A comprehensive Walmart SWOT analysis will provide insight into how one of the world’s largest retail corporations has faced and overcome several challenges, including competition from online retailers and changing consumer preferences, and has spread its tentacles to multiple countries of the world. Walmart is an American multinational retail company that owns and operates a chain of hypermarkets (also known as supercenters, hyperstores, or superstores). A hypermarket is a type of retail store that combines a supermarket and a department store, offering a wide range of products such as groceries, clothing, electronics, appliances, and household items under one roof. Walmart has its headquarters in Bentonville, Arkansas, and operates its wide chain of hypermarkets throughout the United States.
Walmart was founded in 1962 by an American business magnate, Sam Walton, and his brother & co-founder, James Walton. The first Walmart store was opened in Rogers, a city in Benton County, Arkansas, United States, and it was designed to offer customers a broad range of products at low prices. On October 31, 1969, Walmart was legally recognized as a corporation under Delaware General Corporation Law, the statute of the Delaware code that governs corporate law in the state of Delaware, United States of America. In the early years of its inception, Walmart’s primary focus was providing its customers with a wide variety of products at lower and more affordable prices than those of its competitors. The company’s low prices were achieved through a combination of efficient supply chain management, bulk purchasing, and the use of technology to streamline operations.
Walmart was listed on the New York Stock Exchange in 1972, making its shares available for public trading. Although Walmart’s shares are now publicly traded on the stock exchange markets, it is still a family-owned company controlled by the Walton family, the wealthiest family in the United States of America. The company kept proliferating, and by the mid-1980s, it became one of the biggest retailers in the United States of America, with over 800 stores and an annual sales revenue of over $8 billion. Aside from its domestic expansion, Walmart also continued to expand internationally as it kept opening stores in new markets (Canada, the United Kingdom, South America, Germany, Central America, China, South Korea, and Japan) and acquired other retail chains.
As of today, Walmart is the world’s largest company by revenue, generating about US$ 570 billion in revenue annually. Walmart is also the largest private employer in the world, with about 2.2 million employees in over 10,000 stores and clubs, in about 24 countries. The company operates under different names in some countries of operation. In the United States and Canada, it is popularly known as “Walmart.” However, in Mexico and Central America, the company operates under the name “Walmart de México y Centroamérica” and is also known as “Walmex.” In India, Walmart is known as “Flipkart Wholesale.” In recent years, Walmart has focused on improving its e-commerce capabilities and expanding its digital offerings to better compete with online retailers such as Amazon.
As a behemoth in the retail industry, Walmart has faced its fair share of challenges. Therefore, in this article, we will conduct a SWOT analysis of Walmart, examining its strengths, weaknesses, opportunities, and threats. Through this analysis, we will better understand Walmart’s position in the market and its potential for future growth and development.
SWOT Analysis of Walmart
The following are Walmart’s strengths that place the company in an advantageous position for rapid growth and development:
Strong Brand Recognition
Walmart’s brand recognition is one of its greatest strengths as a company. Walmart is unarguably one of the world’s largest retail corporations. As an early market mover, the company has worked very hard, through consistent marketing and advertising campaigns, to establish itself as a household name. Walmart is easily recognized by its logo, slogan, and other symbols of its brand identity, which have become synonymous with low prices and convenience all over the world. In addition to its low prices, Walmart also has a wide selection of products that cut across various categories, such as electronics, clothing, groceries, etc.
Another way through which Walmart has built its brand recognition is through its customer service. Walmart has a solid reputation for providing quality customer service. The company invests heavily in the training of its employees to ensure that they provide excellent service, which, in turn, builds customer loyalty. The company also prioritizes its customers’ convenience as it makes conscious efforts to improve its online presence. This makes it easier for customers to shop for products online from the comfort of their homes and get them delivered to their doorstep. This has helped to further enhance the company’s brand and reputation.
Since customers are most likely to shop at a store they know and trust, Walmart’s strong brand advantage poses a significant advantage for the company in several ways. One of the advantages of Walmart’s strong brand advantage is its ability to attract and retain customers. Walmart has established itself as a low-cost retailer that offers a wide range of products at affordable prices. This has helped the company to attract budget-conscious customers who are looking for value for their money, thereby building trust and familiarity.
Another advantage of Walmart’s strong brand recognition is the competitive advantage it gives the company in the retail industry. Consumers who are familiar with the Walmart brand are more likely to choose Walmart over other retailers when making purchasing decisions. In a world where so many retailers are competing for the attention of consumers, this gives Walmart an edge over its competitors and makes the company stand out in the retail industry. Brand recognition also increases the loyalty of Walmart’s customers to the brand. Consumers who patronize Walmart can develop a significant amount of trust in the Walmart brand, which can make them become repeat customers. Continuous patronage from loyal customers is a substantial source of revenue for the company.
Efficient Supply Chain Management
An important part of Walmart’s success can also be attributed to its supply chain management. Supply chain management refers to the coordination and management of all activities involved in the production and delivery of goods and services, from the sourcing of raw materials to the delivery of the finished product to the customer. Efficient supply chain management is a critical source of strength for Walmart because it ensures that the company is able to deliver high-quality products to its customers at competitive prices.
Walmart’s supply chain management system is designed to minimize waste, reduce costs, and increase efficiency. This system has been developed over several decades, since the company’s inception, and has allowed Walmart to become a leader in the retail industry. The efficiency of Walmart’s supply chain management is based on a few fundamental principles. Walmart uses a centralized distribution system that allows it to manage inventory and transportation from a single location. As a result, Walmart can manage its supply chain more effectively, thereby reducing costs and improving its efficiency.
Another factor that ensures the efficiency of Walmart’s supply chain management is its heavy use of technology. The company relies on heavy use of technology such as radio frequency identification (RFID), electronic data interchange (EDI), and barcode scanning to track inventory and shipments from the supplier to the store shelves in real time. The company has also invested heavily in robotics and automation to improve its supply chain operations. In addition, Walmart uses data analytics by collecting vast amounts of data on its supply operations. The data collected is then analyzed and used to identify patterns and trends which help the company identify areas where it can improve efficiency, reduce costs, and improve customer service.
Another factor that makes Walmart’s supply chain efficient is the company’s ability to work closely with suppliers. Walmart has developed and maintains a solid, cordial relationship with its suppliers, which allows it to negotiate better prices for its products. This ensures that the company is able to offer its products at lower and more affordable prices compared to its competitors. Finally, Walmart’s efficient supply chain management system allows it to respond quickly to changes in customer demand. For example, if a particular product becomes popular and rises in demand, Walmart can quickly adjust its supply chain to ensure that it can meet customer demand. This alone makes Walmart stand out among its competitors in a world where customer preferences can change rapidly.
Diverse Revenue Streams
As a hypermarket, Walmart has diverse revenue streams that provide the company with stability and flexibility, despite the rapidly changing business environment. Walmart offers a wide range of products, including groceries, clothing, electronics, home goods, etc. This diversity of products allows Walmart to appeal to a broad customer base, which helps to ensure that the company’s revenue streams are stable and predictable.
To further diversify its revenue stream, Walmart has expanded into new markets, industries, and business segments. For example, Walmart ventured into the healthcare industry, offering a range of services such as in-store health clinics and online pharmacy services. In 2019, Walmart unveiled its first healthcare center that provided primary care, X-rays, dental, optical, and other services in the United States of America. By 2023, Walmart will have opened over 30 healthcare centers in several states in the U.S. These healthcare centers serve as another source of revenue aside from the company’s numerous stores and supermarkets.
In addition to its existing streams of revenue, Walmart has also invested in e-commerce and digital technologies. The company has made significant investments in online shopping and delivery services, which have become increasingly popular in recent years. Walmart has also launched its own online marketplace that allows third-party sellers to sell their products on the Walmart website. In the financial services industry, Walmart offers products such as prepaid debit cards, credit cards, installment financing, transfers, and cheque-cashing services.
Walmart’s diversification of revenue streams poses an advantage for the company because it is too risky to be overly reliant on a single product or market segment. For example, Walmart will have other sources of revenue to fall back on to maintain financial performance if one market or product segment fails or experiences a downturn. Walmart can also adapt to changing customer preferences and market conditions as a result of its diverse revenue streams. For example, if customers shift their priorities towards online shopping, Walmart can quickly adapt by expanding its already existing e-commerce and digital offerings.
Economies of Scale
Economies of scale refer to the cost advantages that a company can achieve by increasing its level of production or scale of operations. Walmart, one of the largest retailers in the world, benefits significantly from economies of scale as it allows the company to offer products at lower prices than its competitors while still maintaining profitability.
One of the factors that help Walmart achieve economies of scale in its operations is its extensive store network. Companies with large networks can spread their fixed costs over a larger volume of goods. For example, Walmart has more than 11,000 stores worldwide, which allows it to spread its fixed costs, such as rent and utilities, across a larger number of stores, reducing cost per store. The company can also spread the cost of its logistics infrastructure, such as its warehouses and distribution centers, over a larger number of products.
Walmart’s highly efficient supply chain management system also plays a pivotal role in helping the company achieve economies of scale. The system allows Walmart to manage its inventory and transportation effectively, thereby reducing costs and improving efficiency. The economies of scale business strategy pose a lot of advantages for Walmart.
One of the major advantages of economies of scale for Walmart is that it allows the company to negotiate better prices with suppliers. Walmart’s massive scale of operations means that it can purchase large quantities of goods from suppliers, giving it significant bargaining power. This allows Walmart to negotiate better prices for its products, which it can then pass on to customers in the form of lower prices than its competitors, increasing market share.
Another advantage of Walmart’s economies of scale is that it allows the company to invest in new technologies and innovations. With lower costs per unit of production, Walmart will have more resources to invest in research and development, which can lead to new products and services. For example, Walmart has made significant investments in e-commerce and digital technologies, which have helped it to expand its business and attract new customers. The business strategy has also allowed the company to invest in sustainable business practices, such as renewable energy and waste reduction, which are critical for reducing its environmental impact.
Strong Customer Base
As a multinational retail giant with stores in multiple countries, Walmart has a strong customer base formed by millions of people around the world. Walmart’s customer base is strongest in North America. In 2016, about 95% of American consumers shopped on Walmart’s website or at one of Walmart’s numerous stores scattered around the United States. According to Zippia, just one Walmart supercenter in the United States of America serves an average of 10,000 customers in a single day. Walmart’s strong customer base gives it its competitive advantage and contributes immensely to the company’s success.
One of the advantages of Walmart’s strong customer base is the significant amount of revenue it allows the company to generate. With over 230 million customers around the world, Walmart has a large and loyal customer base that ensures the company generates substantial revenue. Since Walmart’s ability to attract and retain customers is critical to its long-term success and profitability, its strong customer base is one of its greatest strengths.
Another advantage of Walmart’s strong customer base is that it provides the company with valuable insights into consumer behavior and preferences. Through the company’s frequent customer data analytics, Walmart can gather and analyze data on the behavior, purchasing patterns, and preferences of its customers. This data helps the company to tailor its products and services to meet the needs of its customers, thereby improving customer satisfaction and loyalty.
Furthermore, Walmart’s strong customer base allows the company to create a competitive advantage through its private-label products. Walmart’s private label products help to differentiate Walmart’s products from those of its competitors. They are designed to meet the needs and preferences of Walmart’s customers. Also, Walmart’s strong customer base enables the company to negotiate better terms and prices with suppliers. With its large purchasing power, Walmart can negotiate better prices for its products. In return, the company offers its products at lower prices than its competitors to retain its existing customers, attract more customers, and increase market share.
Finally, Walmart’s strong customer base provides the company with lots of opportunities for growth and expansion. With its large and loyal customer base, Walmart can explore new markets and expand its business into new product categories without fear of failure. This allows the company to diversify its revenue streams and reduce the risk associated with depending on a single revenue stream.
The following are Walmart’s weaknesses that can help us to gain a better understanding of the challenges the company faces and the strategies it can adopt to address them:
Overdependence on the U.S. Market
Despite its global expansion, a massive chunk of Walmart’s revenue still comes from its U.S. market. There are about 10,500 Walmart stores in the world. About 4,648 of Walmart’s stores are located in the United States of America. Walmart’s overdependence on the U.S. market makes the company vulnerable to economic changes and fluctuations in the U.S. economy. Since the U.S. market accounts for the majority of Walmart’s revenue, any economic downturn or recession in the U.S. can significantly impact the company’s financial performance. An excellent example of this could be seen during the 2008 global financial crisis. Walmart’s sales and revenue were not spared from the harsh effects of the economic downturn in the U.S.
Another effect of Walmart’s overdependence on the U.S. market is that it limits the company’s growth and expansion opportunities. Although Walmart has a very strong presence in the U.S., the company’s growth potential in the U.S. market is limited. To sustain growth and profitability, the company needs to explore new markets and expand its operations into new territories. However, overdependence on the U.S. market can limit Walmart’s ability to expand into new markets and diversify its revenue streams.
Furthermore, being overdependent on the U.S. market can make Walmart vulnerable to political and regulatory changes in the U.S. Generally, changes in government policies and regulations can significantly impact any company’s operations and financial performance. Therefore, Walmart is at the mercy of the U.S. government, since the bulk of its revenue comes from the United States of America. For example, changes in tax policies, trade policies, and labor regulations can affect Walmart’s profitability and growth potential in the U.S. market.
Finally, overdependence on the U.S. market can limit Walmart’s ability to adapt to changes in consumer preferences and trends. While the U.S. market is significant, consumer preferences and trends are constantly evolving and might be different in other countries. Therefore, Walmart needs to stay updated to remain competitive. Overdependence on the U.S. market can limit Walmart’s ability to adapt to changes in consumer preferences and trends, which can affect the company’s sales and revenue.
Despite being the largest private employer in the world with over 2.2 million employees, Walmart’s labor practices have been a subject of criticism and controversy for many years. The company has been accused of maltreating its employees, raising several employee safety concerns, and resulting in negative publicity for Walmart.
Among the most common labor practices that there usually are, Walmart has been criticized for its low wages and poor working conditions. It is said that many of the company’s employees are paid minimum wage or slightly above it, which is often not enough to support a family or make ends meet. As a result, there is a high turnover rate, as employees often leave the company in search of better-paying jobs. The high turnover rates can also be costly for the company, as it has to spend money on recruiting and training new employees. Additionally, Walmart has been accused of violating labor laws and enabling poor working conditions, including failing to pay workers for overtime, forcing workers to work off the clock, and inadequate safety measures. These conditions result in employee injuries and illnesses, which impact the health of the workers and their families. These practices have led to lawsuits and negative publicity, which can damage the company’s reputation and affect its ability to attract and retain talented employees and even customers.
Apart from the negative publicity it gives the company, Walmart’s labor practices can also affect its employees adversely in many ways, which can, in turn, affect the growth and development of the company. For example, Walmart’s labor practices can impact employee morale and motivation. If the employees feel undervalued and overworked, they may be less motivated to perform well on the job. This, in turn, will negatively impact the customer experience. Additionally, employees who feel mistreated by Walmart may be more likely to leave the company, leading to a drastic increase in turnover and training costs.
Furthermore, the local communities in which Walmart operates can be affected by the company’s labor practices. When employees are not paid a living wage, they may struggle to support themselves and their families, leading to an increased poverty rate and reliance on government assistance programs. This can have a ripple effect on the local economy, as people who are struggling financially may be less likely to spend money at local businesses. Additionally, Walmart’s labor practices may influence its relationship with its local communities of operation. Constant criticism of the company’s labor practices generates negative publicity, which can cause local communities to lose their trust in the company.
In conclusion, Walmart’s labor practices can also impact the company’s bottom line. When employees are not paid fairly and treated well, they may be more likely to unionize or engage in other forms of collective action. For example, in 2012, several Walmart employees went on an industrial strike and took to the streets to register their protests against the company. Activities like this can lead to disruptions in the supply chain and increased labor costs, which can negatively impact the company’s profitability. To avoid these adverse implications, Walmart must take steps to improve its labor practices, including paying fair wages, providing safe and healthy working conditions, and respecting workers’ rights.
Limited E-commerce Presence
Walmart has a vast network of physical stores scattered across the globe, and the company has made significant investments in e-commerce in recent years. However, the growth of the company’s e-commerce is limited as it still lags behind other competitors in this space. Many of Walmart’s competitors, such as Amazon and Alibaba, have established robust e-commerce platforms that offer a wide range of products and services. These platforms allow customers to shop comfortably from anywhere and at any time, and this is a significant advantage in today’s market. In comparison to its competitors, Walmart’s e-commerce platform is still relatively small, and this can put the company at a disadvantage when competing with these other companies.
Walmart’s limited e-commerce presence means that the company is missing out badly on a significant and rapidly growing market. E-commerce has become increasingly popular in recent years, and consumers are increasingly turning to online shopping for convenience and price. Walmart’s limited e-commerce presence means that it is not able to capitalize on this trend, and this can limit the company’s revenue growth and profitability. Walmart’s little e-commerce presence means that the company may struggle to attract and retain younger consumers. Since most younger consumers are tech-savvy, they are increasingly turning to e-commerce for their shopping needs, and they expect a seamless and convenient online experience. Walmart’s limited e-commerce platform may not meet these expectations, which can make it less attractive to younger consumers.
Finally, Walmart’s limited e-commerce presence can also limit the company’s ability to collect and analyze data on its customers. E-commerce platforms offer valuable data on consumer behavior, preferences, and purchasing patterns that can be used to improve product offerings, marketing strategies, and customer experience. Walmart’s limited e-commerce platform means that it may not be able to collect and analyze this data, and this puts the company at a disadvantage compared to competitors that have more robust e-commerce platforms. To address this problem, Walmart must invest more in its e-commerce platform. By offering a seamless and convenient online experience, and offering a wide range of products and services, Walmart can capitalize on the growth of e-commerce and remain competitive in today’s market.
Inconsistent Customer Service
Walmart operates hypermarkets and, as a result, the company has been criticized for its inconsistent customer service, with some customers reporting long wait times, messy stores, and difficulty finding products. This is a result of poor training, low wages, etc. Employees who are not properly trained or supported may struggle to provide consistent and high-quality customer service. This can lead to frustration and dissatisfaction among employees, which can impact their job performance and overall morale. This can impact the company and its customers negatively.
Inconsistent customer service can lead to a negative shopping experience for several customers. Due to the brand’s image, customers expect a certain level of service when they shop at Walmart. This includes but is not limited to the helpful and friendly staff, well-stocked shelves, and a clean store. When these expectations are not met, customers can become easily frustrated and dissatisfied, and this can impact their decision to shop at Walmart in the future.
Also, when customers have a negative experience while shopping at Walmart, it is likely to affect the company’s reputation. In today’s age of social media and online reviews, customer service experiences can quickly spread through the internet. Negative reviews and comments about poor customer service can damage Walmart’s reputation and impact its ability to attract new customers and retain the old ones.
Furthermore, inconsistent customer service can affect the company itself negatively. For example, poor customer service can lead to lost sales, as customers may choose to shop elsewhere if they have a negative experience at Walmart. Additionally, poor customer service can lead to increased costs, as the company may need to invest in additional training or resources to improve customer service.
To address these inconsistencies in customer service, Walmart must focus on improving its customer service across all stores. This may involve investing in additional training and resources for employees, implementing processes to ensure consistent service standards are met, and addressing any specific customer complaints or concerns. These measures will help to improve the company’s reputation, attract and retain customers, and improve its overall financial performance.
Thin Profit Margins
Walmart is most popular for providing its customers with low-priced goods. While this is a strength that allows the company to attract new customers and retain existing ones, it is also a weakness for the company. Walmart’s cost leadership strategy may result in thin profit margins for the company. A thin profit margin means that Walmart makes very little money on each item sold. This is because the company has built its brand around this pricing strategy to keep prices as low as possible, which means that its profit margins are also very low. Walmart has to sell a large volume of goods to make a profit, and this can put pressure on the company’s profitability. Walmart’s low prices are also a vulnerability because they are vulnerable to fluctuations in the global economy. If the cost of raw materials or labor increases, Walmart’s profit margins will be impacted.
Another reason why Walmart has a thin profit margin is the cost of doing business. The company has to pay for the cost of the products it sells, as well as the cost of operating its stores and warehouses. These costs can eat into the company’s profits, leaving it with a thin margin. Additionally, Walmart faces stiff competition from other retail companies, which puts pressure on its pricing strategy. To remain competitive, Walmart has to keep its prices low, which further reduces its profit margins.
Walmart’s dependence on low prices can lead to a lack of investment in research and development. The company may be hesitant to invest in new technologies or innovations because this could increase its costs and, therefore, its prices. Refusal to invest in research and development leads to a lack of innovation, which can put Walmart at a disadvantage compared to its competitors.
Finally, Walmart’s dependence on low prices can also impact its relationships with suppliers. Walmart’s low prices put pressure on suppliers to lower their prices, which can impact their profitability. This pressure can strain relationships between Walmart and its suppliers and make it difficult for Walmart to maintain consistent product quality. To fix this weakness, Walmart needs to find a way to balance its pricing strategy with other factors that can impact its long-term success.
The following are opportunities that Walmart can leverage and capitalize on to further solidify its position in the market:
With over 11,000 stores worldwide and a presence in about 27 countries, Walmart is the largest retailer in the world. However, the company still has the potential for expansion into new markets. Global expansion presents a significant opportunity for Walmart as it allows the company to tap into new markets, diversify its revenue streams, and increase its customer base. Walmart can enjoy several benefits through an expansion into new foreign markets.
One of the key benefits of global expansion is the ability to tap into new markets. So far, Walmart has been successful in entering new markets and tailoring its business model to suit local needs. For example, Walmart entered the Indian market through a joint venture with Flipkart, India’s leading e-commerce platform. This joint venture allowed Walmart to enter the Indian market with an established partner, leverage Flipkart’s local knowledge, and offer customers a seamless shopping experience. By expanding globally, Walmart can enter new foreign markets through partnerships with established brands that contribute to the growth and development of the company.
Another benefit of global expansion is the ability to diversify revenue streams. Walmart’s overdependence on the U.S. market already poses enough threat. The company’s revenue is primarily generated in the United States, with international revenue accounting for only a small percentage of its overall revenue. By expanding globally, Walmart can diversify its revenue streams and reduce its reliance on the U.S. market. This diversification also reduces the risk of market fluctuations, economic downturns, and other factors that could negatively impact the U.S. market.
A global expansion also presents an opportunity for Walmart to increase its customer base. By expanding into new markets, Walmart can reach new customers in countries that may not have been familiar with the brand. This increase in customer base can lead to increased sales and revenue, which can help Walmart to achieve its growth targets. It also presents opportunities for Walmart to leverage economies of scale. As Walmart expands globally, it can benefit from economies of scale, which can reduce costs and increase efficiency. For example, Walmart can leverage its global supply chain to reduce procurement costs, negotiate better prices with suppliers, and improve inventory management.
According to Statista, retail e-commerce sales worldwide are forecast to reach US$ 6.9 billion, and this signifies rapid growth in the e-commerce industry. Several factors, including the COVID-19 pandemic, have accelerated the shift towards online shopping, thereby opening a lot of opportunities for companies in the E-commerce industry. Walmart has an opportunity to capture a significant share of this market by leveraging its existing strengths and investing in its e-commerce capabilities.
Walmart has been investing heavily in its online grocery delivery and pickup services, which have seen significant growth during the COVID-19 pandemic. Walmart has expanded its grocery pickup service to more than 3,500 locations and offers same-day delivery from more than 2,700 stores. This puts Walmart in a strong position to capture a larger share of the online grocery market, which is expected to continue growing.
To compete with other big players, such as Amazon Prime, in the e-commerce industry, Walmart has introduced a membership program known as Walmart+, that offers unlimited free delivery, fuel discounts, and other benefits. The company can increase customer loyalty and drive more sales through such e-commerce platforms. Walmart has also been using acquisitions to fuel its e-commerce growth. In 2016, Walmart acquired Jet.com, an online marketplace, for $3.3 billion. This acquisition gave Walmart access to Jet.com’s technology and e-commerce expertise. Walmart has also acquired several other e-commerce companies, including Bonobos, Moosejaw, and Modcloth. These acquisitions have helped Walmart to expand its product offerings and reach new customers.
As the largest retailer in the world, Walmart has a significant scale and resources that give it an advantage in terms of investing in and expanding its e-commerce business. The company can leverage its existing physical infrastructure, such as its network of stores, to fulfill online orders. This provides a competitive advantage over e-commerce-only retailers, who have to invest in warehouses and logistics infrastructure.
Demand for Environmentally Friendly Products
As consumers become more environmentally conscious, there is an increasing demand for sustainable and environmentally friendly products. Walmart can leverage this opportunity by offering a wide range of sustainable products and promoting its eco-friendly practices. Walmart has already made significant progress in its sustainability efforts. The company has set ambitious goals to reduce its greenhouse gas emissions and increase the use of renewable energy in its operations. However, as a leading retailer, Walmart can intensify its efforts to improve its brand image and appeal to a broader range of consumers.
One of the measures Walmart can take to meet up with the increasing demand for environmentally friendly products is to leverage its supplier relationships to encourage its suppliers to adopt more sustainable practices. By working closely with its suppliers, Walmart can encourage them to make changes in their operations, which can lead to a more sustainable supply chain. The company can also reduce packaging waste and increase energy efficiency in its stores and supply chain.
Furthermore, Walmart can also explore partnerships with suppliers and NGOs to develop sustainable products and initiatives. By promoting sustainable and environmentally friendly products, Walmart can reduce its environmental footprint and contribute to a more sustainable future. This move can help Walmart build a positive image among its stakeholders and attract more socially responsible investors.
As the retail industry continues to evolve, Walmart needs to consider diversifying into related businesses such as healthcare and financial services as a significant opportunity to further grow its business. While Walmart is already engaged in some of these sectors, it can further expand its product offerings in these new markets.
Healthcare is a rapidly growing industry with significant demand for services. Walmart has already entered the healthcare industry by offering in-store clinics, pharmacy services, and health insurance. However, Walmart can further expand its healthcare services by partnering with hospitals and healthcare providers to offer more specialized care to customers. The company can also leverage its vast network of retail stores and logistics capabilities to provide affordable healthcare services to customers.
Financial services are another area where Walmart can diversify its business. The company already offers a range of financial services, such as money transfers, check-cashing, and prepaid debit cards. Walmart can further expand its financial services offerings by partnering with banks and financial institutions to offer savings accounts, credit cards, and loans to customers. By offering financial services, Walmart can attract new customers and strengthen its relationship with existing customers.
There are several benefits that Walmart can derive from diversification. Firstly, diversification can help Walmart reduce its reliance on the retail industry, which is subject to economic cycles and changing consumer preferences. By diversifying its business, Walmart can reduce its overall risk and increase its revenue streams. Also, diversification can help Walmart improve its brand image and appeal to a wider range of customers. By offering healthcare and financial services, Walmart can position itself as a one-stop shop for customers, thereby increasing customer loyalty and retention.
Technological advancement is a crucial component of Walmart’s growth strategy. The company has already made significant investments in technology, including machine learning, AI, and data analytics, to improve its operations and enhance customer experience. However, Walmart can still take advantage of technological advancement to further enhance its operations, customer experience, and online presence.
One of the ways through which Walmart can take advantage of technological advancement is through supply chain optimization. By leveraging technology, Walmart can optimize its supply chain, reduce operational costs, and improve efficiency. By using data analytics, Walmart can gather insights into customer demand patterns and inventory levels, allowing the company to optimize its inventory management and avoid stock-outs. This will enable Walmart to provide its customers with a more reliable and consistent shopping experience.
Also, Walmart can provide a personalized customer experience for its customers by using technology like AI and machine learning. The company can gather data on customer behavior and preferences, enabling it to provide a more personalized shopping experience. By analyzing customer data, Walmart can offer customized promotions and recommendations, making the shopping experience more enjoyable and convenient for its customers.
Finally, by investing in cutting-edge technology, Walmart can streamline its supply chain, optimize inventory management, and offer a seamless omnichannel experience to customers. This will enable the company to keep pace with the changing retail landscape and stay ahead of its competitors.
The following are the threats that Walmart faces that can affect the growth and profitability of the company:
The retail industry is highly competitive as it is filled with several large and small players vying for market share. Walmart faces competition from several large retailers, including Amazon, Target, and Costco. These retailers have significant resources and a robust online presence, which makes it challenging for Walmart to compete with them. This poses a threat to Walmart’s profitability as it creates options for customers.
One of the biggest challenges that Walmart faces from the intense competition is the pressure on pricing. With several retailers competing for market share, there is constant downward pressure on prices. As a result, Walmart must continuously adjust its pricing strategy to remain competitive. This can result in reduced profit margins and low revenue.
Another challenge that Walmart faces from the intense competition is the need to constantly innovate and improve its products and services. Although Walmart is an early market mover in the retail industry, its business model is very easy to copy and its competitors have recreated this. With several competitors offering similar products and services, Walmart must differentiate itself by offering better quality, value, and customer experience. This requires significant investments in research and development, technology, and marketing.
Furthermore, intense competition can also result in increased marketing and advertising expenses. As retailers compete for customers, they must invest in advertising and marketing campaigns to attract and retain customers. This can result in increased expenses, which can impact Walmart’s profitability.
To maintain its position as the world’s largest retailer, Walmart must focus on differentiating itself from its competitors. Walmart can achieve this by investing in technology and innovation, improving its customer experience, and offering a broader range of products and services. Walmart can also focus on providing better value to customers by offering competitive pricing and promotions.
Economic downturns and shifts in consumer spending are a significant threat to Walmart’s business. During economic downturns, consumer spending tends to decrease, and consumers become more price-sensitive. This can result in reduced sales and lower revenue for Walmart. Additionally, during economic downturns, consumers may be more inclined to purchase lower-priced products or shop at discount retailers, which can result in increased competition for Walmart.
Also, shifts in consumer spending patterns can also pose a threat to Walmart’s business. As consumer preferences and shopping behaviors change, Walmart must adapt to remain relevant. For example, if consumers shift towards online shopping, Walmart must invest in its e-commerce capabilities to remain competitive. Failure to adapt to changing consumer behavior can result in reduced sales and a loss of market share.
Also, changes in consumer spending patterns can also result in increased pressure on pricing. For example, if consumers shift towards purchasing lower-priced products, Walmart must adjust its pricing strategy to remain competitive. This can result in reduced profit margins and revenue.
To mitigate these threats, Walmart must be proactive and respond immediately to changes in the economy and consumer spending patterns. Measures to take in this situation may include diversification of product offerings to cater to changing consumer preferences, investment in marketing and advertising to remain top-of-mind with consumers, and exploration of new markets for customer base expansion.
Changing Consumer Preferences
Another threat to the Walmart Business Model is the ever-changing consumer preferences and shopping habits. Consumer preferences can change for various reasons, such as changes in the economy, advancements in technology, and shifts in societal values. For example, in recent years, consumers have become increasingly conscious of environmental sustainability and ethical business practices. As a result, they may be more inclined to shop at stores that prioritize these values, even if it means paying a higher price. Therefore, Walmart may lose many customers if they are not aware of these changing preferences.
Another example is the rise of e-commerce, which has fundamentally changed how consumers shop. People can now purchase items from the comfort of their homes, often at lower prices than in brick-and-mortar stores. Walmart has recognized this trend and has invested heavily in its online platform to remain competitive. However, this has required significant resources and a shift in the company’s business model.
The ever-changing consumer preferences can also impact the types of products that Walmart sells. For example, consumers may be more interested in plant-based meat alternatives, and Walmart must respond by offering more of these products. If Walmart fails to do so, it could record a drastic decline in sales and market share. To avoid this, Walmart must always stay on top of the consumer preference trend to be able to make adjustments as and when needed.
Increasing regulatory scrutiny
Since Walmart is subject to the laws of the country in which it operates, one of its major challenges is the increasing regulatory scrutiny imposed by various governments. Governments around the world have become increasingly concerned about the power and influence that large corporations such as Walmart wield. As a result, they have imposed a range of regulations designed to protect consumers and promote fair competition. For example, governments may impose taxes, tariffs, or other regulations that make it more difficult for Walmart to operate in certain regions.
Apart from government laws, Walmart has also been frequently criticized for its labor laws and treatment of employees. In recent years, Walmart has faced numerous lawsuits and regulatory investigations related to issues such as wage theft, discrimination, and poor working conditions. These investigations can result in hefty fines, damage to the company’s reputation, and costly legal battles. Such practices might force the government to implement laws that are unfavorable to Walmart in a bid to protect the citizens.
To manage these threats properly, Walmart must be proactive in addressing the concerns of regulators and consumers. Steps taken in this regard may include investing in employee training and development, improving working conditions, and adhering to labor laws and regulations. Walmart must also stay up-to-date with changing regulations and adapt its operations accordingly.
Litigation refers to the process of taking legal action. Walmart gets sued about 20 times daily and can have up to 5000 lawsuits in a year. These lawsuits are often brought by consumers, government agencies, and even Walmart employees. As a large multinational corporation, lawsuits are not a new thing to Walmart because it is exposed to a wide range of legal risks. These risks can arise from various sources, such as employment disputes, product liability claims, and intellectual property disputes. However, these lawsuits might affect Walmart in several ways.
Firstly, litigation can be a source of the financial burden for Walmart. Legal fees and settlements can be costly, and the company’s reputation can be tarnished by negative publicity associated with lawsuits. Litigation can also be time-consuming, diverting resources away from other essential areas of the business.
Litigation can also affect Walmart’s relationships with its stakeholders. For instance, product liability lawsuits can damage the company’s relationship with customers, while employment disputes can hurt the company’s reputation with employees. Moreover, lawsuits can affect the company’s relationships with suppliers, regulators, and shareholders. Frequent legal actions against Walmart can also impact the company’s growth potential. The company may face challenges in expanding into new markets or introducing new products if it has a history of legal issues.
To reduce the impact of litigation on the Walmart brand, the company must take conscious steps to cut down its legal risks. This can be achieved by compliance with relevant laws and regulations, adoption of the best practices in product safety and employee relations, etc. Walmart should also prioritize risk management and legal compliance in its strategic planning. The company should invest in training and resources to ensure that its employees are aware of legal risks and comply with relevant laws and regulations.
In conclusion, Walmart’s SWOT analysis reveals the strengths (massive scale and market dominance), and challenges (intense competition, changing consumer behavior, and legal risks) of the world’s largest retailer. To maintain its position and encourage rapid growth and development, Walmart must leverage its strengths while addressing its weaknesses and threats. By investing in innovation, expanding its e-commerce capabilities, and prioritizing risk management and legal compliance, Walmart can spread its tentacles to every country of the world and maintain its position as the leader in the retail industry for years to come.