Walmart Swot
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Findings
Strengths: Wal-Mart has great retail brand recognition. It values money saving ideas in all of their stores, and for the overall corporation. Wal-Mart is known for its convenience and a wide range of products all under one roof. In 2002 82% of all households in the US made a purchase at Wal-Mart. Half of all Americans visit a Wal-Mart at least once a month, and of those half one-third go once a week. Wal-Marts core strategy is to be the low cost leader. Wal-Marts competitive advantage is because they are the low cost leader. Wal-Mart commits to deliver quality products with the lowest possible price. Wal-Mart attains this in several ways; their strategy is to have multiple store formats for the different local environments, with a pledge to have every day low prices. They also carry a wide selection of products with a big percentage being name branded merchandise. They want to have the highest level of customer service for their customers. Their stores are “user friendly” store environments, where the goal is making the customers experience satisfactory for shopping at Wal-Mart. Innovative merchandising where displays are made in house and mass produced, thus saving them money and time, they can get their design out in thirty days. They also have a disciplined expansion into new geographical markets. They use a technique called the backward expansion, where they enter the smaller towns before they enter the bigger metropolitan areas. This was one of the most distinctive things about Wal-Mart. This helped keep advertising cost low for Wal-Mart because they had word of mouth advertising before they entered the national advertising arena, and when they did enter it the cost was spread to several different stores. This backward expansion also gives them cheaper prices on the store buildings.
Wal-Mart has four different store formats; they are Discount Stores, Super centers, Sams Clubs, and Neighborhood Markets. The discount stores represents the most stores as shown in exhibit one. The store formats are designed to have effective displays and maximize display space. The overall sales for Wal-Mart have grown significantly since 1962 to 2003. (See exhibit two). 16.7% of total sales in 2003 were due to international sales. Gross profit margins have been rising over the past four years with one pull back, seen in exhibit three and four. For the past several years Wal-Mart has been driving hard to expand its geographic reach. They have either been constructing new stores or acquiring other general merchandising stores. Wal-Mart stores in China are expecting to increase sales because of the booming economy there. In 2002 Wal-Mart bought a minority stake in Seiyu which is Japans fifth largest supermarket chain.
The company has a core competence involving its use of information technology to support its international logistics system for stores. All stores are hooked up to a centralized system. Example of this is each Wal-Mart stores utilities are controlled at the headquarters in Bentonville. Wal-Mart can look at how individual products are performing country-wide, and store-by-store at a glance. It has JIT ordering and delivery system where the average time a product sits in its distribution center is twelve hours. They are the global leader in automating and distribution centers and expediting the transfers of incoming shipments. Wal-Mart has shown continued success in their use in the IT department, with a system that allows managers to view point-of-sale information, and the possible use of RFID chips in the near future could potentially drive down costs even more.
Wal-Mart is the leader in cost effective supply chain management, where all retailers strive to obtain there supply chain structure. Wal-Mart has created synergy with their supply chain management. They are virtually the biggest customers of all their suppliers, which enables them to negotiate the lowest prices for the merchandise to supply their stores. They require all their suppliers to collaborate with them on how to make their business more cost efficient therefore reducing Wal-Marts overall cost at the same time. This has lead about two hundred suppliers to move close to Wal-Marts headquarters in Bentonville. Wal-Marts policy for foreign suppliers is to have them sign and post a list of Wal-Marts Ethics and policies up in there local language and in English in the warehouse in which the products are made. Wal-Mart has a special foreign audit committee that takes care of all the foreign suppliers to make sure they comply with Wal-Mart requirements. In 1989 Wal-Mart was the first ever retailer to pressure its venders to make products and packing supplies environmentally friendly.
The low cost leadership strategy has helped Wal-Mart to fulfill the market of costumers looking for quality goods at a bargain price, in turn has created a loyal and trustworthy customer base for the corporation. This was the market-penetration and market-development strategy that helped the company penetrate, and expand in its target markets. Wal-Mart is sort of protected from the industry competitors by its cost advantages, economies of scale. If the rivalry within the industry competes on price, Wal-Mart is withstanding better then other companies because of its lower overhead costs and advanced inventory system, which in turn they are able to offer prices about 14% lower then competitors. Wal-Mart is considered a “first mover” in the industry which gives it competitive advantage over the others in the industry. Wal-Marts shrinkage is only 1% whereas the industry is at 2%.
Wal-Mart has a focused strategy in place for human resource management and development. People are key to Wal-Marts business and they invest time and money in training people, and retaining a developing them. They sent every Wal-Mart manager to a specialized university aimed to develop the companys management capabilities.
Weakness: Size is Wal-Marts biggest weakness, because it is such a big company, they are not able to offer a wider variety of merchandise like a more specialized merchandiser that do tailor to the individual needs of its customers. Almost all flexibility is lost for the individual products. Size also plays a fact in control of the corporation. The larger an organization is the harder it is to change behaviors and the more bureaucratic it can become. Keeping up the corporate culture is harder to maintain. Corporate culture has a lot to do with turn over rate.
I would also say Wal-Mart has a high dependency on IT. So if something ever went wrong with their systems Wal-Mart would be hurt badly. This could cripple them and have an ever lasting affect on their business. Wal-Marts stores in other countries, the stores