Comprehensive SWOT Analysis of Walmart Inc- Evaluating Internal and External Factors for Competitive Advantage
Introduction
Walmart Inc. is a US-based retailer and wholesaler headquartered in Arkansas, USA. The company is unique for providing goods and services at relatively low prices compared to industry peers. Walmart operates under three business segments: Walmart US, Sam’s Club, and Walmart International (Walmart, 2021). Walmart’s US segment operates both physical and e-commerce brands that provide general merchandise. The international segment includes warehouse clubs, supermarkets, supercenters, cash and carry centers and hypermarkets. Finally, Sam’s Club’s business segment operates members-only warehouse clubs and online platforms. The company operates in 26 countries and has about 11,500 physical stores (Walmart, 2021). Furthermore, the company employs about 2.3 million associates globally, and it is the largest single employer in the US.
SWOT Diagram
| Strengths
Convenient locations Loyal customers Low pricing |
Weaknesses
Huge inventory holding No customer customization Part-time staffing Poor human resource management |
| Opportunities
Growing global market Promoting positive human labor laws Improving perception by the local community
|
Threats
Competition from Tesco and Amazon Adverse government policies in global markets Employee unions |
Strengths
Most of Walmart’s strengths are related to the company’s large size. The competitive advantages associated with Walmart’s size enable the company to withstand threats emanating from being a low-cost retailer (Nyarko, Wang & Annoh, n.p.). The company’s large organizational size means that commercial lenders are willing to provide capital, opening more expansion opportunities for the company. The large capital basket makes it easy for Walmart to pursue expansionary strategies.
Also, the company’s supply-chain management is crucial for its success. Walmart has an efficient supply chain system with few disruptive links (Nyarko, Wang & Annoh, n.p.). Even from the start, the company’s founder transported merchandise directly from manufacturers to Walmart stores. So innovative is the company that it came up with vendor-managed inventory, an initiative that enables its suppliers to manage inventory directly, also the company signs long-term deals whenever it identifies vendors. The vendors are then required to supply at the lowest prices and ensure there is never a shortage. Walmart also has a communication plan that enables them to communicate directly with suppliers to ensure undisrupted supply.
Walmart’s large size enables the company to pursue cost leadership in the market. By purchasing in large volumes, the company exploits economies of scale. Consequently, supplier discounts are passed to the final consumer through low prices, creating a competitive advantage.
Weaknesses
One of Walmart’s weaknesses is related to its overdependence on the US market. Even with over 11,500 stores worldwide, 4,700 of them are located in the US. Besides, revenue from the international market by 2020 was $120 billion, whereas the US market revenue stood at $341 billion (Alam, 2016). Walmart’s expansive global reach is yet to reflect on international markets revenue.
Besides, Walmart has some negative human resource management attributes. Among the issues that have tainted its image is the failure to provide comprehensive healthcare coverage for its employees. Most of Walmart’s employees are primarily poor and lack alternative healthcare coverage. Besides, Walmart’s cost reduction strategy is so ambitious that it negatively impacts workers’ wages. Walmart pays its employees the lowest compared to industry peers, and it has failed to abide by the $15 minimum wage requirement. There is little incentive for top talents to work in an organization with a poor human resource management record.
Walmart is also associated with a thin profit margin. Low-profit margins are a result of the company’s pursuit of cost leadership. That means the profits largely depend on sales volumes. Besides, Walmart lacks differential metrics in terms of organizational size and pricing. The result is a reduced competitive advantage and the likelihood of being copied by competitors.
Also, Walmart’s tendency to stock large inventory results in many market disadvantages. For instance, there is a likelihood of business dilution and possible losses. Besides, the quality of some products may deteriorate while on the shelves, a potential recipe for customer dissatisfaction (Nyarko, Wang & Annoh, n.p.). Large-scale stocking also means that the company pays little attention to customer needs; hence, some customers may lack preferred size options. Such customers may turn to alternative retailers.
Opportunities
There is a huge opportunity for market expansion in developing and middle-income countries. China, Brazil, India, Latin America, and parts of the Middle East offer the most significant potential (Huang & JIA, 2015). Apart from expanding Walmart’s market reach, these countries provide new business prospects, such as diversity, to help the company operate more efficiently than at home.
The company can also leverage its current poor employment relationship record and improve its practices. Any slight improvement can attract a better talent pool relative to other retail stores. Adopting more flexibility in the workplace will also bolster Walmart’s HR management performance.
The rising online retail sector in the US also holds immense promise for the company. As the online retail industry expands, the demand for in-store shopping is dropping. In response to this change, Walmart has closed several stores to focus on online shopping.
Threats
Walmart faces the threat of economic transformations in its different countries of operation. For instance, the Chinese government is on a mission to increase the value of its currency (Yuan) (Huang & JIA, 2015). That means that Walmart will pay its Chinese suppliers more, yet it acquires 80% of its merchandise from the same Chinese suppliers.
Besides, Walmart faces growing political resistance in the US. Local communities have a general feeling that about five neighboring retailers close down within one or two years wherever Walmart opens a store (Nyarko, Wang & Annoh, n.p.). The result is that Walmart ends up competing with itself, which causes local job losses. So entrenched is Walmart’s cannibalization, and sometimes at least 20% of every local retailer’s inventory in places where Walmart operates comes from Walmart stores.
Another threat relates to the growing concern about Walmart’s grocery stock. The company’s limited stock of health groceries will cause it to lose a clientele base (Nyarko, Wang & Annoh, n.p.). Besides, rivals such as Tesco and Amazon are moving to eliminate the price differential advantage enjoyed by Walmart. Once these advantages cease to exist, Walmart will lose its competitive advantage.
Conclusion
Walmart has lived through the changing local and global business environment to remain one of the world’s largest retailers. Walmart’s large operational size allows the company to enjoy the benefits of economies of scale, making it a cost leader in the industry. In the future, the retailer intends to expand its international market through mergers and partnerships. There is, however, a need for Walmart to address human resource management concerns to improve its reputation.
References
Alam, S. (2016). Financial Analysis of Retail Business Organization: A Case of Wal-Mart Stores, Inc (Doctoral dissertation, UNIVERSIDAD DE EXTREMADURA).
Huang, J., & JIA, Y. (2015). Wal-Mart development in the Chinese market: problem and countermeasures based on the enterprise culture and ethics. International Business and Management, 10(2), 11-15.
Ofori-Nyarko, N. S., Wang, F., & Annoh, W. O. SWOT ANALYSIS: WAL-MART STORES INC.
Walmart. (2021). About Us. Walmart.com; Walmart Corporate. https://corporate.walmart.com/our-story
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Question 
Select and research a company from the 2019 Fortune 500 list demonstrating a sustainable competitive advantage in the marketplace.
Evaluate the selected company’s sustainable competitive advantage using the SWOT analysis technique.
Comprehensive SWOT Analysis of Walmart Inc- Evaluating Internal and External Factors for Competitive Advantage
Write a 700- to 1,050-word modified SWOT analysis that includes the following:
An introduction with a detailed description of the company
A SWOT analysis diagram that includes strengths, weaknesses, opportunities, and threats
An evaluation of how specific internal factors (strengths and/or weaknesses) support and/or promote a competitive advantage; examples may include:
Financial, physical, or human resources
Access to natural resources, trademarks, patents, or copyrights
Current processes (employee programs or software systems)
An evaluation of how specific external factors (opportunities and/or threats) support and/or promote a competitive advantage; examples may include:
Market trends (new products or technology advancements)
Economic trends (local and/or global)
Demographics
Regulations (political, environmental, or economic)
Conclusion with an evaluation of how the company has retained its competitive advantage
Include APA-formatted in-text citations and a reference page with at least 2 sources. Note: You may include your textbook as 1 of the sources.