Walmart's SWOT analysis and competitive business strategy

Wal-Mart's SWOT Analysis and Generic Business-Level Strategy

Walmart's SWOT Analysis

Wal-Mart's SWOT Analysis and Generic Business-Level Strategy

Wal-Mart's SWOT Analysis and Generic Business-Level Strategy

Wal-Mart

Wal-Mart is the world's leading corporation in the retail industry. It operates in 27 countries of the world with 69 well-recognized brands. With this huge scale of operations and vast business network, Wal-Mart serves a large number of customers with numerous product categories in its retail stores, departmental stores, and discount stores. It is also considered as the fastest growing business corporation in the Global retail industry. It has a huge supply chain network with highly reliable suppliers, distributors, and promotional firms from all the corners of the world. Wal-Mart has always pursued growth strategies for its business operations in the Global market. At present, it is the largest employers in the world with a total workforce of more than 2.2 million employees. It is headquartered in Bentonville, United States while regional headquarters, offices, and retail stores in all the operating continents of the world. It was established in 1969 by Sam Walton and soon grew as a large scale retail chain in the local market. It entered the Global market through self-owned and franchised retail stores and directly affected the sales performance of existing retail giants (Wal-Mart, 2012).

Threats

Despite having a number of weaknesses and drawbacks in its strategies and operational setup Wal-Mart still have great potential opportunities in the market which it can avail to grow its business in a competitive and effective fashion.

The biggest opportunity for Wal-Mart is to target the new potential markets in the world where there is a room for establishing a well-recognized international brand (Kurtz, MacKenzie, & Snow, 2010).

Wal-Mart should preferably go for making investments through self-ownership. However, it can invite franchisee investors or potential partners for joint venture in high risk markets (Hitt, Ireland, & Hokisson, 2011).

In order to cater the changing needs of the consumers, Wal-Mart should enhance its product ranges and keep more variety of the existing products and brands.

Wal-Mart can also go for horizontal and vertical integration in order to strengthen its market position and achieve cost leadership in its industry (Barley, Bragg, Dawson, Shah, Sillanpaa, & Sleeper, 2012).

Competitors are the biggest threat for Wal-Mart. The large scale multinational retailers and the small scale local retail and departmental stores provide the same branded products at competitive rates. Therefore, Wal-Mart finds it harder to compete on the basis of pricing and product categories. However, it can take advantage of its huge scale of operations and larger business presence as compared to other retailers (Kurtz, MacKenzie, & Snow, 2010).

The marketing and promotional activities of the other retail giants are also a big threat for Wal-Mart's sales and profitability. These retailers promote their products by offering attractive discounts which are sometimes not possible for Wal-Mart to offer to its customers.

The inflationary pressures and severe economic conditions in the target countries also impact the company's business operations in a negative way. These severe economic conditions impact the purchasing power of the consumers. As a result, they restrict themselves from buying high quality and expensive products. These conditions also affect the costs of operations, marketing, and R&D expenses of the company.

Wal-Mart's Generic Business-Level Strategy

1. Cost Leadership Strategy:

The three generic business level strategies of Wal-Mart are Cost leadership strategy, differentiation strategy, and focus strategy. The major focus of Wal-Mart is towards achieving cost leadership in its business operations. This is possible if it controls the costs of operations up to the maximum possible extent. This strategy can also help it in ensuring high profit margins on its investments. The cost leadership strategy is the most difficult strategy for a business organization to pursue. This is even more difficult to achieve when the business organization aims to penetrate in the international markets or wants to strengthen its existing international presence against its industry rivals (Wal-Mart, 2012). In its Global operations, Wal-Mart has also entered into a price war with its competitors which offer different brands at discounted prices. Wal-Mart, on the other hand, always ensures that its retail stores sell the highest quality products for those customers who are more quality conscious than price sensitivity (Hitt, Ireland, & Hokisson, 2011).

2. Differentiation Strategy:

The second generic business strategy of the company is differentiation strategy which entails the company's efforts to differentiate the attributes of its products from those of its industry rivals. Wal-Mart operates in the retail industry. Therefore, it has to keep a wide range of all kinds of products at its retail and discount stores. Being the largest retailer in the world, Wal-Mart has maintained the biggest stock of products which never creates the shortage of products at these stores. At the same time, the competitors of Wal-Mart also try to match this huge scale of operations and promote the same high quality brands in their stores. The most significant strategy which differentiates Wal-Mart's operations from those of its competitor retailers is its focus on customer services - during and after their purchase. Wal-Mart provides superior customer services to its customers which helps it in building long-term relationships with these customers (Kurtz, MacKenzie, & Snow, 2010).

3. Focus Strategy:

At the narrow market segments, Wal-Mart focuses on achieving cost leadership as well as differentiation of its products from its competitors. To achieve this target, Wal-Mart conducts marketing research in that particular market segment and analyzes the type of consumer response, community behavior, and competitive environment which it may face in that market. The focus strategy enable Wal-Mart to keep up pace with the changing consumer needs and offer only those products which are demanded the most. Wal-Mart also aims to achieve brand loyalty through this narrow segmented focus strategy (Hill & Jones, 2012). That is, the customers are targeted by offering the highest quality products as well as superior customer services in all the retail stores and departmental stores of the company. After enjoying a pleasant shopping experience at Wal-Mart stores, the customers become brand loyal and always prefer to make their future purchases from this reliable and well-recognized retailer.

PRODUCT MARKET STAKEHOLDERS

Strengths

Weaknesses

Opportunities

Threats

A large customer base (more than 200 million customer servings per week)

Lack of discount offers (as compared to other industry rivals)

Introduce more product categories into the product lines (new brands and product variations)

Changing consumer preferences (changing life styles, status symbols, earning and spending patterns, etc.)

Competitors' strategies (marketing efforts, strategic moves, etc.)

CAPTIAL MARKET STAKEHOLDERS

Strengths

Weaknesses

Opportunities

Threats

Trust of investors

Highest market share

The largest retailer in the world with respect to unit sales (Wal-Mart, 2012)

Franchising operations (a large number of retail stores are not self-owned)

Expand to potential target markets in the world through self-owned retail stores and discount stores

Multinational industry rivals with self-owned stores

Promotional strategies of competitors

ORGANIZATION STAKEHOLDERS

Strengths

Weaknesses

Opportunities

Threats

Strong supply chain network

Strong business presence in 27 countries

High employee turnover

High costs of operations

Failed to achieve cost leadership

Make more brand loyal customers (Kurtz, MacKenzie, & Snow, 2010)

Improve industrial relations in order to motivate the employees and decrease their turnover

Expanding operations of the competitor brands

Competitive compensation packages offered by the competitor brands.

Wal-Mart's Potential for Success

From the SWOT analysis with the strategic input from different stakeholder groups, it is clear that Wal-Mart has various potential opportunities in its markets which it can avail to become successful in its industry and achieve its strategic objectives. Wal-Mart has to focus on three generic business level strategies; cost leadership, differentiation, and focus in both large scale and narrow segment areas. In order to achieve the cost leadership, Wal-Mart will have to analyze the areas where it can save costs and increase its profit margins. The potential areas where Wal-Mart can find room for cost reduction include marketing and promotion, supply chain and distribution, and Research & Development (Hitt, Ireland, & Hokisson, 2011).

The second business level strategy can be achieved by focusing on what consumers expect from this retail giant. Wal-Mart always maintains a large stock of products from all product categories. It can improve its customer acceptability if the products are stocked and shelved according to their demand and acceptability. For example, the high demand products should be made available to the consumers all the time and must be placed on the high shelves. The company should also make greater amount of expenditures to promote these products to their potential target consumers. In contrast, the low demand products should be placed in middle and low shelves and should be stocked in lesser quantities at bigger stores only. These strategies will help the company in keeping the consumer preferences on the top priority and designing the marketing programs accordingly (Hill & Jones, 2012).

The third business level strategy can be adopted by the company to succeed in the local and international markets. This focus strategy will enable Wal-Mart in targeting the potential market segments individually and designing the marketing strategies according to the earning and spending patterns of the consumers in those markets. At the local level, the company will have to focus on low cost strategy. However, the international operations will require it to implement all the three generic business level strategies at the same time, i.e. The cost leadership along with differentiation and focus strategy in order to be successful in the industry (Kurtz, MacKenzie, & Snow, 2010).

Strategic Issues and Recommendations:

In the light of above analysis, it can be concluded that Wal-Mart will have to encounter the three main strategic issues in order to ensure improved business performance over the years. These strategic issues include high costs of operations (including R&D, supply chain, marketing, etc.), employee turnover, and strength of business presence.

In order to resolve the first issue and turn the situation in the favor of its business operations, Wal-Mart will have to analyze the costs in all its operational areas. The major focus of Wal-Mart should be to reduce the costs which are on the supply-end side of its operations. It should build strong relationships with the suppliers that can supply it the required stock at the lowest rates. At the same time, it should also look at the distribution-end of its supply chain and find the distributors which can provide their services against minimum commissions (Hill & Jones, 2012).

In order to reduce the employee turnover, Wal-Mart will have to improve its employment relationships. It should try to find to reasons for low employee morale and take immediate actions to resolve any issues which employees are facing with this organization. The major areas which can be analyzed for employee turnover issue include salary and compensation packages, work options and working environment, organizational culture, chances of professional growth, and manager-employee relations. The third issue, strength of business presence can be improved by expanding business network through self-owned retail and departmental stores. In order to strengthen its competitive advantage in the industry, it is also recommended that Wal-Mart should not struggle for establishing large scale stores on the basis of franchising agreements. Instead, it should prefer to open small scale stores on self-owned basis and expand their operations with the passage of time. Finally, it is recommended that Wal-Mart should keep an eye on the business affairs and marketing strategies of its competitors in order to move in the most tactful and competitive fashion. In addition to struggling for cost leadership and differentiation, Wal-Mart should also focus on becoming first-mover in its strategic investments.