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Walmart Inc. Case Study

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Background and history of Walmart Inc.

The American Multinational retail store Walmart was founded by Sam Walton who has prior Joined the military in 1942 at the age of 24. In the year of 1945 after their military service ended, he started operating his own variety store. Sam was inspired by the success of his dime store, he got the courage to keep satisfying his customer’s needs. (Walmart, n.d.)

At the age of 44, Sam opened the first Walmart Discount store in Rogers, Arkansas in 1962.

The Walton family launched more than 20 stores in 1967, with a revenue of $ 12.7 million in sales. The firm started incorporating as Wal-Mart, Inc. in 1969, it has listed for the first in New York Stock Exchange in 1972 with 51 stores with records of $78 million in sales. (Walmart, n.d.)

Sam Walton Died in 1992, but his legacy lives on. Walmart has grown to an unbelievable level. It has an operating stores in more than 15 countries. (Success Story, n.d.)

Sam surrounded himself with the people he trust, the people who have ideas and weren’t afraid to take a risk and bring those ideas to life. (Walmart, n.d.)

In 2013, Doug McMillan become the president and CEO of Walmart till date, after more than 20 years of expertise, and the experience he gained in the industry since 1991 when he was an MBA student at the University of Tulsa. (Success Story, n.d.)

Recently in 2018, the company introduced a new name, Walmart Inc. to replace the name Wal-Mart Stores, Inc. (Walmart, n.d.).

Walmart, Inc. has been through many challenges of the new entrants, and new competitors in the industry, but still the company has been performing well and sustaining its position in the global markets. The answers of the questions given below show the life cycle of Walmart.

Q1. How well is Walmart performing? To what extent its performance is attributable to industry attractiveness and to what extent to competitive advantage?

Porter’s Five Forces

These forces were created in 1979 by M. porter for the purpose of understanding the key competencies and effectiveness in the industry The five forces are (Jurevicius, 2013)

  • Industry rivalry
  • Power of buyers
  • Threat of Substitutes
  • Threat of Entry

Power of suppliers

These five forces define the framework of the firm and the competition level in the industry. When the competition is strong in an industry the profit will be less, an industry with fewer obstructions to entry and a small number of buyers and suppliers, and with more sub-goods and competitors, is likely to be a competitive industry. But not attractive because of its low profit. (Jurevicius, 2013)

Industry rivalry

Walmart sells its products at a very less price, in various retail outlets.

the company can outline strong rivalry among the present competitors in discount, variety stores by:

  1. Creating a potential differentiation
  2. Build a scale to have better competition.
  3. Joining with competitors to improve the market instead of competing for a small market. (Fern Fort University, n.d.)

Bargaining Power of Buyers

This has impacted the company’s profitability. The more small and powerful the consumer base is at Walmart, the higher the haggling power of the customer and the capacity to look for offers. Walmart can also handle this by: (Fern Fort University, n.d.)

Building a major foundation of consumers. Will help in decreasing the power of buyers in haggling, and will open opportunities to the company to organize sales and production.

Rapidly innovating new products. Consumers sometimes ask for price reductions and offer on produced goods so the company continues launching the latest products to decrease such haggling of buyers.

New products help decrease the bounce of present consumers of Walmart (Fern Fort University, n.d.)

Bargaining power of Suppliers

There are many suppliers in the industry. Walmart explores the weakness of suppliers from the fowling factors:

  1. The huge number of suppliers.
  2. High availability of supply
  3. Tough competition among suppliers

These forces consider the huge number of distributors as having interest potential to impact the company.

Threat of Entry

The American retail online store Walmart should strongly compile the new entrants. The retailer which are still in the growing stage or small ones, are also competing based on place, convenience, expertise, and other factors. This five forces analysis broke down under the following factors: (Greenspan, 2018)

  1. Make the cost of developing the brand medium.
  2. Decrease the business cost.
  3. Medium cost of capital.

Developing a new brand is costly, but some big start-up businesses have the resources which help to raise their brand name.

This case shows the medium or moderate force of Walmart. Such as the costs of starting a new retail company and also the cost of running it are down to medium. (Greenspan, 2018)

Threat of Substitutes

Walmart, Inc. provides various types of goods and services which have few substitutes. The weak threat of substitutes of Walmart is under the following external imposes.

  1. Moderate availability of substitutes
  2. Low variety of substitutes
  3. High cost of substitutes

Some of Walmart’s substitute products are available. However it is not easy for consumers of low variety substitutes to leave such available products in the retails like Walmart, Inc. (Greenspan, 2018)

Competitive advantage.

It is defined in terms of high or low cost, technical innovation, design leadership, and efficiency. It is the operation of a managerial plan based on organizational learning, and strategic flexibility. (Anuradha & Aradhana, 2006)

Walmart’s in stores and online grocery sales

More than 55% of American shoppers of grocery have been buying from Walmart in the last three months

The American firm has improved its channels to increase the competition from Amazon and other retailers

Walmart’s shoppers from online groceries are given a low price. It provides a good brand selection. (Schmidt, 2018)

Walmart’s offerings and its financial services.

Apart from being a grocery leader is terms of selling. The firm does also provide a wide discipline to serve its customers in term of financial services.

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These services generate of about $1.6 billion. This amount is excluded Walmart’s revenue made but its partners, Synchrony Financial, Green Dot, Jackson Hewitt, and MoneyGram.These partners play a big role in Walmart's financial service.(Schmidt, 2018)

Customers buy pet products.

This is one of the areas that Walmart shines. Most of the consumers who own pets buy from Walmart more than another retail store, with over 65 million pet-owning households in the U.S.A. and more than 40 million stores at Walmart, Inc. Walmart has enough competitors, ( Costco and Kroger) the two competitors combined customer base of over 30 million pet owning. But most of the customers purchase pet products from Walmart. The price strategy, convenience, and brand selection were top considerations for consumers to draw so many pets from Walmart. (Schmidt, 2018)

Q2. In which of Walmart’s principal functions and activities (namely: purchasing, distribution and warehousing, in-store operations, marketing, IT, HRM, and organization and management systems/style) do its main competitive advantages lie? Your answer should identify the distinctive resources and capabilities in each of these functions and activities.

Distribution

This is one of the biggest strengths of Walmart, it offers stores in various forms to serve its consumers. The firm has discount stores, supercentres, neighborhood markets, club stores, and cash-n-carry stores. In 2011, Walmart launched more than 8950 in the world. It included 4,413 stores in America and other stores in 14 countries namely Argentina 63, Brazil 403, Canada 325, Chile 277, Costa Rica 189, El Salvador 78, Guatemala 173, Honduras 56, Japan 371, Mexico 1256, Nicaragua 60, and UK 385. With this wide network of distribution strategy facilities, the company gained additional revenue and profit. (Andrew Fanno, 2012)

Marketing

Marketing is defined as the process of achieving Organizational objectives by identifying the requirement and wants of the target market and satisfying them by providing their demands better than competitors do (Armstrong, 2010)

Segmentation is a process that determines the different needs of the sub-consumers strategy. Walmart uses psychographic and demographic segmentation strategies. (Bhasin, 2017)

Operation

Walmart competes globally in different retail stores. Such as supermarkets and pop and mom's stores. The active retail industry leads towards competition and opportunities, it is being affected by many factors such as migration of people, and the emergence of e-commerce firms delivering anything at the doorstep, this increases the bargaining power of consumers and suppliers also government rules to keep the competition. (Bhasin, 2017)

Information Technology

The Company has been a leader in IT supply systems. This system helps Walmart and its suppliers to have worthy information on customer tendencies.

The IT help Walmart ensure inventory instantly and with little to on human error, it has also provided good coordination between the firm and its suppliers.

Walmart has used the system of Pint of sales (POS) to help supply chain management. POS also helps employees track ongoing sales. This IT system has decreased the hardworking of the employees and keeps more stock for their customers. (UKEssays, 2016)

Human Resources Management

HRM is the strategic and strong path to the management of any Organization’s most valued assets_ the stakeholders who contribute to the achievement of the goals of the business.

HRM will help provide fair competition and good environment, and perspective teamwork.

Walmart has more than 1.5 million associates to work, hence HRM plays a very important role in the organization. (UKEssays, 2016)

Motivation

Motivation is one of the main functions of human resource managers, to motivate it stakeholders, and provide a comfortable environment. Every stakeholder in Walmart wears a staff card which has no name, even CEO put on the same card, this shows that there is no discrimination between the staff. (Thompson, 2018)

Recruitment

The HRM recruitment and selection strategy of employees of Walmart has a different source of new hires. The recruitment aspect of the company has a decentralized system that used local information as a basic process for hiring. Most of the staff are basically the people residing in the area where Walmart operates. Walmart has different types of recruitment such; as online, direct, and through Educational centers. This system of recruitment brings employees from different backgrounds. (Thompson, 2018)

Q3. To what extent is Walmart’s competitive advantage sustainable?

Competitive advantage is a process of the manager to keep making money, provide various goods and products and sustain its position in the market against its competitors.

Walmart Inc. has achieved sustainable competitive advantages in the retail sector over a period of time. (Bartleby Writing, 2010)

Walmart is widely using backward expansion to sustain its global reach. Walmart is familiar with small entering, in rural areas and saturates the area before entering large cities. Walmart has a plan to develop its infrastructure and acquisition of the present buildings. In the global market, the firm has tried to correspond to the culture of local traditions. Walmart recruits the resident of the area they are operating in to manage the stores for the purpose of decreasing the gaps between the locals. The main difference of Walmart is its own supply chain which makes it also have a larger bargaining power than suppliers. (Bartleby Writing, 2018)

Supply chain: This is the process that gives an organization various sustainable competitive advantages, which include low cost of the products, reduced inventory carrying cost, improving variety selection in the store, at a highly competitive price to the customers. This strategy has also helped the firm have control of the market. (Lu, 2018)

The main competitive advantage of Walmart is its pricing strategy. However, the strategic level management regularly tries to combine Walmart with its pricing strategy

Doug McMillion introduced important changes in Walmart's business strategy in the following three directions:

  1. Walmart has announced $ one billion investment in the U.S.A. in 2015 to increase the wages of the associates, train them more and raise the opportunities to build a career with the company. Improving groceries. Due to the increasing level of health consciousness of consumers, Walmart is attempting to increase its range of organic options and fresh produce. This change is more evident in the US market and it is being actively integrated into the marketing communication message of the brand. (Dudovskiy, 2016)
  2. Walmart is planning to amalgamate its physical stores with online stores. Customers can get orders from physical retail outlets, there is also a reminder text from the pharmacy. Generally, the competitive advantage of Walmart can be sustainable in the international market in long term scene. “We buy and & operate for less” this program saves Walmart more than $ 145 million in China. In order to gain profit and be sustainable, the company can also repeat this strategy in other markets. (Dudovskiy, 2016)

Q4. What challenges does Walmart currently face and what measures does it need to take to sustain its recent performance and defend against competitive (and other) threats?

Walmart, Inc. has sustained its position in the retail industry for many, but the competitors in the retail industry are also the biggest challenge that is faces the company.

Amazon (NASDAQ: AMZN)

Amazon is the main strong competitor of Walmart. Amazon has the ability to reduce the prices of Walmart, the main issue for Walmart is that Amazon steals the most affluent shoppers, when the main consumers are stacked for cash they have been obstetrics. Walmart has realized the challenges but counting it will take some years. (Daniel, 2016)

Price pressure

Walmart’s strategy of price cutting is successfully moving. In the pricing survey conducted by Kantar Retail in the southern New Hampshire and northern Massachusetts area, Dollar General's basket of 21 categories across staples was 12 cents cheaper at $28.70 than at Walmart. In the previous year, Dollar General was 18 percent cheaper. Amazon's prices on a basket of 59 items were actually 7 percent more expensive than Walmart.com and 16 percent pricier than at its supercentres. (Daniel, 2016)

Changing Shopping Habits

In the 1990s, Walmart establishes a large number of supercentres, but the demand for physical stores has been increasing as Americans want pickup locations after finishing online research of goods. They can also view the products online according to their places so that they can go and pick them up quickly. Walmart has 80% or more than 4000 stores in U.S. other competitive retailers open small stores to serve the consumers or shoppers to find more goods. Walmart has now established over 280 mini-stores in the current financial year. (D'innocenzio, 2014)

At the same time, Walmart is improving its e-commerce, It is testing online grocery delivery. Walmart has increased its online sales item to over 6 million. Which helped the firm increase its global sales by 30 % to more than $10 Billion for the new financial year. The number of items that Walmart sells online has now increased to 7 million. (D'innocenzio, 2014)

Embrace the Future (Voice Activated)

Walmart’s competitor Amazon has been keeping to low investment into the portfolio of its IT system voice-controlled Echo. Besides Walmart is cooperating with Google Home on the same effect. Which makes a good profit for the company, Lore said. “It’s important to look at not just the technology but what it enables.

“Voice means one best answer is going to be more important than it ever has before because you can’t just get a list of 50 or 100 different things through voice. Having that one-to-one personalization and being really good at it is going to separate the winners from the losers.” (Nusca, 2017)

Make Targeted, Tuck in Acquisitions, and Empower Employees

Lore said the company’s aggressive e-commerce shopping spree included Bonobos, Moosejaw, Shoe Buy, and Mod Cloth. “With respect to the first, it’s really about trying to accelerate growth on the existing site and it’s more of an asset purchase than anything else. It’s not really as much about ROI on the site that we acquired as much as what it can do on Walmart and Jet. The other one…it’s really about thinking into the future.” (Nusca, 2017)

Lore also said that we need to ensure our employees or people are part of the firm’s family and are acknowledged by informing them about the company’s information, there must be also trust between them, empower them, give them space to work and ensure them that they will be awarded for the risk they are taking. Such is the kind of environment and the behaviors which create an ethical and attractive organization. (Nusca, 2017)

References

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