Walmart Stores, Inc. d/b/a Walmart started its operations in 1962 when it opened its first store in Bentonville, Arkansas. Currently, the company has grown into the position of being the largest retailer in the world and the third largest in terms of the number of employees . The company is now a multi-national giant with operations in 28 countries under 65 banners employing over 2.2 million associates . This essay will perform a SWOT, PEST and financial analysis of Walmart in the following sections.
SWOT Analysis
Strengths
Being the largest retailer in the world, Walmart enjoys significant advantages over the competition like strong control over the global and local logistics, better reach to the end customer, economies of scale, better utilization of resources, significant market power advantages over its suppliers and competitors .
Tremendous brand value- Walmart is recognized globally as the face of modern retail
Walmart is considered as a technology champion and has made significant investments in technology which has helped the company to establish a highly efficient logistics, inventory management and supply chain system
Economies of scale allow the company to price their merchandise at a significantly lower rate compared to the competition
Weaknesses
Troubled international operations- the company had to exit Germany and South Korea owing to flawed strategies
Still over reliant on U.S operations as the success is limited in the international arena
Significantly high employee to revenue ratio compared to the competition. Attempts to downsize have invited significant media attention and negative publicity
Operating on thin margins compared with the competition
Faces a large number of lawsuits both in the U.S and international markets pertaining to unethical practices and local protests.
Opportunities
Significant scope for international expansion focusing China and India
Entry into online retailing is a welcome step from Walmart; a significant opportunity lies out there as the majority of the world is getting connected
Takeover/Acquisition opportunities, particularly in the international markets
Global markets have become significantly price sensitive post the 2008-’11 recession. Stores like Walmart that offers low prices are pulling crowds across the world.
Focus on same day supply of perishables including vegetables, fruits and sea-produce
Threats
Rising wages and insurance costs- the company is trying to ward off this threat by inducting more contract labor than full time employees
Prime target of small scale businessmen, environmentalists, politicians and activists across the world. Targeting Walmart provides significant exposure
The threat of online retail is more pronounced as the Walmart stores are located at city fringes which makes significant travel for the city dwellers
Walmart is the jack of all trades, but king of none to a large extent. Niche retailers are gaining popularity with their targeted product offerings and services
Growing discontent among the employees with regard to wages and working conditions
PEST Analysis
Post the SWOT analysis, this section will perform the Political-Economic-Social-Technical (PEST) analysis.
Political Factors
Significant opposition from the local bodies holding Walmart responsible for closing down of smaller shops in the neighborhood.
Political pressure for higher wages and benefits
Political stability in many geographies including the U.S, which provides opportunities for Walmart
Economic
Economic slowdown in many parts of the world including China and Europe
Favorable economic situation in geographies such as U.S and India
U.S plans to control the growth of supercenters in order to increase sales in the U.S stores, which is supposed to impact Walmart .
Social
Favorable perception about Walmart being the symbol of development and prosperity, particularly in the developing nations
Fear of job losses as small stores run out of business owing to the presence of Walmart act as an adverse social sentiment
In the U.S, Walmart stores are located in the periphery of cities and towns. This has worked in the U.S and many other markets as well. But this strategy was said to be one of the reasons for their failure in Germany as Germans prefer shopping in their neighborhood stores
Technological Factors
Generates huge quantity of data year on year, presenting great opportunity for Walmart
Yet to explore the potential of mobile commerce to the fullest extent
Financial Analysis
The total revenues for the fiscal year ended January 31st 2016 stood at $ 482 billion, a decrease of 0.7% over the same period in the previous year . The operating income for the same period also witnessed a reduction of 11.2%. For the year ended January 31, 2016 the operating income stood at $24.11 billion, whereas the previous year clocked $27.15 billion . There was a similar reduction in the consolidated net sales as well for the above said period. The net income for 2016 is $15.1 billion which is 11.8% lower than that for 2015 . The decrease in all key parameters has been attributed to the poor performance of Walmart International and the high operating expenses in the U.S. The wage hike and increased insurance coverage propelled the operating expenses in the U.S. Slowdown in the key international markets such as China and the Europe has significantly affected the revenue from its international operations.
Works Cited
Jurevicius, Ovidijus. Walmart SWOT Analysis 2016. 4 January 2016. Website. 4 March 2016.
McCarthy, Niall. The World's Biggest Employers [Infographic]. 23 June 2015. Website. 4 March 2016.
Nyakreal, Elvis. SWOT and PEST Analysis of Wal-Mart. 25 January 2016. Website. 5 March 2016.
Walmart. Financial Information. 18 February 2016. Website. 4 March 2016.
Wal-Mart Stores, Inc. About Us. 2016. Website. 4 March 2016.
