Walmart- Entry into International Market

Walmart- Entry into International Market

Walmart is one of the leading retail multinational corporates in the world with many subsidiaries, retails channels, and chain stores distributed worldwide. Despite the growing negative publicity such as poor employee welfare, Walmart is an unstoppable force with the largest number of employees globally. In view, the company utilize various resources such as strategic management and cost-effectiveness to gain competitive edge. In 2019, the company was ranked as one of the most successful American corporation in terms of revenues and employment. The company had a revenues of $514.4 billion and has employed more than 2.2 million associates across the globe. To understand the forces that drives Walmart, this section apply SWOT analysis approach to discuss various factors that the company experience in the international market.

Walmart SWOT Analysis

SWOT analysis refers to a technique used to access strengths, weaknesses, opportunities, and threats that the company faces. Walmart SWOT analysis indicates factors that support the company position itself in the international retail industry. In addition, the SWOT analysis helps to offer an insights on the internal and external forces which influence strategic planning of the company. It is also important to discuss the strengths, weaknesses, opportunities, and threats facing the company in order to capitalize on the advantages while minimizing the threats and weaknesses. The strategic implementations in line with the SWOT factors are significant in ensuring that the company maintain its competitive edge in the market.

Strengths

Walmart is the largest retail company in the world, with incomparable economies of scale that is combined with the market power over the suppliers and competitors. Because of the large scale of operations, the company has the largest revenues in the world. Besides, Walmart is highly known retail company around the world with a large number of loyal customers. Walmart leads in the brand recognition because it attract millions of customers every day. Many customers prefer at Walmart because of its high quality low-priced products. It is important to note that Walmart uses its economies of scale to outcompete other stores in the market by selling products at low prices. Because of its ability to purchase large products in large scale from the suppliers lowering the cost unit as well as receiving incentives such as purchase discounts. For further global expansion, the company can utilize its strengths that include global size and the efficiency of its supply chain.

Weaknesses

Walmart weaknesses comprise internal and external strategic factors that hinders the company from working well to overcome its threats. Among the challenges that face the company include low net profit margins. Even though the company is the largest retailer, it is struggling with its falling profits margins. In 2019, Walmart scale down its operations in various countries because of the operation inefficiencies that led to losses. It has been established that Walmart low prices of products has led to revenue problems. Also, huge investments in e-commerce operations have added to the weakness of the company. For example, the company’s revenue was $ 514.4 billion in 2019 while its income amounted only to $6.67 billion. Consequently, the company recorded a profit margin of 1.13% and a gross margin of 24.5% hence there is high discrepancy in revenues and net profits in the company.

Moreover, Walmart experience the issues of employee poor treatment of employees. It has been noted that there are numerous problems that company faces such as widespread discrimination, unpaid overtime, promotion, unequal wages as well as an attempt to reduce healthcare costs. On the other hand, business model pose another challenge for the company. Markedly, Walmart business model can be copied easily hence, it has no competitive advantage over its competitors except low prices. Also, large span of control has adversely affected the company. Notwithstanding its effective communication and coordination, company is being impacted negatively by the huge span of control.

Opportunities

Major opportunity for the company comprise its global expansion because focusing in one area lead to huge opportunity cost. For instance, United State only account for 4% of the global market whereas the rest of the world account for 96% of potential customers. Besides, customers in emerging markets such as Asia and Africa have low level of disposable income hence, these markets provide opportunities for discounted retailers that include Walmart to attract many customers. Other opportunities available for the company involve formation of strategic alliances and offering high quality products that meet health needs of the customers.

Threats

Walmart is experiencing fierce competition from other companies such as Amazon, Tesco, and Alibaba. Many of the competitors use advanced strategies to achieve competitive advantages and increase image and customer base. Despite rising competition, Walmart has improved its online presence and business it has been able to reach customers beyond its traditional business model.

Another threat facing Walmart include increasing prices. It is difficult for the company to offer different products at the same prices. Increase cost of factors of production such as cost of labour, raw materials, and transportation costs affects the costs of products. Also, social trends that comprise change in lifestyle, changes in the demographic characteristics, and health concerns pose significant threats to the company. For instance, customers believe that Walmart does not provide organic and natural food items. This is a threat because it influences customer’s loyalty and the reputation of the company.

Walmart’s Target Markets: Competitive Positioning Strategy and the Market Segment Strategy

Walmart targets low and middles class customers with low levels of disposable income. It is possible for the Walmart to attract customers in these categories because of its ability to sell quality products at low prices suitable for their audience. Since its inception, Walmart has been able to attract lower, middle, and poor customers in the society. In regard to competitive positioning, the company has projected itself as the price-sensitive and customer focused company. Markedly, Walmart has been ranked has ranked as the retailer that provide convenience to the customers by offering wide-variety of products under one roof at the lowest possible price. Thus, the company has competitively positioned itself in the market has high quality and low price discount retailer. In term of market segmentation, Walmart sub-divide its market based on various characteristics such as demographic features to determine the types of items to stock in each location. Firstly, Walmart uses geographical segmentation where it groups customers based on their physical presence. Secondly, it divide the market based on age of customers in particular area and stock its outlets to meet the taste and preferences of customers in each market segment.