Walmart SWOT analysis 2017

| May 10, 2017

Company Background

Key Facts
Name Wal-Mart Stores, Inc.
Logo
Industries served Retail (Discount department stores and warehouse stores)
Geographic areas served Worldwide (11,695 stores in 28 countries)
Headquarters Bentonville, Arkansas, U.S.
Current CEO C. Douglas McMillon
Revenue (US$) 485.873 billion (2017) 0.77% increase over 482.130 billion (2016)
Profit (US$) 13.643 billion (2017) 7.2% decrease over 14.694 billion (2016)
Employees 2.3 million (2017)
Main Competitors Alibaba Group Holding Limited, Amazon.com, Inc., 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 or through our e-commerce and mobile capabilities. Through innovation, we are striving to create a customer-centric experience that seamlessly integrates digital and physical shopping and saves time for our customers.

Physical retail encompasses our brick and mortar presence in each market where we operate. Digital retail is comprised of our e-commerce websites and mobile commerce applications. Each week, we serve over 260 million customers who visit our 11,695 stores under 59 banners in 28 countries and e-commerce websites in 11 countries.

Our strategy is to lead on price, differentiate on access, be competitive on assortment and deliver a great experience. Leading on price is designed to earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices ("EDLP"). 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. Price leadership is core to who we are.

Everyday low cost ("EDLC") is our commitment to control expenses so those cost savings can be passed along to our customers. Our digital and physical presence provides customers access to our broad assortment anytime and anywhere. We strive to give our customers and members a great digital and physical shopping experience.

Our operations comprise three reportable segments: Walmart U.S., Walmart International and Sam's Club.

During fiscal 2017, we generated total revenues of $485.9 billion, which was primarily comprised of net sales of $481.3 billion .”[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 5 retailers in the world in 2016
Wal-Mart Carrefour Costco Tesco Amazon.com
Revenue (in US$ billions) 485.873 80.645 116.073 66.963 114.424
Locations 11,695 11,935 715 6,665 34
Countries served 28 35 9 11 13
Employees 2.3 million 380,000 218,000 476,000 341,400

Source: The respective companies’ financial reports[1][3][4][5][6]

Wal-Mart’s revenue reached US$485 billion in 2017, more than the Carrefour, Costco, Tesco and Amazon.com 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 22nd most valuable brand in the world in 2017[7], worth US$25.4 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.[10] Since then, the company has expanded globally to become the largest international retailer (by revenue), operating 6,363 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$118.089 billion or 24.3% of its total sales in 2017, a significant source of revenue.[1]

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 64 stores outside the U.S. in 2017, which allowed it to maintain the same sales level as in 2016 (excluding currency impact), despite the slowing growth of international retail markets.[1]

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 10, 2017
Format: PDF
Pages: 26
Price: USD $19

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