Walmart's Competitive Advantage including SWOT and VRIO Analysis (Research Paper Sample)

Group 1STMT-500Walmart’s Competitive Advantage Word Count: 2,059July 29, 2023Dr. Bernie Williams Case Study:Walmart, Inc. in 2018:The World’s Biggest Retailer Faces New Challenges Group Members:Jose Baires Stephan Germaine Ying Kong Abbi Langedahl Anna Lilley John Murphy Hazel Navarroza Colby Orchard Johanna Stauffer Korri Thomas Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc141518438 \h 3Performance Evaluation PAGEREF _Toc141518439 \h 3Identifying Competitive Advantage PAGEREF _Toc141518440 \h 3Purchasing Power PAGEREF _Toc141518441 \h 3Distribution and Warehousing PAGEREF _Toc141518442 \h 4In-Store Operations PAGEREF _Toc141518443 \h 4IT Function PAGEREF _Toc141518444 \h 4Marketing Function PAGEREF _Toc141518445 \h 5Human Resource Management and Organizational Function PAGEREF _Toc141518446 \h 5Sustainability of Competitive Advantage PAGEREF _Toc141518447 \h 5Challenges and Measures PAGEREF _Toc141518448 \h 6Current Challenges PAGEREF _Toc141518449 \h 6Sustaining Performance and Defending Against Threats PAGEREF _Toc141518450 \h 6E-Commerce PAGEREF _Toc141518451 \h 6Customer Experience PAGEREF _Toc141518452 \h 7Innovation and Adaptation PAGEREF _Toc141518453 \h 7Sustainable Practices PAGEREF _Toc141518454 \h 7Talent Management PAGEREF _Toc141518455 \h 8Conclusion PAGEREF _Toc141518456 \h 8References PAGEREF _Toc141518457 \h 10Appendix A: Quantitative SWOT Analysis PAGEREF _Toc141518458 \h 11Appendix B: VRIO Analysis PAGEREF _Toc141518459 \h 14 Introduction This paper embarks on a comprehensive analysis of Walmart's operational efficacy, illuminating the intricacies of its widely celebrated 'Everyday Low Prices' strategy. Leveraging the power of the SWOT analysis and VRIO framework, we dissect Walmart's strategic ability to sustain a competitive edge within a volatile and highly competitive retail environment. We scrutinize the issues encompassing Walmart's business practices and working conditions. Additionally, this study posits innovative strategic initiatives for Walmart to ensure resilience and sustained growth in an evolving retail landscape. The analysis yields valuable insights for stakeholders by evaluating Walmart's positioning and potential avenues for continued success. Performance Evaluation   Walmart's growth trajectory from 2005 to 2018 has been impressive, with net sales soaring from $285 billion to $495 billion and a gross margin increase of 10% (Grant, 2019). Competing across diverse market sectors, including grocery, clothing, electronics and infant supplies, its market presence is unrivalled. In the domestic market, Walmart increased its presence from 1,656 to 5,358 stores (Grant, 2019), a strategic move that has been fundamental in establishing its nationwide dominance. Parallel to this, its international footprint expanded from 1,587 to 6,360 stores (Grant, 2019), attesting to Walmart's adept navigation of diverse markets and cultures. These financial and geographical advancements have allowed Walmart to secure a 26% share of the US grocery market as of 2017. This exceeds America's next largest supermarket chain, which holds a mere 10%. Such dominance is not merely a result of strategic expansion or financial growth; it also rests on Walmart's customer-centric approach. By consistently offering low prices, Walmart cultivates trust in its brand, which is integral to its sustained success and competitive advantage. Identifying Competitive Advantage Purchasing Power Grant (2019) notes that Walmart's industry dominance and purchasing power make it sought after and feared by suppliers. Its superior negotiating power reduces suppliers' bargaining power significantly. Walmart vendors gain unfettered access to a vast customer base. However, this comes at a cost due to Walmart's relentless pursuit of "Everyday Low Prices," often leading to "razor-thin" margins for suppliers (Grant, 2019). Walmart leverages its reputation to maintain a strong negotiating position. Grant (2019) states that Walmart centralizes its purchasing activities and imposes purchase limits on suppliers, creating an imbalance of bargaining power in Walmart's favour. Furthermore, he notes that Walmart sets and enforces stringent controls through its 38-page Standards for Suppliers Manual.   Suppliers can access real-time sales and inventory data by leveraging technology like electronic data interchange and the "Retail Link" system, helping them align product offerings with local customer preferences (Grant, 2019). The "on-time in-full" initiative has augmented supplier collaboration, mandating the delivery of complete orders within a tight 1–2-day window or facing a 3% fine (Grant, 2019). Distribution and Warehousing Defying the 1960s belief that discount stores could not flourish in urban areas with populations of fewer than 100,000, Walmart developed a hub-and-spoke distribution center model (Grant, 2019). This model, which serves 75-110 stores within a 200-mile radius, has facilitated Walmart's rural expansion. Unlike competitors that depend on manufacturer shipping logistics, Walmart utilizes its truck fleet to transport 85% of its warehouse purchases, combining large drops with 60% backhaul capacity (Grant, 2019). Walmart's cutting-edge techniques in warehousing and distribution have pushed it to the forefront of global logistics. Strategies such as cross-docking, remixing, and radio frequency identification have improved operations speed and efficiency (Grant, 2019). Walmart manages all global procurement and import processes, with purchasing centers established in Shenzhen and Shanghai, two major manufacturing hubs (Grant, 2019). Moreover, Baytown, Texas, houses Walmart's importation and distribution hub, creating economies of scale and enhancing speed and efficiency against competitors (Grant, 2019). In-Store Operations The underpinnings of Walmart's in-store operational capabilities lie in its corporate structure and values, which place the customer first while delivering low prices and a broad selection of products. Grant (2019) argues that Walmart's decentralized management approach empowers store managers with freedom and responsibility for merchandise, encouraging flexibility and tailored attention to each store's needs. As a discount retailer, Walmart recognizes the importance of the customer experience. Aspects like convenient store hours, proactive employee-customer interaction, and brand expansion echo a corporate culture committed to prioritizing customers. IT Function Grant (2019) states that Walmart's integrated IT infrastructure and private satellite network, linking its inventory control and point-of-sale systems, enable the retailer to analyze 8.4 million updates per minute. Walmart's rapid, data-informed decision-making gives them a competitive edge. This adaptive inventory management process translates into efficiencies and store-specific changes, including layout revisions and product placements catering to customer needs and trends. Marketing Function According to Grant (2019), Walmart's marketing strategy is anchored on its "Everyday Low Prices" slogan, developed to support customer retention while minimizing advertising and promotional expenditures. This approach, combined with its emulation of customers’ values, large-scale presence, and expansive product range, has secured Walmart a dominant position in the retail industry. Human Resource Management and Organizational Function Walmart's Human Resources (HR) distinctiveness lies in its corporate culture and structure. To sustain its success, the firm ensures its associate training, career advancement, and incentive programs align with its commitment to customer satisfaction. Grant (2019) affirms that while employee compensation parallels other discount retailers, Walmart differentiates itself through superior benefits and opportunities. Despite numerous attempts, Walmart has successfully thwarted unionization, enabling it to retain control over its HR practices (Grant, 2019). The company's capabilities in creating customer value, maintaining flexibility, and motivating employees have positioned it as an employer of choice. Walmart's dual-pronged strategy—prioritizing people and offering low prices—has kept it ahead of competitors, fostering job security and boosting associate confidence (Grant, 2019). Sustainability of Competitive Advantage Within the fiercely contested discount retail sector, Walmart has expertly crafted resources and capabilities to preserve its competitive advantage, creating formidable barriers to entry for other retailers. Its unique and costly-to-imitate resources—ranging from distribution center operations, IT infrastructure, reputation, facilities, and partnerships to its cash flow—operate on a scale unmatched by most competitors. Walmart upholds its competitive advantage through strategic inventory management, customer value creation, bargaining power, innovation, and flexibility. This aligns with Grant's (2021) assertion that a firm's internal resources and capabilities provide a more secure basis for strategy in increasingly volatile industry environments. Leveraging its vast scale, Walmart competes in multiple markets, from groceries to electronics, operating in numerous international locations worldwide. Despite a rapidly transforming retail landscape fraught with challenges, Walmart's strategic utilization of its intrinsic strengths, ethical and sustainability advancements, and digital adaptation augur well for its continued success narrative. Challenges and Measures Current Challenges Walmart faces significant challenges in the competitive environment. Grant (2019) detailed that cost-cutting measures often result in low pay, substandard working conditions, and perceived employee exploitation. Changes in the company's management culture have potentially diluted the ethos that once distinguished Walmart. Moreover, suppliers must comply with str...