SWOT Analysis of Walmart

Published June 21, 2021 | Author: PenMyPaper

Key Points

• The strength of Amazon relies on its strong financial status, high brand equity and high brand awareness.
• Its weaknesses can be found in its imitable business model, sub-par customer experience and high employee turnover.
• Amazon has the opportunity for expansion into the e-commerce sector and diversification into unrelated service sectors.
• The company faces threats from steep competition and, political and economic environment.

Walmart is an American multi-brand retailer, which operates in 27 countries. At present, the company holds the leadership position in global retail sector, with a revenue of USD 573 billion . Walmart is best known for its massive collection of products, sold from its retail outlets at discounted prices. The success of Walmart is attributed to its rapid expansion to cater to as many customers as possible. According to our essay writer, Walmart is one of the most commonly researched organizations by business school students. In this article, we have conducted an in-depth SWOT analysis of Walmart, in order to analyze the internal and external factors that influence its business venture. The internal factors cover the strengths and weaknesses, whereas the external factors cover the opportunities and threats of the company.

Walmart SWOT Analysis

Strengths

The strength of Walmart primarily comes from its financial status. Currently, it is the highest revenue generating company in the entire world, with a recorded revenue of USD 573 billion. Its financial prowess allows it to adopt new marketing strategies, that can foster better competitive advantage. Moreover, the company has sufficient financial capital to expand into almost any market in the world, thereby catering a much larger customer base.

It should also be noted that Walmart has a strong and well-established brand image. The company was established during the mid-1900s, has since expanded into 27 countries. As a result, Walmart has developed a global brand, which can be leveraged to draw in more customers. In the year 2020, the brand value of Walmart has been recorded to be USD 77. 52 billion, which is significant increase from USD 67.87 billion in the previous year. This indicates that the company has built a strong brand equity, which enables Walmart to earn more revenue.

The strength of the company also lies in its gargantuan infrastructure. Presently, Walmart operates with 11,500 retail outlets under 56 different sub-brands, run by 2.2 million employees worldwide. This allows the company to serve a massive number of customers in its target market, which is reflected in its high revenue generation. Moreover, it also helps the company to strengthen its presence in its existing market.

Finally, it should be noted that Walmart is best known for its pricing strategies. Since, it is a multi-brand retailer, the company has very little to differentiate itself from other market players, apart from pricing. Walmart sells a wide range of products at significantly lower prices, which is its primary value proposition. The company takes the advantage of economies of scale, where it procures its inventories in massive volumes and sells them to a large number of customers, at a lower price.

Weakness

Walmart is solely focused on providing a large variety of products at a much lower price than its competitors. In order to achieve this low pricing, the company had to cut a lot of corners. First of all, Walmart follows a no-frills shopping experience, with minimal investments on creating a decent ambiance for the customers. This as a result, it can have a negative impact on service quality and eventually the shopping experience.

The business model of the company is highly imitable and can be replicated by just about anyone. One can find the same weakness in the SWOT analysis Amazon as well. Walmart does not really have a differentiating factor of its own which can help in retaining customers. Other market players like Costco and Walgreens offer identical value propositions, including the low pricing approach. The lack of differentiation further pushes the company to lower its prices in order to attract more customers and face the competitive threats. This in turn can further deteriorate the service quality of the firm.

The cost-cutting practices of Walmart has exhibited severely negative impacts on its employees. The Walmart has often faced controversies regarding poor pay packages of its employees. Moreover, it has also been alleged that the company provides poor work environment with no initiatives to take care of the interests of the employees. The poor treatment of the employees has led to high degree of turnover for the company, which it eventually reflected in the poor service quality.

Opportunities

Walmart has a significant opportunity for expansion in the e-commerce sector. The global e-commerce industry has grown significantly in the past half a decade and is forecasted to grow even further. More customers are preferring to purchase their products online, owing to added convenience. Walmart can leverage this market trend and focus on expanding its online presence further. A strategic promotion of Starbucks implies a good example here. Moreover, it has been also found that the Asian market has significant potential for a company like Walmart. The Asian markets have exhibited rapid growth in e-commerce sector in recent past, so Walmart should take advantage of this growth and invest for its expansion in the Asian market, especially with its online retail platform.

As mentioned earlier, the company lacks differentiation. Even though it has a large number of self-owned brands, none of them offers a distinct differentiation to attract the customers. However, the company can choose to introduce some premium brands which focus on quality, rather than just offering cheap deals. The introduction of these premium brands can help the company to reshape its brand image as a company which caters to every demographic groups, and not just the budget conscious ones.

The company has been found to have faced significant backlash due to its poor employee treatment and sub-standard service quality. Walmart has the opportunity to automate some of its supply chain, in order to reduce its dependence on human workforce. Not only will it allow the company to improve its services, but also it will help in improving its brand image. For example, using automated robots to handle its warehouse and inventory management can be quite beneficial for the company.

Walmart also has significant growth opportunity by diversifying into the service sector. Currently the company only operates in the retail sector, however expanding into other unrelated areas through diversification can bring new opportunities for growth. It is suggested that Walmart should enter into the digital media streaming sector to compete with Amazon. How about including this in your research paper conclusion if writing about the possibilities of Walmart expansion? This sector has shown promising trends over the recent years. Moreover, Walmart has the necessary financial capacity to diversify into different industries.

Threats

The most concerning threat for Walmart is the threat of competition. The global retail sector is populated with a number of well-established market players. Each of which seek to offer identical value propositions, while adding their own differentiation as much as possible. Companies like Costco, Kroger, Walgreens, Carrefour, Aldi, among many others pose severe competition for the retail giant. The presence of these firms can significantly bottleneck the sales volume of Walmart, which can be quite concerning in the long run.

(Source: Statista)

Walmart also faces significant threat from the political environment in its target markets. Since the company operates in several international markets, therefore its business operations largely dependent political relationship between the home and host countries. Any political turmoil can have a significant effect on its business operations. Moreover, it should also be noted that sudden changes in the business laws, regulations and policies in the host market can also have a severe negative impact on the company.

Companies like Walmart face the issue of low sales volume, during recessionary periods. People tend to spend less and only prefer to spend on bare essentials. Thus, sudden changes in the economic conditions of the target markets can have a significant impact on the business venture of the company.

Finally, it should be noted that Walmart has faced backlash from local small business unions, due to their predatory pricing. The local unions have alleged that the company and their business strategies are not sustainable for the community, as it can have detrimental effects on local small business owners.

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