Internal Analysis of Wal-Mart - Case Study Example

Internal Analysis - Wal-Mart The analysis of a firm's internal environment provides the basis for identifying the resources and capabilities the firm possesses which give them its exclusive market position. According to this view point each firm possesses at least some resources and capabilities that the other firms in the same industry do not possess. It is these resources and capabilities that make a firm successful and distinct from other players in the market. This paper studies the resources and capabilities of Wal-Mart the giant retail chain store and makes a report on how the company can take advantage of its internal strengths and the opportunities the industry offers. The paper also details how Wal-Mart can guard against the internal weaknesses and avoid the external threats. Wal-Mart - an Overview Wal-Mart Stores is the number one retail store in the World in volume. The company has more than 7,250 stores," including about 975 discount stores, 2,800 combination discount and grocery stores (Wal-Mart Supercenters in the US and ASDA in the UK), and 590 warehouse stores (SAM'S CLUB)". (Hoovers. Com) The Company is the number one retail store in Canada and Mexico and owns 95 percent stakes in the largest Japanese retailer SEIYU. The company is operating in most parts of Asia, Europe and South America. The company has achieved a Turnover of $ 378,799 million for the fiscal year ended January 2008 employing about 2,100,000 people. SWOT Analysis The SWOT analysis of Wal-Mart is presented below: Strengths In the area of management Wal-Mart has been a committed entity in respect of its responsibilities towards customers as well as communities. The corporate structure of Wal-Mart has three core values of respect for the individual, service to their customers, and striving for excellence. These values have enabled the company achieve the fete of the largest retailer of the world. In the human resources area the company is regarded as one of the best provider of training and development to the employees. The marketing strategy in the form of Every Day Low Price (EDLP) strategy has been found to be successful in enhancing the sales growth. The customer oriented approach is one other core value of the company. With ten different divisions of the company available in one place the customer can have a one stop shopping experience which is one of the core strengths of the company. On the financial aspects the company has shown consistent sales and profitability growth during the past years. The company has all its financial ratios indicating its financial strength. The stock price movements are yet another indication of the financial strength of the company. The company has strong and well oriented distribution networks, well equipped and mechanized distribution centers which provide an efficient supply chain management and enormous economies of scale in the operations of the company. The company employs the latest and most sophisticated information and communication technology which enables the company to operate with a clock like precision. Weaknesses The absence of a proper and formal mission statement is the fundamental weakness of the company. The company's mission statement does not provide the necessary definition of their business and does not also provide the direction for the employees. The company has not recognized diversity in the employment with few females in the top management and few minorities. This is a dent in the corporate image of the company. Non-unionization is another weakness of the company. The employees do not have a forum to raise their concerns and hence the employees lack bargaining power. On the marketing side the company has the biggest weakness of continuous expansion. The company has acquired the hatred of many social organizations in smaller towns across United Stated because of the adverse economic impact the company is creating on smaller towns and the trade within these towns. The major complaint in the operation of the store is the increased average time that an individual has to spend in the 'check out' lines. With the growth in size and the number of customers this has become a real problem. Opportunities The company has enough financial and other resources for undertaking mergers and acquisitions to expand in to newer markets. Expansion into emerging economies can be identified as a clear opportunity for the company. The economic changes in the standards of living of the middle income group people in developing countries like India and China provide a good case for expansion. Threats The competition is becoming more and stiffer with the competitors increasing the customer values. Wal-Mart is clearly off the required level in meeting the customer preferences and choices and in providing comparative personalized services to the customers simply because of the larger volume. There is a possibility of politically motivated opposition in some countries where the store wants to expand. (Marketing Teacher) Threats and Challenges faced by Wal-Mart Wal-Mart used a combination of low prices and relentless expansion to grow to be the major industry player in the retail industry. But presently the company is fighting hard to face the competition from its rivals who have redefined the retail business all around. The foremost challenge being faced by Wal-Mart is the greater convenience, larger selection of varieties and brands, higher quality products and un-matching service offered by the rival retailers. The store is struggling to provide the quality being demanded by the customers whose preferences and tastes have been changed by the internet over the period which Wal-Mart failed to recognize while other retailers did. The bigger brands like PepsiCo, Procter & Gamble and the like are trying to enter into exclusive arrangements with other retailers leaving Wal-Mart. Growing in enormous scales was the business model of Wal-Mart which it achieved beyond doubt by emerging the largest retailer in the world. But, now such phenomenal growth itself has become detrimental to its sustenance because the consumers are demanding more freshness and choice. The customers also demand personalized service which Wal-Mart is unable to provide. The second problem that Wal-Mart faces is that in the quest to attain higher sales it has not realigned its customer base. Though the corporation has overgrown in its super-center concept it has not made success in gaining the growth from the affluent customers. The concept of 'value-looping' in retailing followed by Wal-Mart has unraveled itself with the pricing gap between Wal-Mart and its competitors narrowing down enabling customers to choose convenience over wading through a super-center. The fading cordial employee relation is another biggest challenge for Wal-Mart. The availability of millions of items online and the convenience of shopping through internet has transformed the retail definition of scale. Moreover the national brands that lack in distribution have started to open their own retail outlets. This makes the retail giant loose the control both on the customers as well as the suppliers. Wal-Mart is facings stiff competition in consumer electronics and pharmaceutical business which were once its stronghold. There are firms like Best Buy in electronics, CVS Caremark and Walgreen in pharmaceuticals who have redefined the business models much to the detriment of Wal-Mart growth. A host of new entrants also pose another issue that hinders the sustenance of growth and profitability by Wal-Mart. The corporation has also lost its control on the suppliers that it is no more possible for the company to insist on the suppliers to invest in latest technologies. (Wall Street Journal) There are arguments that the dominance of the company creates problems for other stakeholders like suppliers, workers, and communities. According to the cover story contained in Business Week dated October 6, 2003, while the company has through its relentless cost efficiencies save enormous sums of money and passed the part of this saving to the shoppers as bargain prices, its cost cutting efforts have deeply affected the workers. To cite an example it was argued that the sales clerks were paid annual wages much lower than the poverty line declared by the Federal. Another serious issue that makes the goals of the company incongruent with the mission, vision and goals is the alignment with the communities. There is a complaint that the company often is being protested by the local communities from opening the stores in their localities. But the company by sheer power of its size did not heed to the objection of the communities. The mammoth growth of the retail chain has also severely hit the competitors who are smaller supermarkets. While Wal-Mart offers price levels at 14 percent less than the rival supermarkets this throws hundreds of such supermarkets out of business leaving the owners penniless. Moreover this also puts an additional burden on the part of the consumers to travel to the nearest Wal-Mart store in the absence of a smaller super market nearby. " The nub of the problem was that the discounter had relied for so long on selling for less that it did not know any other way to sell" (Anthony Bianco).Unless Wal-Mart takes serious steps to solve this multiplicity of issue the company would not be able to grow any further. References Bianco, A., Zellner, W., Brady, D. , France, M., Lowry, T., Byrnes N., & Zegel, S. (2007) 'Wal-Mart's Midlife Crisis; Declining growth, increasing competition, and not an easy fix in site' Business Week. New York, April 30, 2007, Issue 4032, page 46 Bianco, A., Zellner, W., Brady, D. France, M., France, M., Lowry, T., Byrnes, N., & Zegel S. (2003) 'IS WAL-MART TOO POWERFUL Low prices are great. But Wal-Mart's dominance creates problems -- for suppliers, workers, communities, and even American culture. Business Week New York: Oct 6, 2003 Iss 3852; pg. 100 Hoovers. Com 'Wal-Mart Stores Inc' Marketing Teacher' SWOT Analysis of 'Wal-Mart' Wall Street Journal 'The End of Wal-Mart Era' Read More