Strategic Management Report: Walmart's Competitive Position Analysis

This comprehensive report provides a strategic analysis of Walmart, evaluating its internal and external environments to assess its competitive position in the global retail industry. The report begins with an overview of Walmart, including its vision and mission statements, history, and company overview. It then delves into a detailed strategic analysis, encompassing both the external environment (general and industry analysis, including a discussion of major competitors) and the internal environment (financial analysis, RBV, and balanced scorecard). The analysis identifies key problems and challenges faced by Walmart, leading to specific recommendations for improvement and implementation. The report includes SWOT matrix, grand strategy matrix, and other appendices to support the analysis and recommendations, ultimately aiming to consolidate Walmart's position in the competitive retail landscape.

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Running head: STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENT
Contents
Introduction......................................................................................................................................2
BACKGROUND.............................................................................................................................2
Vision Statement..............................................................................................................................2
Mission Statement...........................................................................................................................3
History/Timeline..............................................................................................................................4
Industry............................................................................................................................................5
Company Overview.........................................................................................................................6
Strategic Analysis............................................................................................................................6
External Environment: General Environment.............................................................................7
External Environment: Industry Analysis...................................................................................8
External Environment Strategic Group (Major Competitors)...................................................10
Internal Environment: Financial Analysis.....................................................................................13
Internal Environment: RBV and Balanced Scorecard...............................................................18
Problem Statement.....................................................................................................................22
Recommendation/ Implementation............................................................................................23
Conclusion.....................................................................................................................................24
References......................................................................................................................................25
Appendix........................................................................................................................................26
APPENDIX A: SWOT MATRIX................................................................................................26
APPENDIX B: GRAND STRATEGY MATRIX (David, 2005)............................................30
Appendix C....................................................................................................................................31
Appendix D....................................................................................................................................33
Appendix E....................................................................................................................................35
References......................................................................................................................................37
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Introduction
The main purpose of current report is to evaluate the internal and external environment of
Walmart and provide recommendations to the company accordingly in order to consolidate its
position in the global retail industry. The paper begins by providing an overview of the company
and the business level strategy of the company. After providing an overview of the company, the
paper focuses on strategic analysis of the company by conducting analysis of the internal and
external landscape. After strategic analysis the paper identifies various problems which have
been identified during the course of strategic analysis of the company and accordingly provides
recommendations to the company.
BACKGROUND
Vision Statement
Walmart’s vision statement is to “Be THE destination for customers to save money, no matter
how they want to shop.” Walmart aims to become the best retailer and touch not only mind but
even hearts of their customers and employees. Their vision statement contemplates strategic
changes that are implemented by Walmart in reaction to modification in competing landscape
and conditions in industry. Also, it not only reflects Walmart’s aspiration to become the top most
retailers in the industry but also presents greater emphasis on business flexibility so as to
accommodate preferences of their customers. For instance, the element of Walmart’s vision such
as offering flexibility to customers irrespective of the way they shop indicates Walmart’s
strategic purpose for attaining leadership in traditional brick and mortar transaction and in online
retailing. The flexibility of the vision statement of Walmart also reflects support for their
employees and consideration for their issues as employees are vital stakeholder groups that are
significant to Walmart’s CSR approach and stakeholder administration.
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Mission Statement
Walmart’s mission statement is “to save people money so they can live better.” This indicates
values of Walmart’s founder Sam Walton. Also imperative resolutions are unambiguous
indications of the Walmart’s mission that corresponds with their slogan “Save money. Live
better”. Thus it is evident that Walmart’s corporate approaches include utilizing prices as selling
point to appeal their segmented audiences and its relevance is indicated in their various corporate
strategies, like for instance, Walmart’s marketing mix or 4P’s includes affordable pricing as their
strategy. Other aspect of Walmart is evident by requisite to lower selling prices as technique to
attain competitiveness. Further, Walmart meets the “save people money” element of their
mission by their affordable selling prices. For instance, customers save money through
unsubstantial spending in buying products from Walmart’s outlets in contrast to purchasing same
merchandise from other outlets. Nonetheless, it is still not evident whether Walmart fulfills the
“live better” element of their mission statement as there are criticisms related to lower wages that
create concerns for Walmart’s staffs related to better living along with HRM concerns that are
encountered in Walmart. There are even critique on long term economic impacts of Walmart’s
extensive selling of cheaper imported merchandise.
David (2005) presented nine components of an efficacious mission statement that includes
customers, product/ services, markets, technology, concern for survival, philosophy, self-
concept, concern for public image and concern for employees. These are as follows:
1. Customers- who are customers of firm?
2. Product/service- what are primary products or service of firm?
3. Markets- Where does firm compete geographically?
4. Technology- Is the technology of firm basic?
5. Concern for survival, growth and profitability- Is the firm committed to growth and financial
development?
6. Philosophy- What are the beliefs, values, aspiration and ethical priorities of the firm?
7. Self-Concept- what is the firm’s unique competence or main competitive edge?
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8. Concern for public image- Is the firm responsible to social, community and environmental
concerns?
9. Concern for employees- Are employees a valuable asset for firm?
After evaluation of Walmart’s mission statement as per nine components of Fred R David it is
evident that Walmart’s defines 3 components i.e. Customers, philosophy, concern for public
image specifically in their mission statement.
Component 1 2 3 4 5 6 7 8 9
Company
Fig: Fred R. David’s Nine Components of Mission statement
Source: Author
History/Timeline
1962: Sam Walton opened 1st Walmart store in Rogers, Arkansas
1967: Walton family owned 24 outlets and generated up to 12.7 m USD in sales
1969: Officially incorporated as Walmart Stores Inc
1970: Walmart became public trading firm and 1st stock was sold at 16.50 USD/share
1971: Opened 1st distribution centre and home office in Bentonville, Arkansas
1972: Walmart was listed in NYSE. It had 51 stores with record sales of 78m USD
1975: Sam Walton motivated by his Korea visit introduced Walmart cheer
1979: Walmart Foundation was formed
1980: Walton family founded Walton Family Foundation. Walmart reached 1 bn USD annual
sales faster than any other firm during that period, had 276 outlets and employed 21,000 staffs
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1983: 1st Sam’s club was opened in Midwest City, Oklahoma. Walmart replaced cash registers
with computerized POS to ensure faster and hassle free checkout
1987: Walmart installed biggest private satellite communication system within USA and linked
operations with voice, data and video communication
1988: 1st Walmart supercenter was opened in Washington, Missouri that combined general items
and full scale supermarket under one stop shopping store
1991: Walmart expanded global region by venturing jointly with Cifra and opened Sam’s Club in
Mexico
1992: Sam Walton articulated mission of saving people money so they can live better
1994: Walmart expanded to Canada with purchase of 122 Woolco outlets
1996: Walmart opened 1st store in China
1998: Neighborhood market format was introduced in Arkansas and Walmart entered UK with
acquisition of Asda
2000: Walmart.com was established
Industry
Walmart is an American firm that operates in retail industry and has primary divisions i.e.
hypermarkets, discount department stores and grocery outlets. Hypermarkets are combination of
supermarket and department stores and hence are expansive retail unit that has variety of
products under one roof such as grocery, general merchandise and other products. Whereas
discount department stores or shops are retail units that sell products at prices lower than market
prices and may offer wide range of assorted items with focus on price instead of service, display
or wide product lines. While a grocery store is retail unit that offers mainly food items or
nonperishable packaged food, bakery, meat etc. Also these may offer household items including
pharmacy. In 2017, Walmart had 26% market share in US in offline and online market with 800
bn USD share in industry. Walmart reported revenue growth rate of 1.25% Y/Y in 3rd Quarter of
2019 to 124,894 mn USD which is lesser than their average revenue growth rate of 5.73%. Their
total revenue in 2019 is 514.415 bn USD.
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Company Overview
Walmart Inc. is a transnational retail company headquartered in Bentonville, Arkansas which
functions chain of hypermarkets, discount department stores and grocery stores and was founded
by Sam Walton in 1962; incorporated in 1969. The company specializes in offering multiple
products and offerings to customers at unbelievably lower prices from both retail stores and
online platforms.
As stated by Hunt, Watts & Bryant (2018) generic competitive strategy which is being followed
at Walmart is cost leadership strategy which focuses on providing products to customers at
lowest possible price by minimizing costs.
The main intensive growth strategy which is followed is market penetration strategy which
involves selling more products to customers in current market in which Walmart operates in
order to grow business.
The competitors of Walmart are Kmart, Costco, Amazon, ALDI and LIDL.
Strategic Analysis
SWOT Chart
Strengths
1. Marketing strategies being adopted by
Walmart.
2. Large economies of scale
3. Strong growth management strategies
4. Strong corporate culture, distribution,
information technology and inventory control
system adopted by Walmart
Weaknesses
1. Management of HR issues.
2. Lack of efficiency in online model
3. High rate of employee turnover
4. Lack of international marketing research
5. Lack of manufacturing facilities.
Opportunities Threats
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1. Obtaining membership in World Trade
organization.
2. Increase in trend of shopping at superstores.
3. Intense competition in pricing
4. Demographics are open to new markets and
products
1. International Expansion barriers
2. Slow global economic growth
3. New retail formats
4. Strong competition in local markets
5. Cultural expansion and marketing issues
External Environment: General Environment
Demographic- The demographic factor impacts operations of Walmart as these determine
strategy adopted in various countries. There are various trends which reflect segmentation of
Walmart’s market such as population size of country in which they operate, income distribution
of customers and ethnic mix of the country in which they operate (Hitt, Ireland & Hoskisson
2007)
Socio-cultural- The socio-cultural factor impacts operations and strategies adopted by Walmart
in which they operate so as to comply with preferences and demands of customers. There are
various trends which reflect Walmart’s socio-cultural aspects such as lifestyle of customers in
the countries in which they operate cultural values of customers and their educational level.
Political-legal- The political and legal factor impacts operations of Walmart as they need to
comply with political and legal activities which are imposed by government of the countries in
which they operate. There are various trends which reflect political legal aspects of Walmart
such as labor policies of the countries in which Walmart is based, taxation policies and initiatives
taken by government of the countries in which they operate.
Economic- The economic status of the country in which Walmart operates impacts their
operations as pricing strategy of their products are dependent on economic conditions. There are
various trends which reflect Walmart’s economic aspects such as purchasing power of customers
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in different countries in which they operate, disposable income of customers and rate of
unemployment in the country in which they operate.
Technological- The technological advancements of the country in which Walmart operates
impacts their various functions such as marketing, operations, human resources and R&D. There
are various trends which reflect this aspect such as rate of technological advancement in the
country in which Walmart operates rate of technology diffusion and availability of technological
infrastructure.
Global- The global business scenario also impacts international operations of Walmart as they
operate in multiple companies. There are various trends which reflect this aspect such as relation
between different countries in which Walmart operates agreement between various existing trade
blocks and global terrorism.
External Environment: Industry Analysis
Threat of new entrants- threat of new entrants is comparatively lower in global retail because of
strong position of few retailers who are present in global retail industry on basis of quality, price
and product range. There are also various barriers of entry due to factors such as requirement of
high investment, requirement of a reputed and established brand name and requirement of
outstanding distribution network. It is important for Walmart to increase its revenues by
appealing more customers towards their products through effective marketing approaches so as
to endure competitive place in global retail industry (Dess & Lumpkin 2003) It is hard for new
entrant in retail industry to gain market share as they first they need to gain acceptance among
customers by building their brand reputation and by increasing their distribution network which
requires huge amount of investment and therefore it is nearly impossible for new entrants to
make such big investments which reduces their threat.
Bargaining power of suppliers- bargaining power of suppliers is moderate in global retail as large
suppliers enjoy high bargaining power in market whereas small suppliers have low bargaining
power. As stated by Vila, Bharadwaj & Bahadir (2015) large market share of Walmart in global
retail industry provides opportunities to both producers and suppliers which enlarges power of
Walmart over its suppliers and withholds competitive place in market. Walmart has also vertical
integration with their vendors which minimize bargaining power of suppliers and in turn enlarges
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efficaciousness of Walmart to provide ideal product to ideal customer in ideal time. Another
factor which results in lower bargaining power of small suppliers is availability of number of
suppliers in market who remain always eager to work with big retailers and therefore existing
retailers do not impose high bargaining power to consolidate their position in market.
Bargaining power of buyers- bargaining power of buyers is lower in retail market currently, but
with increasing level of competition in retail industry, bargaining power of customers is
gradually increasing as they now have luxury to choose between multiple retail options, which is
forcing Walmart to keep prices of their products low all the time (Porter 1980) The bargaining
power of customers in global retail sector is also considered to be low as nearly all the retailers
offer their products at minimal possible price which provides limited scope of bargaining to
customers. As opined by Dow Jones Institutional News (2015) at same time, switching costs for
customers in current global retail market is also negligible in nature and hence customers can
easily switch from one brand to other in search of better products or deal as a result of increased
competition. Therefore gradually increasing bargaining power of customers and low switching
cost is affecting market position of Walmart and therefore it should focus on enhancing customer
satisfaction.
Threat of substitutes- threat of substitutes is comparatively moderate for Walmart in US retail
industry because of absence of retail outlets which offers comfort and lower priced products to
consumers. As stated by Baba (2015) one of the main factors which reduce threat of substitutes
is wide variety of products offered by Walmart and hence they have advantage to be more
competitive in nature because of quality of products and pricing aspects. On other hand main
factor which increases threat of substitutes for Walmart is growing demand and popularity of
online retailers who also provide wide range of products to customers at lower and competitive
prices and due to existing trend in market regarding online shopping Walmart should focus on
paying equal attention to both physical and online retail stores so as to reduce threat of
substitutes and maintain competitiveness in market.
Industry rivalry- The retail industry is very competitive in nature due to presence of large
number of players which includes K Mart, Costco, Tesco, Amazon, Metro AG etc. which
competes with Walmart on basis of cost leadership. These competitors affect position of
Walmart in retail industry as a result of increase in their position due to their business extension
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and also due to enlargement in customer base. The rising competition in retail is influencing
operations of major players and therefore affects their revenues, which can also change strategic
direction of Walmart.
From above analysis it can be stated that retail industry is very attractive industry with higher
potential for growth despite increasing level of competition. Also it can be stated that retail
industry is characterized by presence of big retailers who hold majority of market share. On the
basis of analysis, recommendation to existing firms is to focus on providing customized
shopping experiences to shoppers in order to attract them to stores and products as they cannot
be influenced by cost leadership strategies only as it is followed by nearly all retailers belonging
to industry. It can be recommended to new firms that they focus on differentiating products from
those of competitors as it will help in attracting customers towards products and it is the only
way by which they can compete with larger players in industry.
External Environment Strategic Group (Major Competitors)
Major Competitor 1- Costco Wholesale Corporation is chain of membership-only warehouses
which offers limited collection of regionally branded and private label products. Costco provides
lucrative value deals to loyal customers which allow them to have huge membership renewals.
They also have business operations spread across US, Canada and 8 other countries. The generic
strategy which is followed is cost leadership which enables them to charge lowest possible prices
for products. The main objective of Costco is to consistently offer their members with best
merchandise at lowest prices.
The strengths of Costco are:
Price positioning helps in earning customer loyalty- The strategy which is being adapted by
Costco to gain market share is strategy of being cost leader which has been supported by 15 %
mark-up of Costco which is comparatively much lower than industry average. This strategy gives
attractive value proposition to customers and in turn helps in incentivizing greater footfalls
which helps in increasing market share and customer loyalty.
Low cost Operations- Costco maintains fourfold strategy to build sustainable and
environmentally responsible business. This helps in lowering carbon footprint, improving
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warehouse energy management system, development of waste stream management systems and
packaging design initiatives.
The weaknesses of Costco are:
Offers limited product choices- as compared to other retailer in USA; Costco stocks lesser
products which is a weakness. On average Costco stocks nearly 4000 products while retail stores
such as Walmart stocks around 50000 products and therefore limited offer of product serves as
competitive demerit for Costco in US.
Geographic dependence- The US and Canada market add to more than 80% of their total revenue
which can be considered threatening in context of entry of new companies or during economic
recession.
Product recall - The recall of the products affects reputation of Costco in market which can be
termed as major weakness. For instance Costco was forced to recall its rotisserie chicken salad in
US as a result of outbreak strain in E. coli toxin which impacted sales and harmed reputation.
Major competitor 2- Kmart is an American big box department store chain which was formed
during 1899 and is based in Illinois, United States. Kmart is subsidiary of Sears Holding
Corporation and focuses on making great shopping experience for customers by providing good
quality products and remarkable shopping. Kmart provides various brands which include Adam
Levine, Jaclyn Smith, Route 66, Joe Boxer and Smart Sense. Other than aforementioned deals
and offerings, Kmart also provides various financial services which include leasing options.
Kmart pharmacy provides best in class patient care for customers and acquires top spot in
context of customer satisfaction. Being leading US discount retailer, Kmart sells private label
goods which are mainly targeted towards low and middle income family group. Kmart carries
out business operations from close to 1200 off-mall stores out of which 20 are supercentres by
nature. The objectives of Kmart are creating enduring relations with customers, achieving more
productiveness and efficaciousness, developing brands, re-inventing consistently with
technology and innovation and live values of Kmart everyday while operating in market.
The strengths of Kmart are:
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