Walmart: Business Strategy

This article provides a detailed analysis of Walmart's business strategy, including macro environment analysis, industry and competitive environment analysis, key success factors, value chain analysis, and strategic issues. It also suggests recommendations for improvement.

Running head: WALMART
Walmart: Business Strategy
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Author note

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Part 1:
Macro environment analysis
Factors Description Strength Need of
modification
Recommendation
Political  No actions
taken against
political issues
for a long time
 Unable to
expand due to
no proper and
stable
government
High Yes Walmart will be
able to expand
only under
corporate political
contribution and
the introduction of
a stable
government.
Economic  They have poor
GDP and
contributes
2.3% of the US
economy
(Lombardo
2017)
Medium Yes Contribution to
US economy
should be cut
down so that their
GDP can improve

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 Cutting wages
will lead to
more profit
leading to more
tax amount.
Social  Healthy lifestyle
and trend
 Cultural
diversity trend
and urban
migration
Medium No No
Technological  Increase in
business
automation
 Increase in the
use of mobile
device among
the consumers
(Kumar, Dass
and Kumar
2015)
Low Yes They need to
work on the
technological
aspects, as they
are way behind
other leading
retailers.
Environmental  Chemical
manufacturing
Low No No

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of products
 Trend in
environmentally
friendly
products
Legal  Food and safety
regulations
 Employment
regulations
High Yes Walmart should
consider food and
safety regulations
as a scope to
improve their
quality standards.
Industry and competitive environment analysis
Forces Description Strength Need of
modification
Recommendation
Power of buyers  Large
population
and high
diversity of
buyers
 Small
individual
purchases
High Yes The bargaining
power of the
buyers needs to be
improved for
influencing the
retail markets such
as Walmart.

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(Greenspan
2015)
Threat of
substitute
products or
services
 Substantial
availability
of substitutes
 Expensive
and low
variety of
substitutes
Medium Yes Walmart needs to
keep a check on
the new entrants’
operation, which
might become a
probable threat for
them.
Power of
suppliers
 Large
population of
suppliers
 Stiff
competition
among the
suppliers
High Yes Walmart needs to
control high
availability of
supply, which
makes it difficult
for the suppliers to
affect the retail
organizations.
Threat of new
entrants
 Low cost of
conducting
the business
 Moderate
cost of
developing
the brand
Low No No

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(Rotharmel
2015)
Rivalry among
competing sellers
 Strong
competition
from a
number of
firms in the
retail
industry
 High
aggressivenes
s of the other
retail firms
(Avery 2015)
High Yes Walmart should
also remain
aggressive in order
to sustain in the
competitive
market.

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High
Low High
Low
Price or
customer
service
service
Number of product categories
Retail industry:
Walmart
High volume/
Low price
Calvin Klein
Tommy
Hilfiger
Geographical
segmentation
Competition Macy’s
Dillard’s
High volume Competition
Fig: Strategic group map
Source: As created by the author
Key success factors
There are different key success factors for the retail industry such as a supply chain with
combined technology; superior logistics systems; and, a strong and unique culture. An innovative
supply chain with the most advanced technology has helped the retail industry to be at the
leading edge. Online shopping with the use of smart phones is an outstanding instance of

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connecting the supply chain through technology (Murphy and Li 2015). Logistics is one of the
major components of the retail industry and considered as the critical success factor. An
improved logistics system has helped Walmart and other retailers to provide proper inventory
details to win customer confidence. Improvement in the workplace culture has helped in
experiencing success in the form of hiring, retaining and motivating the diverse workforce and
maintaining a healthy workplace culture.
The retail industry consisting of high- end clothing and personal care products are
responsible for offering high gross profit margins. However, the net margin is comparatively low
in comparison to other sectors. As per the annual report, every year the retail industry is one of
the least profitable sectors. For instance, the ecommerce growth of Walmart has slowed down to
23%. The gross margin of the company was affected due to strong competition from Amazon to
win a bigger share in the retail industry. Furthermore, shares of Walmart fell to 9% as per the
recent information received from the company (Barney and Mackey 2017). The sales on
Walmart.com reduced on a significant basis, which helped Amazon to gain more revenue.
Part 2
Resource of
capability
Valuable Rare Inimitable Non-
substitutable
Contribution
of resources to
competitive
advantage
Leadership Yes Yes Yes Yes Drive for
achievement
and employee
motivation
Presence in
small and
Yes Yes Yes Yes Learn and set
up system for

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medium size
towns
experimental
learning
(Gereffi and
Fernandez-
Stark 2016)
IT investment Yes - - Yes Better
management of
company
activities to
improve
efficiency
Capability to
control IT
Yes Yes Yes Yes Effective link
with the
suppliers by
using EDI
Large size Yes - - Yes Lower cost of
input and
economies of
scale
Relationship
and bonding
with the
suppliers
Yes Yes Yes Yes Enhance the
negotiating
power for
integrity and
reputation
Distribution Yes Yes Yes Yes Avoiding

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system inventory costs
and help in
cross- docking
ability
Strong focus Yes Yes Yes Yes A common
goal to create a
link between
the managers
and the
employees
Culture Yes Yes Yes Yes Hard work and
innovation for
constant
improvement
(Santos and
Laczniak 2015)
Knowledge
management
Yes Yes Yes Yes Lesson from
one retail store
spread easily to
other stores
because
observation is
the best
practice for
opening ideas

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Suppliers Walmart distribution centerWalmart store Walmart shopper
Customers get the scope to pay minimumThe products are arranged properly in the shelf after they reach theThe products are sorted and placed on trucks to move from the distribution centreVendors of Walmart deliver the products to the distribution center or directly to the stores. They can easily bargain
of competitors
Fig: Value chain analysis of Walmart
Source: As created by the author

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Wal-Mart’s value proposition is based on a thin line. In order to achieve low prices and
customer satisfaction, they must create efficient supply chain management and transfer the
products on a timely basis.
The strengths include international size of the organization and international and efficient
supply chain. These strengths keep them ahead of their major rivals.
However, they suffer from a weak profit margin and an imitable business model, which
can be easily copied. Therefore, they should make use of their opportunity to expand in the
developing countries by improving their HR practices (Martinez, Galván and Alam 2017). They
are facing strategic issues in the following areas-
 lack of cleanliness and tidiness in most of their stores;
 the shelves in the stores are not refilled fast;
 there are issues of customer convenience and space due to poor layout and design of the
stores;
 there is lack of digital services;
 the management should work on improving traffic business such as financial services and
gas;
 prices are not much less in comparison to the rival companies;
 Walmart should provide wide variety of products in grocery and merchandise;
 The headquarters should focus on customer service delivery.

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References
Avery, G.C., 2015. Key corporate sustainability drivers: engaged boards and
partnerships. Strategy & Leadership, 43(3), pp.44-48.
Barney, J.B. and Mackey, A., 2017. Monopoly profits, Efficiency profits, and Teaching Strategic
Management. Academy of Management Learning & Education, (ja).
Gereffi, G. and Fernandez-Stark, K., 2016. Global value chain analysis: a primer.
Greenspan, R., 2015. Walmart: Five forces analysis (Porter’s model). Panamore Institute.
Kumar, P., Dass, M. and Kumar, S., 2015. From competitive advantage to nodal advantage:
Ecosystem structure and the new five forces that affect prosperity. Business Horizons, 58(4),
pp.469-481.
Lombardo, J., 2017. Walmart: Organizational Structure & Organizational Culture. Panmore
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Martínez, A.B., Galván, R.S. and Alam, S., 2017. Financial Analysis of Retail Business
Organization: A Case of Wal-Mart Stores, Inc. Nile Journal of Business and Economics, 3(5),
pp.67-89.
Murphy, W.H. and Li, N., 2015. Government, company, and dyadic factors affecting key
account management performance in China: Propositions to provoke research. Industrial
Marketing Management, 51, pp.115-121.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.

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Santos, N. and Laczniak, G., 2015. Marketing to the poor: A SWOT analysis of the Market
Construction Model for engaging impoverished market segments. Social Business, 5(2).