From humble beginnings just over 50 years ago, Walmart’s business model. has grown to become the world’s largest retail company. A single small discount store in Arkansas has now expanded to over 11,000 stores in 28 countries. Some reports suggest that the company now makes $1.8 million of profit every hour.
This SWOT analysis will detail how Walmart came to be the retail giant it is.
- Affordability – few competitors can match Walmart’s size and scale of operations. This helps the company achieve better economies of scale – or cost savings that result from an increased level of production. These cost-savings are then passed onto the consumer.
- Technologically advanced – the measure of success for any retail company is their ability to keep shelves full. Walmart achieves this through the smart use of technology in order tracking, inventory management, and supply chain management.
- Market presence – Walmart is the world’s largest company by revenue and the world’s largest private employer with 2.3 million employees. It is also a market leader in the US, recording almost three times as much revenue as fellow giant Amazon in 2018. This gives Walmart unprecedented power over suppliers and competitors.
- Employee lawsuits – Walmart has had to deal with numerous lawsuits concerning employee discrimination, unfair wages, unpaid overtime, and poor benefits. This has come at a significant cost to Walmart’s bottom line and also to their public image as a fair and reputable employer.
- Simple business model – most Walmart stores are large warehouses that lack character or ambiance and instead focus on low prices. In other words, the company does not have a significant competitive advantage aside from its sheer size and affordability. This makes their business model easy to replicate and thus vulnerable to competition.
- Frequent product recalls – product recalls such as those seen in candle holders and key chains are symptomatic of poor quality control and Walmart’s focus on low-cost, low-profit margin goods.
- Higher profit margins – Walmart has an extensive brand portfolio that they can use to increase profit margins with higher ticket items. This increases profitability while still maintaining the low-cost brand image of Walmart supermarkets.
- eCommerce – in theory, the rise in popularity of eCommerce and the fact that overhead expenses are lower should work to Walmart’s advantage. It might allow them to solidify their position in the market by passing on those savings to online consumers.
- Human resources – Walmart must take steps to improve HR practices around employee work conditions to remain competitive in the labor market.
- Competition – Walmart is not immune to the intense competition found in the retail market. In the US it is competing against several large organizations such as Carrefour, Tesco, and Home Depot. Target sells similar products to Walmart but offers higher quality. The rise of Amazon and its strong position in eCommerce is also a threat to Walmart.
- Opposition to expansion – there is growing opposition in some communities to new Walmart stores, fearing that they might drive small operators out of business. This hurts brand image and makes it more difficult for Walmart to expand into new locations.
- Rising costs of raw materials and labor – operating expenses continue to rise year on year for Walmart. Although offset somewhat by their privately branded premium products, these largely unavoidable expenses have the potential to impact Walmart’s low-cost supermarkets.
- Rapid Growth: From a single discount store in Arkansas, Walmart has expanded to over 11,000 stores across 28 countries in just over 50 years.
- Scale and Affordability: Walmart’s size and scale give it a significant advantage in achieving economies of scale, allowing cost savings that are passed on to consumers.
- Technological Integration: Walmart’s success is attributed to its use of technology in inventory management, supply chain operations, and order tracking to ensure well-stocked shelves.
- Market Leadership: Walmart is the world’s largest company by revenue and private employer, giving it substantial power over suppliers and competitors.
- Challenges with Employee Relations: Walmart has faced lawsuits related to employee discrimination, wages, overtime, and benefits, impacting both its finances and reputation as an employer.
- Simplicity of Business Model: Walmart’s focus on low prices in large, characterless stores makes its business model vulnerable to competition due to its lack of unique selling points.
- Quality Control Issues: Frequent product recalls indicate problems with quality control due to Walmart’s emphasis on low-cost, low-profit-margin goods.
- Diverse Brand Portfolio: Walmart has the potential to boost profitability by leveraging its extensive brand portfolio for higher-priced items while maintaining its affordable image.
- eCommerce Potential: The rise of eCommerce could benefit Walmart by reducing overhead expenses and passing on savings to online consumers.
- Human Resources Improvement: To remain competitive, Walmart needs to enhance its human resources practices, particularly concerning employee work conditions.
- Competition: Walmart faces fierce competition from large retail organizations like Carrefour, Tesco, and Home Depot, as well as quality-focused competitors like Target and the dominating force of Amazon in eCommerce.
- Expansion Challenges: Opposition in some communities to new Walmart stores can hamper expansion plans and harm brand image.
- Rising Operating Costs: Walmart’s operating expenses, driven by increasing raw material and labor costs, could impact its ability to maintain low-cost operations.
- Walmart’s journey from a small discount store to a global retail giant is marked by strengths in scale, affordability, and technological integration.
- However, it faces challenges with employee relations, quality control, and competition, while having opportunities to increase profits through higher-priced items and eCommerce.
- The company must navigate these factors while considering the potential impact of rising costs and community opposition to expansion.
More about Walmart’s business model
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