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Walmart – A Master Plan Analysis

Submitted to: Dr. John Tan

Paper# 4.720 Business Strategy and Change Management

Word count: 3506

Submitted by: -

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Executive summary

This report concentrates on the marketing strategies used by Walmart in the United States.
Walmart serves as a leading retailer and a multinational company focusing mainly on the cost
leadership strategy .This company emphasis majorly to provide a living standard to people at
lower cost and improved quality.

With the changing market conditions, Walmart has faced a step back, because of the new
competitive entrants like Amazon fresh. With the world moving towards the techno-savvy
culture , the e commerce business has become a must do to survive the existence in the
market dynamics Walmart have lost a huge market share which was grabbed by the
competitor Amazon fresh.

The below study investigated the various strategies of Walmart by using the PESTLE Analysis
and SWOT Matrix Analysis. Also the critical success factors and key driver are looked upon in
the study.

The result of SWOT Matrix Analysis derives that Walmart has a strong built brand image, cost
effective leadership and wide spread distribution channel and network which are the major
strengths of the company. While the decreasing hold over market share because of the lack
in e-commerce and the constant pressure over employees are the crucial weaknesses. To grab
on the market share and to put forward the foot, emphasis on e-commerce and providing
home brand are the opportunities to retain the position in the market. Herein the strong brand
image and cost effective leadership are the strengths to capitalize these opportunities,
whereas the wide distribution channels can overcome the weaknesses of the pressure on its
employees. The variety and intense competition and also the varied political problems hamper
the operations of the company and are the alarming threats. These could be overcome by
enhancing the strengths and minimizing the weaknesses.

The PESTLE analysis confirms that, Walmart has higher opportunities as compared to the
threats because of its brand image. Walmart has the potential to withstand the threats in
political aspects. Because of its strong presence majorly in the developed country the
economic factors are the success driving factors to overcome the competitions. The social
factor does hamper its operations as it increases the gap between rich and poor people of the
country. But the cost effectiveness withstands the situation. The advancement in technology
has a direct impact on the traditional business practices followed by Walmart. The
environmental factor is not a key influencing factor as far as e-commerce is concerned.

The major success factors for Walmart as per the study are its reputation, cost effectiveness
and huge product range.

Thus of the basis of these studies it can be recommended that Walmart could adapt proactive
approach to overcome the threats. However, Walmart can improvise its Human Resource
practices, investments in Technology and thus expand and retain its presence worldwide.
TABLE OF CONTENTS

1. Introduction
1.1 About the Company……………………………………………………………………………… 1
1.2 Strategic Purpose…………………………………………………………………………………. 2
1.3 Approach …………………………………………………………………………………………….. 2
2. Analysis
2.1 Reasons for this Situation…………………………………………………………………….. 3
2.2 PESTEL Analysis…………………………………………………………………………………….. 4
2.3 SWOT Matrix………………………………………………………………………………………… 7
2.4 Critical Success Factors…………………………………………………………………………. 10
2.5 Cost Management………………………………………………………………………………… 11
3. Conclusion & Recommendations………………………………………………………………… 12
4. References…………………………………………………………………………………………………. 13
1. Introduction

1.1. About the company

Walmart is a very well-known American Multinational Retail Corporation which was


founded in 1962 and was incorporated in October 1969. Walmart was founded by Mr. Sam
Walton and is still controlled & managed by Walton Family. The first Walmart store was
opened by Mr. Sam Walton in Rogers, Arkansas. The company’s first public trading was in
1972 which recorded sales of $78 million from just 51 stores. The company is one of the
largest retailers in the world with its presence in 28 countries operates with 116,00 retail
outlets under 59 banners. Walmart started as a small store with the simple idea of selling
more for less which was a very unique way to approach the customers. Also, the company
grew so rapidly due to continuous adaption of latest technology and resources and
currently available in 11 countries through e-commerce websites. It has given employment
opportunities to 2.3million associates across the world. The customer service at Walmart
is one of the key success areas. Walmart has one of the largest distribution channels with
150+ distribution centres which are considered to be the business hub for all business
activities, which also includes servicing and delivery to customers directly. Walmart
transportation has a fleet of 6100 Tractors and 61000 trailers with 7800+ drivers. This top
company is known for making more business than its competitors like Home depot, K-Mart
and many more. (Riunet.upv.es, 2017) Walmart till recently had no presence in e-
commerce that is when companies like Amazon Go started to impact the business. When
Amazon declared to enter the retail change through grocery market there was a direct
impact on Walmart shares by -4.49%. (Corporate.walmart.com, 2017)

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1.2 Strategic Purpose

The purpose in this case is to identify what would have went wrong or how it could have
been managed with E-commerce coming into retail market segment. Walmart being
world’s largest grocery sellers with generating over $300 billion on yearly basis recorded
$170billion last year clearly indicating the impact of E-commerce. It is very important to
identify the failures and the success of the company in order to recommend improvising
on this situation. The new executions shall be looked upon. (Toptal Finance Blog, 2017)

1.3 Approach

The approach that is used for this report are PESTEL analysis to identify the macro-
environmental factors and the key drivers that affect this retail giant. The step that
Walmart has taken to establish itself in E-commerce market will be looked at specially.The
key drivers will help understand the future implications. A SWOT Matrix has been used to
identify the weakness and strengths of Walmart. We have made a very effective use of
Critical success factors also, which are important for Walmart to get back to its top position
of the world retail Giant along with its sales margins.

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2.0 Analysis

2.1 Reason for this Situation

Walmart is one of the largest retailers in the US and was largest company by revenue at its
peak. Over the years they have changed the way a person shops. Walmart has been very
successful as they provide products to consumers at a very low cost with wide variety of
options and stores at convenient locations. However, since the last few years they have been
facing major threat in the retail business through Amazon, who has become the biggest
retailer by market value. With success in their online venture, Amazon forayed into groceries
by launching Amazon Fresh in 2007 (Amazon, n.d.).

Traditionally customers rely on physical stores for look and feel of the products however due
to technology advancement especially advancement of handheld devices, customers have
started relying on online shopping to research about a products and getting it delivered at the
comfort of their home. Amazon offers convenience of online shopping and many products for
the customers to choose from.

In the last few years both Walmart and Amazon Fresh offer one stop shopping experience to
the customers, whether by the product being available on the shelf to pick up from or order
online and get it delivered. Both the companies believe in providing the products to the
customers at lower costs. Walmart and Amazon Fresh compete in similar ways however
Walmart has more operations costs due to physical stores. Amazon Fresh being an online
merchandiser saves on these costs.

Walmart already facing tough competition due to market dynamics, now poses a major threat
in grocery business by Amazon Fresh. The biggest reason of this threat is the lacking of
Walmart in its technological capabilities & its image as traditional grocer rather than an online
company. Amazon being an e-commerce company has very advanced IT systems and has vast
presence in global online market. As per a data in 2015, Walmart is the second largest online
seller in the US after Amazon (Forbes, n.d.).

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2.2 PESTEL Analysis

There are various methods through which we can identify the situation of the company
however the most accurate method is preferred by the marketers is PESTEL Analysis.
PESTEL Analysis helps to understand the external factors that affect the company and also
the analysis is done at MACRO level. This very efficiently helps to identify the threats &
weakness of the business. Here we shall focus on the E-commerce business of Walmart
which needs attention and analysis.

Political Factors: -There are several political factors that can impact the business directly
like government policies, shift in legislation, shifts in regulatory to name a few. Walmart
has its own significance in the US economy because of its massive size and presence across
US. Walmart has always been attempting to achieve positive political impact by different
ways and means. The political stability so far has benefited Walmart to a great extent like
opportunity to expand its business in developed countries. Although the launch of Amazon
fresh affected the business of Walmart however the overall support from government also
has helped Walmart evolve in E-commerce. Along with this expansion Walmart is also
experiencing many threats of competition like governmental support of Asian online firms,
Amazon Fresh and many other retail firms which are already ready expand. The major
government support which is needed here is to provide better business conditions in order
to fight cybercrime. This part of PESTEL also shows how Walmart can explore its capacity
to access and reach macro territories in E-commerce industry.

Economic Factors: -The economic situation will have a direct impact on Walmart’s
performance where it operates its e-commerce business. The changes that take place in
macro situations that affect the economic changes are analyzed in PESTEL analysis. In this
case of Walmart there are few external factors of economy which are to be considered.
The biggest opportunity is the economic stability of the markets which are developed, as
the disposal of income is increasing in these developed countries. The chances of success
increase for Walmart’s E-commerce business in most developed countries with economic
stability. Big markets like Chinese market also have a potential threat to Walmart’s e-
business due to economic recession, as china is a big market where a company like Walmart
can penetrate its business. So, Walmart needs a strategy to be implemented in order to

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encash the opportunities available in developed countries that is what could be analyzed
as per PESTEL.

Social Factors: - Walmart being the biggest retailers in the world there is a social pressure
on its e-commerce business to quite an extent. This aspect of PESTEL should help in
analyzing the social & cultural factors affecting the Walmart e-business. Like mentioned
earlier the markets with developed countries which has higher disposal of income is more
favourable in the business of e-commerce however it also poses a threat of increasing gaps
between the rich and poor in many countries. Also, where the income disposal is stagnant
it will be difficult to reach people at macro level in e-business. Social factors are key factors
which will help Walmart to achieve top position in e-commerce as well. The increase in
incomes of the people definitely increases the affordability also with increase in demand
for a comfort. Walmart has a big benefit of its brand image which means the social
acceptance will be rapid in people compared to any new e-commerce brand.

Technology Factors: - Technological factors have a huge impact on the e-commerce


business. With the increase in competition of online availability of brands and products it
is important to be innovative and be influential. The advancement of technology will have
a direct impact on e-business of Walmart as the company needs to continuously
develop/upgraded its technological assets, if the company fails to do so at any point in time
this can turn into the biggest threat for Walmart e-business. What can work here as a
competitive advantage for the company is continued heavy investment in the technology
which can help optimizing business rapidly. There is a lot of scope for improvement for the
company right now by increasing its IT efficiency. However, threats like cyber-crime can
always affect the integrity of the company and the customer’s faith. Thus, it needs to be
ensured that there is a significant investment in technology which is long term and can
keep the customer interface safe and intact. The company will always have to be in a
continuous process or pressure to develop its technology up to date and even plan for
future.

Environmental Factors: -Although the environmental factors will only affect the retail
business of Walmart and probably will not have much negative impact on E-business, it still

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is an important factor to be considered as its operations are subject to natural conditions.
Walmart E-business has an opportunity to create environmental awareness by developing
interest of its customers or people into environmental activities. Walmart has an
opportunity to start developing social corporate responsibility by developing itself as one
of the leading E-commerce organizations. The increasingly popularity for low- carbon
lifestyles also provides Walmart an opportunity to enhance company’s corporate image.

Legal Factors: - It is certainly very important for any company to adhere to the legal
requirements. The effects of legalities and regulations are looked at in this aspect of
analysis. The biggest opportunity for Walmart is the relaxation on the import- export
regulations increasing an opportunity to enhance its supply and export chains in many
markets across the world. The increase in regulations for product disposal over the counter
also can work as opportunity for Walmart’s e-business. The company and further
strengthen its brand image by contributing to environmental regulations. The company
needs to ensure that there is no loophole or miss in terms of adhering to the legal
requirements.

Key Recommendations basis PESTEL Analysis: -

Walmart has maintained stability in its retail business in spite of E-commerce


advancements approaching the market. In fact, rather than following the old school
formula Walmart went ahead and established itself in E-commerce business as well in spite
of huge competition from company’s like Amazon Fresh affecting the US retail chains to a
great extent. We shall want to recommend company to expand its e-commerce business in
developing countries like it has developed its own retail chains. We have also identified
Critical issues and threats through this PESTEL analysis. Also, the company is recommended
to ensure the IT security and constant development of its technology in order to reach Top
position in e-commerce business. Encouraging people towards environment conservation
have a great positive impact on the brand image of the company.

2.3 SWOT Analysis

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SWOT analysis equips a generic picture of the company’s strengths and weaknesses with the
inspection on the strategic capabilities and also the opportunities and the threats. The SWOT
matrix can be fabricated from company to company in a way where all the strengths and
weaknesses can be tied together and strengths are identified which capitalizes on the
opportunity and dilute on the weaknesses and threats. (Johnson, Whittington, Scholes,
Angwin, Regner, 2014)

Strengths:

Walmart has been successful in developing its bank of loyal customers and set a wide
employee base all over. They were able to make this possible by the virtue of few things like
best competitive pricing for their goods, highly satisfied customer services, expansions. Mainly
they stand different very successfully because of their largest scale of operations domestically
and internationally. Today Walmart is the largest super market chain around the globe
generating 484 billion, it makes them to become a strong player to procure the commodities
at its best price in the market. This in turn benefits Walmart and its consumer. Competitive
information technology and systems which erases the errors of missing the orders, maintain
the inventory levels efficiently which benefited the organization. By this way they have
mastered in the management of supply chain and logistics. Walmart’s varieties of product
range make them leaders in setting the competitive market price in various sector and
categories, both branded and home brand.

Leadership in pricing strategy is the other strength which is noticed in Walmart. Walmart has
been successful because of their biggest operations to grab the title of low cost leader in retail
market globally. Company provides their products the lowest price possible to its customer.

Weaknesses:

One of the biggest weaknesses of Walmart is the labour related lawsuits. It has seen that
company spends millions of dollars every year on this. This is because of poor management of
human recourse and poor work culture. Most of the employees are less paid and are on
temporary basis. These employees are paid less due to which they have high employee
turnover rate. This results them in spending more money in hiring low skilled employee and

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training these employee costs them more. However in recent news it was stated that Walmart
has increased their wages for half a million employee.

Other weaknesses which Walmart has are Negative Publicity due to false practices like bribery,
Very high inventory, hateredness of local community and Some products fall in to poor quality
category. Few years ago Walmart was not present in E Commerce which resulted them to lose
their market share, which was captured by Amazon.

Opportunities:

Walmart can grab the growth by expanding its chain more in to retail market which seems to
be emerging now days. These will lead their economic growth and more revenue generation.
They should specially concentrate more on expansion in to international markets globally.

It has been seen that consumer are more in buying and preferring the home brands as it is
with Countdown in New Zealand. Walmart should turn more and more products in to home
brand and sell them. This will fetch them growth in revenue. They can also compete and
develop the trend of healthy eating. Consumers are now towards shopping the healthy food.
This can turn Walmart to a new image and attract customers.

Amazon has proved and made world go crazy about the online shopping. This way of shopping
has impacted the industry. This again is the opportunity for Walmart to become strong in E
Commerce and utilize their largest network and presence in most of the places. Through this
they can offer lower rates for their customers trough online orders procurement. Online order
procurement lowers the cost to company. Therefore company can attain growth in its
revenue.

Other opportunities can be explored by merging with big retail organizations to enter in to the
new market and new segments like travel, health, insurance, sports etc. Walmart should take
over the smaller competitors and build the organization bigger and stronger. They can utilize
these mergers to operate in many ways.

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Threats

One of the major threats to Walmart is their competitors. Companies like Costco, Amazon,
and Tesco are putting their efforts to compete with Walmart in terms of pricing. They almost
have achieved the pricing benefit which Walmart alone use to enjoy. They have successfully
erased the price differences in these markets.

Other than this Walmart has faced resistance increasingly from the local communities as it
was recorded that many of the small retailers was suffered and was closed when Walmart
opened and expanded in many areas in the country. This affected the small business
communities, their family and friends. It has resulted in the resistance for expansion locally by
the authorities. (Slideshare, n.d.)(i2.wp.com, n.d.)

STRENGHTS : WEAKNESSES :
Labor related lawsuits.
Loyal Customers base Local community’s resistance
Large scale operations Poor Work culture
Larger market share False practices
Pricing leadership Non presence in E commerce
Widest range of products More part time employee
Reduced product margin to compete

SWOT
OPPORTUNITIES : THREATS :
International expansion Competitors
Mergers and takeovers Local communities and authorities
Use of own biggest chain for E commerce. Rising price of the commodities
Entry in to other segments through merger.

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2.4 Critical Success Factors

Critical Success Factors are those special features or the activities which are of importance to
a group of customers, therefore an organisation must excel in them so that they can
outperform the competition. (Johnson, Scholes, & Whittington, 2009) However different
customers value different features more or less than other features. It is very important for
organisations to see the value of products through the eyes of their target customers and
expand that segment. Customer’s values towards a brand may change over the years due to
changing technology and at times due to the features and activities which the competitors
provide.

Critical Success Factors are necessary for organizations to achieve their goals. Walmarts
focuses on profit maximization by selling products at low costs and get large volumes of sales.
They have many stores at locations which are convenient for shopping and cost effective for
the company. Walmarts critical success factors are Reputation, Low Costs, Locations of Stores,
Product Range, Large Sales Volume, Superior Logistics and Technology.

Although Walmart excels in all the other Critical Success Factors they need to work on their
technological capabilities and promote their customers for online shopping so they can face
the threat by Amazon Fresh. Walmart needs to come up with strategies to rebrand itself as
an online shopping solution. The following strategy canvas shows critical success factors of
Walmart vs Amazon Fresh

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2.5 Cost Management

Walmart smartly manage its cost by various methods and ways. These are as follows:

Efficiently Budgeting payroll: As in every organization Walmart is also utilizing the budget for
payroll. Mangers keep a track of the position of the budget planned by the company. It is
noted that payroll cost should be less than the planned budget for it.

Utilization of technology to decrease the utility cost: Walmart has utilized Solar systems to
decrease the cost of utility in their most of the plants in US. They also has utilized the computer
technology in such a way that managing and communication the data to every department
made them very efficient to cut down the cost to beneficial level. They have upgraded their
all the appliance to decrease the utility cost as much as possible. For instance new cooling
systems which uses less energy, new roof which allows more natural light in the area.

Cost cutting the travel expenses: Company has done their cost cutting from giving off the
luxury while travelling and staying during travel to different places on official tours. For
instance travelling in commercial class, staying on two-to-a-room basis, having their meals in
regular restaurants etc.

Bargain power: As mentioned earlier due to a large size of it chain and biggest customer base
Walmart automatically gets the bargaining power with the supplier. The make the deal at the
bottom price and for bulk purchases. Bulk purchases arein turn a good volume sales for
suppliers which they do not want to lose. So supplier becomes weak and make a deal.

Efficient management of supply, operations, inventories and distribution channels: Walmart


has become very efficient in managing their inventories such that they can trace their products
at every level which prevents them by bearing lose on inventory management. Also the outlets
they have opened are in outside the cities. This saves their distribution cost

(walmart-thekeytosuccess, n.d.) (winaungko, n.d.)

Conclusion & Recommendation

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The report evidently shows that Walmart has multiple success factors both internal and
external but still it is facing the foot back in market share because of the current trending by
the competition, Amazon fresh. There is a crucial need for Walmart to re-position itself. This
company has very strong image in the traditional market which should be reworked according
to ongoing trend. The strategic factor has the greatest impact on the company’s performance.
This study evaluates that Walmart possess futuristic orientation to overcome the threats
created by the competitor Amazon Fresh. Walmart has extensive strengths and opportunities
as compared to its threats and weaknesses. Ignoring the various criticism from the
communities, local store owners and labour unions, Walmart has grown substantially over a
period of time, with the strategic operations and practices. The success achieved by the
company is majorly because of the factors like customer service, its excellent ability to keep
low prise and the supply chain management.

However for the expansion and retention of the company it is recommended to re-modify the
strategic approach to sustain in the dynamic market. Also in focus on merging with ongoing
trends, it should not dilute the quality of the products. To sustain in today’s Techno Savvy
culture it is highly recommended to boost the investment in the Technology and e-commerce.
The company’s reputation is needed to be reinstated by social advancements to rebuild the
trust. Also, the company grows only with the happy employees. Thus a focused attention
should to pain on the human resources.

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