Analysis Project: A Strategic Analysis of Walmart (Case Study Sample)
The goal of this project is to analyze a Global 500 organization and offer your own recommendations regarding how it might improve its competitive advantage. This is an individual project and constitutes 25% of the final grade in the course. The final report should be 4-5 pages (double-spaced) and follow the guidelines below.
Introduction (about 1 page)
SWOT Analysis (about 2 pages) at least four recourses
Competitive Advantage (about 1 page)
A Strategic Analysis of Walmart
A Strategic Analysis of Walmart
Walmart is a retail organization headquartered in Bentonville, Arkansas, which operates a chain of grocery stores, discount department stores, and hypermarkets. In addition to being the biggest retailer globally, Walmart is also the largest company (“Wal-Mart Stores”, n.d). In fact, it posts revenues that exceed the second largest global retailer – Carrefour – by three times. The story of the company started in the early 1960s. The founders decided to focus their expansion on small towns. Additionally, they developed the “good concept” strategy, which entails offering clients a wide range of products at a discount (“Wal-Mart Stores”, n.d). In order to keep product prices low, the founders insisted on increasing the volumes of sales. The company started trading on the NYSE in 1972 as a family-owned business and continues to be under the control of the Walton Family.
From the humble beginnings, the company has continued to grow exponentially. Today, the firm has 11,695 stores in twenty-eight countries globally. Each week, the company serves more than two hundred and sixty million customers. Over the recent past, it has adopted an online selling strategy that has led to the implementation of an e-commerce website serving clients in eleven countries (“About Us,” n.d.). In the 2017 financial year, the company realized an impressive revenue of $485.9 billion, which represents a 3.1% increase compared to 2016 (“Full year results”, n.d.). More importantly, for forty-four years, the firm has continually increased the dividend earnings. The investment in e-commerce is one of the factors that have contributed to the exemplary financial performance. A SWOT analysis of the company illustrates the areas that the firm needs to focus on to enhance the growth even further.
The main strength that the company has is the effective adoption of the cost-effective leadership. From its inception, the founders developed a strategic plan that entailed providing the lowest prices to a large number of customers (“Wal-Mart Stores”, n.d). According to Ferguson (2017), Walmart is still known for its low prices compared to its rivals in the market. Due to this low-cost strategy, the company has been able to realize the biggest revenues in the world – 485.9 billion (“About Us,” n.d.). Additionally, the firm serves more than 260 million clients in a week. The cost-leadership strategy is made possible through effective economies of scale and optimal capacity and asset utilization. A second strength is the broad domestic and international presence, which enhances broad recognition and allows the firm to access a large customer base. In the U.S., and other parts of the world, Walmart is well-known and, as a result, tends to attract clients easily. Lastly, the firm has started to venture into e-commerce as a way of enhancing its profitability. According to Thomas (2018), the company hopes to increase its online sales by 40% in 2019. Besides reaching a wider audience, the online strategy is likely to enhance the competitive advantage of the firm.
To start with, the company has been experiencing labor-related issues, both in the U.S. and overseas markets. Since the firm relies on the cost-leadership strategy, it has attempted to lower the cost of labor, which results in adverse consequences. According to Abrams (2017), the company was accused of routinely denying to accept doctor’s notes and penalizing workers who take leave to offer care to sick members of their families. In addition, over one thousand employees accused the firm of violating worker-protection laws. For years, the company has been against the unionization of its workforce (Abrams, 2017). In fact, the firm has been facing a myriad of labor-related issues. Because of poor pay, Walmart has also been experiencing high levels of employee turnovers. The worker-related issues have an adverse effect on the organization. Apart from tainting the firm’s image and reputation, the issues are costly. Furthermore, they inhibit the company’s ability to attract the best talent. A second weakness is the reliance on the domestic market for profitability. According to Kalogeropoulos (2017), the American market accounts for 64% of the firm’s revenues. The reliance on one market makes the organization highly vulnerable as poor economic outcomes in that market would affect its financial performance adversely. Overall, the company’s performance in the international markets has not been as impressive.
One of the opportunities is to continue venturing into emerging markets. Today, Walmart has covered most places in the American market. Additionally, the competitive rivalry in the U.S. is high due to the presence of companies such as Costco, Home Depot, and Target. On the other hand, emerging markets, such as India, Brazil, China, and Russia, have been experiencing exemplary economic progress accompanied by a growing middle class. According to Halepete, Seshadri, and Chul (2008), India is one of the countries with a high potential for retail success. However, before venturing into a new market, it is important for the organization to develop and implement strategies that would enhance the possibility of profitability. Secondly, the company should explore the prospect of creating strategic alliances with other retailers, especially in the overseas markets. The advantage of doing this is that it lets the organization understand the foreign markets better and realize superior financial performance. The partnerships can also help reduce the risks associated with entering into a new market. A third opportunity is to increase its online marketing initiatives through e-commerce. Over the recent past, the number of people accessing the Internet has increased. Additionally, it is less costly to deliver value through online means.
The biggest threat facing Walmart is competition. In the U.S., one of its rivals is the Target Corp, which implements similar strategies to Walmart. Similarly, in other international markets, the company faces stiff competition from local players that understand the customers and the industry better. As Walmart ventures into e-commerce, it has had to face competition from companies such as Amazon, which sell products to clients solely through the Internet (Nusca, 2017). In comparison, Amazon has a better understanding of the e-commerce terrain and has already established its brand name. A second threat relates to the regulatory and legal environment in which the company has to operate, especially in the international markets. Because of protectionism, some countries have enacted laws that impede the penetration of foreign firms.
1. Cost-effective leadership
2. Wide domestic and international presence
1. Labor-related issues
2. Over-reliance on the American market
1. Increasing activities in the emerging markets
2. Forming strategic partnerships
3. Enhancing e-commerce
2. Legal and regulatory issues in foreign markets
The first recommendation is for the company to improve its human resource practices. Poor pay, lawsuits, and high turnovers are some of the weaknesses identified in the SWOT analysis. Ideally, the human resource department should be strategic in that it should support the overall goal of cost-leadership. However, this does not necessarily mean that the employees should be underpaid. To remedy the situation, Walmart needs to institutionalize employment security by hiring workers on a permanent basis. Secondly, it should implement selective hiring, which entails h...
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