Since Sam Walton opened his first store in 1962, Walmart has grown into a global retailer with more than 4,000 store in the United States and more than 6,000 internationally. Walmart is comprised of three business segments, Walmart US, Walmart International and Sam’s Club. Walmart Global eCommerce works across all three segments. Walmart’s mission statement “We save people money so they can live better”, is not indicative of where its strategic focus areas are, but it does sound good for the average customer who has a limited budget.
This mission statement leads directly into Walmart Global eCommerce goals which include combining online, social innovations with physical stores to give consumers “anywhere, anytime shopping experience” in addition to its organizational sustainability goal of creating zero waste, using only sustainable energy and selling products that sustain the environment which is important to all of Walmart’s segments including eCommerce.
Walmart’s overall objective is to deliver shareholder value by increasing earnings per share, returns and maintaining strong stable returns on investment. According to Walmart CEO, Mike Duke, Walmart’s strategic focus areas are: •Making sure the company has the best retail talent at every level of the organization by recruiting, developing and retaining the best associates;
•Delivering on the productivity loop that enables Walmart to operate for less so the company can drive prices even lower for its customers •Being even more disciplined about operating expenses and capital spending; •Investing to serve more customers globally and accelerating the vision of anytime, anywhere access by bringing together best-in-class online, mobile and social capabilities and our more than 10,700 stores; and •Benefiting our communities and having a world class compliance organization. Walmart has been a giant of the traditional brick and mortar retailers, having topped the Fortune 500 list on more than one occasion.
Walmart is moving from a traditional brick and mortar discount retailer to a click and mortar discount retailer as it tries to capture the growing electronic retailing (etailing) opportunities. According to CNN Money, Walmart plans to become an online juggernaut, but its online business numbers have been disappointing. According to Business Insider, Walmart Global eCommerce has come up with a plan to do eCommerce right by using the following strategies: •Walmart began recruiting top Silicon Valley talent and acquiring start-ups last year. •Walmart is investing in the “socialgifting” market.
•The retailer got a better search engine.•Walmart is trying to lead the charge in same-day shipping. •Walmart is investing like crazy in its mobile app. While Walmart’s strategies have lead them to overall very good profitability in the past, their eCommerce is struggling against Amazon, an eCommerce giant, and other traditional retailers who are moving to capture customers that are turning to online purchases. Walmart appears to be moving in the right direction with its mobile application, with Smartphone sales having outpaced personal computer sales in 2011. Walmart Global eCommerce will need review and tailor its value chains in order to comprehensively differentiate itself from other click and mortar businesses.
As 2014 approaches Walmart will face several issues/problems which include: Customers who can access competitor prices online when shopping in Walmart; and finding ways to successfully break into the e-tailing market which is a primarily untapped, rapidly growing market. The SWOT analysis will look at Walmart Global eCommerce as it attempts to move definitely into eCommerce while supporting all Walmart’s traditional brick and mortar businesses. Since Walmart Global eCommerce is responsible for all online and mobile innovation, this SWOT analysis will include issues pertaining to all of Walmart, but will pay particular attention to the eCommerce aspect. Stakeholder Analysis
Walmart Stakeholders include the stockholders, executives, employees, suppliers, customers, non-profit groups, non-governmental organization, the communities that Walmart serves, online retailers, brick and mortar retailers, labour unions, and the government (politicians). These stakeholders can be divided into two separate groups: market and non-market stakeholders. Market stakeholder are those who have an economic stake in what and how the company does, whereas non-market stakeholders have a non-economic or political stake. Market Stakeholders
Walmart shareholders are a market stakeholder who want a return on their investment in Walmart. Between 2009 and 2013 more than 60 billion dollars was returned to shareholders through dividends and share repurchases. Walmart executives, like shareholders, have an economic stake in what Walmart, since many receive stock options. Although employees may purchase stock options, they are a market stakeholder given that they rely on Walmart for their income. Many of Walmart’s suppliers rely heavily on Walmart as a buyer of their goods, since Walmart is the largest retailer in the US and is growing internationally as well.
Customers rely on Walmart to provide “Every Day Low Prices” which will only continue if Walmart performs well. Non-profit organizations have an economic stake in Walmart as many of these organizations rely on funding provided by the Walmart Foundation (for example the “Fighting Hunger Together” program). Communities that are served by Walmart are also an important stakeholder: these communities rely on Walmart to employ its citizens and provides goods for purchase at “Every Day Low Prices”. Online/brick and mortar retailers have a unique stake in how well Walmart does given the potential of Walmart impacting their sales Non-Market Stakeholders
Labour Unions play an enormous political role in Walmart. Walmart has been criticized in the news on more than one occasion with regards to fighting with labour unions in their stores and/or mistreating union members. Small retailers and/or labour unions may petition their government politicians to prevent Walmart from moving into their district. Governance
Walmart is governed by three basic beliefs that support a business integrity which include: Service to customers; Respect for the individual; and Striving for excellence. Walmart strives to be honest by telling the truth and keeping their word, be fair by using their business influence appropriately and creating an open environment for raising questions and concerns, be objective by making decisions based on Walmart’s interests, rather than personal interests, and by avoiding even the appearance of impropriety. Walmart has a Global Ethics Office which is responsible for promoting Walmart’s culture of integrity. This includes developing and upholding their policies for ethical behavior for all their stakeholders everywhere they operate. Corporate Social Responsibility (CSR)
Walmart believes that it has an obligation to lead when it comes to CSR. Walmart is committed to using renewable energy, demonstrated by ensuring 21 percent of its electricity globally comes from renewable energy. Walmart created the Walmart Foundation which is responsible for many of Walmart’s CSR projects. The Walmart Foundation has a program in place to empower women around the world through training and career opportunities. The Walmart Foundation also gives money to support local organizations throughout the world. Value Chain Analysis – Walmart
The Figure can of Walmart’s Value Chain Analysis can be found at Annex A. Human Resources (HR)Walmart’s HR practices are based on communication which is clear, concise and relates Walmart’s principles, high expectations and ethics. Walmart provides a comprehensive Health and Well-Being program. There is room to grow from a store associate to manager. These benefits come at a cost, which Walmart has tried to decrease by ensuring more employees are part-time and, therefore, not entitled to the benefits. Technology
Technology integration is one of the primary focuses of Walmart, having played a vital role in its success. Walmart was one of the first retailers to use bar codes. Walmart also employs a Point of Sales (POS) system which is used to guide re-stocking. Walmart’s IT systems have been built to integrate prices, costs and sales in order to lower overall cost and increase profit across the world. Technology has permitted Walmart to ensure an effective and efficient supply chain that it leverages to provide products at low prices that it promises to customers. Walmart Global eCommerce is aggressively growing its technology infrastructure to become a leader in eCommerce. Infrastructure – Real Estate
Walmart makes a concerted effort to opens its stores and warehouses in ideal locations support its “hub and spoke” arrangement which support its brick and mortar stores. These stores and warehouses are supporting Walmart Global eCommerce, since this infrastructure had not been previously built to support it.
ProcurementWalmart deals direct with manufacturers to leverage its buying power to obtain the best price possible. Under scrutiny in the past, Walmart has moved quickly to have its suppliers’ manufacturing, subcontracting and packaging facilities follow standards which are outlined in its Standards for Suppliers.
These standards include Compliance with Laws, Voluntary Labour (Slave, child, underage, forced, bonded, or indentured labour will not be tolerated.), Labour Hours, Compensation, Freedom of Association and Collective Bargaining, Health and Safety, Dormitories and Canteen, Environment, Gifts and Entertainment, Conflicts of Interest, Anti-Corruption, and Financial Integrity. Walmart has put in place a Supply Chain Capacity Building program (SCCB).
The SCCB program components vary from half-day group training sessions to several months of one-on-one engagement with suppliers and factories. Walmart also ensures that the employees of its suppliers have the ability to report violations. All reports are directed to Walmart’s Global Ethics Office, where they are referred for investigation and corrective action if required. Primary Activities
Inbound and Outbound Logistics
These have been included together from an eCommerce perspective. Walmart has an enhanced inbound and outbound logistics system, although this has been problematic for Walmart Global eCommerce, it is working on resolving this issue so it can leverage Walmart’s brick and mortar capabilities. Walmart has adopted the concepts of distribution centers and “hub and spoke” arrangements. It is this “hub and spoke” arrangement which permits stores to effectively keep inventory levels in check while reducing transportation costs in addition to cross-docking. Walmart is always searching for ways to do things cheaper, faster which has more reliable logistics systems by implementing methods such as cross docking systems.
Walmart operates their own logistics system, however Walmart Global eCommerce had to use third party warehouses in order to expedite its business. Walmart is remedying the situation by building warehouses to accommodate its eCommerce business. These practices will not only help Walmart reduce expenses, but also give it more control and flexibility. Operations
Based on Walmart’s Mission statement, Walmart’s goal is to offer a wide range of products at low prices so people can live better. It carries nationally branded products, its own Great Value brand and other private label products tailored to local demand. Walmart has continuously expanded the brands it offers to meet various customer needs which include popular upscale brands such as Apple, and Sony. Walmart’s operational structure has decentralized store management which permits store managers to make decisions relating to product range and pricing. Marketing and Sales
Walmart’s “Every Day Low Prices” provides appeal to its customers, because it permits customers to know that they can buy products at the lowest price all the time. Once criticized for its ethical sourcing and environmental sustainability, Walmart’s annual report affirms dedication and commitment to ethical sourcing and environmental sustainability. Customer Service
Walmart tries to focus on providing customers with the best experience whether they are in store or online. In store, a Walmart associate greets each customer as they arrive, however this type of customer service has not always worked in the past. Walmart strives to have a customer oriented workforce who are motivated and believe in Walmart’s culture. Walmart could not successfully integrate into Germany, since Walmart’s American overtly friendly culture could not be successfully integrated with Germany’s very reserved culture.
SummaryIt is impossible to look at Walmart Global eCommerce without looking at Walmart, since Walmart Global eCommerce leads all online and mobile innovations across all Walmart segments. Although doing well financially, several business news agencies have noted that Walmart is stumbling in eCommerce market as it attempts to adapt its click and mortar business strategies to its eCommerce. It appears that Walmart is attempting to take on Amazon, the king of online businesses, in eCommerce. This means that Walmart.com, started in 2000, is playing catch up, and it is only in the last few years that Walmart has invested heavily in its eCommerce.
Walmart Global eCommerce is run as a distinct business, with its own headquarters, CEO and buyers who buy items specifically for its website. Although Walmart is known as pioneering the supply chain, it has not been overly successfully in imitating Amazon’s supply chain management.
Walmart has tried to leverage the same supply chain as its retail stores in addition to third party warehouses, which has resulted in additional costs for delivery. Amazon’s supply chain, which uses robotic assistants to help fill orders along with warehouses that are dedicated to filling orders, has permitted Amazon to rule eCommerce with ability to deliver products to home for less. One strategy that Walmart is investing in are lockers which were initially introduced by Bufferbox.
Walmart is not alone in adapting this strategy; Amazon is also using this in order to get orders into the hands of its customers more quickly, however Walmart will be able to leverage the over 10,000 stores globally to place lockers which are close to customers. In order to understand Walmart, it is important to look at its review its Value Chain in Annex A, in conjunction with Porter’s Five Forces Analysis in Annex B, PESTEL Analysis in Annex C, SWOT Analysis in Annex D and TOWS in Annex E. Recommendation
It is recommended that Walmart Global eCommerce continue on its current path of @Walmartlabs developing new technology which will enhance a customer’s online experience Walmart and Walmart Global eCommerce to be sensitive to the culture of different countries as it expands globally, and the challenges that comes with each country it moves into. It is also recommended that Walmart Global eCommerce continue to leverage Walmart’s strong brand image while continuing to add differentiated products at “Every Day Low Prices”.
It is further recommended that Walmart Global eCommerce continue to lead all online and mobile innovation for Walmart to ensure that no one segment will fall behind. It is essential that Walmart address HR issues that have the potential to impact its bottom line
Walmart Value Chain AnalysisPorter’s Five Forces Analysis
PESTEL AnalysisPolitical factors: Walmart is currently operates in 27 countries under 69 different banners. Walmart must follow government rules and regulations in each of its host countries. Political conditions that Walmart faces in its host countries include political instability, economic conditions, currency regulations, legal and regulation constraints, tax systems, etc. Economic factors: Economic condition within host countries has the potential to dramatically impact Walmart. Walmart has faced high inflation rates and currency devaluations.
In US and Canada, Walmart is dealing with the challenge of higher fuel and energy costs, inflation, high levels of unemployment, excessively high consumer debt, and high tax rates. The global economic slowdown has hit many companies including Walmart. Social factors: Walmart’s international operations must operate according to local culture of its host countries. As the world becomes more conscious of child labour, unsafe working conditions.
Consumers are demanding that companies be cognizant of where and how their products are produced. This has been made very evident after recent fire/building collapses in the garment industry. Technological factors: Technology has an enormous impact on many businesses, Walmart included. Walmart must continue to invest in Research & Development activities, and automation if it wishes to remain competitive Walmart has recently invested heavily in its eCommerce, so it can compete with the likes of Amazon Ecological factors: Previously criticized for its company’s view on sustainable resources Walmart is moving to become more sustainable. In 2008, Walmart de Mexico opened Plaza Ecologica Ciudad Jardin, located in former Neza 1 dump, in the municipality of Netzahualcoyotl, State of Mexico.
The mall has state-of-the-art technology to save energy and water. Legal factors: Walmart Global Compliance Action Steps. Walmart is an international company, therefore it is addressing 14 compliance subject matters in every market. Every country also has compliance subject matters that are specific to it, but the following 14 areas are common everywhere Walmart does business: anti-corruption, food safety, anti-money laundering, antitrust, pharmacy, labor & employment, environment, privacy, consumer protection, licenses & permits, health & safety, trade, product safety, and ethical sourcing.
SWOT AnalysisStrengthsWeaknesses•Enormous scale of operations which permits it to leverage its buying power. Operates internationally in 27 countries • Strong brand image•Supply chain with integrated technology (inbound and outbound logistics) which enables it to operate effectively and efficiently (i.e. cross docking). In addition Walmart is working closely with its suppliers to maintain an enhanced global standard •Walmart Global E-Business leads all online and mobile innovation •Provides a diversified range of products and services including high end brands (Apple, Sony, etc) •Customer loyalty
•Strong financial performance even during the global recession •Its people – a very strong culture and values that are shared among associates at all levels. A focused human resource management and development strategy which provides benefits. Walmart invests time and money in training its employees •Walmart is a market leader with regards to cost leadership which permits to offer products at much lower prices
•Walmart has changed its store format to include four formats: Supercenters, Discount stores, Neighborhood Markets and Express stores which has allowed Walmart in addition to eCommerce. These smaller format stores have allowed Walmart to penetrate urban centers which it did not have a presence•High employee turnover •Walmart Global E-Business has not been able to effectively leverage Walmart’s brick and Mortar supply chain •Price sensitive customers
•Unlike shopping in a brick and mortar store, customers must wait to receive their goods, goods can be expensive to ship to customers •Security and fraud are common for eCommerce which makes some customers reluctant to use credit cards online •Customers still prefer to look at items in a store before purchasing •As a global retailer, Walmart has the potential to be weaker in some areas due to its huge span of control •It is not focused in one specific area, therefore it is not as focused as some its competitors •Although growing internationally, Walmart is very reliant on its US Segment •Reputation – Negative Publicity (labour related lawsuits).
Although Walmart has worked hard to change its reputation on environment sustainability, diversity, labour relations, and its ethical sourcing, but it has been slow to turn around in the media •Walmart is lagging behind its competitors in eCommerce
•Walmart US culture cannot be easily imposed on other countries. •Walmart USA must be careful that its current expansion plans do not begin to cannibalize sales •Walmart is trailing its eCommerce competitors
OpportunitiesThreats•Walmart has been slowly moved into developing economies including Mexico, South Africa and Brazil in addition to China, and India. It is expected that customers in these countries will move from manufacturing most of Walmart’s goods to purchasing them. This will permit Walmart’s income to grow as it enters more of these companies both through brick and mortar and eCommerce.
•@WalmartLabs team has been busy delivering the next generation of commerce combining online, mobile and stores to let customers shop when, where and how they want. •@WalmartLabs is expanding their team to continue creating best-in-class eCommerce technologies •Walmart Global eCommerce is aggressively growing its technology infrastructure in order to be a leader in eCommerce •Social media sites provide free or low-cost promotions
•Walmart is investing in the “social gifting” market•Walmart is working closely with apple to create a mobile application which will make a customer’s checkout experience much easier•Walmart has moved from having full time employees to having many part time employees to get around providing benefits to full time employees
•There is a big push to increase the minimum wage and benefits available to part time and full time workers •Low barriers to entry are a constant threat in eCommerce. Anyone can have an eCommerce business. People can sell items via Facebook or eBay without the need to have their own websites •Social media sites provide free or low-cost promotions
•All eCommerce merchants are competing with Amazon and its successfulshipping program. Amazon is the Goliath of eCommerce •Walmart offers many of the same products that its competitors do •High fuel, currency fluctuations and inflation costs
•Global recession•Cultural barriers
TOWS AnalysisExternal Opportunities•Walmart has been slowly moved into developing economies including Mexico, South Africa and Brazil in addition to China, and India. It is expected that customers in these countries will move from manufacturing most of Walmart’s goods to purchasing them •ECommerce is growing exponentiallyExternal Threats
•Cultural barriers•Same day shipping•There is a big push to increase the minimum wage and benefits available to part time and full time workers •Security and fraud are common for eCommerce which makes some customers reluctant to use credit cards online
Strengths/Opportunities•Throughout the economic slowdown disposable income was reduced. Walmart was able to gain/retain customer’s loyalty by offering products at affordable prices •As online shopping has grown more prevalent, Walmart has allowed customers to order online using the most current technology •Walmart is working to create an application to find appropriate gifts for friends using information found on their social media pages
•Walmart Global eCommerce must develop software which will prevent fraud and provide online security for customers which will enhance customers online experienceWeakness/Opportunities •Customers can look at items in a retail store before purchasing then either purchase in store or via smartphone while in the store •All eCommerce merchants are competing with Amazon and its successful shipping program.
Walmart retail stores permit customers to order online and pick up in stores reducing shipping costs •Security and fraud are common for eCommerce which makes some customers reluctant to use credit cards online @Walmartlabs can develop software to minimize the chances of security and fraud •Walmart Global E-Business has not been able to effectively leverage Walmart’s brick and Mortar supply chain. Walmart Global eCommerce must build a supply chain which is comparable to Walmart or find a means to leverage Walmart’s supply chain •Walmart US culture cannot be easily imposed on other countries. Walmart should hire local specialists to advise Walmart as it expands into new countries Internal Strengths
•Walmart Global E-Business leads all online and mobile innovation for Walmart •Strong brand image •Strong financial performance even during the global recession •Customer loyalty and low prices •Walmart is investing in the “social gifting” market •@Walmartlabs is developing technology to improve customers online experience •Walmart has an enhanced supply chain
Internal Weaknesses•Walmart is lagging behind its competitors in eCommerce•Walmart global eCommerce does not necessarily offer the same products that its retails stores do •As a global retailer, Walmart has the potential to be weaker in some areas due to its huge span of control •Walmart US culture cannot be easily imposed on other countriesStrengths/Threats •Although Walmart has a strong brand image, it faces competition from its rivals. Walmart can avoid this by selling differentiated products at low prices
•Customers prefer to receive their purchased good quickly. Walmart Global eCommerce can leverage Walmart retail store convenient locations to allow customers to pick up their orders quickly
Weaknesses/Threats•Walmart has had problems adapting its culture as it enters foreign markets, failing to adapt its culture to match foreign markets could be disastrous •As a global retailer, Walmart has the potential to be weaker in some areas due to its huge span of control. Walmart has divided its business into three separate segments. Walmart Global eCommerce works across all three segments