Industry Analysis of Walmart
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Strengths and Weaknesses
The first strength of Walmart is the retailer’s brand reputation. Walmart enjoys a reputation as the biggest retailer in the US and the world in terms of revenues and market share. Walmart remains one of the most recognizable brands in the country. The company has a reputation as one of the most affordable retail companies in the US. Walmart has a reputation for having a broad product offering in its stores, offering a range of items such as electronics, home appliances, groceries, toys, and clothing. Another strength of Walmart is the company’s global presence. As of 2018, the retailer operates over 11,000 stores across the globe (Walmart, 2018). The company operates in all continents and has partnerships with around 2 million associates globally. The international operations of Walmart have increased the brand recognition of the retailer. Walmart can exploit its brand recognition and global presence by applying a market expansion strategy to increase the company’s market share (Qian, 2018). The market expansion strategy will enable Walmart to penetrate unexploited markets in both local and international markets.
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The first weakness of Walmart is that the company records narrow profit margins. Although Walmart reports the highest revenues of any listed company, the retailer reports thin profit margins because of the cost-leadership strategy pursued by the company. As such, the company sells products at considerably lower prices than its competitors to draw customers. The cost-leadership strategy of Walmart is a significant weakness since the company lacks any other competitive advantage over rival companies. The retailer’s lack of a competitive differentiator impedes the ability of the company to attract less price-conscious customers (Cavallo, 2018). The company can overcome the weakness of thin profit margins by implementing a differentiation strategy that will distinguish Walmart from rival retailers in terms of the quality of products and services. The company can achieve differentiation through innovative changes to the organization’s practices and processes.
Resources, Core Capabilities, and Core Competencies
The company owns real estate around the country and abroad. The company owns the buildings and land where the stores are located (Walmart, 2018). The next tangible resource is the inventory in Walmart stores. The inventory comprises of a range of items in the stores and Walmart warehouses. The company’s technological infrastructure is a crucial tangible resource. The technological infrastructure comprises of computers, RFID, check-out equipment. The company owns the vehicles, machinery, equipment, and electronics that enable the company’s operations. Other tangible resources are the cash, capital, and equity held by Walmart.
The reputational resources of Walmart include the company’s brand recognition and reputation (Qian, 2018). The company has experienced and skilled human resources. The company owns information technology systems that enable business transactions in the stores. The company operates a website, various domain names, and various internet accounts and profiles. Other intangible resources include the company’s organizational culture, licenses, partnerships, and networks.
The core capabilities of Walmart include the ability of the company to control its extensive operations despite the scale of operation. The retailer wields massive bargaining power relative to its suppliers due to the size of the company and its large customer base (Bonanno & Goetz, 2012). Moreover, Walmart possesses effective logistics and supply chain management capabilities that underlie the company’s distribution network.
The core competencies of Walmart are the company’s inventory management, customer loyalty, global supply and distribution network, the company’s brand value, and logistics system. The company’s cost-leadership in the retail sector denotes a core competency. The company has a vast, and effective supply chain drives the operations of Walmart and provides a competitive advantage (Huchzermeier, 2016). Moreover, Walmart operates a reliable and efficient logistics infrastructure across the globe.
The two segments of the general environment that exert the greatest influence on Walmart are the economic and political segments. The economic segment affects Walmart since the state of the economy influences the financial and commercial systems of the country (Bonanno & Goetz, 2012). A strong and growing economy drives Walmart’s retail sales since customers have high disposable income. Inversely, economic decline during downtimes and recessions diminishes the disposable income available to consumers leading to declining sales in the retail industry. Other factors such as rising inflation and high interest rates also affect the retail industry by minimizing the revenues and profits of companies like Walmart.
Changes in the political environment impact various aspects of the operations of retail companies. Increased government regulation and interference in the retail industry impacts on the financial status of Walmart. Increased corporate taxes and tariffs hamper the profitability of retail companies (Sides, 2019). Government policies have an impact on economic growth, which tends to affect consumers overall and customers in the retail industry. Furthermore, deteriorating relations between the US and other countries can affect Walmart’s supply chain.
Forces of Competition
The two most significant forces are the intensity of the rivalry among retail companies and the threat of new entrants (Cavallo, 2018). Firstly, the competitive rivalry in the retail industry is intense since retail companies compete to attract customers, grow their market share, and increase revenues. Walmart faces intense competition from Target, BestBuy, Costco, Kroger, and Walgreens. Walmart has addressed the competitive rivalry by implementing a low-pricing strategy across its operations. Walmart offers lower prices than other retailers for the same quality and quantity of goods. The low-price model is a source of competitive advantage for Walmart over rival retailers.
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New entrants into the retail industry pose a significant threat to Walmart. The strategies of new retailers draw customers away from Walmart. Smaller retail and convenience stores emerging up in regions with Walmart presence can erode a portion of the company’s market share. Walmart has responded to the threat of new competitors by integrating technological processes across its operations to improve the efficiency of its operations thereby reducing operating costs (Perez, 2019). Cost control enables Walmart to achieve cost leadership thereby minimizing the threat of new entrants.
Recommendations for Addressing the Competitive Forces
Walmart can mitigate the threat of the intense rivalry in the retail sector by leveraging its resources and capabilities to cultivate competitive advantages (Sides, 2019). The company should improve its customer services to improve customer satisfaction and attract more customers to its stores. Walmart should tap into its innovative capabilities to improve its business processes and create new services that will improve operations and attract customers (Walton, 2019. Walmart can overcome competitive rivalry in the retail industry by pursuing a differentiation strategy. The company will develop unique selling points aimed at fulfilling consumer needs and attracting more customers.
Walmart should pursue an aggressive expansion strategy to address the threat of new entrants. The expansion strategy will allow the retailer to minimize the threat of new entrants by increasing its presence in the market. Walmart can address the threat of new entrants by tapping into the company’s extensive supply and distribution chain to improve operations, minimize expenses, and increase profitability (Huchzermeier, 2016). Furthermore, Walmart can mitigate the threat of new entrants by nurturing customer loyalty through low prices, exceptional services, and offers.
Greatest External Threat
The greatest external threat to Walmart is online retailing. The growth of eCommerce in the US and around the world poses a considerable threat to the position of Walmart. Ecommerce companies like Amazon, eBay and Alibaba pose a significant threat to Walmart (Cavallo, 2018). Online retailing is a threat since an increasing proportion of customers are shifting from shopping in stores to online shopping. Online retailing is a growing threat since more consumers have access to smartphones or the internet and can engage in online shopping from any location. Walmart can address the threat of online retailing by developing an eCommerce division that will handle online sales. The company should install the necessary technological infrastructure to allow customers to buy shop and pay for goods online (Perez, 2019). Walmart should utilize its extensive distribution network and logistics to support the online retailing activities.
Greatest External Opportunity
The greatest external opportunity presented to Walmart is unexploited markets in Asia, Latin America, and Africa. While Walmart has a global presence, the company has few stores in the mentioned regions. The three regions present a significant opportunity for Walmart since the countries in the region have high populations that are continually growing (Qian, 2018). Consequently, Walmart has an opportunity to establish operations in the lucrative markets of Asia, Latina America and Africa to expand its market share in the global retail industry and increase its revenues. Walmart can take advantage of the opportunity by establishing operations in markets within the three regions. The company should undertake in-depth market research before opening stores in the regions. The market research will enable Walmart to understand the needs of the consumers and identify gaps in the retail market. After opening stores, the company can utilize the price penetration strategy to attract customers. Moreover, Walmart can penetrate the markets through partnerships with companies in the region.
- Bonanno, A., & Goetz, S. J. (2012). Walmart and local economic development: A survey. Economic Development Quarterly, 26(4), 285-297.
- Cavallo, A. (2018). More amazon effects: Online competition and pricing behaviors (No. w25138). National Bureau of Economic Research.
- Huchzermeier, A. (2016). How Walmart built sustainability into the supply chain. The Business & Management Collection.
- Perez, S. (2019). Walmart to expand in-store tech, including Pickup Towers for online orders and robots. Retrieved from: https://techcrunch.com/2019/04/09/walmart-to-expand-in-store-tech-including-pickup-towers-for-online-orders-and-robots/
- Qian, J. (2018). Charitable Giving, Corporate Image Building, and Market Expansion: The Case of Walmart (Doctoral dissertation).
- Sides, R. (2019). 2019 Retail Industry Outlook. Deloitte. Retrieved from: https://www2.deloitte.com/us/en/pages/consumer-business/articles/retail-distribution-industry-outlook.html
- Walmart Inc. (2018). 2018 Annual Report. Retrieved from: https://s2.q4cdn.com/056532643/files/doc_financials/2018/annual/WMT-2018_Annual-Report.pdf
- Walton, C. (2019). Walmart needs to rethink its innovation strategy. Retrieved from: https://www.forbes.com/sites/christopherwalton/2019/04/04/katie-finnegans-resignation-raises-important-questions-about-walmarts-innovation-program/#17a3280d3f52
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