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WALMART CASE ANALYSIS
SEPTEMBER 19th, 2012
SWOT Analysis of Wal-Mart: (2008- 2010)
EXTERNAL ANALYSIS: Significant findings on the PESTEL analysis were:(Refer Fig 1 )
* Socio Cultural factor: One of the most important concerns among consumers during that period was price. Since its establishment Walton focused on Everyday low prices (EDLP) and always geared towards the low- income groups of the society. This provided Walmart better opportunities and helped them gain a competitive advantage in the industry.
* Demographic factor: Another opportunity facing the industry was that Consumers (working Mothers and other American ...view middle of the document...
Slack in the economy: This impacts all businesses in the retail industry and forces them to provide discounts and reduce their prices. Walmart enjoys an advantage over other competitors, as they have always been the low-priced provider of goods there by attracting more consumers.
Abundance and Location: Expansion of stores and warehouse clubs (Sam’s club) in small towns and many discount centers (app 2843 stores) reaching wide range of consumers provides a competitive advantage for Walmart.
Larger firms had advantages in discount retailing: With a more number of retail business failures and small chains, large size companies like Walmart had a cost advantage compared to its competitors spreading their overhead expenses and distribution costs.
INDUSTRY STRUCTURE: Walmart is in its mature phase in the retail industry and in the warehouse club segment with a wide diffusion of technologies and reduced rate of innovation. However as referred in the book the nature of competition that Walmart belongs to is the Monopolistic business with large number of firms competing the discount retailing industry directly in the aggregate market and a low/high cost entry/exit based on its individual resources and efficient performance. By considerable efforts in differentiating its products and services, Walmart could retain its competitive advantage in the industry.
Comparison of Five Forces Framework and Wal-Mart Performance in the Retail Industry: (See fig 3 for findings)
Opportunities and Threats
Threat of New entrants is medium: Cost of entry for the new entrants is relatively high. Walmart was aggressive in the use of technology like the EDI links, RFID, POS data and cross docking practices in all of their larger distribution centers and efficient value chain activities. (See fig 2)All of these require large capital investments, which would act as a barrier to entry for new entrants. However the threat of entrants in the specialty discount retailers industry dealing with the special type of goods (Office depot, Toys R Us, Best buy) could be high.
Threat of Rivalry is medium: The two major competitors are Target and Kmart. Although Target shoppers were considerably higher, they attracted more affluent clientele and were upscale discounters. With the slack in the economy, Target is not our immediate threat until the economy rises and Walmart dominates the industry by keeping its prices very low and innovative in the retail segment.
Threat of Buyers is low: As Walmart already provides a very low price there is no threat of backward integration by the customers or switching to a different retailer. Buyers with limited income often don’t have an option. Nevertheless Costco seems to dominate in the warehouse segment as opposed to Sam’s Club. With a very small membership fee charged by both the clubs the switching cost is very low for the customers to swap immediately or in the course of time from Costco to Sam’s Club.
Threat of Suppliers is low: From...