With a market capitalization in excess of USD 415 billion, Walmart is one of the leading global brands. In fact, Walmart is the largest food retailer in the United States with a market share of more than 26 percent as per the list of top grocery retailers in the US.
Having dominated the US market for a long time, Walmart is now aggressively expanding its operations outside the US with a great focus on emerging markets. How successful Walmart is going to be in that pursuit is largely subject to its internal resources and capabilities. This article elucidates the strengths, weaknesses, opportunities, and threats in the context of Walmart by offering a credible SWOT analysis of the company. In case you wish to learn about conducting a SWOT analysis in detail, you should definitely go through our meticulous Swot Analysis guide. So, let’s get started.
Table of Contents
A scrupulous SWOT Analysis of Walmart
- Strong customer base- Walmart serves a huge number of customers in its stores, more than 200 million customers shop from its stores in a week (Statista, 2022). Further, Walmart has strong customer loyalty. It was the leading retailer in terms of customer loyalty in 2021 with a score of 5.68 out of 10 (Redman, 2022).
- Strategic acquisitions- Walmart has acquired many companies to expand its dominance. These include Parcel, a delivery company that is known for its same-day delivery of meal kits, and groceries along with other major e-commerce products. Further, Walmart also ventured into the Indian market by acquiring a majority stake in Flipkart which is a one of the topmost e-retailer in India. These two acquisitions provided Walmart the opportunity to enhance its digital operations. In addition, Walmart has also ventured into the outdoor gear and apparel segment by acquiring Moosejaw. Acquiring these e-commerce platforms would make Walmart competitive with Amazon in the e-retail segment.
- Cost leadership- Walmart uses the cost leadership strategy wherein the prices of the products are kept low as compared to competitors. This enables the company to attract more customers and increase sales manifolds.
- Global supply chain- Walmart has more than 100,000 suppliers in its supply chain network (Walmart, 2021). Further, the company is making use of robots in fulfillment centers to move the pallets. Furthermore, the sorting of products while stocking the goods from the pallets is also done through advanced sortation equipment, thus leading to a reduction in time for storing products. In addition, the warehouse management system software integrates all the assets in the warehouse. Also, the company is experimenting with technologies that would enable trucks to move automatically to its yards from distribution centers (Banker, 2021).
- Omni-channel presence- Walmart operates through both physical and online channels. For example, in India, the company sells the products online through Flipkart while it has collaborated with PhonePe for the digital transaction services whereas, in China, the company offers one hour assured delivery service (Walmart, 2021). The omnichannel presence enables the company to expand its reach and acquire more customers.
- Consolidated financial position- Walmart’s revenue grew by almost $35 billion in 2021 and reached $559.2 billion (Walmart, 2021). Furthermore, the annual cash flow of the company is also increasing on year on year basis. In 2019, the free cash flows amounted to $7756 million which increased to $9515 million in 2020 while the company had $17,788 million in cash by the end of 2021. The increase in liquidity can be utilized by the company to enhance its operations (Walmart, 2021).
- Harsh employee treatment- Walmart has been accused of discriminating against the employees based on their disability, gender, etc. A few months back, an employee with down syndrome filed a lawsuit alleging the store where she worked changed her schedule which was not suitable for her, and thus the company had to incur $125 million in damages (Repko, 2021). Furthermore, the company also violated the civil rights act wherein it excluded female applicants while conducting recruitment for order fullers (EEOC, 2020).
- Restricted mainly to the US market- Out of the total 10,500 stores over 5300 stores are just located in the US. The high dependency on a single country can be problematic for a company, for example, if the US faces any economic depression or natural calamity, then operations of the whole company can get disrupted as it has less presence outside the nation.
- Reputation losses- Walmart has been involved in corrupt practices in many countries including India, China, Brazil, and Mexico wherein it was found to have obtained store permits and evaded hefty fines by bribing government officials (US Department of Justice, 2019). These types of incidents can cause reputational harm to the company.
Opportunities for Walmart
- Expansion in emerging markets- Walmart has a high potential to expand in the markets where it has a limited presence. For example, in India the company operates around 30 stores and the company should open more stores as the retail market is expected to double to $1.7 trillion by 2026 from $883 billion in 2020 (Statista, 2022). Similarly, in China, Walmart just controls 10.3% of all supermarket sales in the country (Jones, 2021). The company should look to expand its operations by acquiring a stake in the other companies operating brick-and-mortar stores to enhance their business.
- Enhanced online presence- Though Walmart is one of the world's largest retailers but its e-commerce sales in major markets like the US constitute just 13% of the total business. The company should aggressively invest in the online infrastructure. The expansion of online business would assist it in continuing operations in a smooth manner even if the businesses close because of another variant of the pandemic.
Threats for Walmart
- Competition- Walmart competes with Home Depot, Ikea, and others in the physical retail segment while Amazon and Alibaba are its biggest competitors in the e-retail sector. Home Depot is the major computer in the home improvement sector and has 2300 stores across the US, Canada, and Mexico, and holds a phenomenal 29% market share (Danziger, 2020). IKEA has a market share of 13.4% in the home furnishing sector in the US. In terms of e-commerce, Walmart has a 6.6% market share while Amazon is in a dominant position with a 37% market share and Alibaba is the biggest e-retailer in China withhold over 58% market.
- Pandemic- Though the conditions are getting normal throughout the world, another variant can result in an increase in the intensity of the cases which can force the company to close down the stores that would ultimately impact its revenues.
- US-China trade rift- Walmart is highly dependent on Chinese suppliers with 70-80% of the goods exported from China (Quine, 2020). The increase in tariffs by the American government by around 15% on $200 billion worth of goods has raised the cost of imports which has led to a rise in the prices of the goods. If the trend of tariffs continues in the future, then there can be an impact on the company's sales as well.
To encapsulate, Walmart is the most preferred retail brand worldwide and serves hundreds of millions of customers worldwide in a week. The company is growing in terms of revenue and its strategy of operating through multiple channels is proving to be successful. Further, the operations are being made more efficient with advancements in the supply chain. But, the employees are not treated well and the company needs to look after the needs of the employees to enhance productivity. Furthermore, the company needs to expand its operations beyond the US market and should enhance its digital presence as well. The rising tariffs because of the US-China trade war can lead to more operational costs while the company also needs to formulate effective strategies for overcoming the competition. Also, you can read the PESTLE Analysis of Walmart to determine how the macroenvironment factors influence the company or the automotive industry.
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QUINE, O. (2020). Walmart Triples India Exports as Major U.S. Companies Pivot From China. www.newsweek.com. Retrieved 30 March 2022, from https:// www.newsweek.com/india-asian-countries-trade-war-walmart-1554632%3famp=1
Statista. (2022). Retail market size in India 2011-2026. /www.statista.com. Retrieved 30 March 2022, from https://www.statista.com/statistics/935872/india-retail-market-size/.
US Department of Justice. (2019). Walmart Inc. and Brazil-Based Subsidiary Agree to Pay $137 Million to Resolve Foreign Corrupt Practices Act Case. www.justice.gov. Retrieved 30 March 2022, from https://www.justice.gov/opa/pr/walmart-inc-and-brazil-based-subsidiary-agree-pay-137-million-resolve-foreign-corrupt