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.
Table of Contents
Strengths
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, inventorymanagement, 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.
Weaknesses
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 businessmodel – 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.
Opportunities
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.
Threats
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.
Key Highlights
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.
Key Highlights
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.
With over $572 billion in net sales in 2022, Walmart operates a differentiated Omni business model with three primary units comprising Walmart U.S., Walmart International, and Sam’s Club (a membership-only warehouse club), together with Walmart+. This subscription service includes unlimited free shipping, unlimited delivery from its stores, and discounts launched in 2021.
Walmart generated over $572 billion in revenue in 2022 and over $13.6 billion in net profits in the same year. Compared to over $559 billion in revenue in 2021 and over $13.5 billion in net profits.
Walmart’smission can be summarized as “helping people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce.” While its vision is to “make every day easier for busy families.” Walmart defines “busy families” as the bull’s eye of its business strategy.
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.
From humble beginnings just over 50 years ago, Walmart has 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 makes $1.8 million of profit every hour.
Samsung was founded in South Korea in 1938 by Lee Byung-Chul. Originally a trading company, it took Samsung 22 years to become the fully-fledged electronics company that most people recognize today. Indeed, the company is a leader in technological innovation through telecommunications, electronics, and home appliances.
Costco is a large American multinational corporation with a focus on low-cost, membership-only retail warehouse clubs. Costco is the 4th largest retail operator in the world, operating 785 warehouses in 10 different countries. Indeed, it has enjoyed rapid success growing from zero to $3 billion in sales within six years.
From humble beginnings just over 50 years ago, Walmart 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.
Headquartered in San Francisco, California, Uber started as a peer-to-peer ridesharing platform. In more recent times, the company has moved into food delivery, rental cars, and bike-sharing. In one form or another, Uber now has a presence in over 900 cities worldwide.
It would be hard to argue the case for a more recognizable entertainment brand than Disney. Disney is of course synonymous with Walt Disney, but it was Walt and his brother Roy who started the company in 1923 in Burbank, California. Disney content is now broadcast on over 100 channels in 34 different languages across the globe.
Coca-Cola is the market leader of the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo. However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.
Founded in 1903 by Henry Ford and is the fifth-largest family-owned company in the world. Ford is a globally recognized brand in the automotive industry for a couple of reasons. First, Henry Ford is well-known as the inventor of the production line and thus the modern automobile industry. Today, Ford has also maintained relevance as the seventh-largest car manufacturer worldwide, selling a range of passenger cars, trucks, and vans.
Tesco was founded in 1919 by Jack Cohen, as a small group of market stalls. After rapid expansion in the following years, the company became the largest retailer in the UK and is now the second-largest in the world. To put their dominance into perspective, consider that Tesco serves around 66 shoppers per second across 7000 retails stores, delivering approximately $180,000 worth of sales every minute.
Nestlé is a large multinational food and beverage manufacturer with more than 2000 brands spread across 197 countries. Some of Nestlé’s well-known brands include Nescafe, Kit-Kat, Purina, Aero, Butterfinger, Maggi, and Haagen-Dazs. Originally a producer of infant food in 1867, it is now considered to be the world’s largest food manufacturer.
Amazon is among the most diversified business model in the tech industry. The company is well-positioned to dominate e-commerce further. And while its online stores have tight profit margins, Amazon still unlocks cash for growth, while consolidating its dominance in the cloud and grabbing new opportunities like voice.
Facebook, with its products, with its strong appeal, and consumer brand has a solid businessmodel, threatened in the last years by privacy concerns, which open up the way to potential regulation to break up the company. If that will not happen, Facebook will have the chance to expand to define other markets like VR.
Starbucks is a global consumer brand with direct distribution, recognized brands, and products that make it a viable business. Its reliance on the Americas as a primary operating segment makes it a weakness. At the same time, Starbucks faces risks related to coffee beans price volatility. Yet the company still has global expansion opportunities.
Among the most recognized car manufacturers, Tesla is valued more than the combined market capitalization of GM and Ford. While the company’s direct distribution is a strength, its lack of financial viability is a weakness. Competition is a future threat. However, if Tesla defines a new market for car manufacturing its potential growth will be massive.
Netflix is among the most popular streaming platforms, with a subscription-based businessmodel. The brand, platform, and content are strengths. The volatility of content licensing and production are weaknesses. The streaming market is a potential blue ocean. Inability to attract and retain premium members, and its fixed long-term costs are threats to its businessmodel.
Apple can leverage a strong consumer brand and set of successful products as a strength. Yet the company is still too reliant on the iPhone as a primary revenue stream. Though Apple is working to open up new markets as an opportunity, it has to make sure to sustain its stores’ sales.
Google’s strength is its strong consumer brand. The company is grabbing new opportunities by opening up industries like voice search and consolidating in industries like the cloud. As a weakness, its revenues primarily come from advertising. A primary threat is the quick change of search and potential intervention by regulators.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
