WalMart case analysis

Strengths

With a store available in each corner, nationally and internationally, Walmart is a superpower retail brand. Using an immaculate pricing strategy, Walmart has imprinted on the WALMART

CASE ANALYSIS 2

minds of the consumers the “Everyday low prices, rollback, and special buy.” Walmart provides an immense variety of products that reaches all cultures and social levels. “Walmart helps people around the world save money and live better -- anytime and anywhere -- in retail stores, online and through their mobile devices. Each week, more than 245 million customers and members visit our nearly 11,000 stores under 71 banners in 27 countries and e-commerce websites in 10 countries. With fiscal year 2014 sales of approximately $473 billion, Walmart employs 2.2 million associates worldwide” (Walmart, 2014).

Each Wal-Mart is strategically placed near a distribution center so that it will not take more than a day’s drive away. The company also has their own trucking fleet, which lowers the cost of transportation and external transportation sources. “Every distribution center supports 90 to 100 stores in a 200-mile radius” (Walmart, 2014).

By having a broad product/service portfolio, Walmart is able to fully serve its customers, filing nearly every void in the customer’s lives with enjoyable service. “Designed to provide a pleasant and hassle-free shopping experience, Wal-Mart Supercenters are enhanced with wide aisles, helpful signing throughout the store, departmental directories and 24-hour service. Supercenters are also equipped with a customer service desk and scanning registers for fast, efficient checkout service” (Royal Properties, n.d.).

WALMART CASE ANALYSIS 3

Weaknesses

Walmart main weaknesses relates to negative publicity surrounding violation of employee’s rights and the “cannibalization of mama and papa stores” to expand the business in metropolitan areas. “While Wal-Mart isn’t the only big box store criticized for its policies, it has become a symbol for much of what is wrong with employers.

Wal-Mart reported a net income of over $11 billion last year—surely plenty of money to remedy some questionable workplace practices—yet stories persist about wage law violations, inadequate health care, exploitation of workers, and the retailer’s anti-union stance. Altogether, some 5,000 lawsuits are filed against Wal-Mart each year, or roughly 17 suits per working day” (Workplace Fairness, 2014).

It has been longed argued that Walmart destroys the completion once it establishes a new store, especially in a metropolitan area. “Wal-Mart Stores Inc., which became the nation’s larg3est retailer by offering its customers low prices, tried to force competitors out of business with that policy, a judge ruled Tuesday” (Daily News, 1993). This has been a heated argument over the years, and one can find as many supporters as opponents to this idea. “Another argument is that Walmart destroys business around it. Anecdotal evidence of an occasional business taking a hit is presented to back this belief. But what are the real facts?

The law of supply and demand dictates that when demand increases, so does the price. The evidence is clear: when a Wal-Mart opens, the price of commercial real estate around it skyrockets. The only reason for it is the increased demand from other businesses who seek to be near a superstore that functions as a center that attracts customers to the area” (Berke, 2013). However, one can stillargue that these “other  businesses” are most likely not mama and papa stores that will not have a slight chance to complete against the supergiant Walmart.

WALMART CASE ANALYSIS 4

External Factors (Opportunities and Threats)

Opportunities

Expansion, expansion, and expansion is the word when it comes to Walmart new opportunities. Walmart is doing extremely well on a national basis and perhaps the supergiant must switch its focus a little to its international ventures. Walmart needs to “take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China region” (Friesner, 2014).

What about mall-based sites? Tim Friesner suggests that “new locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centers, to local and mall-based sites” (2014). A few years ago, Walmart was known for offering every product possible, but food.

Walmart has been gradually reserving a food section space in its stores, and the idea seems to be promising. Opening grocery sections at its stores opens up a whole new area to be banked on. “Concentration on grocery and food will benefit as eating at home, health and wellness trends continue to emerge:

The economic downturn, the perception that home-prepared foods are much healthier - a view held by 2% of grocery shoppers, according to an industry study - and an unmet desire to enjoy affordable, restaurant-type food at home have given food marketers the opportunity to recapture mealtime” (Catala, 2012). Walmart can also invest high on the new health trend and pair up with organic producers. “Walmart, the nation’s largest grocer, announced today it will carry Wild Oats organic food items. Originally introduced in 1987, Wild Oats will re-launch at Walmart starting this month with a new, more affordable price point on quality products covering a broad variety of categories – from salsa and pasta sauce to quinoa and

WALMART CASE ANALYSIS 5

chicken broth. Customers will save 25 percent or more when comparing Wild Oats to national brand organic products. (Walmart, 2014). Another opportunity for expansion is to invest heavily on internet retailing. When thinking about a superpower retailer, one thinks that internet sales are out of the roof. Even though, Walmart is listed in the Top 500 U.S. Retailers, it could be very well being as successful as a leader in sales in international markets. Hence, internet sales in Brazil: “Walmart.com.br did grow more than twice as fast as total e-commerce in Brazil.

That growth rate was 28% to $12.82 billion in 2013 from $10.02 billion in 2012, according to eBit, a Brazilian e-commerce and information technology research firm. Dias also says that Wal-Mart has a goal of becoming over time the biggest Brazilian web merchant. Currently B2W Digital is Brazil’s largest web merchant with e-commerce sales that grew 26.6% to $2.62 billion from $2.07 billion in 2012.” (Dias, 2014).

Threats

As one of the biggest retailer markets, Walmart faces local and global competition from alike retailers such as Target, Costco and Carrefour (Hoovers, n.d.). Even though Walmart has remained as number one retailer for many years now, it has to keep the business on its “toes” and watch the competition for new trends.

Another threat relates to pricing. “The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has led to price competition, resulting in price deflation in some ranges. Intense price competition is a threat” (Friesner, 2014). Lastly, Walmart does face serious threats from political and social issues. “A market analysis report estimated that for every new Wal-Mart super enter that opens, two local

WALMART CASE ANALYSIS 6

supermarkets will close, which is why Wal-Mart is facing severe resistance from several groups when it plans to open new stores. Wal-Mart’s threat to local stores and markets has resulted in local authorities deterring Wal-Mart’s expansion plans. It is becoming increasingly difficult for Wal-Mart to open new stores as the resistance increases. This is affecting the new investments and the time to open new stores for the company” (Catala, 2012).

Problem Analysis

A first problem affecting Walmart relates to legal matters. Walmart does a great job in expanding and renovating its business. However, every business foundation must be built in a fair and clear basis. How many of us have heard that a new lawsuit has been brought against Walmart?

“Wage law violations, inadequate health care, exploitation of workers, retailer’s anti-union stance,” and the latest: “Famed actor and comedian Tracy Morgan has filed a lawsuit against Walmart. He was seriously injured, and his companion and fellow comedian James McNair was killed, when their chauffeured vehicle was struck by a Walmart truck going too fast under the control of an overly tired driver” (Forbes, 2014).

This lawsuit relates right back to one of the main complaints against Walmart; exploitation of workers. The money Walmart spends in settling lawsuits could be used to treat its employees better.

A second problem affecting Walmart growth relates to expanding the business internationally. Even though the supergiant has gone strong when starting international expansion, it has slowed down the pace. “Wal-Mart’s expansion in international markets has been considerably faster than its expansion in the U.S. The retailer currently operates around 6,000 international stores and has opened roughly 600 new stores annually over the past five years. Going forward, we expect Wal-Mart’s international growth to slow down slightly, but it

WALMART CASE ANALYSIS 7

will still remain significantly higher than its growth in the U.S. Wal-Mart is going ahead with different expansion plans for different regions. (Trefis Team, 2013)

In a world of technology, a third and surprising problem, relates to e-commerce and internet sales. Walmart must take the opportunity to grow its sales through internet sales. “The world’s largest retailer, Wal-Mart operates close to 4,000 stores in the U.S., which leaves minimal room for its store expansion. As a result, the retailer relies on increases in same-store sales and growth in e-commerce business for a big portion of its revenue growth” (Forbes, 2014).

Alternative Course of Action

Course of Action 1 – To fix its legal problems, Wal-Mart must take the subject serious. It is very difficult to provide a course of action in this case because Walmart never assumes the guilty of underpaying and mistreating employees. One must first recognize its mistake, and then accept “help.” The super retailer banks on the fact that people need jobs. If one loses their job, probably three other will apply for it. Unfortunately, job losses is only one problem affecting the business and must be addressed. Wal-Mart must enforce its internal controls, train people, and abide by laws.

Course of Action 2 – In order to effective grow internationally, Walmart must focus on the new step. The supergiant rushed to open new stores internationally, but it doesn’t seem it to follow up on its new ventures. “Allegations of widespread bribery at Wal-Mart’s Mexican subsidiary continued to reverberate on Tuesday, with the company beginning a campaign to limit the damage as its shares declined further” (The New York Times, 2012). Moving the business to a different country is a very serious decision and takes commitment. Cultural differences if not learned and previously “studied” can and will “kill” the business.

WALMART CASE ANALYSIS 8

Course of Action 3 – Highly invest on e-commerce/internet sales. As previously mentioned, national expansion is saturated. E-commerce sales are unlimited and can reach every little corner of the World.

Selection / Plan of Action

Course of Action 3 can benefit will benefit Walmart the most. “According to Forrester Research, U.S. online retail sales grew 9% in 2013 and are expected to grow at a compound annual growth rate of 9.5% through to 2018. Wal-Mart believes that it can deliver 30% e-commerce revenue growth this year driven by the industry growth, its Omni-channel initiatives, enhanced product variety over the Internet, and better delivery efficiency.

Moreover, the retailer can effectively leverage its vast presence to sustain a competitive advantage over the online giant Amazon. Wal-Mart witnessed 27% growth in its online revenues in the first quarter of fiscal 2015, which suggests that it is on course to deliver on its promise. Our price estimate for Wal-Mart stands at $79.30, which is less than 5% ahead of the market price” (Forbes, 2014).

One suggestion to make the online business stronger is to offer fewer products and focus on quality. Invest on a survey kind report to research which products sell the most, which products generate more revenue and which products are less costly to handle (shipping, packaging, and so on).

Create a free online subscription to get to know your online customer. Based on the information gathered, provide customized and personalized products ideas. Create an online page where the customer can include family and friends and their profiles and preferences. This way, on their birthday and other events, Walmart website will remind the customer of the event and show them how easy is to order a gift without having their leave home.

WALMART CASE ANALYSIS 9

Keep up with the headlines and trends for the country and offer suggestions and headlines to catch the customer’s attention. For example, the Olympics will be held in Rio de Janeiro, Brazil, in 2016” (Olympic.org, n.d.). Provide a countdown of the number of days until the event arrives. Reminds the customer about sports products that are sold on the website. Provide feedback and reviews on products. However, make this option stand out on the page. Small prints and collapsed texts tends to push the customer away.

Follow up with the customers, keep the website up to date and make sure to always have products available. No one appreciates to visit a website with broken links, products out of stock, and insensitive to the customer’s needs. After all, all businesses are about the customer!

WALMART CASE ANALYSIS 10

Works Cited

Berke, N. (2013, July 31). Storobin: I Will Fight For a NYC WalMart. Retrieved November 22,

2014, from Sheepshead Bites: http://www.sheepsheadbites.com/2013/07/storobin-i-will-fight-for-a-nyc-walmart/

Catala, R. (2012, Marth 20). Walmart SWOT analysis. Retrieved November 21, 2014, from

Communication, Cooperation, Collaboration: http://www.raymondcatala.com/

Daily News. (1993, October 13). Judge: Wal-Mart priced to destroy competition. Retrieved

November 23, 2014, from Google News: http://news.google.com/newspapers?

nid=2457&dat=19931013&id=pHQ-AAAAIBAJ&sjid=HFoMAAAAIBAJ&pg=4803,3533097

Dias, F. (2014, July 02). President of Walmart.com.br. (I. Retailer, Interviewer)

Forbes. (2014, June 09). Wal-Mart Expects 30% rise in E-commerce revenues this year.

Retrieved November 23, 2014, from Forbes:

http://www.forbes.com/sites/greatspeculations/2014/06/09/wal-mart-expects-30-rise-in-e-commerce-revenues-this-year/

Forbes. (2014, July 15). Walmart Investors - Worry Plenty about Tracy Morgan Lawsuit.

Retrieved from Walmart Investors:

http://www.forbes.com/sites/adamhartung/2014/07/15/walmart-investors-worry-plenty-about-tracy-morgan-lawsuit/

Friesner, T. (2014, May 8). SWOT Analysis Wal-Mart. Retrieved November 22, 2014, from

Marketing Teacher.com: http://www.marketingteacher.com/walmart-swot/

Gschwantner, G. (n.d.). The Powerful Sales Strategy behind Red Bull. Retrieved from

SellingPower: http://www.sellingpower.com/content/article/index.php?a=9437/the-powerful-sales-strategy-behind-red-bull&page=1

Hoovers. (n.d.). Wal-Mart Stores, Inc. Competition. Retrieved from A D&G Company:

http://www.hoovers.com/company-information/cs/competition.Wal-

Mart_Stores_Inc.e82225a6f3c5e3bb.html

Olympic.org. (n.d.). Rio de Janeiro 2016. Retrieved from Official website of the Olympic

Movement: http://www.olympic.org/rio-2016-summer-olympics

Royal Properties. (n.d.). Unique Real Estate Solutions. Retrieved from Wal-Mart Supercenters:

http://www.royalpropertiesinc.com/walmart.html

The New York Times. (2012, April 24). Wal-Mart Vows to Fix Its Controls. Retrieved from

Business Day: http://www.nytimes.com/2012/04/25/business/wal-mart-says-it-is-tightening-internal-controls.html

Trefis Team. (2013, February 1). How Important is Wal-Mart's International Business? Retrieved

November 19, 2014, from What's Driving the stock:

http://www.trefis.com/stock/wmt/articles/166048/how-important-is-wal-marts-

international-business/2013-02-01

Walmart. (2014). Walmart - Our Story. Retrieved November 21, 2014, from Walmart:

http://corporate.walmart.com/our-story/

Walmart. (2014, April 10). Walmart and Wild Oats Launch Effort to Drive Down Organic Food

Prices. Retrieved November 23, 2014, from News & Views:

http://news.walmart.com/news-archive/2014/04/10/walmart-and-wild-oats-launch-effort-

to-drive-down-organic-food-prices

WALMART CASE ANALYSIS 11

Walmart. (2014). Walmart Logistics. Retrieved November 21, 2014, from Corporate Walmart:

http://corporate.walmart.com/our-story/our-business/logistics

Workplace Fairness. (2014). Wal-Mart. Retrieved November 22, 2014, from The Good, the Bad,

and Walmart: http://www.workplacefairness.org/reports/good-bad-wal-mart/wal-mart.php