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An Analysis of the Retail Strategy of Walmart

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Walmart is an American company that was set up in 1965 and it became incorporated in 1969. The company operates 11,718 retail stores across 28 countries. The company diversifies into different types of retail business such as, groceries, discount department stores, hypermarket stores, and supermarkets. The company generates revenues that average $418 billion per year thus making it the world’s leading company in terms of annual revenues and an average annual after tax profit of $14 billion. Walmart has its headquarters in Bentonville, Arkansas. Apart from being the world’s top company in terms of revenues it generates annually, Walmart holds another record of being the biggest employer. Walmart provides employment to 2.3 million people. The company operates a chain of retail stores across 28 countries under different names. In the US and Europe the company’s name is Walmart while in Japan it operates as Seiyu Group and Best Price in India. In total, the company operates under 59 different names across the regions that it has its retail stores (Dalic, 2015). The company’s stock trades at the stock New York Exchange market where a unit price of stock goes $88.97 as per the latest statistics. Since Walmart boasts of the largest number of retail stores as well as the largest number of workforce that a single company can accommodate, its retail business has not been smooth and it has faced numerous challenges that has made it to develop the best strategies both marketwise as well as in the corporate matters. In order to understand the company’s operations as well as its retail strategy and competitiveness it is worth looking at the company’s strategies through the analysis of each section listed. The essay seeks to examine Walmart’s retail strategy by analyzing its SWOT, competitive analysis, field observation, and then provide recommendations based on the analysis.

SWOT Analysis

Strengths

Being the largest retailer in the world is one of the most important key pillars of the company’s strengths. Since it is the largest retailer in the world it has an upper hand in terms of bargaining power thus it can get the best deals from suppliers. Additionally, being the largest retailer in the world it can deal with any form of competition posed by its regional or international competitors. Apart from having an upper hand in terms of bargaining power as well as ability to deal with its competitors, the company enjoys economies of scale, effective and efficient use of resources; it can experiment with less risk, and has huge gains from experiencing best practices.

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Investment capabilities, since the company can generate revenues of $476 billion and an average annual net profit of $14 billion, it makes it possible for the company to invest by flexing its financial muscle.

Innovative technology is another strength that the company enjoys. The company has technologically advanced information system that helps it to handle as well as manage and run its logistics. Among the best innovative technologies that works best for the company include; real time order, inventory tracking, and efficient supply chain.

Prices lower than that of competitors. Since the company enjoys large economies of scale it has power of negotiations over its suppliers thus it can get the best deals in the market. The power it has over its suppliers makes the company able to lower its prices as compared to the prices offered by its competitors.

Loyal customers. Amongst a host of retail stores that operate internationally, Walmart is the leading company in terms of loyal customers. Customer retention is very high as compared to its regional as well as international competitors.

Widest selection of products. Walmart is one of the leading retail companies that have the widest range of products. Because of the reason, the company is able to keep customers because customers can acquire all the goods they want by visiting one of the Walmart’s stores(Roberts & Berg, 2012).

Weaknesses

Since it is present in only 28 countries yet there are more than 300 countries in the worldlimits Walmart’s customers from accessing stores in some countries that Walmart is not present.

The company tends to hire more part time employees as compared to the number of full time employees it hires; due to this the company is not assured to satisfactory service delivery.

Involvement of the company in multiple lawsuits is another issue that has been pinning the company’s prospects down.

Due of the size of the company in terms quality management is not assured since it is not easy to standardize quality management for the company owing to diversity of culture and regional authorities. Due to thus the company can experience poor management in one region an act which will weigh down the company’s prospects.

Poorly prepared investment decision is also another aspect that weighs down the company. Examples of poor investment decisions in the recent past include the withdrawal of the company in the Germanand South Korean markets despite investing heavily in the two markets.

Large operational costs connected with highest employment level in the country makes Walmart prone to union actions as well as the public and media scrutiny. As per 2016, Walmart was one of the companies with the highest employee turnover(Roberts & Berg, 2012).

Opportunities

Expanding to the Latin American market has proved to be the huge opportunity for the company since the region has been one of the regions that rakes in a lot of sales revenues for the company despite the company being there for barely 5 years.

Partnership with large companies that provide services such as health insurance, coffeehouses, and travel agencies among others is another opportunity that holds a lot of prospects for the company.

Takeover of smaller competitors as well as mergers with other firms that offer similar services and goods is another great opportunity for the company.

Health and wellness trends that encourage people to take fresh vegetables and fruits thus presenting a great opportunity for the company to increase sales in its groceries.

Efficient supply chain coupled with internet use is another opportunity that the company can maximize to ensure that there is efficiency in the supply chain from suppliers to the consumers(Roberts & Berg, 2012).

Threats

More than 2 million employees increases the threat posed by raising wages as well as the need for employee health insurance.

Danger of recession recurrence in some regions that the company operates is another major threat that the company can be faced with.

Increasing concern about the company’s ethical position is another threat that the company has been facing in the recent past and it can still pose new dangers to the company’s development in future.

Growing economies can change client motivation from going for low cost products to going for quality products.

Competition threat posed by its leading competitors –Tesco, Costco, and Target, may challenge the company’s competitiveness in the future(Roberts & Berg, 2012).

Competitive Analysis

Having carried out Walmart’s SWOT analysis, it is worth analyzing the company’s competitiveness. The company’s competitiveness can be analyzed by looking at the company’s operations, supply chain, corporate practices in order to establish its competitiveness. Despite being a highly diversified company in the retail business, Walmart is mostly known for its discount departmental stores. Walmart has numerous competitors both direct and indirect. Some of the company’s direct competitors include Target, Costco, and Tesco. Indirect competitors on the other hand include eBay and Amazon companies. Direct competitors pose direct threat to the company’s businesses and operations because they operate in the same market while offering the same goods and services in the market (Kipple&Wherry, 2010). On the hand, indirect competitors such as eBay and Amazon compete with Walmart because they offer the same product through online ordering and delivery system thus not posing direct competition to Walmart because they do not operate retail stores such as hypermarkets and discount stores. In as far as retail market competition in the company’s primary market –US retail market, is concerned, the competition is stiff. Walmart commands 30% market while it leading competitor, Target commands 20% of the market. Costco comes at a distant 3rd with 15% market share with Amazon following with 10%. Interestingly, small retailers that operate within different states command a whopping 25% of the market.US retail market share can be best summarized by the use of the chart below;

Chart 1.0 US retail market share

US’s retail market share (Grewal et al, 2011)

Perceptual map that can best summarize Walmart’s competitiveness with regards to its major competitor, Target is shown in the diagram below. According to the diagram, Walmart main competitor is Target, a company that looks operates more than 11,000 retail stores just like Walmart. Their competition is anchored on two key differences that define the company, namely; quality and cost. Target corp. is known to offer quality products in all its stores thus making it one of its main competitive strategies. On the other hand, Walmart’s main competitive advantage is cheap products but of relatively low quality as compared to the quality offered by its main competitor on similar products (Grewal et al, 2011). Based on the perceptual map below, in between quality and cost are the online companies such as eBay and Amazon. Although online companies cannot competitively compete in terms of quality or cost their major competitive advantage is online shopping where customers can transact online.

Walmart’s perceptual map with regards to its major competitor, Target Corporation (Cao, 2014)

Field Observation

Having looked at Walmart’s competitive analysis, visiting the company’s mega store in Bentonville downtown, Arkansas, was important so as to ascertain the issues captured in the SWOT analysis. Interviewing employees as well as the management was the main method used to carry out field observation. We interviewed the management by using a structured questionnaire. Some of the questions that were directed to the top management include;

  • What are the most important retail strategies for the company?
  • What are the strengths of the company and how do you exploit them?
  • What are the most common weaknesses that the company has experienced in the recent past and how have you addressed them?
  • What are some of the company’s opportunities and how have you leveraged on them?
  • What some of the company’s threats and how are you avoiding them?

Alongside questions that were directed to the top management there were other questions that were directed to the employees and suppliers as well. Among the questions that were directed to the employees and suppliers include;

  • Are you happy with the partnership you have with the company?
  • Is the company’s supply effective and efficient?
  • Do you feel the company’s use of supply chain systems have helped improve the company’s services?

Apart from interviewing the company’s stakeholders, observations of the company’s operations as well as noting the level of customer’s satisfaction was important part of the field observation. With regards to the questions that were directed to the top management, it emerged that the strengths, opportunities, weaknesses, and threats that were discussed in the SWOT analysis were confirmed as reflecting the real status of the company. With regards to the questions that were directed to employees and suppliers, it can be noted that employees are generally happy with the company apart from a few reservations that include short leave days, average pay, and long working hours (Casadesus, 2016). A number of the company’s suppliers responded having a fruitful partnership with the company with a few having reservations about the time it takes to pay them for their supplies.

Retail Strategy

The analysis of SWOT analysis as well as a look at the company’s competitiveness greatly informs retail strategy section. As analyzed in the previous sections, the company has one of the most competitive retail businesses as compared to its leading competitor –Target Corp. At the core of the company’s operations are the discount departmental stores. It is worth noting that more than 70% of the company’s retail stores are the discount stores(Roberts & Berg, 2012). The near specialization on discount departmental stores gives the company its competitive advantage of getting to sell relatively cheap products because they can leverage on large economies of scale which gives them bargaining power over suppliers. Walmart’s target market is the low income earners. Most of its departmental stores are situated in downtowns while its hypermarkets are located at the high end residential places (Bell, 2014). Since around 70% of the company’s retail stores offer discount on all the products on offer, it is in order to conclude that Walmart targets low income earners that are located in the medium to low income residential places.

Merchandise assortment in the company’s stores range from green grocery products such as fresh vegetables, to dry foodstuffs such as cereals, to household items such as furniture among other diverse products thus offering a one stop shop. Additionally, the stores have partnered with some companies to offer health advice as well as dispensing service among other services that have been accommodated under every single store that is owned by the company. In terms of price, Walmart is known to offer up to 15% -30% discounts on all the products it offers to the customers(Roberts & Berg, 2012). The 15%-30% discount on all products and services offered by the company is based on the comparison of prices that its leading competitors offer. The discount offered vary from one product to another, each of the price tags on the shelves are discounted but customers are allowed to bargain and get even better deals from the one given (Zentes, 2017). In as far as market positioning is concerned; the company is well positioned in the market. Walmart as a brandis very popular throughout the world due to its unbeatable discounts that it offers on various products. Walmart is highly popular as compared to the popularity that is enjoyed by its customers.

Recommendations

Having looked at the company’s retail strategy, SWOT analysis, and competitive analysis here is an informed list of recommendations that the company should consider exploiting so that it can reap maximum benefits in the retail businesses.

  • The company should consider taking of the upcoming markets such as the Latin American markets because they are less competitive because there are few international or regional retailers that have entered the market thus it remains a huge opportunity for the company.
  • Companies that are in the retail business have made themselves more competitive by adding the product of e-commerce to their supply chain and it has proved to be fruitful for them. Walmart should also develop an e-commerce system that will enable customers to order view and order company’s products at the comfort of their home.
  • Since there is an ongoing campaign that encourages people to take more of fresh products such as vegetable and fruits, the company should prepare itself to breach the market that will be brought by the campaign by expanding their green groceries so as to accommodate anticipated demand.
  • The company should consider offering permanent employment terms to its employees so that it can reduce the high employee turnover that the company currently experiences. Reducing employee turnover will ensure that the company improves quality of the services it offers to its customers.
  • The company should have a well-structured investment strategy that will inform the company’s future investment. Strategic investment plans will eliminate instances where the company has to withdraw from the market like it did in the German and South Korean market where the company withdrew from the markets despite investing heavily on the markets.

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