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Walmart Corporation’s Strategic Analysis for 2017 Report

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Updated: Aug 5th, 2021

Introduction

Walmart is a multinational retail corporation that was founded in 1962 by Sam Walton. The Walmart concept came about after Walton purchased one of Ben Franklin’s stores. His goal was to sell products at competitive prices that would attract a high number of customers, as well as make high profit margins. He found low-cost suppliers who enabled him to offer low-price products. It rose to a multinational status in the 1990s after surpassing its competitors Sears and Kmart in terms of revenue and number of customers (Copeland & Labuski, 2013). The first store was opened in 1962 and incorporated as Walmart in 1969. Headquartered in Bentonville, Arkansas, Walmart operates in several countries across the globe. The corporation is comprised of numerous hypermarkets, grocery stores, and department stores that sell a wide variety of products.

It deals in home products such as electronic appliances, furniture, and bedding. In addition, the retailer also sells music, books, electronics, clothing, shoes, accessories, cosmetics, health products, and groceries. Walmart is one of the largest private employers, with a workforce of approximately 2.3 million employees in its outlets across the world (Krieg, 2014). The company has four main operating divisions, namely Walmart US, Walmart International, Sam’s Club, and Global e-commerce. In the US, it operates several supercentres, discount stores, and neighborhood markets. Walmart has operations in countries and regions that include Argentina, China, Mexico, Canada, India, Brazil, Central America, Africa, United Kingdom, and Chile. Walmart owns 11,718 outlets in 28 countries that are registered under various names (Krieg, 2014). The corporation has recorded positive financial results in the last decade owing to the introduction of an e-commerce platform, as well as the adoption of innovative technologies.

SWOT Analysis

Strengths

Walmart’s major strengths include competitive prices, global organizational size, and the utilization of advanced technologies. The international status enables the company to fund its growth and expansion programs. Moreover, it enhances its ability to offer low-priced products (Copeland & Labuski, 2013). The company’s global presence offers the advantage of better economies of scale that translate to high product volumes and low prices (Hitt, Ireland, & Hoskisson, 2017). The corporation has a technologically advanced information system that simplifies operations such as customer relationship management, inventory, and order tracking. Technology improves decision-making and enhances supply chain management.

Weakness

Walmart’s weaknesses include poor human resource management, a simple business model, and unsustainable profit margins. The company’s human resource practices have led to high employee turnover, scandals, and numerous lawsuits that have tarnished the company’s reputation and brand value (Copeland & Labuski, 2013). Many of its employees earn low wages and do not enjoy benefits such as insurance because the corporation focuses a lot on lowering the cost of operation. The poor treatment of employees has led to numerous lawsuits involving matters such as unequal wages, discrimination, and dangerous working conditions (Burgmann, 2016). The company has incurred huge losses in settling lawsuits that could have been avoided through the improvement of its human resource practices (Burgmann, 2016). The unfair treatment of employees has also led to high turnover and low motivation, which have lowered the overall output of the corporation. Walmart has a simple business model that is easy to replicate. The cost leadership generic strategy can be copied by any new retailer in the market, as well as its major competitors (Copeland & Labuski, 2013). The company’s business strategy affects its profit margins because of the low prices. Moreover, it eradicates the possibility of possessing numerous competitive differentiators (Hitt et al., 2017). This challenge has been mitigated by the corporation’s business size.

Opportunities

Walmart’s opportunities include expanding its operations to developing countries, growth of e-commerce, and increasing demand for organic products. The cost leadership strategy is fit for adoption in developing countries whose economies are growing rapidly. The company can also increase its online presence, a move that will attract more customers (Hill, Jones, & Schilling, 2014). The growth of e-commerce is a great opportunity for Walmart to enhance its competitive advantage by reaching out to more customers, who will also enjoy a wider variety of products. In the contemporary society, the demand for organic products is increasing rapidly. Therefore, Walmart can explore this new avenue and provide healthy food products that will grow its presence around the world.

Threats

The company’s main threats include increased competition, difficulty in sustaining its cost advantage, as well as changing customer preferences due to the development of a healthy lifestyle trends. Increased competition from other retailers such as Costco, TESCO, Amazon, Target, and Carrefour is a threat to Walmart’s sustained domination of the retail market (Hill et al., 2014). These retailers are implementing innovative technologies and adopting business models that enhance their effectiveness and improve customer experiences. The decreasing cost of manufacturing is increasing price competition, a development that has seen Walmart experiencing difficulties in sustaining its cost advantage (Krieg, 2014). This trend is compelling the company to move its production overseas in order to maintain low costs of production. The healthy lifestyle trend is a major threat to Walmart because people are leaning towards organic products (Copeland & Labuski, 2013). The company can take this trend as an opportunity for growth and improvement. However, it is a greater threat than it is an opportunity because many of the company’s products are inorganic. It has not yet embraced the trend fully in a manner that would initiate change toward the sale of more healthy products.

Competitive Advantage

The foregoing analysis indicates that Walmart must take advantage of its size and innovative technologies to expand in developing countries that have rapidly-growing economies. Moreover, its brand name and low-price strategy can be improved to enhance its competitive advantage. It is important for Walmart to address its human resource challenges that have resulted in a high rate of employee turnover and a tarnished reputation. Key strategies that can be used include advocating for equal treatment of employees, provision of employee benefits such as insurance and overtime, as well as better remuneration as a way of improving the retention rates (Krieg, 2014). Proper employee treatment is the most effective strategy that can be used to mitigate the effects of lawsuits and employee turnover on the company’s reputation. Walmart should implement innovative technologies that improve the quality of customer service and enhance shopping experiences. Offering cheap products is disadvantageous because it necessitates the production of low-quality merchandise that might lead to loss of customers (Krieg, 2014). Walmart should improve the quality of its products while maintaining low prices. This goal can be achieved by adopting innovative manufacturing techniques that lower the cost of production. The company should also start offering organic products in its stores in order to benefit from the healthy lifestyle trend that is taking over the retail industry.

Conclusion

Walmart is a multinational corporation that has dominated the retail industry for many decades. However, increased competition from emerging retailers is a threat to its dominance. In order to remain relevant and continue making profits, Walmart should expand in developing countries, improve the quality of its goods, implement innovative technologies, and treat employees fairly. The company has a strong brand that gives it a competitive advantage over existing and emerging retailers.

References

Burgmann, V. (2016). Globalization and labour in the twenty-first century. New York, NY: Routledge.

Copeland, N., & Labuski, C. (2013). The world of Wal-mart: Discounting the American dream. New York, NY: Routledge.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: An integrated approach. New York, NY: Cengage Learning.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic management: Competitiveness and globalization concepts and cases. New York, NY: Cengage Learning.

Krieg, K. (2014). Sam Walton: Founder of the Walmart Empire. Minneapolis, MN: ABDO Publishing Company.

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