Walmart

Running head: WALMART 1

Walmart

Name

Institutional Affiliation

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Walmart

Introduction

Wal-Mart is an American global retail company that operates large discount warehouses

and superstores. In 1962, Sam Walton in collaboration with his brother Bud founded the

corporation in Bentonville, Arkansas (Harris & Strom, 2014). It started as a small store then

expanded to several retail outlets across the globe. Currently, Walmart represents one of the

world’s most valued corporations with annual sales of about $300 billion and employs

approximately 1.3 million workers internationally. Robert and Berg (2012) state that the

company owns more than 5000 stores worldwide with about 80% of them based in the United

States. Undeniably, Walmart has been experiencing a steady and incredible growth owing to its

innovative and revolutionary business strategy that emphasizes on efficient supply chain

management and significant costs cutting. It provides a wide range of products at relatively

lower prices compared to its competitors. Fundamentally, Walmart business model has

transformed retail and wholesale patterns as well as logistics in the transportation and

distribution of commodities in an effort to meet consumers’ demands.

Walmart’s Resources

The company has both tangible and intangible resources. Foremost, Walmart has heavily

invested in real estate. The corporation owns all of its structures and almost all of the adjacent

storefronts. Notably, this strategy is a departure from usual commercial practice since most of the

retailers lease their business buildings. The company buys and develops its new sites, renovates

old ones, and sells vacant structures. On the other hand, Walmart enjoys a wide range of

intangible resources. The company has a large group of experts in various sections ranging from

manufacturing to retailing. In 2014, the Wal-Mart Realty department comprised about 2,500

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accountants, asset managers, architects, attorneys, real estate professionals, financial analysts,

maintenance professionals, store planners, engineers, and refrigeration technicians (Pope &

Pope, 2015). The team handles lease or the purchase of new buildings, working jointly with

future tenants to establish a personalized facility. Additionally, the experienced and efficient

workforce helps the company to control a large retail chain. Importantly, the efficiency of the

company’s human resource has made it successful in entering new markets.

Walmart’s Core Competencies

A core competency refers to the task, which a firm excels. The company’s core

competencies distinguish it from its competitors since they are difficult to mimic. In this regard,

Walmart’s core competencies include company culture, low-cost operations, and distribution.

Firstly, company culture has been the primary factor behinds its success. Walmart’s workers are

efficient, hardworking, and process oriented. The administration encourages a culture that allows

employees to give their ideas and inputs towards transforming their company. In this way,

employees feel appreciated and satisfied with their work thus leading to higher outputs.

Secondly, low-cost operations have been a key core competency in the success of the corporation

in acquiring new markets. For example, during the recession period, the company concentrated

on small cities and lower overheads (Harris & Strom, 2014). Indeed, consumers started looking

for cheaper products and moved to small towns as the economy worsened. In return, Walmart

gained significantly, and the same strategy helps it in entering new markets today. Lastly,

effective distribution strategy has also been a significant core competency. Walmart operates an

unrivaled worldwide network of 146 distribution channels, which enable fast deliveries thus

reducing lead-time (Christopher, 2016). In fact, with trickle-down distribution effect, the trucks

do not have to travel for long distances to make deliveries.

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Walmart’s Capabilities

Walmart embraces technology in its activities. The use of technology has acted as a

propelling force towards creating new opportunities and improving customers’ service.

According to Christopher (2016), firms that compete effectively need to have effective strategies,

which respond promptly to consumers’ complaints, guarantee just in time deliveries, and

production of products that meet consumers’ tastes and preferences. Fortunately, Walmart has

succeeded in producing products of high quality as well as embracing evolving consumers’

needs. Indeed, Walmart imitates a more fundamental corporate strategy based on the slogan

“capabilities-based competition.” This strategy helps the corporation to deliver high-quality

products and promote e-commerce practice, including enhancing technology and physical

distribution channels (Pope & Pope, 2015). The company’s capability to replenish its inventory

has been the key towards attaining these goals.

Walmart’s Value Chain

Walmart’s core competencies, capabilities, and available resources help in maintaining a

sustainable and feasible value chain. The basic company’s value chain focuses on three primary

aspects, including procurement and distribution, logistics management, and inventory

management (Christopher, 2016). Firstly, the corporation emphasizes on the procurement and

distribution policies, which reduce costs. The company can bypass intermediaries in its

distribution since it has the required resources to serve its customers’ needs. Indeed, it has

created a core competency by embracing first mover strategy in retail and distribution divisions

thus creating a competitive edge against its rivals. In addition, the use of multifaceted barcode

technology has made managing of the stores easier and more economical.

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On the other hand, the company’s resources have played a vital role in logistics

management. According to Bonanno and Goetz (2012), approximately 3500 trucks service

Walmart’s distribution system. These trucks assist in shipping of the products from the

distribution centers to stores within a short period. Walmart makes use of cross-docking logistics

technique in which employees sort out the finished goods, and then directly transport them to

various outlets. Finally, the company has heavily invested in information technology and

communication devices to track sales efficiently and merchandise inventories in various outlets

across the globe. Workers at Walmart have hand-held gadgets, which are connected to the shop

terminals through a wireless frequency system. This use of technology allows store

replenishment and order management to be executed by the computers using the point-of-sales

(POS) system. Irrefutably, the company’s core competencies, sufficient resources, and

capabilities help to strengthen its value chain in all the three phases.

Two Primary General Environment Segments and their Influence

Environmental factors play a critical role towards the success of every company. The

political, economic, technological, and social settings influence Walmart’s operations. Arguably,

the two major environmental segments, including political and social factors significantly affect

activities of the corporation.

Population Composition of the Market (Social Factor)

The United States demographics show that the majority are whites accounting for

approximately 72.4%, followed by African/black Americans (12.6%), Asians (4.8%) and others

(Schuetz, 2015). Therefore, the American consumption pattern differs considerably and thus it is

very demanding. In this regard, the increasing supremacy and activism of consumers necessitate

the retail stores to be in an unceasing contact with them. Finished goods launched must be

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customer-centric and fashionable in order to establish an engagement with the consumers.

Currently, the profiles of the customers are changing, and they have started making deliberated

choices based on their lifestyle desires and their alacrity to take part in environmental

conservation. Therefore, these changes have adverse effects on the Walmart’s operations since it

has to conduct market research on the new consumers’ tastes and preferences. Indeed, although

the company has invested heavily in the ecosystem, the population is beginning to develop some

concerns regarding the environmental problems. Walmart has no other alternative apart from

integrating these concerns in their goods and services. Unfortunately, consumers’ perceptions

differ with the locality thus posing a significant challenge for Walmart to manage its stores

across the globe.

Political and Legal Factors

The US is a federal constitutional nation in which the president is the head of both the

state and the government. The judiciary and the Congress share supremacies with the national

government while the federal government shares authority with the state government. In this

regard, Walmart’s administration is well conversant with the US political system such that the

business in America is flourishing. However, there are some significant disparities between the

American political system and the rest of both developing and developed nations. In some of the

countries, the legislature or the Supreme Court has the broader scope of supremacy (Bonanno &

Goetz, 2012). Therefore, Walmart faces various challenges entering new markets owing to these

political and legal restrictions. Indeed, in some nations especially in Asia, the company has been

forced to collaborate with renowned local retailers for it to enter the market. Unfortunately, such

factors are beyond the control of the company thus posing a great risk to its operations outside

the United States.

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Two Main Porter’s Forces of Competition Significant to Walmart

The five Porter’s forces of competition remain indispensable in the operations of the

Walmart. The significance of every factor depends on prevailing circumstances and locality. The

two Porter’s forces of competition, which are substantially significant to Walmart Company,

include the threat of substitute services and goods and competitive rivalry within the industry.

Competitive Rivalry within the Industry

Walmart faces both direct and indirect competition in the industry. Foremost, direct

competition comprises the giant retailer chains, which compete directly with Wal-Mart.

Companies such as Kroger, Target, Walgreen, Costco, and CVS Caremark are the leading

Walmart direct competitors since they provide a similar variety of goods. Target and Kroger only

operate in United States territory while the rest own stores in overseas nations (Schuetz, 2015).

Wal-Mart has previously focused on their competency abroad to lessen the competition. Indeed,

it charges low prices than their competitors to command significant market share. Nevertheless,

Target Company concentrates on delivery of discounted high-quality commodities with a wider

product variety compared to Wal-Mart thus posing a competitive threat. The second type of

competition includes indirect competitors. It transpires when a new distribution corporation

opens stores to serve a sizeable affluent customer base. In addition, vending machines are

gaining popularity in the US. The goods sold in these devices include snacks, drinks, coffee,

candies, and sandwiches. Notably, the competitive rivalry within the industry is intense and thus

Wal-Mart needs to implement viable strategies to maintain its supremacy.

Threat of Substitute Products and Services

Wal-Mart presently faces a cluster of physical big and small retail stores. Additionally,

they are other retailers, which compete aggressively against Wal-Mart principally by specializing

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in particular products or marketing their goods globally through the Internet (Bonanno & Goetz,

2012). There is also a tendency in which some retailers deal in a wide range of services and

goods rather than specializing in one line of products. As a result, the products offered by one

store are more likely to be found in another. Although Walmart focuses on providing unique

products to its customers, the availability of substitute goods poses a significant challenge in the

market, especially new markets. Furthermore, with the changing consumption patterns, many

consumers are tempted to test new products offered in the market thus reducing their loyalty to

already established companies such as Walmart.

Significant Strategies to Address the Two Forces

Walmart should formulate and implement strategies, which ensure low threat of

substitute products and competitive rivalry. Foremost, the corporation needs to integrate a

differentiation policy, which guarantees uniqueness of the products produced. In this way, every

market segment will be severed better since differentiation would be centered on the needs of

different marketplaces. Additionally, Walmart should implement a strategy that caters for

switching costs to avoid extra or unforeseen expenses, which would interfere with the company’s

low price policy (Christopher, 2016). Importantly, the company needs to expand its lines of

production and sales to serve all needs of their clients. Consumers prefer to shop under one roof

for all their needs thus providing a wide range of commodities attract more customers. The

company could enhance its competitive edge by engaging in social activities since consumers

favor firms, which take social responsibility.

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SWOT Analysis of the Walmart Corporation

Strengths

Wal-Mart enjoys very powerful strengths, which enables it to be the retail market leader.

For example, it is a giant retail corporation across the globe and thus benefits from economies of

scale. Indeed, Walmart size allows it to charge relatively low prices for its products and still

maintain its profitability level. Additionally, the wide range of goods, including health and

wellness, entertainment, apparel, grocery, and electronics give Walmart a competitive edge

against its rivals. The company also sells both own label and brand products, which are even

cheaper thus attracting more customers. Moreover, Walmart has made several innovative and

technological advances such as barcode as well as Scan and Go application, which helps

consumers merchandise and makes payment at self-check kiosks. The company also saves

money owing to its extensive information systems, which track sales, inventory levels, and

orders among other valuable information in real time.

Weaknesses

The company experiences various weaknesses. Firstly, Walmart goal of cost savings has

been disrespectful to the workers, and thus it has been involved in several labor lawsuits. The

company is criticized for unpaid overtime work, low salaries, poor working conditions, and

female discrimination. These issues damage the company’s reputation thus company needs to

focus on enhancing its employees’ welfare. Secondly, Wal-Mart does not utilize the

differentiation strategy, a situation that causes it to lose some consumers based on prices. In such

a case, the cost leadership becomes ineffective, and the company needs to implement a new

approach offering something else rather than cheap products. Thirdly, Walmart experience high

labor turnover thus making the company incur extra replacement expenses (Schuetz, 2015).

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Furthermore, with the escalation of operational efficacies and importation of Chinese products to

the United States market, Wal-Mart’s gross margins have decreased owing to price reduction. In

an effort to address its weaknesses, the company should embark on the differentiation strategy,

which makes its products unique to serve every market segment.

Opportunities

Despite various weaknesses, Walmart has several opportunities to exploit. Foremost,

there is an excellent opportunity for the corporation to invest abroad owing to its fast growth in

sales compared to the home market. Foreign markets provide new openings for Wal-Mart’s

growth and offer new experience for the firm as it functions quite differently overseas (Robert &

Berg, 2012). Indeed, although it already operates in China, Mexico, India, and Brazil, it should

intensify its existence in these marketplaces to sustain future growth. Walmart should also

increase own label since studies demonstrate an increase in popularity of own label commodities.

Online shopping is another opportunity. The current trend shows that a significant size of the

population prefers to shop online. Walmart needs to capitalize on online market and establish

convenient pickup stores for commodities purchased online without extra costs. Lastly, Wal-

Mart has an opportunity to venture into the banking sector. The retailer receives a payment of

approximately $140 million monthly through electronic check transfers, debit cards, and credit

cards (Pope & Pope, 2015). Launching its bank could save the company expenses relating to

third party payment processing.

External Threats

Walmart has to address various less beneficial market aspects to maintain its market

share. Firstly, there exists a conflict of interests when the corporation attempts to advance its

processes in pursuit of higher revenues. Although there is room for improvement, it is difficult to

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think how far Walmart can reach in this scope given its business identity and size. For instance,

it may be expensive to produce and sell pork meat in a small ecologic farm compared to an

industry. Therefore, Walmart could avoid this threat by establishing sustainable facilities.

Secondly, some competitors such as Amazon, Target, Tesco, and Costco seek to remove price

variances that Wal-Mart enjoys (Schuetz, 2015). The company will lose its customers and

experience high competition from them in future since low prices offer a competitive edge to a

firm. International barriers also act as a threat. Subject to the business, regulatory compliance

could be a hurdle when entering a new market. Additionally, resistance from locals is another

threat Walmart face. Some of the local retailers lose their customers to Walmart and thus

campaign against it to retain their clients. Therefore, Walmart needs to implement an inclusive

trading strategy, which guarantees social responsibility to foreign markets to avoid hostility from

the inhabitants.

Conclusion

It is evident that Wal-Mart is the leading retailer in America and the major employer

internationally. The company benefits from economies of scales owing to its large size. In

addition, Walmart massive investments in IT and logistics have led to costs saving making it the

less expensive option in the marketplace. Indeed, opening many stores across the globe enables

the corporation to reduce shipping time and costs thus leading to considerable low final

expenses. Although cost leadership has been a fundamental strategy for the firm, it is important

to evaluate other options owing to the ever-changing markets and consumption patterns.

Importantly, the company has to be more social and humble in the way it treats its employees to

avoid the risk of damaging its reputation and losing the purchasing power of its clients. Indeed, if

the prices of Walmart become similar to those of its competitors in future, customers may

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consider such issues when making their purchasing decisions. Despite various weaknesses and

threats, Wal-Mart has great potential to advance both locally and internationally owing to its

market experience, technology, and size.

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References

Bonanno, A., & Goetz, S. J. (2012). Walmart and local economic development: A

survey. Economic Development Quarterly, 26(4), 285-297.

Christopher, M. (2016). Logistics & supply chain management. Pearson UK.

Harris, E. A., & Strom, S. (2014). Walmart to sell organic food, undercutting big brands. New

York Times.

Pope, D. G., & Pope, J. C. (2015). When Walmart comes to town: Always low housing prices?

Always?. Journal of Urban Economics, 87, 1-13.

Roberts, B., & Berg, N. (2012). Walmart: Key Insights and Practical Lessons from the World's

Largest Retailer. Kogan Page Publishers.

Schuetz, J. (2015). Why are Walmart and Target next-door neighbors?. Regional Science and

Urban Economics, 54, 38-48.

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