Wal-Mart’s SWOT Analysis
SWOT refers to Strengths, Weaknesses, Opportunities and Threats. SWOT is usually used by management teams in identifying external and internal factors that have the possibility of affecting the future performance of a company (Faarup, 2010, p. 182-184). Wal-Mart is the largest retailer globally. It can employ SWOT in the analysis of results in order to improve performance while continuing its expansion across the world. Weaknesses and strengths focus on the internal factors that are identified via internal scanning. Threats and opportunities are usually identified via external factors’ analysis as well as industry analysis. The focus of this paper is on providing SWOT analysis that Wal-Mart can use in strategic planning while expanding globally.
The greatest strength of Wal-Mart is its operations’ scale. It is a leader in the market due to the position that it currently occupies as the largest retailer globally with different products. The company can use this strength in shifting product mix efficiently in order to satisfy the dynamic demands and therefore achieve more benefits from sales’ increase. Wal-Mart has high revenue as well as operating income that no closest competitor can match. With large-scale operations, this company has the ability to negotiate with suppliers so that they can supply their products at low prices. As such, this is a competitive advantage that the company can use in improving economic returns as well as market share. Offering products at low prices will attract more customers. Despite dominating the retail market in the United States, this company is still expanding operations globally at a rapid rate.
The low operations cost of Wal-Mart has made it possible for it to continue providing low prices to customers as compared to those of competitors within the same industry. Being a price leader, this company has attracted recurring and steady customers’ stream because they consider its products as being less costly. The overseas expansion strategy of Wal-Mart provides a staunch growth foundation. During the 2013 fiscal year, Wal-Mart generated 29.1 percent of its revenue from international operations (Wal-Mart Stores, 2014, p.6). The company’s overseas operations will enable it to increase its returns since it will be able to take advantage of emerging markets. The rapid small-store formats’ expansion in different markets has increased the competitive advantage of Wal-Mart is regional markets.
This company has high Information Systems’ competency and this has enabled it to realize significant savings in regards to cost since it is effective and efficient in tracking inventory levels, orders and sales among other important information. This has enhanced real-time business operations (Hills, Jones, & Schilling, 2014, p. 128-130). Instant access to this kind of information as well as quick analysis enable every store to make informed and timely decisions that include responding to the dynamics of the market as well as giving the company a better competitive advantage.
The labor relations of Wal-Mart have suffered adverse effects due to litigations. From 2009, Wal-Mart has faced several lawsuits and charges concerning labor relations. Wal-Mart has incurred over $1 billion as settlements expenses (Wal-Mart Stores, 2014, p. 7). The reputation of this company can be tarnished by such litigations leading to qualified and skilled employees’ shortage. This can affect its competitive advantage negatively in case the employees start asking for higher compensation in order to work for it. Skilled employees may also opt to work for its competitors. Allegations that were made in the past that the company was involved in corrupt deals or practices in advancing its interests within some markets can increase its exposure to serious liabilities that include fines, settlements, operations’ suspension or penalties. The malpractices can cause a severe damage in the company’s brand image while limiting its opportunities for growth. The high rates of turnover that Wal-Mart experienced can increase the operational costs because the company will have to engage in new employees’ training regularly.
Emerging markets that include Brazil, China and India have retail markets that are growing steadily. These have created new opportunities that Wal-Mart can exploit in order to enhance its revenue growth. This company has made an announcement that it has plans for more expansion within the new economies so that it can benefit from the steady growth of retail markets. Internet retailing is growing in different countries providing opportunities for Wal-Mart to serve more markets. In addition to direct sales, information dissemination via the website of this company has played an instrumental role of helping retailers increase sales. Currently, Wal-Mart has 10 e-commerce websites that it operates outside the United States. For example, the company has increased stake ownership in Yihaodian which is a Chinese e-commerce enterprise to 50% (Wal-Mart Stores, 2014, p. 9). This will help the company in leveraging on the expanding online market in China. Through online channels, the company will be able to penetrate into the newer markets at a rapid rate especially in places where retail stores establishments have limited expansion.
Wal-Mart will be able to increase profits and sales due to private label commodities’ acceptance. This is because there is a steady growth of the market for private label. Consumers prefer private label commodities that are relatively cheaper because they are more attractive as alternatives to the national brands whose prices are higher. Grocery products’ demand has been increasing tremendously over the recent past because of the emerging healthy eating trend. This is an opportunity that Wal-Mart can exploit by expanding grocery stores in order to increase revenues by benefiting from this worldwide trend. Wal-Mart ought to expand organizational diversity through the employment of locals in its stores overseas while expanding. This will enhance market opportunities because it will instill ownership or association’s sense among the locals and thereby increase clients’ base as well as revenues.
The labor costs of Wal-Mart have been increasing more so in the United States due to increased costs of healthcare and wages. Although the minimum hourly wages set by the federal government have been increasing (to $7.25 from $5.15 in 2010), most states like Washington have increased minimum wages further (to $9.19 from$9.04 in 2013) in response to the increased living costs (Wal-Mart Stores, 2014, p. 10-11). There is also intensifying competition that Wal-Mart is currently facing in its international and domestic markets. The worthy competitors of this company in U.S for instance include Target and Tesco. These offer general merchandise that are similar to those of Wal-Mart. Companies like WinCo Foods are eroding the competitive advantage that Wal-Mart has as the price leader because they buy products from factories and farms directly. The client base of Wal-Mart is continuously being invaded by non-traditional competitors including Amazon e-commerce enterprise. This is because more consumers now start shopping through online sites like Amazon so that they can find the most ideal prices. This competition is likely to damage the competitiveness of Wal-Mart causing a loss of the market share. Overseas, the company has political instability to deal with due to the status of its worldwide retailers. Therefore, governments can place barriers to the entry of Wal-Mart or expansion within their economies in order to protect local enterprises or industries.
Faarup, P. K. (2010). The marketing framework. Aarhus: Academica.
Hills, C., Jones, G., & Schilling, M. (2014). Strategic management theory: An integrated approach. New York: Cengage Learning.
Wal-Mart Stores. (2014, Jan. 17). Wal-Mart Stores, Inc. SWOT Analysis, 1-12. Retrieved from: http://eds.a.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=97bdd783-ec5d-4457-9e38-2ccf0d8f1e12%40sessionmgr4003&vid=1&hid=4210