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SWOT Analysis of Wal-Mart Stores Research Paper


Introduction

In strategic management and planning examination of the internal and external factors is very important. These factors are categories in the SWOT analysis, which involves the analysis of strengths, weaknesses, opportunities, and threats.

The strengths and the weaknesses are the internal factors while the opportunities and threats from the internal factors. Through SWOT analysis a strategy can be developed and used in the marketing of the firm (Bohm 2). It can also be used in avoiding any weaknesses thus enabling it benefit from any opportunities in the future regardless of expected threats.

According to Boham (2) SWOT analysis is responsible for the offering of vital information that enables evaluation of the capabilities and resources of a firm against competitive background it operates from. This is used in strategy formulation as well as enhancing competition in the market. The paper gives a SWOT analysis of Wal-Mart stores, one of the leading retail stores in the world.

Background

Wal-Mart is the leading retail store in the United States of America. It has several stores in the North America region that it solely owns and operates. It has its headquarters in Bentonville; Arkansas becoming the largest company that privately employs people (Blair 262).

It has 8,500 stores in 15 different countries. It operates under fifty five different store names although in the USA it operates on its own. In Mexico it operates as Walmex, in India as best price, in UK as ASDA, under its name in Puerto Rico, and as Seiyu in Japan. In Brazil, Argentina, Canada, UK and Puerto Rico it fully owns the operations.

Outside North America the investments had mixed results (Blair 262). It pulled out from Germany when its operations were rendered unsuccessful while in china the operations have been successful. During the 2010 financial year the company recorded $258 billion that translates to total sales of 63.8%. The competitors of Wal-Mart stores are many in the respective countries where it has the different stores

SWOT Analysis

According to Kneer (2) when the Wal-Mart stores was founded in 1962 by Sam Walton the core values of the company were “respect for individual, service to the customers and striving for excellence”. All these core values have the objective of satisfying customers and believing that customers are important to the company.

Over the years the company has been operation with profits even in times of economic crisis because of its belief in customer satisfaction. The following is the SWOT analysis of the Wal-Mart stores where each are broken down and discussed in detail. They comprise the strengths, weaknesses, opportunities and threats which are the internal and external factors respectively.

Strengths

These forms the resources of a company as well as capabilities applied in the market so as to develop the market competitive advantage. Wal-Mart stores phenomenal success has been as a result of the following strengths. It has dominated the American retail market (Kneer 2) because of its brand that is powerful.

The sale of huge merchandise in US and a “market share of more than 30% of health and beauty aids” demonstrate dominance of Wal-Mart (Pahl and Richter 21). It provides a variety of goods under one store making it convenient to many American families (Pahl and Richter 21).

The services offered by the company are worth the value of the money the consumers pay. The branding which is strong is based on a pricing strategy where prices are low with the aim of attracting and retaining a huge customer base. Kneer (2) observes that through the use of advanced technology the company is able to offer low prices because it has the strength to reduce operational cost.

Through the automated distribution links the chain store is able to control its expenses ensuring that low price offer is maintained. Deliveries in the Wal-Mart stores are faster because the technological system is interlinked thus ensuring time saving and efficiency (Kneer 2).The technological advancement and embracement has enable the company regulate the procurement and logistics department reducing any form of goods theft.

This is because the system can observe and monitor the movement of goods in and outside the stores. This has reduced the expenses of unnecessary losses. Over the years the company has over grown experiencing global expansion (Pahl and Richter 21). For example it has stores in the UK, Brazil, Argentina, and Puerto Rico as well as in china. Wal-Mart believes in human management and their development. This can be explained by the training it offers to its employees and having faith in them. This has boosted the performance of the employees making it a world class retail store.

Weaknesses

These are viewed as the company’s problems that are internally manifested. Being the largest retail store in the world and in several countries it is faced with the weakness of controlling all the chains and branches. This is because technology has failures and cannot be 100% effective.

The IT might not be always efficient and because its management is technologically driven and controlled, the slightest failure may cause problems in service provision. Wal-Mart sells variety of products under one roof making is likeable, but it may lack flexibility that some of the competitors operate using (Pahl and Richter 22).

Lack of focus can be seen as a weakness that is embraced by the Wal-Mart chain stores. Although Wal-Mart has stores in many countries it is not globally recognized. According to Kneer (3) competitors of the Wal-Mart may take the advantage of globalization and go internationally thus giving the company a global challenge. Its presence in few countries is the biggest weakness the company has.

Wal-Mart has the capacity of manufacturing goods, of which this can be seen as strength. However when the huge manufacturing investment hinders quick response to changes availed by environmental strategy can be seen as a weakness. This is because competitors can use this to their advantage affecting the Wal-Mart operations in the short run. Pahl and Richter (24) note that Wal-Mart dominance has negative effects in its operations.

For example, the supercenters that are to be opened will be closely located, this would allow internal completion that it impossible for some to gain enough balance costs. The issue of lowering prices to chase competitors saw a failure of 25% of the Wal-Mart stores in delivering the core values to its consumers (Pahl and Richter 22).

Opportunities

These are the environmental external factors that a company may experience allowing them to grow as they make profits. According to Kneer (2) Wal-Mart has the opportunity of forming strategic alliances through merges with global retailers.

For example it can focus on the ready markets of Europe, India and china which have not been fully utilized (Pahl and Richter 22). Other than forming mergers or alliances there is possibility of opening stores in the emerging world economies like India and china which have large population hence large consumer base. These are opportunities that can see Wal-Mart expand its capital base as well as profits and growth.

This can exploit new markets through diversification by opening super centers, and malls. Opening of new stores gives Wal-Mart the opportunity to create employment thus reducing inflation because dependence ration is reduced. This changes the lives of many citizens who may not be necessarily Americans.

With the embrace of technology, Wal-Mart can take advantage of internet shopping that can reach a large populations clientele. Pahl and Richter (22) note that Wal-Mart has the potential of retaining its customers through low pricing. This creates customers loyalty which is important in development of a retail store like Wal-Mart.

Threats

These are caused by the unexpected or foreseen change in the external environmental factors which are threatening to the firms operations and productivity. Wal-Mart is the number one retail store meaning that it is seen as the target by competitors (Kneer, 2), who can be globally or locally.

Competition reduces the market share and any slightest mistake in customer satisfaction may be the start of a downfall. The retail store also faces the threat of price competition from other operators in the retail industry. This is because all the retail may decide to operate under a low price that the Wal-Mart’s and according to factors that determine demand price is one.

When the prices are low the demand increases and vice versa. The retail store faces the threat of being targeted by political enemies. This is being a globally recognized store political problems exposure are high (Pahl and Richter 24). The political woes and economic inflation and tax wars are huge threat to Wal-Mart.

This may affect the operations of the store hence failing in some countries. In low regions outsourcing is applied this reduces the cost of production. This according to Kneer (3) has led to price competition causing price deflation which is a threat to the operations of Wal-Mart.

It faces threat of innovation that other retailers may adopt before it does. Currently strategic planning and management are based on the idea of globalization and technological prowess. However Wal-Mart still operates under the old and outdated strategies that are not applicable in the 21st century.

This is a huge threat to the operations and future expansions of Wal-Mart. Pahl and Richter (24) note that Wal-Mart lack transitional strategy which makes it hard to adapt in locally based markets, have economies of scale, improve knowledge flow and locate its operations in locations that optimal. It faces the challenge of growing and establishing stores in foreign countries (Pahl and Richter 24). This was what led to fall of its stores in Germany.

Conclusion

SWOT analysis deals with the external and internal environmental factors responsible for strategic planning. They also help in marketing and knowing the competiveness and capability of a company. The SWOT analysis of Wal-Mart stores is well explained in depth where different environment factors both internal and external have been examined. Although it has great and much strength the weaknesses and threats are also great.

Works Cited

Böhm, Anja. The Swot Analysis. München: GRIN Verlag GmbH, 2009. Print

Blair, John D. Strategic Thinking and Entrepreneurial Action in the Health Care Industry. Amsterdam: Elsevier JAI, 2007. Print.

Kneer, Christian. The Wal-Mart Success Story. München: GRIN Verlag GmbH, 2009. Print

Pahl, Nadine, and Anne Richter. Swot Analysis – Idea, Methodology and a Practical Approach. München: GRIN Verlag GmbH, 2009. Internet resource.

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