SWOT ANALYSIS

Walmart Inc. SWOT Analysis Student Name Strategic Management & Business Policy, BUS402 Martha Klima-Gamble

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Walmart Inc. SWOT Analysis

Description of Walmart’s History, Products, and Major Competitors

Walmart Stores, Inc. is an international retail company that runs large warehouses and discount superstores. The company was founded in 1962 by Sam Walton (Farfan, 2014). The main aim of the company was to improve the lives of people in society by helping individuals to save more money. Walmart began its free trade in 1972 on the New York Stock Exchange (NYSE), where it recorded sales of $78 million in its 51 stores. With its fast growth, in 2010, Walmart started to acquire many e-commerce businesses such as Moosejaw in 2017 and Jet.com in 2016.

The retail shop outlets cover hundreds of households consumable items, including organic, produce, meat, nuts, furniture, electronics, and appliances (Forbes, 2019). Walmart is considered one of the world’s most valuable retail stores, with over $300 billion in revenues every year. It does more business than its combined direct competitors such as Kmart, Sears, Kroger’s, and Safeway (Farfan, 2014). When it comes to online shopping (supplies, etc.), Amazon is at the forefront. Walmart is the largest grocery provider; hence, to continue maintaining a competitive advantage with Amazon, it should continue keeping prices as low as possible and keeping its delivery fee lower than Amazon to register higher scores in line with customer satisfaction. This includes improving item packaging, availability of grocery items, and smooth working with their Website.

Assessing The Financial Performance and Condition of Walmart Corporation

In particular, to evaluate the recent performance of Walmart, there is a need to look at the annual reports. It is also necessary to examine such financial indicators like sales and net revenues from 2017 to 2019 to shed light on the economic health of Walmart.

The Income Statement

The profit and loss statement depicts the company’s incomes and expenditures during one financial year. It shows how the profits are transformed into the new revenue. The following is the evolution of the income statement from 2017 to 2019 of Walmart company.

Breakdown1/30/2019 ($)1/30/2018 ($)1/30/2017 ($)Total revenue$514,405,000$500,343,000$485,873,000Cost of revenue$385,301,000$373,396,000$361,256,000Gross profit$129,104,000$126,947,000$124,617,000Operating expenses$107,147,000$106,510,000$101,853,000Total operating expenses$107,147,000$106,510,000$101,853,000Operating income or loss$21,957,000$20,437,000$22,764,000Interest expense$2,346,000$2,330,000$2,367,000Total other income/expense nets-$8,368,000-$3,136,000$0Income before tax$11,460,000$15,123,000$20,494,000Net income$6,670,000$9,862,000$13,643,000

(Walmart, 2012)

As seen in the table above, there is an increase in revenues each year, going from $485,873,000 in 2017 to $514,405,000 million in 2019 (Lu, 2019). Growth can be seen in the last three years. Similarly, there has been an increase in gross profit in the last three years. Thus, the cost of goods sold has followed the same outline as revenues. The operating income presents the profits made from the company’s operations after subtracting the expenses. Finally, there is a decrease in Net Income, mainly due to an increase in expenses. However, the decrease in Net Income is accrued due to the increase in expenses when opening new stores worldwide.

SWOT Analysis

This brings us to conduct a SWOT Analysis to define and determine the Strengths, Weaknesses, Opportunities, and Threats facing Walmart Inc.

STRENGTHS

Walmart Inc. has powerful forces that enable it to lead in the retailer market nowadays. They include:

• A wide variety of products: Walmart sells a range of products compared to its competitors. These products include, but are not limited to, groceries, electronics, clothes, and appliances. Notably, Walmart sells both its own label and branded products.
• Innovation: Walmart was the developer of many innovative and technological advances. Currently, the company has launched a Scan and Go app, which allows users to use their mobile phones in a transaction. The organization saves a lot of money due to its extensive information systems that track orders and sales (Business Strategy Hub, 2020).
• Economies of Scale: Worldwide, Walmart is one of the biggest retail companies. The company exercises high buyer power on supplies to reduce prices. Besides, due to its large size, the company benefits from economies of scale, which transfers to reduced product prices for the consumers.
• Cost leadership: Walmart has placed the lowest priced option for their customers. Therefore, when people think about a cheap place to purchase their groceries, they consider Walmart. The retailer stores sell products at a lower price than its competitors, such as Amazon.
• The supply chains: They enable the firm to save costs that are dominant for their competitive advantage. Further, the company’s international operations are a strong factor since most competitors only operate within U.S. territory (Business Strategy Hub, 2020). However, in 2013, Walmart earned nearly $135 billion in sales from its foreign stores.

WEAKNESSES

Some of the weaknesses on which Walmart should work include:

1. Lack of product differentiation: Walmart does not have a differentiation strategy as its competitors. This can lead to losing some consumers if the time comes when customers do not consider product prices. Usually, a successful product differentiation strategy creates brand loyalty among consumers.
2. High employee turnover: Employee turnover increases the company expenses as it has to train new staff always.
3. Negative publicity: Walmart faces much criticism, including poor working conditions and bribery cases. These accusations destroy the company’s reputation.
4. Decreasing sales margin: With the rise in import operations of Chinese goods in the U.S. market, Walmart has recorded declining gross margins due to reducing sales in specific product categories.
5. Labor-related lawsuits: The firm faces a lot of labor grievances, including poor working conditions, low wages, gender discrimination, and unpaid overtime work (Business Strategy Hub, 2020). These allegations create a bad image of the company, which can result in consumer reduction.

OPPORTUNITIES

Taking a look into the market in which Walmart works, there are some opportunities that Walmart can explore to improve and grow, but also, there are some threats that need to be faced.

Opportunities include:

• Online shopping: With the COVID-19 pandemic, there is an unusual spike in demand for grocery and household products as consumers prepare for stay at home (Business Strategy Hub, 2020). Therefore, Walmart is benefiting from the millions of people stocking up on products for the unknown future. Hence, the company has an opportunity to expand its stores to ensure sufficient supplies of products.
• Banking industry: The company has a chance to enter into the banking industry. Each month, Walmart receives nearly $140 million in payments through credit cards, electronic check transfers, and debit cards. Therefore, Walmart can establish its own bank to save cash on third-party automated payment processing.
• Health Concerns: Due to the increasing need for health concerns, consumers are willing to buy healthier food in groceries. Therefore, Walmart can take advantage of this and stock healthier groceries to earn more. Further, with COVID-19 cases, many people are investing in more fruits and vegetables and less sugar.
• Social welfare: Minding social welfare by going green and environmental sustainability. The company should reduce greenhouse emissions, invest more in renewable energies, and create self-sufficient supercenters.
• Strategic alliance: The company has an opportunity to create strategic partnerships with other global retailers. It can also decide to merge with other small or large corporations to increase profits by minimizing risks and expanding markets.

THREATS

• Competitor’s powers: Walmart competitors such as Amazon are putting more effort into removing the lower price strategy that the company enjoys (Massey, 2019). Since the low price is the main advantage of Walmart, if its competitors eliminate it, the company is likely to lose many consumers and experience increased competition in the future.
• Legal and political issues: Walmart is always faced with political and legal matters which hinder it from operating in some nations.
• Online e-commerce competition: Several small-scale companies are investing in online business. Therefore, in the future, Walmart risks facing high competition from both large and small companies.
• Technical issues: Customers have always complained about technical problems on Walmart’s Website. Their Website is said to be slow, and the products are listed in a disorganized