Wal-Mart Formal Case Analysis-Swot

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Wal-Mart Formal Case analysis
June 2007

SWOT Analysis

The SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a business, in order to reach its objectives. Wal-Mart objective is to always offer low prices and to become the number one largest retailer in the world. Strengths refer to the attributes of the organization that help achieving its objectives. First of all, Wal-Mart is one of the largest retailers in the world. Its size it allows Wal-Mart to control suppliers, to control competitors and to open stores wherever they want. Their international presence contributes to its power. Having the second largest net sales in the world, this company is an important player in the world’s economy. A large number of people work in their stores, many suppliers distribute only for Wal-Mart and for many manufacturers their main client is Wal-Mart. Also it is the largest employer in the United States according to the American government. Working in a Wal-Mart does not require high-level education, so people that don’t have a college degree have an opportunity to work for them. From Exhibit 1 we calculate that the number of new stores opened around the world in one year (2003-2004) was of 234. This demonstrates that one of Wal-Mart’s strategies is an aggressive growth. Another one its strengths are the low prices offered on its products. Low prices are an important factor in a family’s buying habits and Wal-Mart makes sure to remind that to people everyday through their commercials. Furthermore, their IT department is continually improving and finding new ways to reduce spoilage and waiting times. Their new tools for management, forecasting and inventory allowed fast distribution between centers, and inventory accuracy as high as 94% in Japan. The possibility of online purchasing increased the popularity of Wal-Mart’s website. All in all Wal-Mart went from a simple retail store to a powerful retail brand. Weaknesses refer to the attributes of the organization that are detrimental to achieving the objectives set. Wal-Mart size can also be seen as a disadvantage. Having stores all around the world, sometime the coordination process might be difficult since their span of control is huge. Also, communication between stores might not always be efficient, since different countries have different cultures, different languages and conflicts may arise between managers. As seen, in some countries as Germany and Japan, Wal-Mart ignored local cultures and went on the idea that their international renown and sales will lead them to success, but it was not the case. At their size it is somewhat difficult to adapt and offer particular services in order to satisfy all their clients. In addition low prices are usually associated with low quality products, which is usually the case with Wal-Mart’s products imported from China. There are no warranties offered on products and no customers follow up. Moreover, Wal-Mart is becoming more and more criticized on the international market for their low wages, child labour, and obliging their employees to work all night by closing them in the stores. The criticism goes even further for the nonexistence of unions and for the heavy reliance on part-time employees. As seen in Japan, the number of temporary employees was 80%-85%. Furthermore as Wal-Mart grew bigger and bigger and more and more powerful, it became extremely difficult for small retailers to survive. When it would open in a new location, the giant would oblige most small store to close, and people loosing everything they built. Opportunities refer to the external conditions that are helpful to the company. Due to its power, Wal-Mart can easily become the largest retailer in the world. At their current level it is easy to take over local markets, to merge with local business, or even form strategic coalitions to win market share in Europe and Asia. As the...
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