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SWOT Analysis of Walmart

SWOT of leading retail store Walmart which focuses mainly on its


pricing. Always low prices being its motto. Read on to know more.

Strengths

1. The company has a core competence involving its use of


information technology to support its international logistics
system. For example, it can see how individual products are
performing country-wide, store-by-store at a glance.

2. A focused strategy is in place for human resource


management and development. People are key to Wal-Marts
business and it invests time and money in training people, and
retaining a developing them.

3. Wal-Mart has grown substantially over recent years, and has


experienced global expansion (for example its purchase of the
United Kingdom based retailer ASDA).It has also created a
joint venture with bharti in India.

4. Summary
5. This report is mainly a case study about Wal-Mart Stores, Inc.
(branded as Walmart), and also includes a comprehensive analysis
for the retail giant.
6. Firstly, there will be an analysis concerning values and philosophy of
business, logistic system, and information technology. Secondly, an
external environment examination will be given. It would be
discussed by market segmentation, Porter's Five Forces Framework,
because of the business philosophy of Wal-Mart, it would mainly
focus on the buying power and competitors of retail industry, there is
also one analysis regarding PESTLE follows. After that, a prospect of
future development of Wal-Mart would be given. To summary the
analysis above, it is a SWOT result of Wal-Mart.
7. In the next section, Wal-Mart's strategy for China market would be
mainly described. Because China market will be one part of the most
important market in Wal-Mart' Asia strategies, the recommendation
both on strategic level and business level would be made based on
all kinds of analysis for China market. Finally, there will be a
conclusion which will be a brief summary combined all analyzing
results and recommendations, and it is the end of this report.

8. SWOT analysis
9. Values and philosophy
10. The culture of Wal-Mart is simple but difficult to achieve - keep
price low to customers everyday, According to Sam Walton's belief,
there is only one boss: the customer, As a result, Wal-Mart earns the
sales, customers' unshakable loyalty, and I noticed a detail, which
showed the most vital advertising way of Wal-Mart is the world of
mouth communication of customers but not the regular ways. In
addition, because of the low price everyday, the price is quite stable
which can help easily predict the sales, therefore, the possibility of
out of stock and overstock is reduced. Sam Walton, he advocated
thrift, not only his personal life, but also the principle he did business.
Even he passed away, his spirit of questioning the cost of every
single item of expenditure had been deeply planted in the Wal-Mart,
and it became a culture.
11.Wal-Mart as a major retail business, knows the value of the customer
is not buying the amount of his time but his life will bring the total
spending of goods, including his own family and friends and word of
mouth effect. Customer satisfaction and corporate profits there is a
linear causal relationship, but also loyal customers and corporate
profits a positive relationship exists between the. Practice shows that,
for more than 90% of the firms, its source of profit for 1 / 10 brought
about by the general customers, 3 / 10 brought about by customer
satisfaction, while 6 / 10 brought about by the loyal customers.
Therefore, the enterprise has brought an important revelation,
bringing customers the greatest satisfaction, and then to win
customers.
12. So, Wal-Mart's service strategy, customer satisfaction is the
most important strategy. Customer satisfaction strategy is simple and
that is the need to stand in the position of consumer users, rather
than stand on the position of producers and consumers to consider
and deal with problems. And this customer first, always put the
customer first philosophy at the Wal-Mart from procurement to final
sales of goods as a whole.
13. For after-sales service, Wal-Mart has also done very well. In
the Wal-Mart store, a shopping more than a certain limit, you can
enjoy the delivery service. Wal-Mart customers in any store to buy
any commodity that can be returned to stores within a month, and
take back all the money. In comparison, for large retail stores with
Carrefour in Return the score is far lower than Wal-Mart. Carrefour
often adorned the walls of "promotional goods will not be refunded,"
the interests of consumers, which do not comply with provisions of
the law, even if it is normal product's return, in the Carrefour also
need a number of persons signature.
14. Wal-Mart to provide customers with "high-quality services" and
"unconditional refund" commitment is by no means nice slogan. In
the United States, Wal-Mart not hesitate to refund policies which will
ensure that every customer no worry. Wal-Mart has four refund
principles:
15. (1) If the customer is not a receipt - a smile to the customer
returns or refunds.
16. (2) If you are not sure whether Wal-Mart to sell such a
commodity - a smile to the customer returns or refunds.
17. (3) If the goods sold in more than a month - smiling, to the
customer returns or refunds.
18. (4) If you suspect that goods have been improperly used - a
smile to the customer returns or refunds.

19. Logistic management system


20. Wal-Mart is the leader of the retail distribution revolution. Its
unique distribution system can greatly reduced costs and accelerated
inventory turnover, and this is the best way to support its "every day
low prices" policy. Wal-Mart to add inventory method is called "cross
docking" - "a system where goods arriving on inbound trucks were
unloaded and reloaded on outbound trucks without entering
warehouse inventory"(Grant, R. 2008). The non-stop delivery system
comprises parts as follows:
21. An efficient distribution center - Wal-Mart's suppliers of the
various branches of the orders of goods sent to Wal-Mart distribution
center, distribution center is responsible for the completion of the
selection of goods, packaging and sorting work. Wal-Mart distribution
center with a highly modern mechanical facilities, 85 percent of
goods sent here have adopted mechanical processing, which greatly
reduces the cost of manual processing of goods. At the same time,
due to the large number of purchases of goods, so that automatic
machinery and equipment are fully utilized, the scale advantage of
the full show.
22. Rapid transport system - Wal-Mart's motor fleet is its delivery
system to another incomparable advantages. In 1996, when Wal-
Mart already has the 30 distribution centers, more than 2000 vehicles
cargo trucks, to ensure that any purchase from the warehouse to a
store no more than 48 hours, compared to other stores with the
industry average of once every two weeks meeting cargo once, Wal-
Mart store shelves can guarantee an average of twice a week fill.
Fast delivery, so that all Wal-Mart stores, even if only to maintain
minimal inventories can maintain normal sales, resulting in
substantial savings in storage space and costs. However, as the
effective operation of efficient transport systems, Wal-Mart 85% of
goods transportation through their own distribution centers, while only
5% of Kmart, the result is a Wal-Mart's cost of sales is less than the
industry average cost of sales 2 % ~ 3%, the year Wal-Mart's low-
cost strategy to become a solid foundation.

23. Information technology


24. Retail sector, especially transnational business groups and
large retail chain enterprises, raising the level of modern
management rely mainly on the use of high-tech. Information
gathering and dissemination, sales data, category management,
inventory and merchandise inventory, supply chain management,
depend on high-tech electronic technology can be completed
efficiently.
25. One of the most important logistic supports is its information
technology support. It's advanced satellite communications network -
Wal-Mart heavily in building a satellite communications network to
supply the system more perfect. The application of this system, so
that distribution centers, suppliers, and each branch can be formed
for each connection point of sale operations, can be completed in just
a matter of hours "to complete orders - orders for the various
branches Summary - Submit Order" the entire process, greatly
increased the operating efficiency and accuracy.

26. Human Resource Management


27. Wal-Mart relationship with employees is a real sense of
partnership, peer relationships. This is the company's outstanding
performance in the face of competition can be one of the reasons.
28. You mention the "associates," There's a story. The
company founder Sam Walton in a vacation with his wife Helen to the
England trip, half-way out Weiss visited the company a retail store - J
W Lewis Partnership stores. The store, he saw a sign above
lists the names of all staff colleagues, which left a deep impression
on him. Back to the company, Mr. Sam, after the first thing is to
change Wal-Mart employees in all referred to as "associates" of.
Indeed, the "employee", "associates" It's two words there is a great
difference. "Employee" refers to people who work for someone else;
"peer" refers to the same as the allies to forge partnerships.
29. Wal-Mart employees in the establishment of equal partnership,
this is only the beginning of innovation. Soon each employee for Wal-
Mart began to implement its "profit-sharing plan," while
implementation were "buy stock plans," "Employee Discount
provides," "Scholarship Program" and so on. In addition to these,
staff also enjoy some of the basic treatment, including paid vacation,
holidays, grants, medical, personal and housing insurance. Some of
these plans reflect the economic partnership, plans are to follow each
one, Mr. Sam said, "true partnership" and developed this partnership
means a frank relationship, so that each one involved in those who
have become the winners, which makes Wal-Mart's attractive
enough.
30. The company's "profit-sharing plan" provides: Any one to join
Wal-Mart is more than one year and in the year for at least 1,000
hours of employees, are eligible to participate in "profit-sharing plan."
Used in the profit growth the company produced on the basis of a
formula, one from each eligible to participate in the wages of
employees to allocate a certain percentage into the scheme.
31. "Buy stock plans" can make it easier for employees to carry out
stock investment and benefit from. Require their staff to opt to pay in
their own detention of a fixed amount each time, or one-time payment
to buy the stock; also be acceptable provided funding to purchase
shares of its employees may be subject to subsidy equivalent to the
amount of 15%. Any have reached the age of majority in their state of
full-time staff or staff employed by the peak season are eligible to
participate in the program.
32. According to the "employee discount rule", staff, staff spouses
and their dependents who, in the Wal-Mart stores, Wal-Mart shopping
plaza, and Wal-Mart's U.S. stores HyperMart shopping, and many
kinds of normal price of goods can play a 10% discount .
33. For those who work more than one year in Wal-Mart
employees, Walton Foundation to the children they are about to
provide scholarships to high school graduation. Upcoming high
school graduation, while working for Wal-Mart, or not yet eligible for
scholarships provided by the Walton Foundation, the staff will be
helped.
34. Employees at the Wal-Mart's inspired contribution to the their
own strength. They make plans to cut costs and design ingenuity of
the goods on display, but also invented a flexible sales promotion.
Wal-Mart to pay an employee found that home delivery services can
be traveling the same from the original route of the Wal-Mart trucks to
replace it with the proposed Wal-Mart's expenditure each year for
more than one million U.S. dollars. An employee on the cash flow of
income and expenditure rationalization recommendations at an
annual cost savings of more than 9000 U.S. dollars.
35. This is why Wal-Mart has such a strong cohesion of the reason.
36. PEST
37. Political factors
38. U.S

39. Economic factors


40. Social factors
41. Technological factors
42. Five Force Analysis
43. Industry rivalry
44. Threat of entry
45. Threat of substitutes
46. Threat of suppliers
47. Buyer power

48. SWOT results


49. Strengths
50. The philosophy of business and organisation culture - low price
every day.
51. Solid financial strength.
52. Gain advantages from its logistic management system.
53. A high degree of information technology applying for its entire
business.
54. Unbeatable cost advantages.
55. High quality of services.
56. Strong negotiation ability with suppliers to get lower purchasing
price.
57. High customer loyalty because of its low price policy.

58. Weaknesses
59. Wal-Mart is one international organisation; however its main
market is still within U.S, its oversea market share is not satisfactory,
for example, it encountered ALDI and Carrefour in Europe and
suffered big loss.
60. Although it acquired ASDA in UK and it seems the only success
in Europe market, ASDA still need to face a lot of other UK retailer
giants like Tesco and Sainsbury.
61. The history of oversea development is quite short.
62. Wal-Mart only covers a few countries in the world.
63. Opportunities
64. Oversea market is still the priority consideration for Wal-Mart,
like China (get more area coverage), East Europe, and South Africa.
65. If Wal-Mart can understand the characteristics of government
regulars and market running situation of potential market, it would be
helpful for Wal-Mart to enter new market.

66. Threats
67. All industries suffered from the financial criss and recession.
68. Wal-Mart is the No.1 Retailer in the world, which means all
other retailers are its competitors.
69. Wal-Mart's leading position would force other retailers form
alliances, which would make Wal-Mart new threatening rivals.
70. Wal-Mart encountered more and more critics concerning its
squeezing employees and suppliers

Weakness

1. Since Wal-Mart sell products across many sectors (such as


clothing, food, or stationary), it may not have the flexibility of
some of its more focused competitors.

2. Like Wal-Mart is facing competition in North America with


stores such as Kmart and target. Several smaller retailers,
primarily dollar stores, such as Family Dollar and Dollar
General, have been able to find a small niche market and
compete successfully against Wal-Mart for home consumer
sales.

3. Wal-Mart is the Worlds largest grocery retailer and control of


its empire, despite its IT advantages, could leave it weak in
some areas due to the huge span of control.

Opportunities
1. To take over, merge with, or form strategic alliances with other
global retailers, focusing on specific markets. Example
bharti-walmart in India.

2. The stores are currently only trade in a relatively small number


of countries. Therefore there are tremendous opportunities for
future business in expanding consumer markets.

Threats

1. Being number one means that you are the target of


competition, locally and globally.

2. Being a global retailer means that you are exposed to political


problems in the countries that you operate in.

3 .
intaining its promise to customers of everyday low prices, Wal-Mart has
injured many of its

4. competitors. A new
Wal-Mart SuperCenter
opens up about every
38 hours (McNally,
2005). Although
5. Wal-Mart, like any
other firm,
experiences problems
and challenges in the
workforce, it continues
to
6. thrive because they
learn from their
experiences and
change or adapt
accordingly. Wal-Mart,
in 1962, opened its
first
7. Wal-Mart Discount
City and now it sells
more toys than Toys
R Us, more clothes
than the Gap and
Limited, and
8. more food than
Kroger and a few other
supermarkets
combined (Upbin,
2004). If Wal-Mart was
its own economy, it
th
9. would rank 30 right
next to Saudi Arabia
while growing at the
rate of about 11%
each year. The Wal-
Martization
10. of the world is
bringing about good
and bad changes to
commerce around the
globe. Wal-Mart is
expected to be the
11. first trillion dollar
retailer in the world.

12.
13.U
1 4 .
With annual sales of about $300 billion, around 68% of the sales come
from Wal-Mart Stores, 19% from its

15. international
operations, and 13%
from its Sams Club.
Wal-Marts annual
profits are about $10
billion and they have
16. a market value of
over $250 with assets
worth over $105
billion. As of April
2005, in addition to its
approximately
17. 4,000 stores in the
United States, Wal-
Mart had over 815
stores in Mexico, 393
stores in Japan, 322
stores in United
18. Kingdom, 278
stores in Canada, 85
stores in Germany, 54
in Puerto Rico, 60 in
China, 293 in Brazil, 16
in South
19. Korea, and 12
stores in Argentina
while expanding into
these countries on a
continuous basis.
Currently, it employs
20. over one million
people in the United
States and nearly half
a million individuals
internationally; it is the
largest
21. private employer
worldwide.
Furthermore, it ranked
th
10 on Forbes Leading
2000 Companies in the
World based on
22. composite scores
for sales, profits,
assets, and overall
market value. As a
matter-of-fact, Wal-
Mart ranked first in
sales,
23. ranked sixth in
total market value, and
they ranked eight in
overall profits through
Forbes ranking of
Worlds 2000
24. Leading
Companies in Forbes
April 12, 2004 issue.
25.
26. To capitalize on the
global opportunities,
Wal-Marts
international division
will need to take action
on several
27. different fronts,
ranging from
enhancing its global
procurement
capabilities to entering
new countries. Despite
the
28. challenges, Wal-
Mart will undoubtedly
emerge as a truly
global retailer. That
should mean leading
market positions in
29. Europe, Japan, and
emerging markets -
places where Wal-
Marts presence is
limited today.
Competitors and
suppliers
30. around the world
will need to prepare to
compete in markets
that will be shaken and
remade by Wal-Marts
global
31. expansion (Wal-
Mart International: The
Challenge Abroad,
2006)
Walmarts SWOT analysis gives insights on the internal and external
forces significant in the companys strategy development in the retail
industry. While these factors vary over time, Walmarts growth depends
on the firms ability to capitalize on its strengths. Also, in spite of the
companys weaknesses, its strengths are far more significant
considerations. Walmart can use these strengths to exploit its
opportunities in the retail market. The firm can also use its strengths to
counteract the threats to its business. These are important factors in
ensuring Walmarts continued leadership as the biggest retailer in the
world.

This SWOT analysis of Walmart shows that the company can


have higher long-term success potential through aggressive
global expansion, especially in retail markets in developing
countries.

Walmarts Strengths (Internal Forces)


In this part of the SWOT analysis, Walmarts strengths are all related to
the size of its business. These strengths enable the company to
withstand threats despite its weaknesses. Walmarts strengths for further
global growth are:

1. Global organizational size


2. Global supply chain
3. High efficiency of supply chain
Walmarts global organizational size gives the firm deep pockets to fund
growth and expansion. The global supply chain also provides business
resilience from market-specific risks. In addition, Walmarts supply chain
has high efficiency because of advanced technologies for monitoring and
controlling the movement of products from suppliers to its stores.

Walmarts Weaknesses (Internal Forces)


Walmarts weaknesses impose challenges on the firms ability to
withstand threats also identified in this SWOT analysis. These
weaknesses are directly related to the companys generic
strategy. Walmart uses the cost leadership generic strategy,
which leads to the following weaknesses:
1. Thin profit margins
2. Easily copied business model
Thin profit margins are a typical effect of using the cost leadership
strategy. Because Walmart minimizes selling prices, it also needs to
minimize profit margins and rely more on sales volume. The cost
leadership strategy also makes Walmarts business model easy to copy.
The firm does not have significant competitive differentiators, except for
its business size.

Opportunities for Walmart (External Forces)


Walmarts opportunities are mainly about expansion and improving
business practices. These opportunities are linked to the global
economic situation. Also, the human resources situation in the
organization presents issues that are actually opportunities for the firm to
improve. In this portion of the SWOT analysis, Walmarts opportunities
are:

1. Expansion in developing countries


2. Improvement in human resource practices
3. Improvement in quality standards
Walmarts opportunity to expand in developing countries is based on
their high-growth economic condition. On the other hand, the
opportunities on HR practices directly relate to the criticisms on the
companys employment practices. Walmarts opportunity to improve
quality standards addresses consumers concerns on the health effects
of using low-cost and sometimes low-quality products.
Threats Facing Walmart (External Forces)
The threats to Walmarts business are linked to the retail market
condition and the changes on consumer perceptions about the products
they buy. These factors should compel the company to make some
competitive strategic changes. In the context of this SWOT analysis, the
threats to Walmart are:

1. Aggressive competition
2. Healthy lifestyle trend
3. Small-scale/individual online selling
The healthy lifestyle trend is a threat and an opportunity. It threatens
Walmarts business because many of the companys goods are not
healthful, organic or natural. It is an opportunity for Walmart to improve
its quality standards. However, this factor is more of a threat because the
firm currently does not prioritize healthful products in its stores.
Aggressive competition is a threat because other large retailers could
use aggressive marketing and strategies to capture some of Walmarts
customers. Small-scale or individual online selling is a threat against the
companys retail business. Because of the Internet, small sellers or
individuals can bypass Walmart and use their own websites to sell
products to online consumers.

Recommendations based on Walmarts


SWOT Analysis
This SWOT analysis shows that Walmart must prioritize using its
strengths to exploit opportunities in the global retail market. The
companys weaknesses and threats should be secondary
priorities. Walmart can improve its HR management standards and
product quality standards to improve firm performance. Also, the
company must continue expanding its business to exploit economic
opportunities in developing markets. Walmarts strengths based on its
global organizational size, global supply chain, and high efficiency of the
supply chain can support aggressive global expansion in foreign
markets.