Sample Case Analysis - Walmart

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Walmart case analysis Dr. Meacham Brief introduction Walmart is a “Home brand Name” everybody in U.S and most of the people in different parts of world are familiar with. Being the largest retailer in the world, Walmart has 4,743 stores in U.S alone and 10,500 stores and clubs under 24 different countries. It employs almost 2.3 million Walmart associate worldwide. It was founded by Sam Walton is 1962 with the mission of helping people save money so they can live better. Walmart is a one stop retail store for most Americans for grocery and household items. Walmart defines its vision statement as “ to be the destination for customers to save money, no matter how they want to shop.” The mission statement of Walmart is to “ Save people money so they can live better.” Analysis on a Walmart can be done by performing its External analysis, Internal analysis, and analysis on its Business and corporate level strategy. Despite being a retail giant, Walmart is still vulnerable to any social, political, legal change. The recent trending topic about increasing minimum labor hours may directly affect Walmart since the policy does not go well with Walmart’s Cost leadership low-cost strategy. With the current pandemic, Walmart is making change in its operation in ecommerce platform by offering “Next day delivery”, online store shopping and curbside grocery pickup and delivery. The company has yet to update its technology and the ecommerce service to assist the customers better. The company has a bad reputation for its minimal employee wages and benefits. The company was also bashed for dumping the hazardous insecticide to the sewage pipes. According to the company’s CEO, the company needs some improvements on stocking up the product and proper staffing in the store. External Analysis The External Analysis of Walmart store can be done using Porter’s 5/6 forces. Porter’s 5/6 forces cover the analysis on Industry rivalry, Threat of substitutes, Threat of new entrants, Bargaining power of buyer, and the bargaining power of supplier. a) Industry Rivalry: Walmart has a strong industry rivalry with other retail giants such as Amazon, Macy’s, Target, Kohls, Kroger, Dollar tree and so on. The presence of large number of strong retail firms in the market contributes to the strong industry rivalry as Walmart now must compete with all those firms to stand out in the public. Not only that, but these company also have their own strategy with the purpose to achieve positive differentiation and diversity from other companies. As a result, companies tend to be more aggressive. Strong aggression among these company effects also contributes to the strong industry rivalry.

b) Threat of substitutes Walmart is known for its low-price products. And the number of retailers offering as low price as Walmart are handful. Consumers would be less likely to go for substitute products since it would cost them more dollar amount to do so. That is why the Threat of substitutes ranges from low to moderate for Walmart. c) Threat of new entrant Walmart has a high threat of new entrant. Opening your own retail store is easy to achieve since it requires low to moderate capital to do so. The laws and policies here in United States of America is extremely supportive of any new businesses. Hence, it is not hard to enter a retail business. Online platform has taken retail businesses into whole new level. Having an online retail saves a lot of capital and labor cost and hence attract a lot of new entrants into a market. d) Bargaining power of Buyer Bargaining power of Buyer is low. It is because Walmart implements a Cost leadership low-cost strategy and has a comparable lower cost than its competitor. Switching a brand is cost ineffective to the customers since it is highly unlikely for them to get a product at a similar price in another store. Walmart appeals to a large number of populations who has a little or no influence over a brand. e) Bargaining power of supplier The bargaining power of supplier is low in case of Walmart. There is a high saturation of large number of suppliers in the market. Many suppliers would want to do business with Walmart since Walmart is the largest retailer and the number of people shopping at Walmart is comparatively high. Most of its supplier are small company that do not have a much power over Walmart. With so many suppliers wanting to be involved in the Walmart, the switching cost from one supplier to another is low for Walmart. External analysis can also be performed by using Macro-Environmental analysis. Micro Environmental analysis is a detailed analysis on Political, Social, Economic, Technological, Legal, and Environmental factor. Micro Environmental analysis helps to determine if those factors are a potential opportunity or a threat to the company. a) Political factor Political factor can both be threat and opportunity to Walmart. Any change in policy regarding foreign trade and business, increase or decrease in taxes and tariffs deeply affects Walmart’s economy. Political stability is equally important to Walmart and its manufacturer and supplier since unstable political situation might prevent them from meeting their standards and focusing on their operational goals. Political pressure on increasing the current wages is also another example that challenges Walmart’s low-cost strategy.

b) Social factor Social factor is another way to analyze consumer’s behavior, attitude, lifestyle, and culture that could possibly influence the growth and the economy of Walmart as a corporation. Social factor can be considered both opportunity and threat to the Walmart depending on how Walmart reacts to the recent change in trends and the cultural diversity. Some of the changes Walmart could implement towards its benefit could be responding towards new healthy lifestyle by stocking up with organic foods and vegetables in its stores, providing alternative healthy and organic foods full of nutrients than processed foods, understanding the culture of the place it is located at and implementing it in its stores to attract the customers and providing online shopping and delivery services especially to elderly people and people with disabilities. This can also help improve the brand recognition and can possibly increase the brand loyalty. c) Economic factor Economic change and stability around the world are another threat to the Walmart. Inflation around the world as a result, increases the producing cost of the Walmart. With the economic recession and the increase in the value of currency in comparison to U.S. dollar value, Walmart would no longer be able to keep up the low price for a long time. And even if it does maintain its relatively low-price, Walmart is likely to face thinner profit margin or even a loss. According to the annual report of Walmart, any economic factor that affects Walmart also affects its supplier and its manufacturers. The increase in cost of goods sold affects Walmart’s Cost Leadership Low-cost strategy. d) Technological factor Technology is a driving factor for most of the company including Walmart. Walmart should utilize social media platforms to promote the company and the proper use of ecommerce platform including online business activities such as shopping and shipping activities. Walmart is taking advantage of this opportunity by focusing more on ecommerce and self-checkout service in the store. According to the Annual Report, the total ecommerce sales was 11.6% of the total sales in U.S. Walmart is also trying to implement robotics and automated units to some of its store for store maintenance and online orders. e) Legal factor Walmart operates in 24 different countries and hence is subjected to many different law and regulations of each country. Legal factors such as laws regarding trade and business, taxes, Employment laws, minimum labor wages, food and safety regulations, customer data protection laws, foreign taxes and so on has great impact on the Walmart and its

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suppliers. Walmart is abided by these rules and Walmart is subjected to face consequences if it does not follow those rules. For example, Walmart was sued by its current and former employees for violating the employment act by not letting them sit while working. As a result, Walmart agreed to pay $65 millions to those employees. f) Environmental factor Environmental factors pertain to the company’s effort on preserving and promoting clean and pollution free environment and is well supported by the society. Customers are more likely to support the company that promotes green, sustainable, and pollution free environment. As a result, company branded as eco-friendly are more likely to receive positive feedback. Walmart should take advantage of this opportunity by focusing on environmental factors such as business sustainability trends and environmentally friendly products. Internal Analysis Internal Analysis is an analysis on company’s internal component. Internal analysis is performed by doing analysis on company’s strength and weaknesses, company’s core competencies, competitive advantage against its competitors, and the Financial statement analysis. a) Firm’s strength and weakness Some strengths of Walmart are as follows:  Walmart is a well-known retail store for its low prices. Most of the people around the world are familiar with the name “Walmart”. The company also have a strong brand loyalty.  The company also has a large scale of operation. The company seems to do well not only in grocery but also in clothes, household supplies, automotive and so on. The company has its ways to offer low prices to its customer in every operation it is involved in.  Walmart implements “economies of scales” where it produces large volume of products in minimum price. Walmart has a cost advantage over its competitor because its large size and its ability to produce large volume in low cost.  With modern technologies, Walmart is unstoppable with its supply chain. The company uses Just-in-time inventory system, and the company is really good at tracking and monitoring inventories that it is almost impossible to have an empty shelf of any products at Walmart. Some of the weaknesses of Walmart are as follows:

 Walmart does provide its employees with better benefits and incentives. The company lacks to provide proper healthcare system to its employees. The employees there must work under pressure and poor working conditions.  Some of the stores lack proper staffing.  Walmart has a high turnover rate.  Because of its low-price strategy, the company has low profit margin.  The company targets for the low-income customers or the customers who cares about the price more than a brand. The company fails to target the customer who cares about the quality more than the quantity of the product. That is why Walmart always has disadvantages over the premium retailers. b) Company core competencies Walmart has two strong core competencies that gives the company a competitive advantage over its competitor. They are:  Low price strategy and buying power Walmart offers relatively cheap low prices than other retailers. Walmart also has a buying power over its competitor. The size of the Walmart allows it to buy products in bulk at discounted price than its competitors. Walmart can also manufacture a large volume of products at a same time by keeping the cost low. This helps Walmart to keep the overall cost low.  Excellent logistic and supply chain Walmart has a great logistics and supply chain management. Walmart has over 140 distribution centers around the world which not only decreases costs, but also making it easier for the merchandise to get to the retail store in time. Walmart uses Just-in-time inventory system to keep track of its merchandise. Walmart is good at keeping its shelves full. c) Competitive advantage over its competitors  Walmart’s Brand image: Walmart has a strong brand image which is backed by loyal customers. Walmart is a home brand known to almost all the people in United states.  Distribution and supply chain: Walmart has a great efficient supply chain management. Walmart has 140 distribution centers over the world that helps Walmart to reduce costs and to transfer the product into the stores in time.  Cost Leadership strategy: Walmart has an effective Low-cost strategy. Walmart has a buying power over its suppliers and its competitors. Because of its large size,

Walmart has a financial strength to buy the products in bulk at a low price than its competitors. This allows Walmart to lower its selling price. Financial statement analysis We analyzed Walmart’s Annual report 2021 and found some results:  We found out that the net income for the year 2021 and the year 2020 was $13.150 billion and $14.881 billion respectively.  There was a significant decrease in net income by $1.731 billion in year 2021. This could be because of the COVID.  Walmart U.S. net sales totaled $370 billion for fiscal 2021, up about 8.6% from $341 billion in fiscal 2020. The increase in the total sale could be because of the ecommerce. It also could be because of the lift of the COVID ban and the availability of vaccine.  Greater concentration on ecommerce sales, online grocery sales was seen amid COVID. The total ecommerce sales accounted for 11.6% of total U.S net sales for fiscal year 2021. Analysis of business-level positioning strategy The business level positioning strategy analysis will highlight what the overall positioning of Walmart is, how it is supported by functional strategies, the influence Walmart has had towards competition, response towards competition, and the advantage the positioning strategy over competitors. Overall positioning of Walmart has been categorized into the low prices and customer centric. The majority of the public correlates Walmart to its “everyday low prices” philosophy. This philosophy was established as Sam Walton, the founder of Walmart took note that more profit could be made as sales could increase by 3 times by having lower prices compared to competitors. Another part of the positioning strategy would be the customer centric and how Walmart prioritizes the importance of customer service. This brand positioning was achieved by following the standard that employees need to create and maintain a relationship with customers by following a concept of thinking and acting like customers. The positioning strategies allows Walmart to provide value and low price to customers which allows Walmart to maintain cost leadership and customer loyalty. A functional strategy is a method in which a firm follows to achieve a corporate objective by maximizing resource productivity. Some functional strategies that businesses tend to use are financial, marketing, production, human resources, and research and development strategy. Out of these, there are 3 different functional strategies that support Walmart’s brand positioning: financial, human resources, and production strategy. Walmart’s financial strategy prioritizes long term cost leadership that has been developed by a successful long-term supply chain management and for providing convenient methods for customer to complete purchases such curbside pickup. The human resources strategy comes into play as one of Walmart’s main focuses is on customer service. It is noted that Walmart is using this strategy to improve customer service as an article published on Business Research Methodology shines a light upon a billion-dollar investment in 2015 towards associates in order to provide higher wages, more

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training, and to provide more opportunities, career wise within the company. Finally, the production strategy also supports Walmart’s brand positioning as Walmart continuously is looking for ways to improve products and services. This is achieved as Walmart adapts to consumer preferences, an example of this can be noted as Walmart is increasing inventory for organic produce “due to increasing level of health-consciousness of consumers.” The human resources and production strategies support the customer centric brand positioning strategy as these 2 strategies add value to the customer experience. On the other hand, Walmart’s financial strategy supports the low-price positioning strategy. Walmart’s positioning strategy has negatively and positively influenced its competitors but one must also recognize the responses Walmart has made towards competitors. Walmart has negatively influenced the competition due to its large sales volume. With more than 11,000 retail stores, the amount of sales volume Walmart has forced smaller firms to lower their wages and/or go out of business. Without focusing on the negative, Walmart also had a grand positive influence towards competition through the international market and competitive responses. As Walmart continues to expand and enter the international market, it has encouraged its competitors such as Amazon to do the same. Competitors are continuously attempting to adapt and make changes in order to be able to compete with Walmart. The competitive response is also a great influence as it encourages retailers in Brazil and Argentina put pressure on manufacturers, change in retail practice, and encourages competitors to adopt IT. Analysis of corporate-level strategy The corporate-level strategy analysis for Walmart will cover the international market Walmart has entered and the methods of entry. As this is addressed, it is essential to identify how it created additional value to Walmart. The international market entry from Walmart was made due to the intense amount of competition within the United States. This entry created additional value to Walmart as a whole as Walmart is not operating in 24 different countries. It is noted that this has added to Walmart as in 2021, Walmart international had total net sales of $121 billion, according to an article published by Statista Research Department in May 2021. The methods of entry into the international market consists of acquisition, mergers, and partnership. An example of acquisition can be seen in 1994 when Walmart targeted Woolco Discount Stores due to how high the market potential was. Walmart has also entered the international market by merging into the Brazilian retail sector. Walmart has done so by merging with Lojas Americanas and controlling 60% of the total joint venture, according to an article published in 2002 by Angela da Rocha and Luis Antonio Dib. The same article also shines a light upon the partnership method, specifically when Walmart purchased 6.1% of Seiyu Limited Share to respond to challenges in Japanese market. Considering Walmart’s vision statement “to make every day easier for busy families”, the methods of entry seem appropriate in order for Walmart to achieve its objective and follow the brand positioning strategy. Recommendations Walmart’s 2021 annual report pinpoints that one of the main challenges Walmart faces is foot traffic in stores. It seems that Walmart needs to work on maintaining that relationship with the customers, focus on the in-store pick-up service, and maintain its greatest strength which is

everyday low prices. By focusing on the in-store pick up service, it can assist with foot traffic as it gives consumer ease of ordering online and getting the item faster or since they are already physically at the store they may shop for more. It is also recommended for Walmart to always keep its low prices in stores, so it encourages customers to go to the store rather than shop online or go somewhere else. Both of these recommendations follow the customer centric branding strategy and will ensure a successful future.

Works Cited  Greenspan, Roberta. “Walmart Inc. Five Forces Analysis (Porter’s Model), Recommendations - Panmore Institute.” Panmore Institute , 22 Feb. 2019, panmore.com/walmart-five-forces-analysis-porters-model-case-study.  Walmart. “About Us.” Walmart.com , Walmart Corporate, 2021, corporate.walmart.com/our-story.  “Walmart Five Forces Analysis.” Notesmatic , 26 Feb. 2017, notesmatic.com/walmart- five-forces-analysis/.  Farooq, Umar. “Pestle Analysis of Walmart.” Marketingtutor.net , 2019, www.marketingtutor.net/pestle-analysis-of-walmart/.  “Walmart SWOT Analysis | In-Depth Overview to Retail Company.” Someka , 2 Feb. 2021, www.someka.net/blog/walmart-swot-analysis/.  “Walmart’s Core Competency - 656 Words | Bartleby.” Www.bartleby.com , www.bartleby.com/essay/Walmarts-Core-Competency-PKQVTRFMYRFS. Accessed 4 Dec. 2021.  “Wal-Mart Core Competencies Explained Free Essay Example.” StudyMoose , 30 Mar. 2017, studymoose.com/wal-mart-core-competencies-explained-essay. Accessed 4 Dec. 2021.  Grace, Christine LaFave. “Top Takeaways from Walmart's 2021 Annual Report.” Winsight Grocery Business , Winsight Grocery Business, 23 Apr. 2021, www.winsightgrocerybusiness.com/retailers/top-takeaways-walmarts-2021-annual- report.  Pratap, Abhijeet, and About Abhijeet PratapAbhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management. “Walmart's Business Strategy: A Case Study of Cost Leadership and Technological Innovation.” Notesmatic , 26 May 2020, notesmatic.com/walmarts-business-strategy-a-case-study-of- cost-leadership-and-technological-innovation/.  Dudovskiy, John. “Walmart Business Strategy and Competitive Advantage - Research- Methodology.” Walmart Business Strategy and Competitive Advantage , 28 Mar. 2016, research-methodology.net/walmart-business-strategy/.  Mohammed, Shah. “Brand Positioning Strategy -Walmart, an Example.” Brand Positioning Strategy -Walmart, An Example , Medium, 30 July 2020, shahmm.medium.com/brand-positioning-strategy-walmart-an-example-702d26271c7.  Statista. “Walmart International Sales by Country 2021.” Statista , 11 May 2021, www.statista.com/statistics/269416/sales-of-walmart-international-by-country/.  Rocha, Angela da, and Luis Antonio Dib. “The Entry of Wal‐Mart in Brazil and the Competitive Responses of Multinational and Domestic Firms.” International Journal of Retail & Distribution Management , MCB UP Ltd, 1 Jan. 2002, www.emerald.com/insight/content/doi/10.1108/09590550210415266/full/html.

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