Part 1: External Analysis
Executive Summary
With a particular focus on the retail industry with the Standard Industrial Classification (SIC) code 5311, this comprehensive industry analysis revolves around Walmart’s external environment. The study carefully analyzes the dynamics of buyer and supplier bargaining power, the possibility of new competitors, the existence of substitute products, and the level of competitive rivalry using Porter’s Five Forces framework. Every force is carefully evaluated and assigned a strong, medium, or weak impact. Beyond this, the study explores the retail industry’s wider profitability landscape, offering a complex perspective on industry dynamics. This thorough analysis not only sheds light on current issues but also proactively pinpoints opportunities and threats that are crucial for successfully navigating the intricacies of the retail sector.
Bargaining Power of Buyers
Customers have significant power in the retail industry because they have many options available to them, which allows them to switch between retailers easily. The abundance of alternative retail options and the low switching costs further bolster this strong negotiating position. Customers have much power because they have so many options, so retailers need to pay close attention to what they want and need. The strength of bargaining power in the retail sector is derived from a number of factors, such as the degree of transitional ease and the volume of viable options (Burbach. 2021).
Bargaining Power of Suppliers
The retail industry is known for having weaker supplier bargaining power. It is especially true for large retailers like Walmart, who have significant negotiating power due to the volume of purchases they make; the sheer size of these transactions supports the retailers’ ability to impose terms and conditions. However, there are subtle differences that can upset this equilibrium. One such variable is the existence of exclusive supplier agreements, which can change the game and potentially increase supplier bargaining power. These agreements give these suppliers more leverage because they have a smaller pool of available suppliers.
Threat of New Entrants
It is determined that there is a moderate threat from new competitors entering the retail market. This assessment is a result of the industry’s comparatively low initial capital requirements. However, well-established behemoths like Walmart strategically employ economies of scale and leverage deeply ingrained brand loyalty to build strong walls that keep out new competitors. Even though the initial investment may be affordable, the established brands’ broad operations and devoted clientele profoundly influence the competitive landscape (Burbach. 2021). Because of the combined effects of economies of scale and brand loyalty, it is difficult for new competitors to quickly gain a comparable market share, which reduces the overall threat of new competitors in the retail sector.
Threat of Substitute Products
Substitute products pose a serious threat to the retail sector, especially in the area of alternative shopping channels, where this threat is strong. Because e-commerce platforms are so widely used, customers have access to more options than just traditional brick-and-mortar stores like Walmart. The ease of use and accessibility that Internet shopping provides highlight how difficult this task is. With so many options available to them, customers can easily choose the online marketplace as a strong substitute for physical retail locations. Because of this change in customer behaviour, traditional retailers are under more pressure from competitors to adapt strategically to changing market dynamics and improve their value propositions in order to stay strong in the face of the constant threat posed by substitutes.
Intensity of Competitive Rivalry
Intense market competition between multiple players vying for a greater market share is a hallmark of the retail industry’s noticeably high level of competitive rivalry. A constant struggle for customers’ attention and loyalty, as well as aggressive pricing wars, are signs of this increased rivalry. Walmart is a major player in the industry and makes a significant contribution to this competitive environment (Burbach. 2021). The competitive environment is made more intense by the company’s unmatched size and strategic cost leadership initiatives. Walmart’s enormous operational scale gives it significant control over market dynamics and the ability to set standards that rivals have to follow. In order for other retailers to remain competitive in a setting characterized by a high intensity of competition, the unrelenting pursuit of cost leadership further stokes competitive fervour (Marcilla. 2014).
Part 2: Internal Analysis
Executive Summary
This section examines Walmart’s internal operations in detail. It gives particular attention to comprehending the interdependencies between Walmart’s various operations. It closely examines both the primary functions, such as product sales, and the supporting functions, such as resource and technology management. Finding the intricate web of interconnected processes that support the business is the aim. The analysis also examines Walmart’s unique benefits and drawbacks in relation to competitors in the market. This study looks closely at Walmart’s operations in an attempt to identify what makes the company special. It aims to highlight the unique attributes that set Walmart apart in the dynamic retail industry.
Value Chain Analysis
Walmart’s value chain analysis entails a thorough investigation of all aspects of the company’s business operations, including both core and supporting roles. Every major activity—inbound logistics, operations, outbound logistics, marketing and sales, and service—is carefully examined to identify how it uniquely contributes to the process of creating value overall. In a similar vein, the roles of support functions such as technology development, procurement, human resource management, and general administration in improving productivity are thoroughly evaluated (Burbach. 2021). Uncovering the complexities of Walmart’s value generation is the main goal of this in-depth investigation. By dissecting every link in the value chain, the analysis looks for possible opportunities for growth and areas of competitive advantage, providing critical information needed to make strategic decisions.
Primary Activities
Key operations that directly support the development, manufacturing, and delivery of Walmart’s goods and services are essential parts of the chain. Inbound logistics refers to the effective administration of the supply chain, which includes inventory control, transportation, and sourcing (Marcilla. 2014). The main functions of operations include quality assurance, product assembly, and overall production effectiveness. Finished product distribution and customer delivery are the main goals of outbound logistics. In order to increase product visibility and sales, marketing and sales activities use strategic promotion, advertising, and sales channels. Lastly, customer service, post-sale support, and guaranteed customer satisfaction are all included in service activities. Every one of these main operations is essential to Walmart’s value-creation process and overall competitiveness in the retail sector.
Inbound Logistics
An efficient system that manages the complexities of the supply chain and maximizes sourcing, transportation, and inventory control is Walmart’s inbound logistics. The organization cultivates strategic relationships with suppliers, upholds effective warehousing, and utilizes expedited transportation to guarantee a seamless influx of merchandise into its vast distribution network.
Operations
The three main pillars of Walmart’s operations are skilful product assembly, strict quality control, and a dedication to overall production excellence. By employing state-of-the-art technologies and optimizing its workflow, the organization achieves exceptional operational efficacy, thereby reducing expenses and optimizing productivity. Walmart is positioned as a leader in the delivery of products that are both economical and precise thanks to this strategic approach.
Outbound Logistics
Effective outbound logistics are essential to Walmart’s business, and they include distributing goods efficiently and delivering completed goods to a variety of retail locations. Customers are more satisfied because of the company’s wide distribution network, which ensures prompt and economical deliveries. This strategic focus on outbound logistics strengthens Walmart’s capacity to accurately and effectively satisfy customer demands.
Marketing and Sales
By combining advertising, promotions, and a variety of sales channels, Walmart’s marketing and sales expertise strategically advance product promotion. Due in large part to its enormous size, the company can negotiate favourable terms with suppliers, which results in competitive pricing and added value for customers. Walmart is better able to provide affordability without sacrificing quality thanks to this strategic approach, which also strengthens its market position.
Service
Walmart’s commitment to service extends beyond the point of sale to include customer service and post-purchase assistance. With quick response times, easy returns, and programs to improve the clientele’s overall experience, the business puts a high priority on customer satisfaction. This dedication to customer service upholds Walmart’s reputation for offering a thorough and customer-focused retail experience while also guaranteeing customer loyalty.
Support Activities
Improving overall effectiveness and operational efficiency requires support activities in Walmart’s value chain. To guarantee smooth operations throughout the vast retail network, general administration entails strategic decision-making, policy formulation, and managerial coordination. To create a talented and driven workforce, human resource management makes investments in hiring, training, and employee welfare (Chiu et al., 2021). Technology development places a strong emphasis on innovation, using state-of-the-art tools to improve operations and adjust to changing consumer preferences. Through employing and forming different programs to control supplier relationships, the supply chain may gain quality and efficiency through procurement. Walmart’s operational foundation is supported by these support activities, which help the company maintain a competitive edge and deliver exceptional value to both customers and stakeholders.
General Administration
The decision-making and strategic coordination required for overall organizational governance are included in Walmart’s general administration. IT include creating policies, coordinating various departments, and making sure that managerial procedures are carried out without a hitch. Maintaining a unified operational framework that enables efficient communication and strategic alignment throughout the vast Walmart retail network is the aim.
Human Resource Management
Walmart’s success is largely due to its human resource management strategy. For the purpose of cultivating a knowledgeable and driven staff, the organization makes large investments in talent acquisition, training, and development. Prioritizing employee well-being, engagement, and diversity initiatives fosters a positive workplace culture, which in turn improves customer service and productivity.
Technology Development
To stay at the forefront of the retail industry, Walmart places a high priority on technological development. Using state-of-the-art technologies to improve operational efficiency is a feature of constant innovation in this field. Walmart’s ability to remain competitive in a dynamic market is largely dependent on its technological advancements, which range from automated inventory management systems to data analytics for well-informed decision-making and e-commerce solutions to adjust to changing consumer preferences.
Procurement
A key component of Walmart’s cost leadership strategy is strategic procurement. The business makes sure that supplier relationships, negotiations, and sourcing are all done effectively. This tactical method balances the competing objectives of cost-effectiveness and quality by optimizing the supply chain. Walmart strengthens its position as a cost-effective retail leader by securing favourable terms with suppliers and upholding strong procurement practices, which improve its ability to offer competitive pricing to customers.
Company’s Main Products/Services
Supplying groceries, consumer electronics, clothing, and household goods, Walmart is a prominent worldwide retailer with a wide range of goods and services to offer. A wide range of suppliers, from regional producers to global manufacturers, are used by the company to supply its products (Wang. 2021). Walmart’s extensive clientele consists of consumers from various demographic groups who are looking for high-quality goods at affordable costs. As it works with distributors and retailers to make its products available through multiple channels and guarantee global accessibility, the company also engages in direct sales to end users through its retail locations and e-commerce platform. Walmart’s reputation as an all-encompassing and customer-focused retail behemoth is bolstered by sophisticated supply chain networks (Marcilla. 2014).
Primary Value Chain Activities
Walmart manages the supply chain effectively, guaranteeing the best possible sourcing, transportation, and inventory control, which is the first of its main value chain activities. Then come operations, which use cutting-edge technology and streamlined procedures to focus on effective product assembly, strict quality control, and overall manufacturing excellence (Chiu et al. 2021). Walmart’s vast distribution network makes it possible for finished goods to be delivered quickly and affordably to a variety of retail locations through more efficient distribution and delivery processes. In order to negotiate advantageous terms with suppliers and provide competitive pricing, marketing and sales use strategic promotion, advertising, and sales channels, leveraging Walmart’s enormous scale. Service, in the end, goes beyond the point of sale and improves the customer experience by including customer service and post-sale support (Wang. 2021).
Figure 1. Supply chain management
Competitive Advantages
Walmart uses its competitive advantages in a number of value-chain activities. Because of its size, the company in inbound logistics is able to negotiate advantageous terms with suppliers, which guarantees supply chain stability and cost-effectiveness. Walmart’s operational advantage is based on operational excellence in quality control and product assembly, which promotes efficiency and cost-effectiveness. Outbound Logistics’ vast distribution network helps ensure deliveries that are both economical and timely, which raises customer satisfaction (Wang. 2021). Walmart’s extensive marketing and sales network enables smart supplier negotiations, which benefits customers by lowering prices. Furthermore, the company’s dedication to service, which goes beyond the point of sale, strengthens client satisfaction and loyalty. With the help of these benefits, Walmart is positioned as the industry leader thanks to its size, effectiveness, and customer-focused policies.
Part 3: Recommendations
Business Level Strategy
Identification and Rationale
The core of Walmart’s business-level strategy is cost leadership. The company has deliberately positioned itself as an economical retailer, constantly offering its large customer base a variety of products at competitive prices. Walmart’s cost leadership strategy is justified by its capacity to take advantage of economies of scale. Walmart can negotiate favourable terms with suppliers, optimize its supply chain, and achieve cost efficiencies in operations thanks to its vast network of stores and large customer base. Because of this, the business is able to offer products at a lower cost than many of its rivals, drawing in price-conscious customers and cultivating a sense of loyalty.
Achievement through the Value Chain
Walmart has integrated its cost leadership strategy deeply into all aspects of its value chain operations. The company’s ability to negotiate with suppliers in Inbound Logistics guarantees cost-effective sourcing. By simplifying procedures, operational efficiency in operations increases cost savings even more. Utilizing Walmart’s size for effective distribution and outbound logistics lowers costs overall. Sales and Marketing use cost advantages in negotiations, but Service places more emphasis on low-cost customer satisfaction programs. Walmart is able to continuously provide value to customers through lower prices and maintain its market leadership because the whole value chain works together to support the company’s cost leadership strategy.
Corporate Level Strategy
Identification and Rationale
Related diversification is Walmart’s main corporate-level strategy. Beyond traditional retail, the company has extended its operations into a number of related business lines, such as e-commerce, pharmacy, and grocery. Walmart’s related diversification strategy is based on the goal of maximizing cross-selling opportunities and fostering synergy. Walmart can increase customer loyalty and attract a larger customer base by providing a wide range of goods and services. Additionally, by using this strategy, the business can reduce the risks brought on by variations in particular markets or product categories. Walmart creates a convenient and all-encompassing shopping experience for customers by utilizing its well-established brand, supply chain expertise, and operational efficiencies across these related businesses.
Implementation
Walmart uses a mix of strategic alliances and internal development to carry out its related diversification plan. The company has invested heavily in e-commerce capabilities and entered the grocery market, among other organic product and service offerings, as part of its internal development strategy. Furthermore, strategic partnerships and acquisitions of e-commerce platforms, for example, have been instrumental in bolstering Walmart’s position in related business domains. Walmart’s related diversification strategy is successfully implemented thanks to these strategic moves that allow it to leverage the expertise of partners and enhance its capabilities in diverse areas.
Recommendations
E-commerce Expansion and Technological Innovation
Walmart should prioritize expanding its e-commerce business and developing new technologies as the importance of e-commerce in the retail industry only grows. The business should make investments in cutting-edge web platforms, improve user interfaces, and take advantage of cutting-edge technologies like data analytics and artificial intelligence to customize the online buying experience (Wang. 2021). The significant threat posed by competing goods from online retailers, as noted in the external analysis, supports this suggestion. Walmart can enhance its market position, counteract the threat of digital competitors, and seize opportunities in the changing retail landscape by embracing the shift in consumer preferences towards online shopping.
Sustainable Practices Integration
Walmart needs to make the integration of sustainable practices across its value chain a top priority in order to meet its customers’ growing demands for sustainability and corporate responsibility. This recommendation corresponds with the observed trend of increased consumer awareness of environmental issues. Walmart can meet customer expectations and stand out in a crowded market by implementing eco-friendly packaging, cutting carbon emissions, and adopting sustainable sourcing. Through operational efficiencies, this initiative can save costs, attract environmentally conscious customers, and build long-term brand loyalty.
Strategic Partnerships and Market Diversification
Walmart should strategically seek alliances and broaden its market presence in order to manage geopolitical unpredictability and potential economic downturns. This advice is based on the retail industry’s high level of competitive rivalry and the medium threat posed by new competitors. Walmart can expand more successfully into new areas by leveraging local knowledge and forming joint ventures or strategic alliances with local players in emerging markets (Wang. 2021). It lowers entry barriers. It can also serve as a safeguard against fierce competition in certain areas by broadening its market presence. Walmart has a history of successful international expansion, and this proactive approach helps the company navigate the complexities of the global market.
Conclusion
Finally, Walmart’s strategic analysis shows a strong base based on operational excellence, cost leadership, and a dedication to customer satisfaction. Important insights are revealed by carefully analyzing the internal value chain activities and the external industry landscape. Walmart has a strong position in the retail industry thanks to its natural competitive advantages, which include its wide distribution network and negotiating power. It is advised that the business aggressively pursues e-commerce growth, implements sustainable practices, and strategically expands its global footprint through partnerships in order to improve its market standing further. Walmart’s initiatives are in line with industry trends and consumer preferences, guaranteeing its relevance and adaptability in a retail landscape that is changing quickly. Walmart’s position as an industry leader that is adaptable to opportunities and challenges is cemented by the synergy between cost leadership and strategic innovation.
Reference
Burbach, C., 2021. Walmart Strategic Analysis. https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1373&context=honorstheses
Chiu, Y.L., Hsu, Y.T., Mao, X. and Wang, J.N., 2021. An empirical study of holiday season discounts: A comparison between third-party marketplace sellers and fulfilled by Walmart Sellers. SAGE Open, 11(2), p.21582440211024179.
https://doi.org/10.1177/21582440211024179
Marcilla, L., 2014. Business analysis for Wal-Mart, a grocery retail chain, and improvement proposals. Southeast Missouri State University and Universitat Politècnica de València https://www.academia.edu/download/50653114/Business_analysis_for_Walmart_FINAL_TFC_Laura_Barbera_Marcilla.pdf
Wang, Z., 2021. Business analysis on sustainable competitive advantages. In E3S Web of Conferences (Vol. 235). EDP Sciences. https://search.proquest.com/openview/ee3a697aa37a1ba8a2a4d001a8e53066/1?pq-origsite=gscholar&cbl=2040555
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