In 1962, Sam Walton founded Wal-Mart by opening the first Wal-Mart in Rogers, Arkansas. Wal-Mart Stores Inc. was incorporated October 31, 1969. By the end of the 1960s, Wal-Mart had grown to 276 stores in 11 states, and Wal-Mart went public in 1972. In 1991, Wal-Mart opened its first international store in Mexico City and has never looked back. As of this year, Wal-Mart has 8,446 store and club locations in 15 countries that serve more than 176 million customers every year (walmartstores. com) Every company, even one as large as Wal-Mart, has strengths, weaknesses, opportunities, and threats.
Some of Wal-Mart’s strengths, weaknesses, opportunities, and threats, identified using information from their website, walmartstores. com, are the following: Strengths •Is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. It has an established name brand that is identified with reasonable to cheap pricing and bargain pricing. Wal-Mart deals in all types of goods from clothing to electrical items, from jewelry to garden equipment and therefore caters to a wide range of individuals.
Plus, it has a wide network of stores which makes it accessible to all types of individuals. •Has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA). •Has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart’s efficient procurement. •Has a focused strategy in place for human resource management and development.
People are key to Wal-Mart’s business and it invests time and money in training people, and retaining and developing them. It also gives its people a stock ownership and profit sharing plan. •Is able to buy in bulk and gain huge bulk discounts that are not available to other organizations, and Wal-Mart is able to pass on the discounts and pricing benefits to the customers thus further solidifying its reputation as a bargain store. Weaknesses •Is the World’s largest grocery retailer and despite its IT advantages, Wal-Mart could be weak in some areas due to the huge span of control. Less flexible then some of its more focused competitors due to its selling of products from many sectors (such as clothing, food, or stationary). An example of a more focused competitor would be Best Buy. •Is global, but has a presence in relatively few countries Worldwide. •Has faced much litigation from employees accusing it of unfair employment activities – especially from its female workforce that has given the organization a bad reputation as an employer. Wal-Mart has also been in court over its strong-arm tactics of opposing the unionization of its American workforce. Has earned much negative publicity for its strong-arm tactics and squeezing suppliers of profit margins by threatening to take its business elsewhere. •Has sold goods from its Chinese suppliers that in the past year have been marred by many different cases of health and safety hazards. Opportunities •Since Wal-Mart currently has a presence in relatively few countries there is a tremendous opportunity for future growth into the rapidly expanding consumer markets of China and India, as well as Europe, by taking over, merging with, or forming strategic alliances with other global retailers or local retailers in those countries.
This type of opportunity would present itself if Wal-Mart chose to follow a growth strategy found on page 125 of the textbook. Specifically Wal-Mart would be engaged in horizontal related integration, which is when a company acquires other companies in the same business, and is one way external growth is accomplished, according to pages 126 and 127 of the textbook. •The current economic crisis has decreased the disposable income of many individuals which has caused many individuals and households to lower their expectations and to shop for bargains, thus Wal-Mart stands to gain in such a situation.
Due to the cheap rate that Wal-Mart is able to buy its products from suppliers, it is able to provide customers with even bigger bargains to encourage them to shop at its stores. In addition to its low prices, Wal-Mart should continue with its current strategy of large, super centers, which is basically a one stop shopping experience for everything you may need or want. The one-stop shop experience is appealing to customers in that it makes shopping easier. To provide the ease of shopping Wal-Mart is guaranteeing that the customers will find what they want when they want it.
This is supported by convenient presentation and the right level of service every time the customer shops. In doing so, Wal-Mart can appeal to an even larger market. According to pages 151 and 152 in the textbook, this opportunity would become apparent if Wal-Mart used a low-cost strategy where the business produces basic, no-frills products for a large market of price-sensitive shoppers. •New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centers, to local and mall-based sites, such as their Wal-Mart Neighborhood Markets and their Marketside stores.
Using a focus-low-cost strategy, page 153 in the textbook, that enables Wal-Mart to realize the opportunity of appealing to those customers who want the feel of shopping in a small store and do not like the large supercenters Wal-Mart has become synonymous with. Also, with the Marketside stores, Wal-Mart is using an external growth strategy through unrelated diversification, pages 126 to 127, because its Marketside stores are in a different industry than its normal retail stores. •Another opportunity facing Wal-Mart is that internet shopping is growing. To take advantage of internet shopping, the Wal-Mart must focus on the customer.
The customer receives friendly site designs, efficient order fulfillment, fast delivery and professional customer response. They process returns, refunds, and rebates quickly. This opportunity can be realized by following a stability strategy, page 129. If Wal-Mart focuses on improving the experience customers receive while shopping on their website, they can focus on stabilizing their current businesses and still grow their customer base. Threats •Big name retailers such as JCPenney are having huge sales, such as 50% off sales; this is difficult for Wal-Mart to compete with, as its profit margins are not that high on each unit.
They make their money through volume of sales. •The reduction in disposable income of customers and the fear of job losses have caused people to not spend as much on their shopping and while this is can be an opportunity; it is also a threat to Wal-Mart, which relies on consumer spending. •As a very large competitor, Wal-Mart becomes the target of competition, locally and globally. •As a global retailer, Wal-Mart is exposed to political problems in the countries that it operates in. •Manufacturing costs have fallen due to outsourcing to low-cost regions of the World.
This has lead to price competition, resulting in price deflation in some ranges, and intense price competition is a threat. •Wal-Mart must not only face threats from its competitors, but it also faces the threat of theft by its customers, which increases costs due to losses in merchandise and increased security measures. Also, theft by employees is another type of threat faced by Wal-Mart. •Regulation from foreign governments, China in particular, is a threat Wal-Mart must face while trying to expand globally. Also, skepticism from the local population of an international American retailer is a threat faced during global expansion.
In less than 50 years, Wal-Mart has become a household name in America and an international powerhouse. By finding ways to reduce costs, Wal-Mart has been able to keep its prices low and appeal to price conscious shoppers. Also, with the advent of the Wal-Mart Supercenters, it has been able to appeal to many people who want shopping to be as convenient as possible. As the 21st Century is under way, Wal-Mart appears to be headed for even more expansion, and with Wal-Mart’s current strategy working and the many opportunities presented in today’s market for it, Wal-Mart will continue to have great success.