Walmart SWOT analysis 2016

| October 19, 2016

Company Background

Key Facts
Name Wal-Mart Stores, Inc.
Logo
Industries served Retail (Discount department stores and warehouse stores)
Geographic areas served Worldwide (11,528 stores in 28 countries)
Headquarters Bentonville, Arkansas, U.S.
Current CEO C. Douglas McMillon
Revenue US$482.130 billion (2016) 0.7% decrease over US$485.651 billion (2015)
Profit US$14.694 billion (2016) 1.7% decrease over US$16.182 billion (2015)
Employees 2.3 million (2016)
Main Competitors Costco Wholesale Corporation, Dollar General Corporation, Dollar Tree, Inc., Kohl's Corporation, Macy's Inc, Sears Holdings Corporation, Target Corporation and many other retailers/wholesale companies.

Wal-Mart business description taken from the company’s financial report:

“Wal-Mart Stores, Inc. helps people around the world save money and live better – anytime and anywhere – in retail stores, online, and through their mobile devices. We earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices ("EDLP"), while fostering a culture that rewards and embraces mutual respect, integrity and diversity. EDLP is our pricing philosophy under which we price items at a low price every day so our customers trust that our prices will not change under frequent promotional activity.

Our operations comprise three reportable business segments: Walmart U.S., Walmart International and Sam's Club. During fiscal 2016, we generated total revenues of $482 billion, which was primarily comprised of net sales of $479 billion. Walmart U.S. is our largest segment and operates retail stores in various formats in all 50 states in the U.S., Washington D.C. and Puerto Rico, as well as its online retail operations, walmart.com.

Walmart International consists of the Company's operations in 27 countries outside of the U.S. and its operations include numerous formats of retail stores, wholesale clubs, including Sam's Clubs, restaurants, banks and various retail websites.

Sam's Club consists of warehouse membership clubs and operates in 48 states in the U.S. and in Puerto Rico, as well as its online operations, samsclub.com.”[1]

Walmart SWOT Factors

Strengths

1. Being the largest retailer in the world, with unmatched scale of operations and strong market power over suppliers and competitors.

Wal-Mart is the world’s largest company by revenue and the largest retailer in the world.[2] It is also the world’s largest private employer, with more than 2.3 million staff. The company is a retail market leader in the U.S. and is a major competitor in all geographic markets in which it operates.

Figure 1. Comparison of the top 4 retailers in the world in 2016
Wal-Mart Carrefour Costco Tesco
Revenue (in US$ billions) 482.130 billion ~113.280 billion 113.666 billion ~102.684 billion
Locations 11,528 12,296 686 6,902
Countries served 28 35 9 13
Employees 2.3 million 380,000 205,000 476,000
Retail space (square feet) 1.149 billion - 98.7 million -

Source: The respective companies’ financial reports [1][3][4][5] (Carrefour and Tesco revenues are rounded up due to revenue translation.)

Wal-Mart’s revenue reached US$482 billion in 2016, more than the Carrefour, Costco, Tesco and Amazon.com (US$107 billion) revenues combined. The company employed twice as many people and owned about 5 times more retail space than its top 3 rivals.

Forbes listed Wal-Mart as the 20th most valuable brand in the world in 2016[6], worth US$24.7 billion. No other direct competitor, except Amazon, has made it to the Forbes list of the most valuable brands.

What does ‘being the largest retailer in the world’ mean to Wal-Mart?

  • Economies of scale. The company can share its fixed costs over many products, which makes Walmart one of the cheapest places to shop.
  • Efficient and effective use of resources. Wal-Mart can use its resources, such as distribution facilities, information systems, knowledge and other capabilities and skills, more efficiently and effectively over a large number of locations.
  • Huge gains from implementing best practices. The company can identify better ways of performing tasks, managing stores and hiring new employees and can achieve huge gains by implementing these best practices in its vast network of stores.
  • Experimenting with less risk. The company can engage in many experiments within its stores or in new store formats without the risk of losing a substantial amount of profits or revenue.
  • Market power over suppliers and competitors. Due to its size, Wal-Mart can exercise its market power over suppliers by requiring lower prices from them. The company can also affect the competition by selling selected items at a loss, thus driving competition out of the market.

2. International presence.

Wal-Mart went international in 1992 through a joint venture with Cifra, a Mexican retail company, opening a Sam’s Club in Mexico City.[11] Since then, the company has expanded globally to become the largest international retailer (by revenue), operating 6,299 retail units in 27 countries outside the U.S. The company operates under different brand names, such as ASDA in the U.K., Walmex in Mexico and Seiyu in Japan. Wal-Mart’s non-U.S. revenues reached US$123.4 billion or 25.6% of its total sales in 2016, a significant source of revenue.[12]

Wal-Mart strongly focuses on its international segment as this provides an opportunity for growing the company’s operations. The company added 4.5 million square feet of retail space and 9 stores outside the U.S. in 2016, which allowed it to maintain the same sales level as in 2015 (excluding currency impact), despite the slowing growth of international retail markets.[12]

Wal-Mart’s international expansion strategy not only helps the company to grow, but also strengthens the company’s retail leadership position. By growing internationally, the company diversifies its income sources, gains valuable new experience and further benefits from economies of scale.

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Published: May 4, 2016
Format: PDF
Pages: 26
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