Do you want to know Walmart strength, weaknesses, threats & competitive strategies? If YES, here is a detailed Walmart SWOT analysis plus competitors analysis.
The whole idea of this SWOT analysis is to try to show you what made Walmart Inc. one of the most successful companies in the world and how over the years their competitive advantages have positioned them to become a dominant player in the retail industry globally.
Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores, headquartered in Bentonville, Arkansas. The company was founded by Sam Walton in 1962 and incorporated on October 31, 1969. It also owns and operates Sam’s Club retail warehouses.
As of January 31, 2022, Walmart has 11,503 stores and clubs in 27 countries, operating under 56 different names. Walmart is headquartered in the Walmart Home Office complex in Bentonville, Arkansas. The company’s Business model is based on selling a wide variety of general merchandise at low prices.
Walmart is the world’s largest company by revenue, with US$514.405 billion, according to the Fortune Global 500 list in 2019. It is also the largest private employer in the world with 2.2 million employees. It is a publicly traded family-owned business, as the company is controlled by the Walton family.
Sam Walton’s heirs own over 50 percent of Walmart through their holding company Walton Enterprises and through their individual holdings. Walmart was the largest U.S. grocery retailer in 2019, and 65 percent of Walmart’s US$510.329 billion sales came from U.S. operations.
Although Walmart Inc. seems to be one of the leaders in retail industry, but they have major competitors who are equally doing pretty well in the industry and of course controlling a segment of the market.
These major competitors are Alibaba Group Holding Limited, Amazon.com, Inc., Costco Wholesale Corporation, Dollar General Corporation, Dollar Tree, Inc., Kohl’s Corporation, Macy’s, Inc., Sears Holdings Corporation, Target Corporation and many other retailers/wholesale companies.
In North America, Walmart’s primary competitors include grocery stores and department stores like Aldi, Lidl, Kmart, Kroger, Ingles, Publix, Target, Harris Teeter, Meijer, and Winn Dixie, Canada’s The Real Canadian Superstore, Sobeys and Giant Tiger, and Mexico’s Comercial Mexicana and Soriana. Competitors of Walmart’s Sam’s Club division are Costco and the smaller BJ’s Wholesale Club chain.
SWOT Analysis for Walmart Inc. Inc.
- Economies of Scale
Reliable statistics shows that Walmart Inc. Inc. is the world’s largest company by revenue and the largest retailer in the world. It is also the world’s largest private employer, with more than 2.3 million staff and 11,718 stores in 28 countries.
The company is a retail market leader in the U.S. and is a major competitor in all geographic markets in which it operates. Revenue (US$500.343 billion (2018) 2.98 percent increase over 485.873 billion (2017) Profit (US$) 9.862 billion (2018) 27.7 percent decrease over 13.643 billion (2017).
Due to its huge economies of scale, the company can share its fixed costs over many products, which makes Walmart one of the cheapest places to shop. For example, as Walmart rapidly expanded into the world’s largest corporation, many critics worried about its effect on local communities, particularly small towns with many “mom and pop” stores.
There have been several studies on the economic impact of Walmart on small towns and local businesses, jobs, and taxpayers. In one, Kenneth Stone, a professor of economics at Iowa State University, found that some small towns can lose almost half of their retail trade within ten years of a Walmart store opening.
- Ability to Easily Maximize Its Resources
Another obvious strength that is synonymous to Walmart is the ability to easily maximize its resources and scale up within a short period of time; they can boast of efficient and effective leveraging of its resources.
Walmart can leverage on its resources, such as distribution facilities, information systems, knowledge and other capabilities and skills, more efficiently and effectively over a large number of locations with easy. This usually give them edge over their competitors within the locality where their store is situated.
As a result of this strength, the company can generate huge gains from implementing best practices. The company can identify better ways of performing tasks, managing stores and hiring new employees and can achieve huge gains by implementing these best practices in its vast network of stores.
- Ability to Experiment with Less Risk
If there is anything that Walmart can do with less risk that has the potential to help them gain new market shares, it is experimenting with less risk. Some of their competitors would have to deal with huge risks to launch out in some territories. As a matter of fact, the company can engage in many experiments within its stores or in new store formats without the risk of losing a substantial amount of profits or revenue.
Walmart usually uses its market power over suppliers and competitors. Because of its capacity and 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.
- Ability to Spend More on Branding and Store Design
Another strength that Walmart can boast of is the ability to spend more on branding and store design within a short period of time. In 2006, Walmart announced that it would remodel its U.S. stores to help it appeal to a wider variety of demographics, including more affluent shoppers.
As part of the initiative, the company launched a new store in Plano, Texas, that included high-end electronics, jewelry, expensive wines and a sushi bar. On September 12, 2007, Walmart introduced new advertising with the slogan, “Save money. Live better.”, replacing “Always Low Prices, Always”, which it had used for the previous 19 years.
Global Insight, which conducted the research that supported the ads, found that Walmart’s price level reduction resulted in savings for consumers of $287 billion in 2006, which equated to $957 per person or $2,500 per household (up 7.3 percent from the 2004 savings estimate of $2,329).
- Strong International Presence
In most countries of the world, Walmart is a household name, they have a strong international presence and this is indeed counting as a positive for the company. Walmart went international in 1992 through a joint venture with Cifra, a Mexican retail company, opening a Sam’s Club in Mexico City.
Since then, the company has expanded globally to become the largest international retailer (by revenue), operating 6,360 retail units in 27 countries outside the U.S.
Walmart strongly focuses on its international segment as this provides an opportunity for growing the company’s operations. The company added 47 new supermarkets/stores in Central America, 15 in Chile, 4 In China and 11 in the uk in 2017, which allowed it to grow the international sales.
Walmart’s international expansion strategy not only helps the company to grow, but also strengthens the company’s retail leadership position. By growing internationally, the company diversifies its income sources, gains valuable new experience and further benefits from economies of scale.
- Tendencies to Exhibit Unethical Business Practices
On January 11, 2018, Walmart announced that 63 Sam’s Club locations in cities including Memphis, Houston, Seattle, and others would be closing. Some of the stores had already liquidated, without notifying employees; some employees learned by a company-wide email delivered January 11.
All of the 63 stores were gone from the Sam’s Club website as of the morning of January 11. Walmart said that ten of the stores will become e-commerce distribution centers and employees can reapply to work at those locations.
- Bad Labor Relations
With over 2.3 million employees worldwide, Walmart has faced a torrent of lawsuits and issues with regards to its workforce. These issues involve low wages, poor working conditions, inadequate healthcare, and issues involving the company’s strong anti-union policies.
In November 2013, the National Labor Relations Board (NLRB) announced that it had found that in 13 U.S. states, Walmart had pressured employees not to engage in strikes on Black Friday, and had illegally disciplined workers who had engaged in strikes. Critics point to Walmart’s high turnover rate as evidence of an unhappy workforce, although other factors may be involved. Approximately 70 percent of its employees leave within the first year.
- Poor Crime Control Management
According to an August 2016 report by Bloomberg Businessweek, aggressive cost-cutting decisions that began in 2000 when Lee Scott took over as CEO of the company led to a significant increase in crime in stores across the united states.
These included the removal of the store’s famed greeters, which are in part seen as a theft deterrent at exits, the replacement of many cashiers with self-checkout stations, and the addition of stores at a rate that exceeded the hiring of new employees which led to a 19 percent increase in space per employee from a decade previous.
While these decisions succeeded in increasing profits 23 percent in the decade that followed, they also led to an increase in both theft and violent crime.
In 2015, under CEO Doug McMillon, Walmart began a company-wide campaign to reduce crime that included spot-checking receipts at exits, stationing employees at self-checkout areas, eye-level security cameras in high-theft areas, use of data analytics to detect credit fraud, hiring off-duty police and private security officers, and reducing calls to police with a program by which first-time offenders caught stealing merchandise below a certain value can avoid arrest if they agree to go through a theft-prevention program.
In addition to hundreds of thousands of petty crimes, more than 200 violent crimes, including attempted kidnappings, stabbings, shootings, and murders occurred at the 4,500 Walmarts in the U.S. in 2016. In 2019, 23 people were killed in a mass shooting at a Walmart store in El Paso, Texas
The “One-Size-Fits-All” Merchandising Strategy Product
In 2006, Walmart took steps to expand its U.S. customer base, announcing a modification in its U.S. stores from a “one-size-fits-all” merchandising strategy to one designed to “reflect each of six demographic groups—African-Americans, the affluent, empty-nesters, Hispanics, suburbanites, and rural residents.”
Around six months later, it unveiled a new slogan: “Saving people money so they can live better lives”. This reflects the three main groups into which Walmart categorizes its 200 million customers: “brand aspirationals” (people with low incomes who are obsessed with big name brands), “price-sensitive affluents” (wealthier shoppers who love deals), and “value-price shoppers” (people who like low prices and cannot afford much more).
Walmart has also made steps to appeal to more liberal customers, for example, by rejecting the American Family Association’s recommendations and carrying the DVD Brokeback Mountain, a love story between two gay cowboys in Wyoming.
Please note that by adopting this business model, Walmart gained more customers and they are sure going to keep welcoming more customers.
- Changing Customers Habits
Changing customers’ habits has indeed helped Walmart to expand their customer base. Walmart customers cite low prices as the most important reason for shopping there. The average U.S. Walmart customer’s income is below the national average.
A 2006 Walmart report also indicated that Walmart customers are sensitive to higher utility costs and gas prices. A poll indicated that after the 2004 US presidential election, 76 percent of voters who shopped at Walmart once a week voted for George W. Bush while only 23 percent supported senator John Kerry.
When measured against similar retailers in the U.S., frequent Walmart shoppers were rated the most politically conservative. Thus, as of 2014, the “majority 54 percent of Americans who prefer shopping at Walmart report that they oppose same-sex marriage, while 40 percent are in favor of it.”
Due to its prominence in the Bible Belt, Walmart is known for its “tradition of tailoring its service to churchgoing customers”. Walmart only carries clean versions of hip-hop audio CDs and in cooperation with The Timothy Plan, places “plastic sheathes over suggestive women’s periodicals and banned ‘lad mags’ such as Maxim magazine.
In addition, Walmart also caters to its Christian customer base by selling Christian books and media,”such as VeggieTales videos and The Purpose-Driven Life”, which earns the company over US$1 billion annually.
- Leveraging on Big Data Analytics to Increase Market Shares
As the largest retailer in the U.S., Walmart collects and analyzes a large amount of consumer data. The big data sets are mined for use in predictive analytics, which allow the company to optimize operations by predicting customer’s habits. Walmart’s datacenter is unofficially referred to as Area 71.
In April 2011, Walmart acquired Kosmix to develop software for analyzing real-time data streams. In August 2012, Walmart announced its Polaris search engine. The amount of data gathered by Walmart has raised privacy concerns.
- Intense Competition
If there is any major threat that Walmart Inc. Inc. is facing presently, it has to be from their major competitors; indeed, intense competition is a threat to the company. Walmart also had to face fierce competition in some foreign markets.
For example, in Germany it had captured just 2 percent of the German food market following its entry into the market in 1997 and remained “a secondary player” behind Aldi with 19 percent. Walmart continues to do well in the UK, where its Asda subsidiary is the second-largest retailer.
In May 2006, after entering the South Korean market in 1998, Walmart sold all 16 of its South Korean outlets to Shinsegae, a local retailer, for US$882 million. Shinsegae re-branded the Walmarts as E-mart stores. Walmart struggled to export its brand elsewhere as it rigidly tried to reproduce its model overseas.
In China, Walmart hopes to succeed by adapting and doing things preferable to Chinese citizens. For example, it found that Chinese consumers preferred to select their own live fish and seafood; stores began displaying the meat uncovered and installed fish tanks, leading to higher sales.
- Global Economic Crisis
Economy crisis is a major threat that all industries and companies face and Walmart Inc. Inc. is not immune from it. As at today, because of the effect of the corona virus pandemic (COVID -19), the economy of all the countries is on the downturn.
Jobs are less and people are working at the least minimum wages. When there is economy crisis, purchasing power usually decline a great deal which ultimately will affect the sales and income generated from retail outlets and Walmart is not immune.
- unfavorable government policies
Government policies can adversely affect any industry including the retail industry and they may have a very bad impact. For instance, government can come up with a policy that will compel all US based companies not to source their raw materials from some countries and that all products sold in the US must be manufactured from scratch from the United States.
With this type of legislation, Walmart Inc. Inc. can be affected because the company rely on some products that are manufactured outside of the United States of America. As a matter of fact, such interventions can result in the reduction or total elimination of some key products from their shelves within the United States.
- Bad Publicity
Bad publicity is yet another threat that Walmart is exposed to. Walmart has been subject to criticism from various groups and individuals, including labor unions, community groups, grassroots organizations, religious organizations, environmental groups, firearm groups, and the company’s own customers and employees. They have protested against the company’s policies and business practices, including charges of racial and gender discrimination.
Other areas of criticism include the company’s foreign product sourcing, treatment of suppliers, employee compensation and working conditions, environmental practices, the use of public subsidies, the company’s security policies, and slavery. Walmart denies doing anything wrong and maintains that low prices are the result of efficiency.
In July 2019, the Walmart subreddit was flooded with pro-union memes in a protest to the firing of an employee who posted confidential material to the subreddit. Many of these posts were angry with Walmart surveying its staff on the Internet. The posting of the union content is in response to the aforementioned alleged anti-union position Walmart has taken in the past.
No company is perfect and Walmart Inc. Inc. does not claim to be perfect hence they worked hard to be able to position their business to maximize their strength, leverage on the opportunities that are available to them, mitigate the risks they are exposed to and they are equipped to confront their threats.
Little wonder Walmart is the largest private employer in the United States, employing almost five times as many people as IBM, the second-largest employer. Walmart employs more African Americans than any other private employer in the United States. In March 2018, Walmart announced that it is producing its own brand of meal kits in all of its stores that is priced under Blue Apron designed to serve two people.