Wal Mart Swot Analysis

Wal-Mart Stores, Inc. was started by Sam Walton in Newport, Arkansas in 1946 in an effort to “help people save money so they can live better” and was achieved by keeping sales prices lower than his competitors by reducing his profit margin. From this simple concept the company has grown to nearly 3000 stores in 14 countries and is the world’s largest company in terms of revenue bringing in a staggering average of $401 billion annually. In addition to the Wal-Mart supercenters you now have the Wal-Mart neighborhood markets as well as Sam’s clubs that have begun to pop up all over since 1984.

The ability to offer value and service to customers has largely determined their competitive position within the retail industry. There are many programs that are in place to meet the high competitive pressures within the retail industry that are the cornerstone of the Wal-Mart philosophy and are as follows: * Every Day Low Prices (“EDLP”) – the pricing philosophy under which items are priced at a low price every day so that the customers trust that the prices will not change frequently within promotional activity. *

Roll backs – the commitment to pass continually internal and external cost savings on to the customer by lowering prices on selected goods. * Store Within a Store – a program to provide accountability to assistant managers and department managers as to merchandise planning and overall department performance. * Store of the Community – a program to ensure that the merchandise assortment in a particular store fits the demographic needs of the local community in which that store is located. (www.sec.gov/Archives/edgar/data/104169/000119312506066792/d10k.htm, 2006)

The strengths of Wal-Mart are abundant in number. You can find positive points about every aspect of business conducted. In one store they offer a huge selection of goods at a very competitive, if not the best, prices in a one stop store. Because of their size they can get huge discounts from suppliers and pass these savings on to the customers. They also manufacture their own branded goods as well as supply goods from local suppliers and other major brands. A focused strategy is in place for human resource management and development.

People are the cornerstone of Wal-Mart’s success and it invests time and money in training, developing, and retaining them. While the company is a perennial powerhouse there are also a few things you have to make sure that you don’t overlook. Controlling such a huge organization is a huge task and in particular managing over 2.1 million employees. Suppliers are always under pressure with price and their ability to supply when required to do so. Low prices often lead the customer to be concerned about the quality of the goods they are receiving but some concern is offset by the satisfaction guarantees offered.

The sheer variety of products offered may limit the flexibility in comparison to some of its more focused competitors. The opportunities that present themselves are seemingly endless in terms of the markets that remain untapped. Expansion into other countries and forming partnerships to enter these countries is probably the main opportunity. Taking over companies overseas is also possible. Home delivery of orders placed through the internet is a big opportunity and allows an even more convenient shopping experience than ever before.

The idea of Wal-Mart convenience stores is a strong possibility and would allow them to overcome local objections and increased travel costs. The biggest opportunity would have to be the fact that our country is in the middle of a recession and as we all know in times of recession people often take the best value at the lowest price which always brings Wal-Mart to the forefront of shopping once again. The threats that face the company are as follows:

Local competing vendors hate the possible arrival of Wal-Mart and a lot of opposition usually occurs. In Europe the expansion of the German retailers, Aldi and Lidl, is growing fast. These companies offer limited stock but are local and cheap. They use efficiency when running with only 1000 or so stock items against the normal 20,000 to 30,000 items in Wal-Mart. Because Wal-Mart is so successful, they are open to attack on any ethical stance such as low pay, poor work conditions, and the supply of goods from cheap labor countries.

Any large business has a group of individuals that are involved/invested in the furthering success of the company and they are referred to as stakeholders: Internal stakeholders include: all stockholders, the CEO, executives, and employees.

The external stakeholders include: customers, communities/public, government and politicians, and suppliers. When you are looking at the stakeholders and trying to figure out if their needs are being met you basically want to look at three points:(1) Are they making a profit? (2) Are they doing it ethically? (3) Is expansion occurring? As far as the profits go you can’t help but see that the stakeholder’s needs are definitely being met as the profits have continued to increase year by year in spite of being in a recession. When it comes to the ethics of the company I would have to say that you can argue both sides.

They employ over 2.1 million people and spend lots of time and money developing employees. On the other hand if you look at the average pay of the everyday worker its less than what is needed to be considered at the poverty level in the U.S. which makes it possible for them to receive such state assisted aid as food stamps, medical assistance, and other state and federal assistance which the taxpayers are paying for. So I do believe they are being ethical but definitely have room for improvement when it comes to average pay of the average employee.

If you look at the expansion of Wal-Mart in the past years as well as the opportunities for expansion in the years to come; the facts are staggering. They have further cornered the market with the creation of Sam’s Club which offers wholesale style shopping allowing for even lower costs and have recently been looking into starting Wal-Mart style convenient stores that could be popping up on every street corner and prove to be a worthy adversary for such giants as CVS/Walgreens in the convenient store market. Strengths| Weaknesses|

1. Loyal customers.| 1. Carry large inventories.| 2. Great pricing.| 2. Stopped buying America.| 3. Good locations.| 3. Not many size selections for the consumer.| 4. Good benefits for full-time employees.| 4. Staff is mostly part-time employees that do not receive benefits. | 5. Good locations| 5. Many communities dislike Wal-Mart because they put their small business out of business.| | 6. Sales products from other countries with unfair labor laws.|

After reviewing all the facts presented I think it is clear to see that investing in Wal-Mart is a sound financial decision. Whether you look at the history of the company from the expansion aspect or whether you look simply at the financial side you will see that as a whole they have been the model of consistency and revolutionized the way people shop worldwide. You will be hard pressed to find any company in any market that has shown the ability to adapt and survive while increasing profits, building more stores, and expanding into 15 countries worldwide.

If you look at what has already been accomplished I believe the decision is clear, but if you look at the future possibilities then I believe you would agree that it was would be financially/economically irresponsible not to invest in Wal-Mart Stores, Inc. If you are still unsure about whether Wal-Mart is a safe investment, you must look at a few of the facts. After the stock market lost 20% of its value in October 1987, Sam Walton, then one of America’s richest men, was unfazed. Its stock has traded between about $45 and $65 since 2000.

Since October 7, 2007, the S&P 500 was trading slightly above the 1500 level and Wal-Mart was trading at about the $47 level. The S&P 500 dropped to lows at the 756 level while Wal-Mart went down to $42.90 and then traded around the $50 level for the next year and a half. This shows much more stability than the overall market.

According to Forbes.com, Wal-Mart is the third largest company in the world with regards to market capitalization and sales as well as being one of the largest private employers in the U.S., Mexico, and Canada. When all is said and done you would be hard pressed to make Wal-Mart look like a bad investment.

Works Cited

Bhasin, Hitesh. "SWOT Walmart." SWOT Walmart N.p., 29 June 2010. Web 17 June 2012. <http://www.marketing91.com/swot-walmart/>. "FORM 10-K. N.p., 31 Jan 2006. Web. 17 June 2012. http://www.sec.gov/Archives/edgar/data/104169/000119312506066792/d10lk.htm. “SWOT Analysis Examples – Business Assessments. “ Swot Analysis Examples. N.p., n.d. Web. 17 June 2012. http://www.businesstune-ups.com/swot-analysis-examples.html.