal-Mart SWOT Analysis Number: Situation Analysis of Wal-Mart Wal-Mart is the world’s largest retailer and the highest revenue-generating business in the history with its international sales hitting as high a US$109 billion in fiscal year 2011. This giant retailer is based in the USA and it operates international outlets in various countries worldwide. The company was formed by the legendary Sam Walton in 1960 and has since it has been experiencing tremendous growth since its inception. In the year 2011, Wal-Mart was declared as the number one retailer in the whole world with fiscal year net income of US$16 billion on sales of US$419 billion. Back then, the company had more than 2 million employees and about 8,500 stores in 15 nations (Ivey School of Business, 2012). Wal-Mart store has had its ups and downs though it still thrives in the retail industry to extend its growth to other regions all over the world (Ivey School of Business, 2012). Wal-Mart store does not deal with specific goods though it deals with various big box goods and services through its various retail shops globally. The company’s competition comprises of major big box retailers such as Target, K-Mart, grocery stores and other smaller retailers like General Dollar. Most of these competitors have reinvented themselves by stocking more inventories and offering lower prices on particular products compared to Wal-Mart. Wal-Mart growth can be attributed to the aspect of offering low-priced products though it later copied the merchandise assortment strategies of other retailers mostly through observation as a result of store visits (Ivey School of Business, 2012). Problems The main challenges that were facing the company as per the date the given case study was published included the issue of intense competition and sales drops. By 2012, the company was still trying to pull through from a sequence of mistakes that had given its rivals such as Amazon and Dollar Stores close the performance gap(Ivey School of Business, 2012). Most of the competitors had analyzed and copied numerous aspects that used to differentiate this giant retailer from the other competitors. Some of the aspects that were copied included their distribution systems which are were termed by the given case study as one of the best distribution systems. The company usually engages in cross-docking of products so as to minimize their storage time in the warehouses on top of positioning its warehouses near distribution centers. In addition, Wal-Mart eases management of ordering and shipping from suppliers by adopting electronic data interchange (EDI) systems. Immediately these aspects were copied, Wal-Mart could not make much difference in the market a factor that led to nine consecutive quarters of declining same store sales. Decision Statement According to Robert McDonald, CEO of the Procter Gamble, Wal-Mart problems came from execution issues from its stores in back in the US whereby more nimble competitors like Dollar General started rolling out small format stores that were eating into Wal-Mart’s share (Ivey School of Business, 2012). In order to curb the problem of unfavorable competition from the other retailers, Wal-Mart must introduce new tactics such as intense marketing and focus much on ecommerce so as to retain its customers who had moved to Amazon because of convenience associated with online shopping that the company offers. Wal-Mart needs to gather more information about its customers so that it can identify how it can bring unique values to the online shoppers whose number has continued to increase dramatically. With regard to the copied mode of distribution and other differentiating strategies, the company management must be creative a little bit more and introduce a new concept in its distribution and network system that will give it an upper hand in the market hence differentiate it from the rest. Other options that Wal-Mart can focus on include concentrating on product differentiation and improve its brand name that has been tarnished by the ongoing claims by the members of the society about how it denies its employees crucial rights. It appears as if the company has reached its saturation point in the same-store-sales, therefore needs to focus much on product differentiation. The company also needs to redefine its strategy so that it can remain consistent with the economic changes. The company should not just “copy paste” other retailers’ strategies like those of Costco, rather it should introduce new features at Sam club through better marketing efforts so as to attract more customers. SWOT matrix analysis strengths weaknesses 1) Scale of operations (largest retailer in the world by sales) 2) Competence in distribution and network systems 3) Variety merchandising provider 4) Supplier connections 5) Large purchasing power 6) International operations 7) Operational effectiveness 8) Strong customer loyalty and brand 1) Labor related lawsuits 2) High employee turnover 3) Little differentiation 4) Negative publicity 5) Reliance on Chinese imports 6) Global economic conditions 7) Targeted by small biz as leading retailer 8) Opposition Groups(community, Environmental, Political, Unions) 9) Wal-Mart has no formal mission statement and its strategies have been copied Opportunities 1) Retail market growth in emerging markets 2) Rising acceptance of own label products 3) Trend toward healthy eating 4) Online shopping growth (online retail sales) 5) Brand expansion 6) Acquisition of successful startups in competitive markets 7) Develop customer shopping experience satisfaction SO Strategies 1- Being a well recognized brand known as retail market leader, Wal-Mart can take advantage of this major strength by allowing customers to go for bargain and offers discounts as well while other retailers do not this so often (S8,O5) 3- As the trend of online shopping has grown more over the years, Wal-Mart can keep its customer up to date and allows them to order online by offering customer oriented products (S3,O4) 2- since the company can effectively retail in the international markets, Wal-Mart can continue expanding its operations in the emerging markets particularly in the Asian continent (S6, O1) WO Strategies 1- Wal-Mart has to redifine its strategies as there is lot of potential increase in retail business in the future bacause adoption of its strategies by the other retailers is among the main causes for its nine times consecutive profit decline (W9,O6) 2- Since customer buying patterns are similar across the world, Wal-Mart can update its customers about its new own labeled products and distribution and network systems on internet as well. (W3,O4) 3- Wal-Mart should provide benefits to its employees who will boost up the morale of the employees and leads towards the sustainable growth of the organization (W1,O6) Threats 1) Increasing competition from brick and mortar and online competitors 2) Rising commodity prices 3) Increasing resistance from local communities 4) Variety of competition nationally, regionally and locally 5) Substitute products more easily because of intense competition 6) The competitors are gaining control over International Market 7) Being a worldwide retailer means that you are uncovered to political troubles in the countries that you operate in ST Strategies 1- Wal-Mart has a strong brand image; it can face a massive competition against its rivals. This can be avoidable by offering differentiated products at affordable prices (S8, T1) (S3, T1) 2- Wal-Mart has been able to develop a brand value that is able to sustain itself even at the time of economic/political instability in the country which they are operating by introducing differentiated products and satisfied guaranteed programs to create goodwill with the customers (S7,T6) (S8,T7) WT Strategies 1- To avoid any tough competition, Wal-Mart should focus on existing product line and continue pularising its own labeled producrs or to remain above the competition by investing more on advertising campaign to keep its competitors always on pressure (W5, T1) (W6, T1). 2- Make  a thorough study of the foreign market and adapt according to their culture  to establish itself in the Asian/European market.(W8,T7) Explanation of the Strengths Opportunities (SO) According to the analysis of Wal-Mart Incorporation discussed above, it is clear that the main strengths of the company include scale of operations (largest retailer in the world by sales), competence in distribution and network systems, being a variety merchandising provider, supplier connections, large purchasing power, having cost leadership strategy as well as operational effectiveness. Wal-Mart has been having some of the best distribution and network systems for a long time before its strategies were copied by the other retailers. Being the largest retailer globally is another major strength of the company because it has enabled it to penetrate in new markets easily because of having adequate and effective resources needed. The core opportunities for Wal-Mart include retail market growth in emerging markets, rising acceptance of own label products, trends toward healthy eating, online shopping growth (online retail sales), brand expansion, acquisition of successful startups in competitive markets, develop customer shopping experience satisfaction. The company has tremendous opportunities especially with regard to online shopping. The management can continue on building a “continuous channel approach” to balance its physical stores and online stores. Walmart.com should aim at carrying out a broader selection of products that are not available in the other online stores. The widespread of its brand internationally and the continuous acceptance of its own label products in the domestic market is another major opportunity for the company. Explanation of the Weaknesses Threats (WT) The main weaknesses of the company as outlined under SWOT analysis include labor related lawsuits, high employee turnover, little differentiation, negative publicity, reliance on Chinese imports, global economic conditions, targeted by small biz as leading retailer, opposition Groups(community, Environmental, Political, Unions). Wal-Mart image has continued to tarnish because of the labor related law suits because many people claim that the organization denies its employees crucial rights like right to be in a union. This enables the company to exploit them since they do not have any bargaining power. In the recent past, the company also lost much of its differentiating features because other retailers learnt and copied its systems such as the distribution system. This means that the company does not have any feature that makes it unique. Wal-Mart core threats include the intense competition in the retail industry, the rising commodity prices, availability of substitute products because of intense competition, and exposure to the international politics in the countries the retailer is operating in. Wal-Mart Incorporation has in the past few years been facing stiff and unfavorable competition from its closest business rivals both in the domestic and in the international market. Back in the USA, the main rivals include General Dollar, Kroger Company, Target Corporation, Safe Way Incorporation, Costco Wholesale Corporation just to mention a few. The company has also been facing political pressures in different parts of the world to a point that it tries to lobby its supplier to help it in this battle. In the international sphere, Amazon and Dollar Tree Incorporation are some of the key rivals. Other threats to the company include availability of close substitute products from the small retailers such as General Dollar and Family Dollar have affected and will continue to affect the company’s sales. Moreover, the company’s growth is under threat because of political pressure in various countries it is operating. With this analysis, it is clear that the given recommendations would help Wal-Mart in restoring is productivity. As mentioned earlier, the company should introduce new concepts in its distribution and network systems so as to have an upper hand in the market and have a differentiating factor unlike its competitors. In addition, Wal-Mart management should focus much on ecommerce so as to meet the increasing demand for online shopping. References Ivey School of Business. (2012). Half a century of supply chain management at Wal-Mart. London: Ivey Publishers. Read More