SWOT Analysis of Walmart

Strengths

Weaknesses

Largest retailer in the world

Low Profit Margin

Broad line of goods

Little differentiation

Cost strategy of leadership

Bad publicity

Global operations
Opportunities

Threats

Emerging market

Local comunities

Growth of the online purchases

Man power costs

Strengths
Largest retailer in the world
Walmart has an impressive online presence. There are 11 countries with a dedicated Walmart ecommerce websites and the total e-commerce sales increased by 22 per cent in 2015, and about
75 percent of walmart.com sales come from non-store inventory. Such a solid presence in online
platform and an efficient utilization of online sale channel is a significant strengths that
immensely contributes to Walmarts core competitive advantage of cost leadership.
Being the largest retailer in the world, with unmatched scale of operations and strong market
power over suppliers and competitors.

Comprasion of the top 4 retailers in the world in 2016

The company can share its fixed costs over many products, which makes Walmart one of the
cheapest places to shop.Walmart can use its resources, such as distribution facilities, information
systems, knowledge and other capabilities and skills, more efficiently and effectively over a large
number of locations.Due to its size, Walmart can exercise its market power over suppliers by
requiring lower prices from them. The company can also affect the competition by selling
selected items at a loss, thus driving competition out of the market.
Broad line of goods
Walmart offers a broad assortment of products and brands, which helps in catering to the diverse
needs of its customer base. The company offers products under six categories: grocery;
entertainment; apparel; health and wellness; and home products. Under these categories, Walmart
offers various products which include apparel, health and beauty aids, electronics, toys, lawn and
garden items, jewelry, automotive products, home furnishings, hardware, sporting goods, pet
supplies, house-ware, grocery, home improvement and others. The company offers these products
under various private labels such as Athletic Works, Bakers and Chefs, Canopy, Durabrand,
Equate, Everstart, Faded Glory, George, Great Value, HomeTrends, Mainstays, Members Mark,
No Boundaries, Ol Roy, Ozark Trail, Parents Choice, Puritan, Sams Choice, Sam's Club, Secret

Treasures, Spring Valley and White Stag. Walmart also offers a variety of licensed brands such as
General Electric, Disney, McDonalds, Better Homes & Gardens, OP, Starter, Danskin Now and
Just My Size. Such diversification of product and brand portfolio helps the company serve a
broad customer base and retain them, and attract new customers.
Cost strategy of leadership
To compete and attract a broad customer base in the highly competitive retail industry, it designed
various programs. Some of the successful programs include Every Day Low Prices (EDLP),
Rollback and Store of the Community. Through EDLP program, Walmart ensures that its
customers get the lowest prices on goods every day and prices could have no impact due to
change in promotional offers. With the EDLP, the company maintained market share gains in
major categories such as food, consumables, over-the-counter and apparel.
Global operations
The companys robust store network compared to its major competitors helps to serve its
customers more efficiently. Walmart operates more than 11,500 retail stores under 63 banners
serving more than 260 million customers across 28 countries. Geographically, the company
operates 4,574 stores across 50 states in the US, 655 Sam's Club and 6,299 stores internationally
including Africa (408), Argentina (108), Brazil (499), Canada (400), Chile (395), China (432),
Central America (709), Japan (346), Mexico (2,360), India (21) and the UK (621). To support
retail stores, Walmart operates approximately 313 distribution facilities strategically established
in its operating regions including 137 in the US and 176 international facilities in Africa,
Argentina, Brazil, Chile, China, Canada, Central America, Japan, South Africa, Mexico and the
UK. Walmart achieve high market penetration and help increase footfalls in its stores.
Weaknesses
Low Profit Margin
Walmart operates with a low profit margin in order to sustain its cost leadership competitive
advantage. As it is illustrated in figure(Changes in Walmart profit margin) below, Walmart profit
margin has been consistently decreasing during the past five years to amount to 24.29 per cent in
2015. Low profit margin can be a weakness for the business since it leaves a very little room for
price adjustments if such a necessity arises, for example in times of economic crises.

Changes in Walmart profit margin

Little differentiation
Walmart has no differentiation compared to its competitors, which might hurt the company in the
future if commodity prices or average consumer income would increase. Low cost leadership
strategy wouldnt be as effective as it currently is and Walmarts main competitive advantage
would erode. There is no innovation in walmart.com.
Walmart pay is innovative thing for retail companies. Walmart use QR code, and entegrate to
mobile app.
Bad publicity
Along with a high level of brand value as discussed above, Walmart brand image has been
damaged due to a series of scandals. These include bribery scandal in Mexico, discriminatory
employment practices used by some Walmart suppliers, low employee wages paid by Walmart
suppliers in developing countries and notorious stance of the company towards the work unions.
These instances have weakened Walmart brand image to a significant extent.
Opportunities
Emerging market
Walmart has an opportunity to expand its operations in emerging markets, which are preferred
destinations for retailers as GDP in these markets is expected to grow. A large section of people in
emerging countries are younger, increasingly urban and interested in modern retail formats.

According to in-house research, low and moderate sales and tight consumer spending in the UK
and the US is a sign for retailers to scout other growing markets. According to Global Retail
Development Index (GRDI) annual study, the BRIC countries, namely, Brazil, Russia, India and
China, are the world's largest developing markets. India is the most attractive emerging market,
followed by Russia, China and the UAE in second, third and fourth position, respectively. With
an allowance of 51% FDI in multi-brand retail, India stands as one of the huge prospective
markets. In India, Walmart announced the opening of 50 wholesale stores and launching B2B ecommerce platform by 2019. It also plans to invest in its supply chain infrastructure and supplier
development in India to increase presence in the cash-and-carry segment. In China, the company
plans to establish 115 new stores and seven new clubs by 2017. Investments in these regions
could enable Walmart to achieve territorial diversification and enhance its business sustainability.
Growth of the online purchases
In 2015 the global e-commerce market was estimated to be $1.5 trillion which is forecast to grow
at an average of 15% for the next 3 years. Despite this high growth rate, in 2019 ecommerce sales
will still only account 12.4% or $3.5 trillion of total retail sales of $28.5 trillion.

Global Retail and E-commerce Sales Forecast in Trillions

Threats
Local communities
The resistance from local communities is another factor to face. Walmart has a negative impact
on local retailers as some of them lose their clients and end up closing their businesses after a

couple of years Walmart opens in the area. This affects not only the retailers but their families and
the community as a whole.
Man power costs
Increasing manpower costs may have a negative effect on the company. The tight labor markets,
government mandated increases in minimum wages and a higher proportion of full-time
employees are resulting in an increase in labor costs. The Department of Labor in the US
enforces the Fair Labor Standarts Act (FLSA), which specifies the basic minimum wage and
overtime payment standards for employees. The Wage and Hour division of the department is
responsible for enforcing these standards. Currently, for all workers covered by the FLSA, the
minimum wage is set at US$7.3 per hour and, in the event of working hours stretching beyond 40
per week, an overtime payment of no less than one and a half times the regular rate of pay needs
to be paid. However, the minimum wages in 29 states and the District of Columbia are higher
than the federal rate. These wages range from US$7.5 per hour in Maine and New Mexico to
US$10.5 per hour in Washington, D.C. With an employee base of around 2.2 million people,
Walmarts operating margins could be impacted considerably by these pay hikes.
SO analysis

1- WalMart'sproductchainandglobal presence arehuge. But

therearestillmanydevelopingcountriesaroundtheworld, andthesecountriesareout of Walmart.
Walmart can starttoserve in
developingcountriesbyusingitsbroadproductlineandtheworldwidebrandimage.

2- TherelationshipwithWalmart'ssuppliers is sostrongthat it can not be overlooked.

Itsuccessfullyreflectsitssuccessboth in physical presence andvirtual presence (wallmart.com).

Withthedevelopment of technology, theuse of the internet has

increasedandpeopletendtogeteventhesimplesthouseholdneedsfromthe internet.
But buyingfromthe internet is a difficultprocessandrequiresveryseriousexperience. The role of
thesuppliers is veryimportant in theprocess of buyingfromthe internet.
At thispoint, WalMart can keepupwiththisevolvingtrendif it can
useitsexcellentcommunicationsuccesswithitssuppliers.
WO analysis
Walmart is a companywithlowprofitmarginsbecause it
bringsqualityproductsandsuitablepricestopeople, not cheapandcheapproducts.
WalMart.com is thefoundationforWalMart'sweakness. WalMart is abletotakeadvantage of
thisvulnerabilitybecause of thelowcost of onlinesalesandtheabilitytoreachmillions of
peoplethrough a site.
Since customerbuyingpatternsaresimilaracrosstheworld, Wal-Mart can
updateitscustomersaboutitsnewproductsandpolicies on internet as well.AlthoughWalmart is
theworld'slargestretailer, there is nonotabledifferencewith his competitors.
Whenpeoplearebuyingproducts, they can nowfindmorethanoneoption.
Thefactthattherearecompetitorswhenbuyingfromthe internet
andthefewdifferencesbetweenthecompetitors can causepeopletoturntocompetitors in
somecases.Physically, shopping is verymuchaffectedexternally. Factorssuch as thecloseness of
thestore, its size, andthebehavior of shopstaffinfluencecustomers.
But thevirtualenvironment is different. Theothercompany is a
clickawayandalmostoffersthesamething as walmart.
Walmart has a trumpcardtomakethishand-to-handcompeting, WalMartproducts.Walmart can
getrid of othercompetitorsbyincreasingtheir online saleswiththeseproductstheyproduce.WalMart
can alsowidenitsdistributionworldwidebyexploitingcountriesunlikeitsdomestic market.
ST analysis

Therearesomanypeopleworking in Walmartthatthecontributionyoumaketothecountry'seconomy is
undeniable.Butthisalso has a negativeeffect on WalMart. Human powermeanscost.Infact, it is
precisely at thispointthat walmart.com can seetheprominenceandcontribution of it.
Thanksto online sales, WalMart can save a bit of money on
humanpowerandgetmoreprofit.WalMart has a strongbrandimage; it can face a
massivecompetitionagainstitsrivals. This can be avoidablebyofferingdifferentiatedproducts at
affordableprices
WT analysis
Walmartsellsthousands of highqualityproducts at cheapprices. At firstglance, thissentence, which
is verywelcomingtoWalmart, can be seento be a bit deeperand not welcomedbythelocalpeople.
Walmart, whichaffectssmallbusinessesnegatively, has beenthesubject of manyarguments.
One of them is thesouth park, wherethecurrentaffairs in
Americaarecriticallyandhumorouslyairedwiththeexpressions of 4 children.From time to time
thepublicmayreact, but WalMartmaycomeacrossit.Suchreactionsaregenerallylocal, and not
universallyaccessible. Walmart can getrid of thisbadperceptionbyincreasingtheproportion of
localworkers in physicalstores, andbycollaboratingwithlocalcompanies on theway of
productdistributionduringonlinepurchases.
Toavoidanytoughcompetition, Wal-Mart shouldfocus on
existingproductlineortoremainabovethecompetitionbyinvestingmore on
advertisingcampaigntokeepitscompetitorsalways on pressure
Make athoroughstudy of theforeign market andadaptaccordingtotheirculturetoestablishitself in
theAsian/European market.