Wal-Mart

SWOT Analysis
Kara Groff

Table of Contents:
Overview....page 3
Strengths.....page 4
Weaknesses.....page 6
Opportunities..................................................page 8
Threats....page 10
Recommendations......page 12
References..page 13

Student:
Kara Groff
2015 Cleneay Ave.
Norwood, OH 45212
(419)-656-1234
GroffKC@Xavier.edu

Faculty Member:
Dr. David J. Burns
Xavier University Marketing Department
3800 Victory Parkway
Cincinnati, OH 45407
(513)-745-3956
Burnsd@Xavier.edu

Overview
Wal-Mart was founded in 1962 by Sam Walton when he and his brother James Bud
Walton opened the first Wal-Mart Discount City in Rogers, Arkansas. Since then, Wal-Mart has
grown to be the second largest company in the world. In the United States, the company
includes Wal-Mart discount stores, Supercenters, Neighborhood Markets, and Sams Club
warehouse membership clubs. The company also has many international operations. Wal-Mart
is considered a variety store which focuses on low prices featuring apparel as well as hard goods,
and has been committed to upholding their basic value of customer service.
Advances in technology have contributed a great deal to the growth of Wal-Mart. Highly
automated distribution centers were implemented and Wal-Mart was able to drastically cut the
costs of shipping and delivery time. Sophisticated computer systems were installed to track
inventory which resulted in quicker checkout time and reordering. More recently, wire-less instore systems have been used to increase customer service. Beginning in the early 1990s, WalMart went to great lengths to increase their market share. They introduced a full line of groceries
into their stores, diversified their market by appealing to certain ethnic groups through bilingual
advertisements, and took steps to promote the awareness of environmental issues.
Currently, Wal-Mart has net sales of $256.3 billion, which is an 11.6% increase over net
sales of the similar period last year (Wal-Mart Company Profile 4). Business decisions such as
closing stores that were not profitable, and expanding during recessions when consumers were
looking to discount stores to save money, have made Wal-Marts undeniable success all the more

obtainable. However, there have been negative feelings towards Wal-Mart as a retailing giant
because of issues concerning wages, heath care and the environment.
Strengths
Wal-Mart has an abundance of strengths which is obvious due to its incredible success.
Wal-Mart is the largest employer in the United States and the company is one of the few places
left for people to get a decent job without a college education. Wal-Mart also has the second
largest net sales in the world. This incredible number of sales is due significantly to Wal-Marts
aggressive growth strategy. In 2003 alone they added 425 new stores all over the world. An
increase in customer demand for SuperCenters encouraged the company to add 4,000 more.
Overall they added 48 million square feet of retail space (Wal-Mart Company Profile 6). They
can also attribute their large amount of sales to the fact that they have stores all over the world.
Their truly global presence is apparent in their operation of around 1,350 Wal-Mart Discount
Stores, 1,700 SuperCenters, 85 Neighborhood Markets and 550 Sams Clubs in the United
States, with numbers continuing to growand about 1,300 locations in Canada, Mexico, the UK,
Germany, Asia and South America (Wal-Mart Company Profile 5).
One of Wal-Marts competitive advantages is their remarkable logistics system. They are
able to ship merchandise from any of their numerous distribution centers in order to provide the
cheapest and most efficient route. They even have their own distribution center for their online
orders. The invention of sharing sales data with suppliers through computer programs has
allowed Wal-Mart to consistently keep their shelves stocked with popular items. Technology in
general is an unbelievable strength that Wal-Mart is able to invest in to improve their company.
Having a website has allowed for increased sales all over the world. This not only provides
convenience for customers, but with a logistics system like the one Wal-Mart has in place, online
orders have become a breeze to fill.
Even though Wal-Mart has been criticized for their low wages, they are actually doing a
lot of good for lower income people. They can save a family about $1,000 a year with their low
prices (Wal-Mart Storm 3). Wal-Mart can beat out many competitors with their aggressive
pricing strategy. They have the ability to cut prices on some products, such as toys, by thirty
percent in order to stimulate more sales. Wal-Mart has even been able to lure in higher-income
customers when they open store in more urban areas. Since Wal-Mart has become the nations
largest food retailer, people from all income levels are shopping there for their necessity items.
They have even been working on a more upscale appearance of their stores to attract these
customers. The service that Wal-Mart offers to its customers is a great advantage as well. They
have a strong image that it is a friendly and helpful place to shop where people are always
willing to make your experience a good one. The added incentives are the constant price
rollback, as well as the store-within-a-store. A great deal of Wal-Marts success can be attributed
to the fact that the company was based on identifying, knowing, and understanding what exactly
customers want from a retailer.
A few final strengths are linked to the public criticisms that Wal-Mart has been facing.
They are paying particular close attention to environmental issues and have vowed to increase
use of renewable energy, reduce waste and carry environmentally sensitive productsWal-Mart
will soon be selling baby clothes made using organically grown cotton and has plans to improve
its truck fleet efficiency by twenty-five percent in the next three years (Two Public Relations
3). Wal-Mart has also recently been pushing for a higher minimum wage, a step that is
surprising to many other retailers in the industry.

Weaknesses
In the eyes of some of the general public, Wal-Mart has weaknesses that affect not only
their image, but the lives of other people. Some view Wal-Mart as a retailing giant that has taken
over the retail industry. Because of Wal-Marts low prices and well-known name, they have been
able to capture the sales of an unbelievable number of consumers, and have therefore made it
extremely difficult for small retailers to survive. Ethical shoppers, those who are concerned with
the well-being of small retailers, are angry at the monopolizing power Wal-Mart has been able to
gain in the past few decades. Most small shops have been forced to close due to lack of sales.
Some people refuse to shop at Wal-Mart because of these issues. This poor image that Wal-Mart
has in some peoples eyes has taken a toll on its stock price as well.
Many environmentalists are concerned with the large scale buildings that are not sensitive
to the environment. These buildings also cause a problem of traffic pollution and congestion
which can damage small communities. The employees of Wal-Mart can suffer a great deal as
well. Many receive only poverty-level wages and horrible health care benefits. Problems with
these healthcare benefits lead to employees applying for public aid, which in turn means that
taxpayers are the ones paying for Wal-Mart employees healthcare costs (Wal-Mart Storm 2).
Wal-Mart has been accused of discriminating against female employees and violating child labor
laws. Because of these criticisms, employee morale has been decreased as well.
Wal-Mart sometimes has a disadvantage in the location of their stores. Although WalMart has grown and expanded a great deal into the international market, they still do not have a
large part of the European market. They are only present in the UK and their competitors are
gaining in the other surrounding countries. Wal-Mart also needs to consider the consequences of
placing their stores too close together. Instead of increasing the volume of products per store,
they open another one. Wal-Mart has already been facing a problem with a decrease in Saturday
store sales. A lack of products, as well as a decrease in the quality of them, may be attributed to
this loss of sales. They have also been said to have poor presentation and marketing of products
on the floor.
Price deflation is a serious dilemma that Wal-Mart and many discount stores are facing as
well. They often buy too much of one product and then have to put it on sale or clearance in
order to turnover the merchandise. Instead of increasing sales with low priced items, Wal-Mart
is actually lowering their profits. Consumers will only buy so much of a particular product, even
if it is priced low. Wal-Mart has a tendency to overstock and therefore reduce gross margins
when they sell products for reduced prices.
Also, after seeing disappointing numbers, Wal-Mart has repeatedly said that their
company would have increased earnings in the following quarter. Unfortunately, they have not
been able to keep this promise. Wal-Mart has a weakness in that they promise unrealistic
earnings, and then do not meet their expectations. This causes their stock to constantly waiver.
Even as the economy is rising, Wal-Marts stock is not necessarily seeing an increase.
Finally, Wal-Mart can have problems with their flexibility. Since Wal-Mart sells
products across many sectors, such as clothing, food, or stationary, it may not have the flexibility
of some of its more focused competitors (SWOT Analysis 1). These competitors have the
ability to make changes and improve on a certain product lines when the needs of their customers
change. Wal-Mart, however, may have too much merchandise and not be able to focus in on

sectors that need to be improved. They also might not have the available information, resources
and know-how to make any changes.
Opportunities
Since Wal-Mart is the largest retailer in the United States, it has a very good opportunity
to become the largest retailer in the world. They do not always carry a diverse selection of
products, so they could expand stores and merchandise to attract more customers. An area that
could especially be increased is their musical products. Wal-Mart does not carry a large quantity
or mixture of musical products such as instruments, and these can be high profit items. Their
image could be improved if they focused on having certain products, such as CDs and DVDs
available on their release dates.
Along the same lines, Wal-Mart could diversify their store types. They have been
successful with implementing Neighborhood Markets, and have even tried a mall store recently.
By focusing on a specific target market in a specific area, Wal-Mart could be the number one
retailer for everyone. They already have the available resources to try new store types in new
segments. It is also a logical step to increase and expand their current SuperCenters, which are
expected to increase sales dramatically in the future. The reason it is expected to drive growth
so affectively is SuperCenters are considered extremely high growth stores, more productive than
supermarkets and expecting to produce $500 in sales per square foot (Wal-Mart Company
Profile 8). Wal-Mart has yet to penetrate to many East and West Coast food markets that
occupy the top 50 (food retailing markets) (New Competitors 1).
Another great opportunity is to improve on the areas which they have been criticized.
Wal-Mart has already announced a new health care plan which would increase benefits to
employees. They are very concerned with child labor laws, so they have said that they will pay
especially close attention to their overseas suppliers and their labor practices. Also, Wal-Mart
has the opportunity to work on improving the environment. They have such a large image that
any programs they support have the ability to produce tremendous results. By working on
solutions to these concerns they can help improve their image and increase their market share.
Wal-Mart is such a major player in the retail industry that its decisions can have an effect
on the global economy, the environment and society. They have the ability to slightly decrease
the price of inflation because of their low prices. Also, due to their low prices, there is an
increase in wages in developing countries. For the United States, wages may be low, but in other
places where manufacturing goods is cheaper, wages can actually be considered high. By
offering jobs and increasing the wealth in other countries, it is possible for a substantial middle
class to exist there and also increase Wal-Mart sales by having stores in those areas (Wal-Mart
Storm 4.
Continued international expansion is a huge strategic opportunity for Wal-Mart. There is
actually more opportunity for growth in developing countries and Asian markets than there is in
the United States (Variety Stores 8). Creating alliances and licensing agreements are ways to
move into these market segments. Other growth opportunities include the Internet and improved
supply chain management through radio-frequency identification (RFID).

Threats
In order to keep prices low, Wal-Mart has had to cut costs in other areas. This includes
squeezing suppliers to offering their products at much lower prices. This has driven competitors
to do the same, which is causing profits to plunge downward drastically. A threat to Wal-Marts
image is the fact that for the few years after they open up a new store, the wages of that county
fall by three to five percent. Another threat is the rapidly growing chain of Dollar General
discount stores. These stores are able to open in smaller areas where there are not enough
customers to support Wal-Mart. The deep discount that is offered at Dollar stores competes
greatly with Wal-Mart.
The economy has a slight effect on Wal-Marts customers. They have an advantage
because the do offer cheap products that appeal to people in the time of a recession. However,
most of Wal-Marts customers do not directly experience most of the governments attempts to
stimulate the economy. Wal-Mart must work very hard to compete in times of uncertainty.
Another threat that Wal-Mart faces is brand-name recognition. Although they carry and have
increased their assortment of name brand products, most consumers searching for name brand
products will not look at Wal-Mart to find them. Wal-Mart lacks a direct sales force to increase
sales, whereas smaller retailers are focusing more and more on this aspect therefore increasing
their competition.
A major threat to Wal-Mart is the areas that they are expanding into may not be easily
attainable. It will be difficult for them to gain a good part of the market share of hard-line
products such as home improvements. These areas have greater competition and Wal-Mart does
not have a clear cost advantage. International expansion may also create slow or rough shortterm growth. The international market is predicted to have excellent long-term growth success,
but these earnings may not be seen in the near future. Also, Wal-Mart has huge expansion plans
that are very public. If these stores do not open on time, or are subject to delays and build
issues, then analysts predictions will not be met and share price may suffer (Wal-Mart
Company Profile 9). On the contrary, if Wal-Mart successfully meets all of its deadlines,
investors may still be hesitant to invest in their company. In the past, when retailers meet their
expectations, and the economy is doing well, they tend to under perform. Also, two of WalMarts main product lines, apparel and food, are very slow growth sectors, and Wal-Marts
dominating position in the industry may make investors believe there is little room for the
company to grow.
Wal-Marts image has been seriously threatened by the numerous accusations of being
bad for the country (Two Public Relations 1). The documentary movies that are being
produced could seriously hurt the companys sales, especially since they are being premiered
right as the holiday shopping season is starting. The shopping experience some customers have
at their store is also a threat to Wal-Mart. Customers are often complaining about the long
checkout lines and the insufficient quality of the products that are offered. Once this idea is
spread throughout a community, it is difficult to change the publics opinion.
Also, RFID could possibly be a threat to Wal-Mart by ruining relationships with
suppliers. This system promises to do a great deal for supply-chain management. However,
there is always the possibility that technology promises more than it can actually offer. Some

manufacturers of low-cost consumer products may not see the advantages of implementing such
a system and not want to comply with Wal-Marts mandate for the new system.
Recommendations
Wal-Mart has been extremely successful in the past, and has a very promising future
ahead of them. Unfortunately, there is always a negative side to success. For Wal-Mart, they are
faced with opposition from people who are concerned with the little guy. The fact that WalMart has the ability and resources to be such a major competitor in the retail industry scares
some people. Small stores in small communities, as well as employees, target Wal-Mart because
they know it is a large company with the resources to defend itself.
In order to improve its image in the eyes of these people, Wal-Mart may want to address
these issues head on. Wal-Mart has already taken giant strides to be seen as a more
environmentally friendly organization, as well as to increase the benefits of its employees. They
should continue this approach, possibly even more publicly than other retailers in the industry.
Wal-Mart could even start a campaign to help the little guy. Since they have such a global
impact, any issue they raise will undeniably get a great deal of attention. In a campaign of this
sort, Wal-Mart could focus on promoting the other small specialty stores in their community.
They could help advertise for local shops that do not sell competing products, but complimentary
ones. Instead of taking sales away from themselves, Wal-Mart could change their image to one
of a company that cares about the community.
Along with this, Wal-Mart should focus on their employees. Publicly giving employee
benefits or rewards will increase morale as well as their image. Once Wal-Mart has invested in
their image in their home country, they should also focus on increasing their market share in the
international markets that they are not already involved in. Some other countries hold the
greatest growth potential and these areas should be seriously considered by Wal-Mart.
References
Cramer, James J. Wal-Mart, Fess Up to Weakness Within. Wake-Up Wal-Mart.com,
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<http://www.wakeupwalmart.com/news/20050817-rmcom.html>.
Kalra, Ritu. Wal-Mart Storm Swirling. The Hartford Courant. 2 November 2005. 3 November
2005. Retrieved from <http://www.courant.com/business/hcwalmart1102.artnov02,0,391016.story?coll=hc-headlines-business>.
Lindeman, Teresa F. Two Public Relations Campaigns pit Wal-Mart Against Critics. Pittsburgh
Post-Gazette. 1 November 2005. 3 November 2005. Retrieved from <http://www.postgazette.com/pg/05305/598285.stm>.
McClenahen, John S. Wal-Marts Big Gamble. www.industryweek.com. April 2005. 3
November 2005. Retrieved from <http://www.industryweek.com/ReadArticle.aspx?
ArticleID=10055>

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<http://www.marketingteacher.com/SWOT/walmart_swot.htm>.
The Story of Wal-Mart. The Cultural Marketplace The NUR Network. 3 November 2005.
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2005. Retrieved from <http://ariel1.xu.edu:2058/servlet/BCRC?
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Wal-Mart Stores, Inc. Company Profile. www.Datamonitor.com. April 2005. 3 November
2005. Retrieved from
<http://www.datamonitor.com/~c657fcfba2b74e80baa5c9c06f24d5e6~/companies/compa
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