Updated date:

Walmart Strategic Process and Analysis

Dominic has been online writer for ten years. I enthusiastically deliver quality work to help students achieve their academic dreams.

Walmart Strategic Process and Analysis


Executive Summary

Walmart is the leading retailer in the US and among the world's largest multinational corporations. It is famous for its economic organization and has done very well regardless of its recent market instability. Nevertheless, it still encounters pressures from challengers in the trade business and has flaws to be developed. Walmart leads in the physical space in the online retail business. This retail firm is in constant competition. However, Walmart has grown its marketplace for an extended period compared to competitors. The company started as a grocery and retail shop that relied on physical space. Amazon started its operations as an online bookseller company that later expanded its online business to selling other products. However, Walmart recently introduced its online services and has invested massively in digital services and technology. This paper explores or Value Chain or VRIO analysis, a Five Forces model, and the PESTLE analysis for Walmart.

Contents

Executive Summary. 2

1.0 Introduction. 4

1.1 Company Background. 4

2.0 ANALYSIS. 4

2.1 Internal Environment Analyzes. 5

2. 1.1 Walmart Inc. VRIO or Value Chain Analysis. 5

2.1.2 Walmart Competitive Advantage. 6

2.1.3 Walmart business strategy. 6

2.1.4 Organizational structure and management system design. 6

2.2 External environment Analysis. 7

2.2.1 PESTLE Analysis. 7

2.2.2 Porter's Five-Factor Model 7

2.2.3 Walmart response to Porter’s Forces. 9

3.0 Formulation. 9

4.0 Implementation. 9

5.0 Conclusion. 10

References. 10

Appendices. 11


1.0 Introduction

1.1 Company Background

Walmart is a top American international retail corporation running a series of hypermarkets, department stores, and grocery stores. The headquarters of the company is in Bentonville. It has developed to be among the world's major firms. Currently, Walmart has generated $548.74 billion in revenues, becoming the world's leading firm itemized by Global Fortune. Among its accomplishments comprise being the largest private company with about 2.2 million staff and the top grocery store in the US by 2020 (Nguyen, 2017). Walmart's growth over the previous five years is impressive.

The company's story started with Sam Walton's vision for excellent value and customer service. Walton opened Walmart's first store in July 1962 in rural areas of Rogers, Arkansas, to focus on early growth by avoiding direct competition from retail giants at the time. Walmart's growth was exponential; within the first decade of its operations, it became one of the United States' most prominent retailers. Having conquered the local market, Walmart began expansion projects into the international market. It started by opening a store in Mexico and then proceeding to Canada, Shina, Germany, and the United Kingdom (Nguyen, 2017). Global strategies either establish new stores or acquisitions. Its international operations constitute 6,101 stores in 26 countries.

Walmart is driven by the vision to become the destination for customers wishing to same money regardless of what they purchase. Over the last five decades, the company's immense success is attributed to the simple idea of selling more for less. The strategy has helped the brand edge out its competitors by appealing more to price-sensitive customers. Everyday low price (EDLP) is the cornerstone of Walmart's strategy coupled with high-quality goods and services and excellent customer service (Nguyen, 2017). Additionally, the retail's one-stop shopping business model has worked to its advantage by attracting and retaining today's customers who seek the convenience of a one-stop shopping experience.

2.0 ANALYSIS

The analysis involves the assessment of the economic challenge, which examines its internal and external environments.

2.1 Internal Environment Analyzes

This analysis includes the valuation of the financial challenge, which tests its external and internal environments.

2. 1.1 Walmart Inc. VRIO or Value Chain Analysis

Walmart upholds material dealing with, distribution center, and stock administration to control and manage its production network cost. This cycle relies upon providers spread across the globe. Walmart has constructed a strong association with its providers, who give crude materials progressively according to necessity. This drawn-out relationship is worked through buying in a mass amount, consequently decreasing expense (Pingolia, 2020). This entire cycle is smoothed out through a data framework.

Most merchandise does not touch the distribution center floor. They are moved from approaching trucks to active trucks on a 24 miles length transport line, subsequently diminishing transportation cost, transportation time, and stock expense. The stores e promptly renewed before the stocks began to discharge, thus expanding the activity's general productivity. It follows a decent and prosperous showcasing and deals technique. Similarly, they energize new items and imaginative thoughts alongside the danger associated with presenting something similar on the lookout. To catch the client section, it advances the items from unique recordings and channels to online media (Pingolia, 2020). The main trait is client support to keep up the brand picture and notoriety in the open market.

It enhances the item to meet consumer loyalty. All stores are coordinated with uniform costs and store opening times, so clients perceive stores any place they go. The shop floor representatives are prepared to speak with clients' prerequisites. The framework of any firm contains organizational culture, functional exercises, and workers. Walmart's have a massive foundation which upholds practices like administration of innovation, store network and Human Resource to serve their clients. Walmart is on Fortune's 100 Best work environments list. However, it confronted serious analysis for a helpless human asset on the board and outperformed that stage (Pingolia, 2020). There is open correspondence among workers and associations to advance novel thoughts, face challenges, and progress toward greatness. It centers on representatives' vocation improvement by giving serious wages and extensive advantages like clinical service.

2.1.1.1 Non-core Competencies

The organization’s items, private name brands, and bundle conveyance networks are authoritative assets and abilities that do not fulfill every one of the necessities, specifically the VRIO structure and VRIN system (Pingolia, 2020). These capacities are non-center abilities that help fortify Walmart's worth chain and upper hands.

2.1.1.2 Walmart Core Competencies/Long-Term Competitive Advantages

Walmart excels because of its set of skills and experience in the retail industry. Nguyen (2017) defines core competency as a task or field an organization excels. According to the researchers, an enterprise's core competency is an area its competitors find difficult to imitate. In other words, core competencies differentiate a firm from its rivals in the market. Pingolia (2020) views core competency as a company's strategic advantages in its underlying skills, technical capacities, functions, and pooled knowledge. As Nguyen (2017) further adds, an organization will usually apply to a wide array of business activities and practices that often transcend product and market borders.

Walmart's supply chain is considered the most technologically advanced and efficient in the retail industry. The company's supply chain management combines vendor roles in distribution, electronic product information, and its warehouses' strategy. Walmart's supply chain is based on three goals: mastering the art of determining what is needed, how much is needed, and when it needs it. The company's unique supply chain management makes it a pioneer in getting detailed product information electronically (Nguyen, 2017). The firm's technological advantage in supply chain management plays a critical role in its excellent inventory management system.

It enhances the item to meet consumer loyalty. All stores are coordinated with uniform costs and store opening times, so clients perceive stores any place they go. The shop floor representatives are prepared to speak with clients' prerequisites. The framework of any firm contains organizational culture, functional exercises, and workers. Walmart's have a massive foundation which upholds practices like administration of innovation, store network and Human Resource to serve their clients. Walmart is on Fortune's 100 Best work environments list. However, it confronted serious analysis for a helpless human asset on the board and outperformed that stage (Pingolia, 2020). There is open correspondence among workers and associations to advance novel thoughts, face challenges, and progress toward greatness. It centers on representatives' vocation improvement by giving serious wages and extensive advantages like clinical service.

2.1.1.3 Walmart Inc Capabilities

A core capability is defined as a firm's set of skills, professionals, resources, or people who are distinctively superior to the competition. Core capability takes time as the organization learns how processes and resources work together for its benefit. The success of these firms leads to sustainable competitive advantage. The firm also gains a high position in a market share. There are four key elements of core capabilities. They include physical and technical systems, organizational systems, people, team and skills knowledge, and values regulation.

2.1.2 Walmart Competitive Advantage

Walmart has a competitive business strategy. Its price differentiation in the market makes it have a high competitive advantage. Cost leadership is Walmart's generic strategy. According to Nilufer (2020), cost leadership involves an economic strategy that emphasizes attaining low costs. Competitive advantage happens when a business utilizes its low-cost raw materials, skilled workforce, efficient operation, and control costs to ensure customers' maximum value. The following are types of competitive advantages of business:

  • Product differentiation: Walmart has competitive advantages in the marketplace through service or product differentiation (Nilufer, 2020). The firm has a competitive advantage if it provides unique products or services.
  • Distribution Network: A unique distribution channel for company products can be a great way to differentiate the firm products and build a competitive advantage.
  • Intellectual property: Intellectual property such as software, knowledge, skills, trade secrets, and technology can build an essential competitive advantage for the firm (Nilufer, 2020).
  • Customer service: Good customer service in an organization can attract potential customers; also, it can build loyal consumers.

2.1.3 Walmart business strategy

The first strategy is to have proper technical systems and capabilities. Walmart has a long way to match digital solutions level in the retail business. The company has revolutionized the shopping experience. There are more reasons for Walmart to improve its e-commerce systems. Shoppers are gradually moving from brick-and-mortar stores to embrace the convenience of shopping technologies. Because of this, Amazon enjoys a 52.4 percent share in the e-commerce market, with Walmart and several other brands sharing the rest (Nilufer, 2020). Thus, the first step to compete with rivals would be to invest in comprehensive technological solutions around an excellent online store system.

Walmart also needs a greater market outreach. The brand has exhausted the local market with its unmatched dominance in physical stores. A practical and aggressive global expansion strategy will be another step towards contending Amazon for the largest retail brand in the world. Since the company already has a robust international distribution network, robust digital solutions would make expansion successful. The company can learn from Amazon's strengths and weaknesses to outmaneuver it in global expansion strategy (Pingolia, 2020). With its EDLP pricing strategy, if Walmart can customize the entire online shopping experience, beating competitors would not be a gigantic task.

Moreover, Walmart can capitalize on creating a sense of community. Recent data shows that 63 percent of consumers will shop with brands that stand for a purpose reflecting their values and beliefs and reject those that do not. Ninety percent of consumers assert choosing an authentic brand over its competitors regardless of product and service offering. Although Amazon is a famous brand, it is not purpose-driven. Therefore, Walmart's best way to win and retain customers is to demonstrate its values and authenticity by establishing a community. There are multiple ways of creating a sense of community, both online and off the internet (Pingolia, 2020). Some of the approaches include opening a forum, community-based blogs, and getting involved in community events.

2.1.4 Organizational structure and management system design

A collaborative sourcing program is designed to find mutual benefits across the entire supply chain for both purchaser and supplier (Jabbar & Hussein, 2017). The program benefits Walmart significantly in several ways. For instance, by identifying mutual benefits between its suppliers up and down the supply chain, Walmart gains the power to stabilize its supply chain. A stable supply chain is essentially reliable and predictable, meaning Walmart can deliver against its customers' requested delivery date, which varies between customers and orders (Pingolia, 2020). Collaborative sourcing eliminates unnecessary middleman costs such as marketing, enabling Walmart to lower its product prices than market rates.

The success of a business depends on the success factors. Success factors involve the limited areas where satisfactory results ensure successful improved performance of the organization, individual, or department. Walmart has every strategy to succeed in the e-commerce area. The company has a high purchasing power, financial capability, local delivery retail shops, and the acquisition of jet.com that gave the company significant technology in e-commerce. The success of these firms leads to sustainable competitive advantage. The firm also gains a high position in a market share Pingolia, 2020). The elements involved are physical and technical systems, organizational systems, people, team and skills knowledge, and values regulation.

2.2 External environment Analysis

Walmart is a customer-oriented brand. Therefore, this core competence is a customer-centered business strategy that focuses on the customer's convenience. By focusing on customer convenience, this brand can attract a comprehensive coverage of customers around the country. The company also gains its popularity by focusing on the customers and providing customer convenience service. Recently, the company launched its premium subscription offering service to unlimited food deliveries for food over $35. By offering affordable premium subscriptions to its customers, company gets a competitive advantage over other companies. It offers a variety of goods and services as compared to its rival company. The analysis involved is the porter’s five forces analysis.

2.2.1 PESTLE Analysis

Porter's forces involves powerful instrument that analyzes the competition level in a business environment. Also, it is a tool used for identifying potential strategic profitability. It is essential for new businesses entering a new industry or a sector. The analysis states that the competition in an industry depends on five forces. Walmart invested in the Indian Flipkart by converting its wholesale capital and carry Indian stores into contentment centers. The investment was an instant success. Walmart’s macro-environment or remote environment factors include:

2.2.1.1 Political Factors

Walmart considers political variables in the retail market, for the most part relating to government measures (Nguyen, 2017). Walmart's environment incorporates governmental security issues.

2.2.1.2 Economic Issues

Walmart is feeling the embrace of economic changes. Any change prompts fluctuations in the company’s incomes. These economic variables indicate that Walmart misuse opportunities (Nguyen, 2017).

2.2.1.3 Socio-cultural issues

The socio-cultural factors are facing Walmart influence buyer discernment and inclinations. . The company has already pointed to Flipkart as the primary driver of its growth. The company has invested in new technology. The purpose of improved technology is to evolve the online grocery pickup and delivery to a quick and efficient process. Walmart has the benefit of having a huge chain with a network of more than 5000 physical retail units across the country. Moreover, in the United States, Walmart has the highest sales level with 340 billion sales. Walmart can expand its brands to achieve different social preferences (Nguyen, 2017).

2.2.1.4 Technological issues

Walmart should address innovative patterns. Walmart's creative external elements incorporate expanding business analysis or information and expanding utilization among customers (Nguyen, 2017). Walmart has 77% of the company's stake. Therefore, Flipkart has generated many profits for the company. Flipkart is a vast e-commerce opportunity for the company. These competitive advantages possessed by Walmart prove that the company has a lot to compete for the market (Pingolia, 2020). Walmart can expand its interest altogether these elements.

2.2.1.5 Natural Factors

The natural elements in Walmart relate to environmental protection concerns. Natural preservation is presently a famous standard (Nguyen, 2017). Walmart's large-scale climate's natural outer components incorporate business manageability patterns and harmless to the ecosystem items trend. To achieve business supportability, Walmart should improve operational productivity.

2.2.1.6 Legal issues

Walmart depends on the prerequisites of rules and regulations. The legitimate Walmart's environment incorporates law change, sanitation guidelines, and business guidelines.

2.2.2 Porter's Five-Factor Model

The model was developed in 1979 by Michael Porter and featured five forces that shape the degree to which an industry is competitive (Nguyen, 2017). Porter's five forces would help Walmart develop strategies for a sustainable competitive advantage and long-term profitability.

2.2.2.1 New Entrants’ Threats

The retail sector is desirable and competitive at the same time. As current players become advanced, new and, emerging businesses bring innovative solutions and do things. In other words, new entrants can exert pressure on Walmart through cost-saving practices, better value propositions, and lower pricing. As such, Porter's threat of new entrants exerts a medium force on Walmart.

2.2.2.2 Buyers’ Bargaining Power

Buyers in the retail sector are excessively demanding. The industry is characterized by customers, the best value, and experience at a lower price. They also expect efficiency and convenience in their shopping experience (Nilufer, 2020). Customer behavior in the retail industry explains why brands like Walmart can thrive with the best offering at minimal prices.

2.2.2.3 Suppliers’ Bargaining Power

The retail and discount industry is marked by stores procuring materials and goods from diverse customers. However, this only applies to some types of retailers. Walmart's ability to sustain its pricing strategy and cost leadership is its ability to secure suppliers' least possible prices (Nilufer, 2020). For a supplier to work with the brand, they must meet specific requirements, including fees, reliability, cost, employee health, and safety.

2.2.2.4 Threats of Substitute Services and Products

The threat affects a firm and industry's profitability adversely. A classic example of the threat includes Google Drive replacing hard drives with better data storage solutions. The threat of substitute products and services would be expected to be high in the retail industry due to Walmart's nature of business (Nilufer, 2020). Walmart's line of products makes substitute products and services a weak and irrelevant force.

2.2.2.5 The Existing Players’ rivalry

An intense rivalry between competitors drives prices down, causing reduced profitability of an industry. The United States retail industry has major brands like Target, Costco, Amazon, Best Buy, and Walmart. These firms are of varying sizes and adopt different business models, causing a solid industry rivalry. The aggressiveness of these firms and the industry's competitiveness exert pressure on Walmart (Nilufer, 2020). Thus, it can safely be concluded that existing players' rivalry is a strong force in the retail sector.

2.2.3 Walmart response to Porter’s Forces

Walmart can respond to these forces to better position itself by having a clear differentiation strategy or pricing. Their famous roll-back pricing approach is intended to monitor entrant pricing and provide lower prices constantly.

3.0 Formulation

The multinational corporation is enjoying more substantial e-commerce growth since the last decade. According to Pingolia (2020), Walmart's revenue from its e-commerce platform grew to USD 25.1 billion. The United States market alone generated $15.7 billion net sales in 2019. Walmart's online market share is estimated at only 5.3 percent, just above eBay's 4.7 percent, covering 37.3 percent of the United States e-retail market. Walmart's e-commerce is growing at 97 percent, significantly more than the industry's average of only 27 percent (Nilufer, 2020). The growth high growth rate is attributed to the company's heavy investment in its digital solutions.

International expansion presents multiple opportunities for the company's growth and development goals. The firm has dominated the domestic market-beating the likes of Amazon. The United States is also Walmart's largest market segment that also generates the most significant portion of its revenues. Therefore, internationalization will reduce its overdependence on the local market. Walmart's domestic and international presence is unleveled. Its presence in the digital market is incomparable to its competitors. The company’s success in the e-commerce market has made it difficult for other brands to compete (Nilufer, 2020). Even though Walmart is considered a rising contender, it emulates technological infrastructure that is often described as highly effective and efficient will be a monumental task.

4.0 Implementation

Walmart has a robust supply chain network and logistics management. The corporation's robust supply chain network has enabled it to overcome competition in the retail industry and set it apart from its rivals (Pingolia, 2020). The excellent supply chain works to the company's advantage in four critical ways. For example, it ensures Walmart acquires goods and services at the lowest prices, minimizes costs, controls operating expenses, and improves efficiency in managing international business.

The company's pricing strategy and brand popularity are its primary sources of competitive advantage. Walmart's supply chain and pricing strategy have been the company's central focus since its inception. Even companies with advanced innovative solutions like Amazon recognize Walmart's effective pricing strategy, keeping prices as low as possible—EDLP, an approach the company has sustained despite economic pressures (Pingolia, 2020). Walmart is the most popular retail brand in the United States and is known in most corners of the world. It serves 275 million customers weekly and generates the most revenue of any brand in any industry. Its popularity is a significant advantage in terms of market coverage. Walmart cannot only compete directly with rivals but also has a chance to outperform the company. Walmart's physical footprint and employee base will allow the company to edge out online store performance.

Walmart has been responding to rivals’ online dominance in various ways.

The company should acquire technological means of competing rivals. The main reason Walmart acquired Jet.com is that it was formed and run by ex-competitor employees. The company acquired Jet.com, an online store, for $3 billion; in the following year, it acquired ModCloth, a women's online fashion store. In the same year, Walmart began testing a project involving 1.4 million retail associates delivering products to customers after hours. The company bought Bonobos, an online men's e-commerce platform, and a new online grocery location in the United States (Nguyen, 2017). All these measures contribute to Walmart's impressive online performance.

5.0 Conclusion

Walmart’s managers hoped to acquire technological infrastructure. Jet.com, lead by Marc Lore, helped integrate Walmart's physical stores and online systems. The acquisitions above meant Walmart has access to online markets that it did not initially have. Therefore, since Walmart has a superior logistics network, it plans to use its physical stores as stores for online shoppers. In other words, Porter's five forces techniques show the degree to which competition is a considerable concern for Walmart. However, Walmart can counter the rivalry using three strategies and invest heavily in sustainable differentiation to make the brand competitive. Its products are superior to alternatives in the market and scaling its systems, processes, staff, technology, and partner, and increasing market size consolidation strategies.

The analyses above offer exciting insights into Walmart's ability to compete directly. Walmart enjoys a strong brand presence in the United States from its brick-and-mortar setup. It is the king of physical stores in the United States market. The analysis also indicates that Walmart has a superior pricing strategy and an efficient supply chain. The company's EDLP pricing strategy and its reliable and robust distribution network make it a dominant retail enterprise. It also has a promising growth in the online market. However, competition is a primary concern as far as the brand's future is concerned. With the retail industry's anticipated movements, Walmart is to fuel e-commerce channel rapid expansion and stabilize brick-and-mortar passage growth. The omnichannel strategy and model of Walmart offer the retail considerable growth opportunities. Also, Walmart’s global footprint presence in China allows the company to benefit from upcoming demographic changes with the growing middle class in China. Based on these analyses and as shown above, Walmart’s core value is better than its present market value, indicating that it is ready to compete in the e-commerce marketplace and the best investment choice.

.

References

Jabbar, A. A., & Hussein, A. M. (2017). The Role of Leadership in Strategic Management. International Journal of Research -GRANTHAALAYAH, 5(5), 99-106. https://doi.org/10.29121/granthaalayah.v5.i5.2017.1841

Nandonde, F. A. (2019). A PESTLE analysis of international retailing in the East African Community. Global Business and Organizational Excellence, 38(4), 54-61. https://onlinelibrary.wiley.com/doi/abs/10.1002/joe.21935

Nguyen, T. T. H. (2017). Wal-Mart’s successfully integrated supply chain and the necessity of establishing the Triple-A supply chain in the 21st century. Journal of Economics & Management, 29, 102-117. https://www.researchgate.net/publication/320239187

Nilufer, N. (2020). A critical assessment on business strategy from aviation to the retail industry during COVID-19 Pandemic: A Walmart Case. International Journal of Business Ecosystem & Strategy (2687-2293), 2(2), 8-14. http://bussecon.com/ojs/index.php/ijbes/article/view/205

Pingolia, S. (2020). Case Analysis of Walmart and Flipkart M&A. Available at SSRN 3701098. https://ssrn.com/abstract=3701098

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2021 Dominic Mutua

Related Articles