Internal Analysis of Wal-Mart
Wal-Mart is a famous and powerful brand that has a reputation for providing its clients value for their money. Since it has been in business for several decades, it has developed loyal clients and customers. It also has one of the largest net sales in the world. According to Lee Scott, President and CEO of Wal-Mart Stores Inc, “for the fourth quarter, we topped $100 billion in sales, the first time in history that any retailer has reached this milestone in a single quarter.” (“Wal-Mart Reports Record Fourth Quarter Sales and Earnings”, 2008, p.2)
Also, Wal-Mart has also started to expand its operations globally by putting up stores in other parts of the world. Wal-Mart also has a strong logistics system that enables is to ship and deliver its products from its distribution centers to its stores at a faster rate. This has not only maintained the prices of its products very low but it has also helped the company reduce its expenses.
It also efficiently uses existing technology to its advantage which is manifested in being the first to use the Universal Bar Code System. Also, the entrepreneurial culture of frugality has become a part of the company’s culture. Its top executives are very careful about spending their money and they lived a very simple lifestyle. They also demanded frugality from their employees. In addition, Wal-Mart stores are known throughout the United States because of its ability to lower the prices of its products down to the minimum.
Although Wal-Mart is known as a global company, it does not have that many stores outside the United States. It has also recently started to expand its operations.
The company has gained notoriety for paying its employees or “associates” below the minimum wages. According to A.Bianco (2003), in 2001 Wal-Mart’s sales clerks earned an average of $8.23 an hour or $13,861 a year compared to the federal poverty line of $14,630 for a family of three. It must be stressed that no head of the family can adequately provide a good future for his family with the meager salary it gives to its employees.
Also, despite existing laws protecting the right of female employees, Wal-Mart is known for its policy of discrimination against female employees. Its female employees are less likely to be promoted and to receive increase in wages. Because of these employment policies, there is always a high risk that Wal-Mart will always be involved in suits.
Because of these employment policies, a small percentage of the population has boycotted Wal-Mart and its stores. They have refused to patronize Wal-Mart stores. Although at present their number is very small to affect Wal-Mart, they may in the future increase in number. Also, it is very noticeable that Wal-Mart’s growth has significantly reduced compared to its growth in the past years. According to A.
Bianco (2007), in 2006, Wal-Mart’s competitors are fast catching up. Its competitors such as Costco, Safeway, Walgreen’s CVC and Best Buy are all growing two to five times faster than Wal-Mart. (p.4)
A few years ago, economists predicted that the growth of Wal-Mart will slow down. Wal-Mart however has proven its critics wrong. According to an article entitled “How Big can It Grow?-Wal-Mart” presently, it already is one of the world’s biggest company and its expansion is inevitable. (p.2) Wal-Mart has already expanded its operations in other countries such as into Mexico, Britain, Japan, Canada, Germany and China. (“How Big can It Grow?-Wal-Mart, p.1) It seeks to add more stores in these locations and it is currently considering the possibility of opening new stores in other countries. In addition, because of the ever increasing demand for cheap goods, there is still opportunity for Wal-Mart to grow in the intensely competitive retail industry
As one of the leading companies, Wal-Mart has become the target of many competitors. For the past decades, Wal-Mart has been able to get rid of its competitors to the point of forcing them to close down or transfer to different towns or cities as far from Wal-Mart as possible. Yet there are some stores that have not only survived despite the presence of Wal-Mart but have even thrived. These stores are Target, located in Minneapolis, Costco, in Washington, and HEB in Texas. These stores offer the same thing as Wal-Mart the only difference is that these stores offer a nice shopping experience for luxury good. (“How Big can It Grow?-Wal-Mart”, p.8) This may be an indication that in the future, customers may get tired of the rock-bottom price and cheap goods and opt for luxury goods at lower prices.
In addition, Wal-Mart has been the subject of criticisms from people in the government. It has been sued a number of times in the past because of its entrepreneurial culture. Wal-Mart must do something about this to improve its image by means of effective public relations to avoid legal suits. In addition, demand by consumers for cheaper goods is continuous despite the increasing prices of raw materials and the increasing cost of labor. Wal-Mart must be able to continue to minimize its expenses for it to be able to meet the expectation of its consumers.
Strategies Wal-Mart may utilize
Wal-Mart’s strength can be derived mainly from its strength and power and a powerful campaign. As of the moment its existing competitors cannot compete with its Everyday Low Prices strategy. According to New England Consulting, in 2002, Wal-Mart has helped its American consumers save $20 billion. If we take into account the price cuts that other retailers have to make in order to compete with Wal-Mart, the total annual savings of for American consumers is $100 billion. (A. Bianco, 2003, p.1)
Also, its stores and super centers can be seen in strategic locations in the United States. Taking this into account, Wal-Mart may utilize these advantages to ensure continuous growth in this business. Wal-Mart should identify specific locations inside and outside the United States to enable to establish additional stores and super centers.
Its weakness is mainly derived from its employment policies which have affected the company’s reputation and goodwill. In view of the company’s aggressive policy of maintaining its prices very low, it has to adopt a very aggressive policy against labor unions. It has been known to illegally fire workers, conduct unlawful surveillance, and threaten and intimidate employees just so its employees will be discouraged from forming unions. There were even instances wherein the company had to close its stores if it finds out that its employees are forming unions. (“The Real Facts about Wal-Mart,” p.7)
If Wal-Mart is serious in maintaining its growth in the next five years, it has to change its employment policies. The entrepreneurial culture will have to be replaced with more favorable terms and conditions of employment for its employees all over the world. It has to comply with existing laws. In addition, it also has to establish strong Public Relations campaign to be able to better communicate with its customers and to change its image in the business industry.
In order for the company to avoid threat in the intensely competitive business environment, it has to identify stores which are performing well and which stores are not performing very well. If the location of some stores is not strategic then the company must decide to close it or transfer it to better location. In addition, the company can minimize threat if it will continue to import cheap products from other countries to ensure that the products it sells remain cheap and start to outsource some of its non-core functions.
Bianco, A. Der Hovanesian M. Young L & Gogoi P. (2007). “Wal-Mart’s Midlife Crisis: Declining Growth, Increasing Competition, and not an easy fix in site.” Business Week. New York, Issue 4032.
McPhee, W. & Wheeler D. Making the Case for the Added-Value Chain. Strategy and Leadership. Chicago: 2006 Vo. 34 Issue No. 4
“The Real Facts about Wal-Mart.” GayPASG.com. Retrieved 7 May 2008 from: http://www.gaypasg.org/GayPASG/AboutGayPASG/Wal-art%20RealFacts%200608.htm
“Wal-Mart Reports Record Fourth Quarter Sales and Earnings” (2008). www.biz.yahoo.com. Retrieved 6 May 2008 from: http://biz.yahoo.com/prnews/080219/latu055.html?.v=101