Overview of the company
Wal-Mart operates in retail stores that are widespread in the United States. The stores are also available in other countries. The enterprise branches include discount stores, neighborhood markets, and supercenters. The company has a distinguished competitive advantage in the market. The firm is the largest retailer due to its exceptional scale that enables it to gain market share from its competitors (Faarup, 2010). Much of the profits can be attributed to the large pool of employees. However, the profits are projected to go down due to healthcare and rising labor costs. An evaluation of Wal-Mart’s SWOT (strengths, weaknesses, opportunities, and threats) is pertinent to understand the strategies of the company.
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One of the strengths is that Wal-Mart has an unprecedented scale that makes it a market leader due to its competitive advantage. The company has more than 8500 stores that garner approximately $400 billion in revenue.
The other strength of Wal-Mart is that it effectively uses the cost differentiation technique (Faarup, 2010). This technique is superb to assist the company to provide products at low prices. The price strategy at Wal-Mart is flexible. Flexibility, in this case, implies that the company can lower or raise the price of the products depending on the changes in the market (Glandon, 2014). The flexibility in pricing enables the company to experience a larger pool of customers since customers are pleased with the services given by Wal-Mart. Most of the clients attribute Wal-Mart with reasonably priced products. Therefore, this keeps steady difficulty on the rivals. The competitors ineffectively utilize the cost differentiation strategy. This failure is attributed to the fact that they will be forced out of the market if they try the low price strategy practiced by Wal-Mart.
The other observable strength of Wal-Mart is that it can apply the internationalization strategy in the market. Ghazzawi (2014) argues that the internationalization strategy is a strong foundation for growth in the US market. This strength is particularly significant since the US market is reaching maturity. Taking Wal-Mart into context, it has more than 4000 units in 14 countries. Wal-Mart can extend its approach internationally through acquisitions and innovation. Observably, Wal-Mart has nine international store paradigms (Faarup, 2010). This is exceptional to the competitors. Wal-Mart is distinct because the firm has been able to hit a $100 billion net sales mark.
Big Box Retailing Methodology
One of the weaknesses challenging Wal-Mart is its big-box retailing methodology. The hindrance of this method is that it limits penetration into urban areas. Therefore, the company has no substantial influence on the urban centers (Glandon, 2014). However, the management of the company believes that there are numerous opportunities to grow in urban settings. The scenario observed is that there has been cannibalization of the existing stores (Thompson, 2010). The cannibalization is brought by the development of large-format stores.
The other observable weakness of Wal-Mart is various lawsuits in the economy. Ferrell (2014) argues that litigation affects labor relations negatively to provide products at low price points. Most of the time, Wal-Mart has been sued by different parties in the market. This causes the company to face a pre-tax charge that runs into millions. The low-cost strategy used by Wal-Mart coerces the company to purchase in bulk to keep their prices down.
One of the opportunities is that there is the presence of emerging markets. In Asia, more markets are evolving that favors the scope of Wal-Mart. It is projected that China sales will grow by up to 16% in the following year. This is apparent because, in 2010, China’s retail rose to approximately 17.9% (Ferrell, 2014). The increase in sales recorded $366.9 billion. The other emerging market comes from India. From growth statistics established by the Indian market, it can be predicted that the market will grow by 30% next year.
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The other opportunity lies within the internet marketing (Reed, 2015). Progressively, Wal-Mart has adopted the use of social media to reach diverse markets. This trend shows that Wal-Mart is continuing to embrace the use of technological advancement to enrich its marketing paradigm (Cleary, 2014). The company has opened a website where customers access information relating to the enterprise. Therefore, there is a high likelihood that Wal-Mart will reach more customers using internet marketing. For instance, Walmart.com traffic had more than one billion visits in 2010. The record was an increase of 15% in the previous year.
Wal-Mart faces numerous threats, which affects its ability to perform in the market. The following are the various threats faced by the company:
Healthy lifestyle Trend
The healthy lifestyle trend poses a significant threat to Wal-Mart. The trend threatens Wal-Mart’s business, as most of the products produced by the company are not healthy (Glandon, 2014). This threat is strangling since the company currently does not prioritize healthy products in its respective stores.
Unpredictable Commodity Prices and cost inflation
Wal-Mart is threatened by rapid changes in product prices (Ferrell, 2014). Also, the company faces stiff competition from other chain stores. The rapid changes in prices cause Wal-Mart to lower its prices to remain competitive in the market.
The other noted threat is that Wal-Mart continues to be challenged by endless lawsuits. The company has not been able to pay its workforce accordingly. Furthermore, healthcare costs and wages are projected to increase, which will cause the company to experience escalated costs (Reed, 2015). Escalating labor expenditures make threats to Wal-Mart’s effectiveness and performance. This is apparent because more costs are incurred than the profit received (Cleary, 2014).
The company also faces increased resistance to expansion from authorities and local firms. This is apparent because two local supermarkets close down whenever Wal-Mart enters a particular market. Thus, the enterprise faces severe competition from several groups when it thinks of opening new stores. This hinders new investment. The company is forced to stop the plans to expand to other areas where other supermarkets are operating.
In conclusion, Wal-Mart takes advantage of its strengths to gain a competitive advantage. However, it has several challenges threaten the firm such that its profit margins are always subjected to reductions. Nevertheless, some opportunities can be used to turn the threats and weaknesses of the firm into profit-generating opportunities. The other relevance from the discussion is that being a leader in the market could prone a firm to fierce competition.
Cleary, R. (2014). Supermarket Responses to Wal-Mart Supercenter Expansion: A Structural Approach. Empirical Economics, 47, 905-925.
Ferrell, O. (2014).Marketing Strategy:Text and Cases. Mason: South- Western/CengageLearning.
Faarup, P. (2010). The Marketing Framework. Aarhus: Academica.
Ghazzawi, I. (2014).The Wal-Mart Stores, Inc: An American Dream that Touched the World. Journal of the International Academy for Case Studies, 20, 9-32.
Glandon, P. (2014). Sales And Firm Entry: The Case Of Wal-Mart. Southern Economic Journal, 81, 168-192.
Reed, T. (2015). Employee Class Actions Four Years After Wal-Mart V. Dukes. Defense Counsel Journal, 82, 255-281.
Thompson, J. (2010) Strategic Management. Andover: Cengage Learning.