Walmart-Case Analysis

INTRODUCTION

Wal-Mart Stores, Inc. is an American public corporation that runs a chain of large, discount department stores. It is world’s largest public corporation by revenue and is founded by Sam Walton in 1962. It is the largest private employer in the world and the fourth largest utility or commercial employer.

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Other key facts include: Employs 1. 8 million in over 6,700 stores in 14 countries. Serves 175 million customers per week generating an average of $6. billion in weekly sales Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U. S. It also owns and operates the North American Company, Sam’s Club.

Wal-Mart’s business segments are: Wal-Mart Stores, Sam’s Club and Wal-Mart International. Wal-Mart is a discount store and provides cost leadership strategy to public. According to the Fortune 500 index of the wealthiest and most powerful corporations in the world, Wal-Mart holds the number one spot, ranked by its total sales.

CASE OBJECTIVE

This case objective is to study Wal-Mart’s history, external environment, internal environment, perform a SWOT analysis, analyze its business strategy, performance measures, and to provide strategic recommendations. Moreover, Wal-Mart’s “glory days are over” and its stock is “dead money”. So, what had worked in the past for Wal-Mart was no longer sustainable in the current competitive environment. The president Lee Scott wondered whether he should somehow adjust Wal-Mart’s course or to change efforts he had started over the past few years would begin to have a positive effect.

ANALYSIS OF EXTERNAL ENVIRONMENT

Overall, Wal-Mart’s external environment has a large effect on the success or failure of the company. There are many elements that comprise it and must be handled accordingly. There has been a shift in the balance of power that Wal-Mart has held for many years. In 2006, the threat of competitors such as Target and Kroger has lead to the smallest percentage increase in sales for new stores.

Wal-Mart’s growth has been compromised. Its competitors are growing two to five times faster. The issue of competitors is only one of the threats Wal-Mart faces. Others include the many problems like lawsuits, environmentalists, political entities, and employee-related issues. The external environment is analyzed by looking at the general, industry, and competitive elements.

GENERAL

The general environment of Wal-Mart includes the six dimensions of society. Under each dimension, Wal-Mart cannot control the factors influencing the general environment. Wal-Mart must understand each aspect and plan their strategy around it. They include:

Economic Given the current economic condition, rural areas who are hit the hardest are of special concern to Wal-Mart. There are many stores located in these areas that have 50,000 people or less. However, the power of Wal-Mart is their cost leadership strategy. For those people that are hit by the recession, they have a high tendency to save money but need necessities. Wal-Mart can accommodate the necessities at a low-price. The climb in oil prices also hurts businesses and consumers. The war in Iraq countries is another problem that Wal-Mart faces in terms of international expansion and government relationships. The entrance into a foreign market is difficult under this situation.

Sociocultural Wal-Mart’s target market is broad. They want to appeal to all customers of every income bracket. Initially it was for the low to moderate income families, but have grown to include the higher income brackets. However, there is a problem with this strategy. Simply stated, you cannot please everyone. If one group is more marketed, the other will suffer. This is a problem that needs to be addressed by Wal-Mart. .

Global The 1990s’ trend towards globalization is still in its growth phase for industries around the world. There is greater access to foreign markets due to the reduction of trade barriers, signing of bilateral and multilateral free trade agreements, and an increase of technology. For Wal-Mart to be successful in a global market, they must understand the best practices in each country they are located. The first globalization efforts were into Mexico, Brazil, and Argentina. They later branched into Europe and Asia. There are some current trends in globalization for retail companies. Price sensitivity, expansion from saturated major cities into rural areas, and the development of shopping centers that have every department a consumer would want and need.

Technological The retail industry’s next biggest breakthrough is radio frequency identification (RFID). This technology helps retailers register and track movement of goods from the warehouse to the store shelf. It can even track shoplifting. Electronic commerce is a very prominent element of retail technology. There are improvements in broadband and an increase of internet access in most developing nations.

Many consumers rely on the internet for their lifestyle. Wal-Mart has always been a leader in technology. They have optimized and maximized their operational efficiency. A lot of investments have been made into technology that has benefited their company. Wal-Mart has their own private satellite network and manages their own logistics through warehouses and distribution centers. Along with the RFID, Wal-Mart also has an extended point-of-sale (ePOS) that provide transaction terminals with solutions for switching between checkout and customer service. Lastly, they have intelligent inventory management (IIM) which enables real-time visibility into inventories and throughout the supply chain. This facilitates the speed of decisions.

Political/Legal Wal-Mart is the “poster company” for many political issues. Trades, health care, the environment, discrimination, and worker pay are examples of the many issues. Other concerns include the breaking of antitrust laws. Wal-Mart is seen to be the micromanager in the industry market. They coordinate actions of many firms above the market.

Environmentalists have large issues with Wal-Mart and applying pressure. Given that it’s one of the largest companies, the effort to “go green” is quite prominent. Therefore, in order to promote good environmental practices, Lee Scott is vamping Wal-Mart’s environmental strategy with the help of Conservation International. The improvements include increasing efficiency of their vehicle fleet by 25 percent within three years and doubling in ten years, reducing energy use in stores by 30 percent and solid wastes by 25 percent in a three year period.

Lastly, Lee wants to invest $500 million annually in environmental technologies. Actions by local, state, and federal officials in the United States have been initiated in relation to Wal-Mart’s handling of hazardous waste. Political leaders are disgruntled and making statements about Wal-Mart’s “sub-standard wages and health care benefits. ” Lee Scott had pledged to increase wages by 6% in a third of its stores; however, critics are not satisfied because the funds will be offset by pay caps. Several cities erected legal obstacles to the location of Wal-Mart stores in specific areas.

Governments in Inglewood, California, Cedar Mill, Oregon, and Vancouver have rejected Wal-Mat expansion plans. Lawsuits have also erupted which greatly affect Wal-Mart’s reputation. One example of a class-action lawsuit is Dukes v. Wal-Mart Stores where there was a pattern and practice of discrimination against female employees. It was stated they were treated unfairly when it came to promotions, pay, training, and job assignments.

Demographic The estimate of those aged 65 and older is significantly increasing over the years. Americans are getting older.Along with age, there is an increase of diversity. There are many ethnic groups in the workforce, including Wal-Mart. Sensitivity and attention to avoiding discrimination should be followed. Overall, people are living longer and people are becoming increasingly proficient with technology. There is opportunity for businesses to embrace this; however; there are always problems associated with age and technology. The concept of change is apparent. Sam Walton had stated, “Everything around you is always changing. To succeed, stay out in front of that change. ”

COMPETITORS

The overall competitive environment for Wal-Mart includes a few different factors. First, there are sales competitions from the other discount retailers in their industry that also operate on an international stage including e-commerce. Second, retail site location is a problem because every discount store wants the high traffic space. Lastly, the departments of Wal-Mart are in constant competition with large discount stores that specialize in that area. In terms of relative market leadership to its competitors, Wal-Mart is the number one retailer in 77 of the 100 largest general merchandise markets in America. Its financial ratios are mid-range when benchmarked with its competitors. Target has higher margins than Wal-Mart’s 5. 87 percent operating and 3. 23 percent net margin. A factor that leads to a lower margin is the grocery department because of its low margin profits.

CONCLUSION

Wal-Mart, the largest discount retailer, has seen better days. Their growth has been succeeded by their major competitors. A waning public image has become the focal point for improvement regarding lawsuits and their corporate social responsibility. The expansion in the domestic market has suffered through these issues. This case analyzed the different aspects of the retail business that included the external, internal, and business strategy concepts. Overall, an assessment was made on Wal-Mart and recommendations were given to try and address their problems and where their future is headed.

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Walmart-Case Analysis. (2018, Feb 28). Retrieved from https://graduateway.com/walmart-case-analysis/