Posted: March 23rd, 2023
The primary focus of this essay is Walmart, a publicly traded family-owned business. Walmart was founded in 1962 by Sam Walton, after which it went public in 1970, with its proceeds used to expand the company (“Our history,” n.d.). Since its foundation, Walmart has continued to experience significant growth in the retail industry, ranking among the world’s largest retailers. However, like other firms operating in a fast-changing business environment, Walmart faces considerable threats from disruptive innovation from its competitors. Exploring Walmart’s vision, mission, strategic goals, and competitive advantages, and creating a SWOT and PEST analysis, will systematically evaluate the business and create a strategic plan for sustained innovation in the global marketplace amid potentially disruptive innovation.
Walmart’s unique mission and vision statement lays the foundation for its business model. The firm’s mission statement is to help people save money and live better lives, while its vision statement is to make each day easier for busy families. On the one hand, Walmart’s vision and mission statement reflect Walton’s ideals, which were to give customers a wide assortment of quality products, the lowest possible prices, guaranteed satisfaction, friendly, knowledgeable services, convenient hours, a pleasant shopping experience, and free parking (“Walmart.com’s history and mission,” n.d.). On the other hand, the statements also define the firm’s business model, which revolves around offering lower prices relative to competitors, a wide variety of merchandise, and convenient best shopping experiences through its brick-and-mortar and online retail shops.
Some sources reveal that Walmart has had several strategic goals since its 2013 meeting with investors. Among the company’s key strategic goals are reducing expenses, enhancing its international proceeds, and increasing its brick-and-mortar store sales. While Walmart’s strategic objectives are mainly short-term or intermediate, they lay a foundation for achieving longer-term goals such as the company’s growth and expansion and high shareholders’ returns.
Walmart’s key strengths are mainly the internal factors that enable the firm to gain a competitive advantage and overcome industrial threats. The company’s key strengths include economies of scale, international presence, and a good supply chain. In terms of economies of scale, Walmart’s large organizational size makes it easier to stock several assorted products in its stores, distribute its fixed costs over its merchandise, and offer lower prices. The global expansion strategy also enables Walmart to diversify its operations in other markets and tap into its sales and revenue. For example, it is estimated that the firm has 10,500 stores in 24 countries, alongside its e-commerce websites (“In which countries,” n.d.). This internationalization helps Walmart secure a more extensive customer base and generate more sales in the growing economies. In addition, Walmart’s diversified supply chain is a significant strength that enables the company to avoid market disruptions and continue operations even when the local supply chain is affected. These strengths mainly offer Walmart a competitive advantage over retailers with a fixed supply chain, limited local operations, and smaller retailers who incur huge fixed costs to sell restricted goods under one roof.
An analysis of Walmart’s internal operations reveals a few weaknesses that may increase the firm’s vulnerabilities to disruptions from other competitors. These weaknesses include an imitable business model, low profits, and competitive disadvantages relative to other industry players. According to the literature, Walmart adopts a cost-leadership business strategy, which integrates the lowest cost relative to competitors (Atikiya et al., 2015). While this strategy helps attract price-sensitive consumers, it also limits the firm’s profit margins which are solely dependent on the sale volume. Besides, Walmart’s low-cost business strategy is a disadvantage compared to other players that offer relatively higher prices for quality products. Arguably, such firms make high proceeds by specializing in certain products and selling them at a high price among price-insensitive customers. Besides, Walmart has an imitable business strategy based on price and product assortment, which other firms can copy. In essence, Walmart’s cost leadership, imitable business model, and competitive disadvantage relative to high-end specialty business are sources of the company’s internal weaknesses.
Besides its significant weaknesses, Walmart has several opportunities to leverage to enhance performance and competitiveness in the industry. Some of the critical opportunities for the firm include further global expansion and improving its human resource practices. Although the global COVID-19 pandemic has been a blow to several countries, some of these economies, such as Asian nations, have shown a potential for growth over the past few years. Therefore, Walmart can seize this opportunity and venture into unexplored or underexplored countries. Walmart also can enhance its human resource practices to provide the best customer experience that may attract and help retain its clients. Reports reveal that Walmart’s workforce has fallen drastically, by 120,000 employees, since 2008 (Lutz, 2013). This change has considerably affected its customers’ experience because the available employees cannot adequately meet their customers’ needs. Fortunately, with the help of technological advancements, Walmart may have an opportunity to improve its human resource practices.
An analysis of Walmart reveals that a majority of the threats to its operations are external forces. These forces include fierce competition and changes in consumers’ tastes and preferences. On the one hand, Walmart stocks many inorganic and unnatural foods cheaper than organic products. On the other hand, consumers are shifting to healthier lifestyles, driving them to purchase natural and organic products. The progressive growth in health consciousness among consumers, leading to a change in their taste and preferences, poses a significant threat to Walmart’s competitiveness. In addition, the fierce competition from large and small e-commerce retailers poses a threat to the firm’s operations, as the former can offer similar services and products as Walmart.
Walmart’s operations are impacted by political factors, some of which present opportunities while others threaten its success. Some of the political factors that influence Walmart’s operations include political stability and policies. Political cohesion and stability in the domestic and international countries present an opportunity for Walmart to expand its operations globally without fear of damage caused by political instability. However, political pressure also presents a threat to the company’s operations. For a while, Walmart has been highly criticized for its low wages, which contradicts its mission statement of bettering people’s lives. If left unaddressed, the growing political pressure for increased wages may compromise Walmart’s operations and taint its image among its customers. Therefore, while leveraging the stable political climate, the company should also address wages to avoid adverse impacts on its success.
Economic factors such as growing economies and economic stability are some of the significant financial elements impacting Walmart. Several countries have been experiencing economic growth before the pandemic hit, presenting an opportunity for Walmart to venture into such nations where the demand for large retailers is high. Surprisingly, the economic downturn during the pandemic has also been an opportunity for Walmart to increase its sales volumes. Forbes report shows that by March 13, online sales at general merchandise retailers such as Walmart had climbed 50 percent (Goldberg, 2020). This rise may be attributed to financial conservation among consumers who purchase less expensive and most necessary products. Walmart can maintain its high sales or even experience higher purchases during economic stabilities through its low-cost business strategy, e-commerce retailing, and an assortment of different high-demand products during the economic downturn.
Consumers’ tastes and preferences are the major socio-cultural factors impacting Walmart’s success. Consumer taste has been shifting away from unhealthy to healthy products raising the demand for the latter. This change in consumers’ tastes and lifestyles is an opportunity for Walmart to stock its store with healthier and organic foods. Besides, consumers, today prefer online to traditional shopping. This change is prevalent among the elderly and busy families that lack time to visit physical stores. This change presents an opportunity for Walmart to improve its e-commerce user interface and offer better shopping experiences for its online shoppers.
Technological advancement in the retail industry’s landscape presents Walmart with an opportunity for growth and enhanced consumer experiences. These technical factors include business automation and robotics to improve the business’ efficiency. Business automation has penetrated every retail industry aspect, from order placement to fulfillment. Besides, some e-commerce giants, such as Amazon, are already using robotics in warehouses and capitalizing on advanced technology, such as drones, in delivering consumer orders. Mobile usage among consumers has also increased significantly, contributing to dramatic growth in online purchasing. These technological factors are an opportunity for Walmart to enhance its e-commerce store to serve the growing number of online shoppers and invest in automation, robotics, and big data analytics to facilitate business efficiency.
Besides its strengths and opportunities, Walmart has a few competitive advantages reinforcing its industry success. The firm’s key competitive advantage is its successful implementation of the vendor-managed inventory (VMI) system (Bookbinder et al., 2010). Scholars describe this supply chain practice as a “strategy based on the principle that the manufacturer or supplier assumes the responsibility for the management as well as all decisions regarding the product inventory at the customer by utilizing the demand information obtained from the consumer” (Joseph et al., 2010, p. 300). In essence, the VMI transfers the inventory management responsibility to Walmart’s vendors, whereby they assume the task of monitoring and restocking the inventory levels. This practice is mainly supported by information-sharing technologies that enable Walmart’s suppliers to establish consumer demand, stock, and replenishment levels. VMI is a source of Walmart’s competitive advantage because it allows the firm to avoid transportation and distribution costs, which are transferred to its vendors. This cost-cutting strategy also enables Walmart to share the lower costs of operations with its consumers through low-priced merchandise, thus outperforming competitors that incur transportation and distribution costs.
Besides the VMI, cross-docking is also a source of Walmart’s competitive advantages. Scholars define cross-docking as the process of receiving and unloading trucks, consolidating products into the cross-docking center, and transferring merchandise to temporary storage before loading them onto shipping trucks for distribution to their final location (Ardakani & Fei, 2020). Nassief et al. (2016) also add that cross-docking is an exercise of direct shipment. Products are received from inbound trucks and sent through outbound trucks, allowing the rapid movement of merchandise. In this context, Walmart’s vendors deliver merchandise to the firm’s distribution centers, where they are sorted and repackaged, ready for delivery to stores within a few miles. Cross-docking enables Walmart to cut back on its operational costs, especially in inventory holding costs, by eliminating the storage component from its supply chain. This cost-cutting strategy also enables the firm to transfer the reduced costs of operations in the form of low product prices, thus boosting its competitiveness in the industry.
Apart from its supply chain, Walmart’s high-tech innovation and information technology,, such as the RFID program,, is also a source of its competitive advantages. The RFID technology enables Walmart to automatically identify products that require restocking, thus promoting an efficient flow of goods to meet customer demand. Besides, this information technology enables online shoppers to identify replenished and out-of-stock goods, which creates an outstanding shopping experience. Scholars argue that Walmart’s RFID program allows the firm to develop real-time databases and target a minimal inventory, enhancing its competitive advantage in cost reduction (Nguyen, 2017). In essence, Walmart derives low-cost and increased product replenishment competitive advantages from its investment in RFID information technology.
Furthermore, Walmart derives its low-cost advantage from its strategic partnership with manufacturers and suppliers. The firm searches for suppliers with the best prices and quality products and creates a long-term partnership that guarantees the vendors continuous purchases from Walmart throughout their contracts. In turn, Walmart secures the lowest prices for commodities from these vendors. This strategic partnership reinforces Walmart’s low-cost competitive advantage over firms with multiple vendors who offer relatively high prices due to a lack of long-term purchase assurance.
As is evident from the SWOT and PEST analysis, there are several opportunities that Walmart can seize to promote sustained innovation in the global marketplace. Among the strategic plans that Walmart should pursue is diversification. Diversification is an ideal strategy for firms to gain more opportunities from existing markets, spread business risks, and gain higher returns (Kabeyi, 2018). In this context, Walmart should pursue business diversification into growing economies to achieve higher returns. As is evident from a 2021 Statista report, Walmart U.S. accounted for 67 percent of Walmart’s global net sales in 2021, and it has historically been responsible for the company’s most significant sales (Statista Research Department, 2021). This statistic reveals that the United States is Walmart’s largest market. However, the U.S. market is also highly saturated with brick-and-mortar and e-commerce retailers such as Amazon, The Kroger, and Costo. Therefore, Walmart should invest in diversification in other growing economies that are less occupied by large retailers or few physical stores. Arguably, this corporate strategic plan may help Walmart gain higher returns from the least explored markets while generating significant revenue from its large U.S. market.
Besides diversification, Walmart should restructure its HR practices and adopt robotics in its stores. As the SWOT analysis shows, Walmart’s HR practices are a source of its weaknesses because the available workforce is relatively low compared to the organizational size and demand. The PEST analysis also reveals a significant use of robotics in retail. For example, e-commerce retailers such as Amazon enlist robots in their fulfillment centers to facilitate easy movement of inventory from shelves, thus reducing the shipping times and costs of human labor.
Amazon Go has also been utilizing cashier-free stores whereby consumers are not required to queue to pay for the purchased goods. Such technological advances present an opportunity for Walmart to achieve its strategic vision of offering its consumers a pleasant shopping experience. Notably, the firm should invest in store robotics to allow inventory movement across the shelves, thus saving money it would otherwise spend on human resources. Such technological advances would also help Walmart reinforce its competitive advantage in cost by transferring the reduced cost of human capital into low-priced commodities. Besides, the firm should also improve its cashier-free system to make it more efficient and effective, especially for many customers. This change in the firm’s typical operations may help Walmart achieve its strategic goal of providing the best customer experience by eliminating waiting time.
Furthermore, Walmart should diversify its products to address the issue surrounding product quality in its global stores. The SWOT analysis reveals that Walmart mainly stocks low-cost products, some of which are of lower quality than high-quality-high-cost merchandise. Although costs are part of the firm’s competitive advantage, it should also pursue quality products to make it more appealing among quality-sensitive consumers. Walmart should create long-term contracts with its vendors to maintain this innovation’s sustainability and competitive advantage as it has before with other commodities. This strategy would help the firm purchase the goods for relatively low prices and stock high-quality merchandise.
The synthesis of information from this paper reveals that despite operating in a highly disruptive business environment, having a few internal weaknesses and several threats in the industry, Walmart has multiple opportunities to seize to enhance its competitive advantage in the retail sector. Notably, the firm should adopt technological advances in the retail industry, such as business automation and robotics, to enhance its business and HR practices. Walmart should also invest in business expansion in growing economies, which are promising markets for large retailers who wish to trap new markets.
Besides undertaking the proposed strategic business plans, Walmart should also pursue innovative solutions to address potential disruptive innovation in the retail industry. Arguably, competition in this sector is fierce, as more companies such as Amazon continue to develop new tactics of disrupting business practices to gain a more significant market share. This disruption is evident from Amazon’s use of robotics in its fulfillment centers, investment in drone delivery, and cashier-free stores. These practices are disruptive innovations because many retail firms have yet to embrace or fully implement them in their operations. Therefore, to maintain sustainable innovation, Walmart should continuously monitor the market using tools such as PESTLE to identify innovations in the industry and assess how they are likely to impact the firm’s operations. Overall, Walmart should also invest in these innovations in retaliation to its rival’s tactics and as a strategy of business survival.
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