Introduction
Walmart is a big American retailer that owns and runs many shops and supermarkets. It was established in 1962 and is based in Bentonville, Arkansas. It has grown significantly in recent years and now also operates under the Sam’s Club brand, a wholesaler form of Walmart Grocery. Walmart’s operations are not limited to the United States. It owns around 11,000 stores in 26 external markets (Coppola, 2020).
Throughout the 1980s, Walmart rapidly grew, and by its 25th anniversary, it had over 1,000 sites throughout the nation. Walmart’s rapid ascent draws directly from its founder’s immense aggressiveness and philosophy, Sam Walton’s, venturing into new locations and establishing low-cost retail stores. Furthermore, Walton joined Walmart and Price Club, a warehousing firm, in 1983. Because of his bravado, he became the richest man in America by 1985, with a personal fortune of $3 billion. Fortune 500 Walmart ranked Walmart the world’s biggest firm by sales, making $550 billion yearly (Staff, 2021). It is the biggest grocery retailer in the United States, with retail operations accounting for 65% of company revenue. Walton Enterprises, a management business managed by the Waltons, controls more than half of the corporation, transforming it into a publicly listed, family-owned enterprise (Murphy, 2020).
Walmart began growing internationally in 1991, and even after Walton’s death, the corporation continued to grow rapidly. Its consistent low pricing business approach, in which it sets low prices for its goods daily rather than only sometimes, put it ahead of the competition, particularly as it expanded. The firm’s large inventory allowed buyers to get everything they needed for their homes in one place, and the company spurred suburban growth from the 1980s to the 2000s—the ability Walmart’s to engage with supply chains assisted in the company’s supremacy.
Walmart has always faced competition, but its adversaries have evolved as the corporation has expanded and developed. Initially, Walmart’s competitors were small family businesses spread throughout the country. In suburban regions, Walmart became famous as a model for merging numerous services and items in a single location. Smaller businesses found it impossible to compete in volume and variety of goods, and many found it very difficult to outperform Walmart’s low-price promise since Walmart would provide department store products, food, and services all under one roof. It has been able to fight for the best price by purchasing commodities in huge quantities and constantly, then offering them at discounted prices to smaller businesses in neighborhoods.
As a result, the business raised its capacity to compete with larger corporations like Sears, long regarded as America’s ideal department store. The Sears products were well-known for including almost every available item. Walmart eclipsed Sears using an explosive growth pace established in the 1980s, thanks to its smart procurement strategy and rapid expansion into suburban areas. Walmart’s expansion coincided with the rise of internet shopping in the 2000s. Amazon supplanted Walmart as the leading rival and remains so to this day. Amazon has come to prominence as Walmart’s main adversary due to its enormous online sales presence, creating an immediate challenge to Walmart’s marketing strategy, to which Walmart is actively responding (Debter, 2019). Walmart possessed a large supply network, but it could not compete with Amazon’s online delivery dominance.
External Factors
Walmart must analyze the external environment because they participate in the business world, constantly influenced by forces outside their jurisdiction. A PESEL analysis provides a macro analysis of the external environment and breakdown of political, economic, social, technical, and environmental issues affecting Walmart. These variables might have a long-term impact on the company’s success and operations and must be considered in the company’s long-term business strategies.
PESTEL Analysis
PESTEL stands for Political, Economic, Social, Technological, and Environmental Factors in an Industry, and it is an abbreviation for a macro-environmental examination. The elements are examined.
The first aspect of addressing is the political climate in which the retail business operates. Throughout its existence, the media and a few policymakers have vilified Walmart for “killing the little person,” “unjust compensation for labor,” and “inhumane” its workforce through low labor rates and low pricing. Walmart has experienced political criticism for its opinions on these issues and has stated that, while its lowest-paid workers’ pay is occasionally near the minimum wage rate, it is the biggest employer in several areas. Walmart is the leading employer in Florida, Alabama, Illinois, Indiana, and Georgia (Sauter & Suneson, 2019).
Walmart has lately fought for a minimum wage increase, gaining the support of many of its most vocal political opponents. Walmart is thus presently inclined to pay a higher wage to its workers. This fundamental change in approach doubts the genuineness of the company’s goals. It is instructive to note that Walmart has undertaken a significant deployment of self-checkout solutions in preparation for prospective wage rises that its rivals may never be able to afford. If the minimum wage increases, Walmart may gain in the long term as its rivals would be forced to pay their workers more, lowering their already-thin profit margins.
Politics and the judicial system are intricately connected. Today, Walmart has more legal potential than legal concerns. It has the resources to cope with future difficulties such as food standards and labor constraints. Most of Walmart’s competitors lack the financial capacity to cope with these legal difficulties, and they will be faced in places where Walmart cannot be. Tax policies may jeopardize Walmart’s success. Walmart and its legal and financial leaders are likely to employ almost every legal technicality to cope with such a legal risk in ways that rivals may not be able to (Debter, 2019).
Walmart has benefited from excellent economic conditions. Countless businesses have been labeled non-essential, and most of Walmart’s potential competitors have shut down, possibly never to reopen, owing to the dire circumstances. As for Walmart, each store was declared essential during the pandemic, and the company witnessed higher revenue during the pandemic owing to the country’s economic situation (Fitzgerald, 2020). It is the most profitable firm on the earth and handles supply lines in the US. Walmart could use its purchasing power to exert control over its supply chain by imposing terms on firms who wish to sell their items on Walmart’s shelves.
Walmart has always been and continues to be an important element of American society. The socioeconomic issues posed by suburban expansion have been considerably more manageable due to Walmart’s aggressive price cuts and hundreds of retail sites. Walmart’s operation influences communities throughout the United States and across the world, and many people depend on the employment possibilities provided by Walmart, either directly or indirectly, as a result of its thousands of workers. It actively contributes to employment creation via the positions it provides and indirectly through the distribution network that flows into its shops and customers globally.
As it battles with Amazon in the e-commerce space, Walmart faces its most serious technical challenge and danger. Amazon has the advantage of being an early adopter and aggressive investor in technology (Debter, 2019). It has much room for expansion yet is not entirely susceptible. Nonetheless, it can still utilize its supply chain network to counter Amazon’s sales channels. Walmart has made it a big strategic aim to increase its technological and financial aspects and has begun leveraging business automation, data analytics and business intelligence to remain competitive (ProjectPro, 2022).
Porter’s Five Forces Analysis
Porter’s Five Forces analysis of the retail industry demonstrates Walmart’s strong competitiveness in various sectors. Amazon, its main rival, is the undisputed king of online retailing. Amazon and Walmart compete in various areas, such as supply chain efficiency, data analytics, business intelligence, and internet use (Debter, 2019).
A potential new entrant might be detrimental in several ways. Walmart has established market domination due to its sheer size, quantity, and exposure. It has been successful in overcoming the suppliers’ bargaining power. Suppliers to Walmart seem to be at a competitive disadvantage in negotiations as there is a power imbalance that favors Walmart. Because its display space is expensive, it sets pricing consistently, compelling suppliers to remain competitive to meet those expenditures (Acharya, 2020). Walmart’s unique inventory management, which has been in place for about three decades, has been a significant component of the retailer’s recent climb to dominance, and benefits suppliers.
Walmart has opposed consumer-driven profit-cutting measures. It offers consistent, low-cost rates that compete with those offered elsewhere. It has offered a price match promise to encourage shoppers to browse elsewhere. Despite Amazon’s purchase of Whole Foods, Walmart maintains its dominance in the local food sector. With a client base of around 25%, Walmart is the undisputed leader in food sales in the United States (Coppola, 2020).
SWOT Analysis
Strengths
Walmart is the world’s most well-known retail chain, with millions of customers purchasing every day. Its online store stocks around 60 million items. It is the world’s best performing publicly listed company in terms of revenue; in 2020, it pulled $500 billion worth in sales (Murphy, 2020). It recently acquired ASDA, a British grocery company, and Flipkart, an Indian e-commerce juggernaut. It has also collaborated with Bharti, India’s largest retailer. The company’s global efforts have been a huge success (Ravikumar, 2020).
Walmart operates about 11,000 stores and clubs globally through its three business divisions: Walmart International, Walmart.com, and Sam’s Club. US Walmart’s global sites are known by over 50 distinct names, which have aided the company is growing its global reach and profits. Its marketing strategy is based on economies of scale, enabling it to provide such cheap prices. Consequently, it is one of the most affordable shopping destinations worldwide (O’Connell, 2020).
Walmart is well known for its shipping and logistical services. It uses information technologies to keep track of the success of each product in each country’s store. Walmart’s workforce is its most significant asset. It invests heavily in the training and appraisal of its human resource. The huge workforce and resource management structures ensure a solid grip of assets – including data systems, logistics, supply chain networks, expertise, and other skills. The internal operations are excellent at all locations; the company has a proper management approach for its data systems, distribution centres, supply chain networks, and expertise. Its operations are excellent at all of its locations (ProjectPro, 2022).
Along with its huge corporate structure and global reach, Walmart can exercise market influence on suppliers and partners. The company’s implementation of e-commerce has been a success. Walmart’s sales hit an all-time high in the first half of 2020 (Fitzgerald, 2020). The corporation relied significantly on in-store sales for the most part. After earlier mishaps, Walmart improved its e-commerce capabilities, resulting in a huge increase in online sales. Walmart’s total sales achieved record highs Due to strong in-store and online sales (O’Connell, 2020).
Weaknesses
Legal fights and grievances have been filed against Walmart employees. Low income, inadequate care, and poor working conditions are a few of the issues raised in the press. Walmart’s huge size and power render it susceptible in certain areas. Despite this, it continues implementing a cost-cutting strategy. As a consequence, the company’s profit margins are very low. It has had a blemish on its brand image; in 2007, it was the target of a lawsuit alleging gender discrimination. As shown by compensation and promotion discrepancies, the corporation has discriminated against female employees |(Debter, 2019)
It is simple to replicate Walmart’s business model. Except for its massive corporate size, the corporation has no discernible competitive advantage over its competitors. Businesses have been forced to rethink their operations due to the recent systemic racism protests. Walmart’s practise of locking up ethnic hair care items while leaving white hair care items unlocked sparked outrage in June 2020. Walmart was compelled to discontinue its discriminating policy. Walmart has also been sued for failing to adhere to safety rules resulting in the deaths of staff members (Burke, 2020). Walmart has approximately 11,000 locations worldwide, including 4,700 in the United States, and a more than $120 billion global revenue base. Suits harmed Walmart’s reputation, particularly allegations that the company paid foreign officials in China, Mexico, and other countries (Planes, 2013). It pledged to pay $280 million to resolve the bribery lawsuit in 2019.
Opportunities
Walmart may embrace the opportunity by extending its operations into other areas. They might originate in the Middle East, China, or Latin America (Blazyte, 2020). Walmart may form strategic alliances with other significant corporations or combine with other retail behemoths. Walmart may benefit from small-business purchases. Introducing innovative human resource strategies to Walmart might be a fantastic opportunity. Because the organization is so reliant on its employees, introducing new approaches to human resource management is a critical opportunity.
Low-cost products may sometimes be perceived as poor quality and pose a risk to consumers. Walmart has established mechanisms to monitor the quality of its goods to address customer worries about health. In the past years, consumers buying online has increased substantially. Walmart may take advantage of this opportunity by expanding its online sales systems (O’Connell, 2020). Walmart intended to spend $1.2 billion on the acquisition of Flipkart by 2020 (Ravikumar, 2020). Walmart operates four healthcare facilities around the US. It may expand healthcare services to meet industrial needs. Walmart Insurance Services LLC is its latest venture into the healthcare sector (Sebastian, 2020).
Threats
Walmart has made news lately due to the “Impeach 45” incident. It promoted T-shirts claimed to incite violence. According to Walmart, the T-shirts were distributed by third-party vendors on the firm’s Marketplace rather than by the corporation itself.
In 2017, Walmart was challenged for offering phoney craft beer. The beer has been promoted and advertised as being produced by a non-existent corporation. Walmart is a popular target for rivals. Target, a direct rival, offers similar but higher-quality merchandise. Costco, on the other hand, enables consumers to purchase in quantity. Compared to Walmart, these businesses have a great reputation for treating their workers well. In several sectors, the government gives aid to both firms and consumers (Lunenburg, 2012).
Many small-scale online selling firms and individual retailers have sprung up, offering the same things at the same prices. It has the potential to endanger the company’s long-term existence. Customers have often reported unhappiness with Walmart’s website due to technical flaws. The website’s content is jumbled, and it takes a long time to load. Amazon is well-known for its fast, effective, and well-organized site, which provides customers with an outstanding online shopping experience. As of 2020, Walmart operated in over 25 countries, including over 400 locations in China (Blazyte, 2020). It is exposed to trade wars and retaliatory tariffs between the US and China as a multinational corporation.
Corporate-Level Strategy
Being more environmentally conscious is one of Walmart’s current strategic priorities. According to the PESTEL report, Walmart recognizes the need of recruiting stakeholders concerned about environmental sustainability. Significant US lawmakers are also worried about the environment’s long-term viability. Walmart has vowed to enhance sustainability by using low-emission delivery trucks and reducing overall carbon emissions (Walmart, n.d).
Walmart claims to want to be carbon-neutral by 2040. According to its website, the corporation’s goal is to strengthen global supply networks. Its mission is to eliminate waste and run-on renewable energy while maintaining human dignity through ethical hiring. Although this is Walmart’s stated purpose, financial concerns certainly play a role. Walmart may earn political favor by adopting these environmental goals and wooing a rising class of stakeholders who oppose investing in corporations that do not promote environmental sustainability (Walmart, n.d).
Another strategic goal is to leverage technology to build a digital presence that can compete with Amazon’s. From its inception, Walmart has recognized that the world is data-driven. Walmart began using a tailored inventory system. As a result of his strategy, distributors gained an advantage. This data-driven benefit has grown over time. Amazon controls ten data-driven retail sectors, making it difficult for Walmart to compete. Walmart places a high value on its massive data infrastructure. The primary goal of Walmart’s use of big data is to improve its customers’ shopping experiences. They accomplish this by analyzing millions of keywords. Walmart manages several petabytes of data in real-time. It generates recommendations based on this data and also uses it to help suppliers make informed decisions. Walmart has a significant competitive advantage (ProjectPro, 2022).
Business-Level Strategy
Walmart’s size offers it huge power over its suppliers. It may also provide much lower prices than rivals. It sells Great Value goods, which are its private-label items that are less costly than their name-brand equivalents. It can also afford to pay its employees far higher wages than its rivals. It is capable of replacing personnel at a lower cost by utilizing technology. Walmart’s data collection services are accessible seven days a week, 24 hours a day. The data is incredibly important, and it has aided Walmart in building a technical fortress that is competitive (ProjectPro, 2022).
Company Structure and Control Systems
To save operating expenses, Wal-Mart employs a straight management structure. The characteristics of continental and divisional structures may describe the firm’s overall structural design. Like most big organizations, the ruling executive board of directors takes key managerial decisions. Furthermore, the stakeholders make particular choices, such as nominating new directors during the annual general investor meeting. Walmart’s highest decision-making organ is generally the Annual General Shareholders Meeting. The Board of Directors is the executive body in charge of putting the AGM’s decisions. The board of directors comprises fourteen members that represent the various sectors of the organization.
The board of directors handles the AGM’s decisions and manages the organization’s everyday operations. The CEO and representatives make tactical choices for the company during the annual shareholders’ general meeting, which is then carried out by the management board. Within the organization, there are divisional and regional subdivisions. The sub-divisions can make decisions and conduct their businesses as they see fit. On the other hand, critical choices are made at the company’s top. The company’s segments include Wal-Mart Sam’s Club, American stores, and Wal-Mart International. Those divisions have greater autonomy in governance and administration (Greenwood & Miller, 2010).
Geographically, the sub-divisions are considerably more distinct. The Wal-Mart store in the United States, for example, is divided into three sections: Wal-Mart South, Wal-Mart West, and Wal-Mart North are the three locations. Wal-Mart Global has four divisions: India, China, Mexico, and Brazil (Planes, 2013). The regional heads oversee the sub-divisions. The regional heads and executive vice president meet at headquarters to standardize the functioning of the basic industry and regional divisions. Market Managers handle Wal-Mart International operations and report to regional executives. Local Store Managers are exclusively responsible for store management and work with Assistant Managers to develop and execute the strategic plan. Store managers are responsible for supervising staff work like sales associates, tellers, and shelf stackers (O’Connell, 2020).
Recommendation
Walmart’s global supply networks and size are its most valuable assets. Walmart’s major faults are in the fields where it places a lot of strategic emphases: sustainable development and the internet. Walmart’s capacity to compete with Amazon will be a huge issue in the future. With the purchase of Whole Foods, Amazon has made a clear push into the retail food business, and Walmart is already at a competitive disadvantage in the digital market. Walmart’s fate may be determined by e-commerce. Walmart’s expansion coincided with the rise of internet shopping in the 2000s. Amazon supplanted Walmart as the leading rival and remains so to this day. Most of Walmart’s competitors lack the financial capacity to cope with these legal difficulties, and they will be faced in places where Walmart cannot be. Walmart should continue to focus on Big Data analytics and allocate considerable intellectual capital to catch up to Amazon. Smartphone users make four extra trips to the store and spend 70% more than non-smartphone users. Walmart’s digital strategy will be a key component of its e-commerce strategy in the future, and it will provide the corporation with a long-term competitive advantage.
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