Sample Case Analysis - Walmart

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Feb 20, 2024

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Walmart case analysis Dr. Meacham Brief introduction Walmart is a “Home brand Name” everybody in U.S and most of the people in different parts of world are familiar with. Being the largest retailer in the world, Walmart has 4,743 stores in U.S alone and 10,500 stores and clubs under 24 different countries. It employs almost 2.3 million Walmart associate worldwide. It was founded by Sam Walton is 1962 with the mission of helping people save money so they can live better. Walmart is a one stop retail store for most Americans for grocery and household items. Walmart defines its vision statement as “ to be the destination for customers to save money, no matter how they want to shop.” The mission statement of Walmart is to “ Save people money so they can live better.” Analysis on a Walmart can be done by performing its External analysis, Internal analysis, and analysis on its Business and corporate level strategy. Despite being a retail giant, Walmart is still vulnerable to any social, political, legal change. The recent trending topic about increasing minimum labor hours may directly affect Walmart since the policy does not go well with Walmart’s Cost leadership low-cost strategy. With the current pandemic, Walmart is making change in its operation in ecommerce platform by offering “Next day delivery”, online store shopping and curbside grocery pickup and delivery. The company has yet to update its technology and the ecommerce service to assist the customers better. The company has a bad reputation for its minimal employee wages and benefits. The company was also bashed for dumping the hazardous insecticide to the sewage pipes. According to the company’s CEO, the company needs some improvements on stocking up the product and proper staffing in the store. External Analysis The External Analysis of Walmart store can be done using Porter’s 5/6 forces. Porter’s 5/6 forces cover the analysis on Industry rivalry, Threat of substitutes, Threat of new entrants, Bargaining power of buyer, and the bargaining power of supplier. a) Industry Rivalry: Walmart has a strong industry rivalry with other retail giants such as Amazon, Macy’s, Target, Kohls, Kroger, Dollar tree and so on. The presence of large number of strong retail firms in the market contributes to the strong industry rivalry as Walmart now must compete with all those firms to stand out in the public. Not only that, but these company also have their own strategy with the purpose to achieve positive differentiation and diversity from other companies. As a result, companies tend to be more aggressive. Strong aggression among these company effects also contributes to the strong industry rivalry.

b) Threat of substitutes Walmart is known for its low-price products. And the number of retailers offering as low price as Walmart are handful. Consumers would be less likely to go for substitute products since it would cost them more dollar amount to do so. That is why the Threat of substitutes ranges from low to moderate for Walmart. c) Threat of new entrant Walmart has a high threat of new entrant. Opening your own retail store is easy to achieve since it requires low to moderate capital to do so. The laws and policies here in United States of America is extremely supportive of any new businesses. Hence, it is not hard to enter a retail business. Online platform has taken retail businesses into whole new level. Having an online retail saves a lot of capital and labor cost and hence attract a lot of new entrants into a market. d) Bargaining power of Buyer Bargaining power of Buyer is low. It is because Walmart implements a Cost leadership low-cost strategy and has a comparable lower cost than its competitor. Switching a brand is cost ineffective to the customers since it is highly unlikely for them to get a product at a similar price in another store. Walmart appeals to a large number of populations who has a little or no influence over a brand. e) Bargaining power of supplier The bargaining power of supplier is low in case of Walmart. There is a high saturation of large number of suppliers in the market. Many suppliers would want to do business with Walmart since Walmart is the largest retailer and the number of people shopping at Walmart is comparatively high. Most of its supplier are small company that do not have a much power over Walmart. With so many suppliers wanting to be involved in the Walmart, the switching cost from one supplier to another is low for Walmart. External analysis can also be performed by using Macro-Environmental analysis. Micro Environmental analysis is a detailed analysis on Political, Social, Economic, Technological, Legal, and Environmental factor. Micro Environmental analysis helps to determine if those factors are a potential opportunity or a threat to the company. a) Political factor Political factor can both be threat and opportunity to Walmart. Any change in policy regarding foreign trade and business, increase or decrease in taxes and tariffs deeply affects Walmart’s economy. Political stability is equally important to Walmart and its manufacturer and supplier since unstable political situation might prevent them from meeting their standards and focusing on their operational goals. Political pressure on increasing the current wages is also another example that challenges Walmart’s low-cost strategy.

b) Social factor Social factor is another way to analyze consumer’s behavior, attitude, lifestyle, and culture that could possibly influence the growth and the economy of Walmart as a corporation. Social factor can be considered both opportunity and threat to the Walmart depending on how Walmart reacts to the recent change in trends and the cultural diversity. Some of the changes Walmart could implement towards its benefit could be responding towards new healthy lifestyle by stocking up with organic foods and vegetables in its stores, providing alternative healthy and organic foods full of nutrients than processed foods, understanding the culture of the place it is located at and implementing it in its stores to attract the customers and providing online shopping and delivery services especially to elderly people and people with disabilities. This can also help improve the brand recognition and can possibly increase the brand loyalty. c) Economic factor Economic change and stability around the world are another threat to the Walmart. Inflation around the world as a result, increases the producing cost of the Walmart. With the economic recession and the increase in the value of currency in comparison to U.S. dollar value, Walmart would no longer be able to keep up the low price for a long time. And even if it does maintain its relatively low-price, Walmart is likely to face thinner profit margin or even a loss. According to the annual report of Walmart, any economic factor that affects Walmart also affects its supplier and its manufacturers. The increase in cost of goods sold affects Walmart’s Cost Leadership Low-cost strategy. d) Technological factor Technology is a driving factor for most of the company including Walmart. Walmart should utilize social media platforms to promote the company and the proper use of ecommerce platform including online business activities such as shopping and shipping activities. Walmart is taking advantage of this opportunity by focusing more on ecommerce and self-checkout service in the store. According to the Annual Report, the total ecommerce sales was 11.6% of the total sales in U.S. Walmart is also trying to implement robotics and automated units to some of its store for store maintenance and online orders. e) Legal factor Walmart operates in 24 different countries and hence is subjected to many different law and regulations of each country. Legal factors such as laws regarding trade and business, taxes, Employment laws, minimum labor wages, food and safety regulations, customer data protection laws, foreign taxes and so on has great impact on the Walmart and its

suppliers. Walmart is abided by these rules and Walmart is subjected to face consequences if it does not follow those rules. For example, Walmart was sued by its current and former employees for violating the employment act by not letting them sit while working. As a result, Walmart agreed to pay $65 millions to those employees. f) Environmental factor Environmental factors pertain to the company’s effort on preserving and promoting clean and pollution free environment and is well supported by the society. Customers are more likely to support the company that promotes green, sustainable, and pollution free environment. As a result, company branded as eco-friendly are more likely to receive positive feedback. Walmart should take advantage of this opportunity by focusing on environmental factors such as business sustainability trends and environmentally friendly products. Internal Analysis Internal Analysis is an analysis on company’s internal component. Internal analysis is performed by doing analysis on company’s strength and weaknesses, company’s core competencies, competitive advantage against its competitors, and the Financial statement analysis. a) Firm’s strength and weakness Some strengths of Walmart are as follows:  Walmart is a well-known retail store for its low prices. Most of the people around the world are familiar with the name “Walmart”. The company also have a strong brand loyalty.  The company also has a large scale of operation. The company seems to do well not only in grocery but also in clothes, household supplies, automotive and so on. The company has its ways to offer low prices to its customer in every operation it is involved in.  Walmart implements “economies of scales” where it produces large volume of products in minimum price. Walmart has a cost advantage over its competitor because its large size and its ability to produce large volume in low cost.  With modern technologies, Walmart is unstoppable with its supply chain. The company uses Just-in-time inventory system, and the company is really good at tracking and monitoring inventories that it is almost impossible to have an empty shelf of any products at Walmart. Some of the weaknesses of Walmart are as follows:

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