STRATEGIC

MANAGEMENT
STRATEGIC ANALYSIS OF-

Submitted by- Submitted to-

Aastha Singh-191102 Dr. S. Shyam Prasad
Monish Agarwal-191220
Shreya Agarwal-191234
Stuti Jain-191237
Suyash Jain-191239
Team- 4
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 About the Company
Walmart is an American multinational retail corporation that operates a chain of hypermarkets,

discount department stores, and grocery stores, headquartered in Bentonville, Arkansas. The

company was founded by Sam Walton in 1962 and incorporated on October 31, 1969. It also owns

and operates Sam’s Club retail warehouses. As of July 31, 2020, Walmart has 11,496 stores and

clubs in 27 countries, operating under 56 different names. The company operates under the name

Walmart in the United States and Canada, as Walmart de Mexico y Centro America

in Mexico and Central America, as Asda in the United Kingdom, as the Seiyu Group in Japan, and

as Flipkart Wholesale in India. It has wholly-owned operations in Argentina, Chile, Canada,

and South Africa. Since August 2018, Walmart holds only a minority stake in Walmart Brazil,

which was renamed Grupo Big in August 2019, with 20 percent of the company's shares, and

private equity firm Advent International holding 80 percent ownership of the company.

Walmart Inc. competes against major firms in the retail industry, such as Amazon.com and its

subsidiary Whole Foods Market, as well as Costco Wholesale, Home Depot, and eBay Inc. The

variety of competition compels Walmart to develop strategies to protect the business from the

issues in its industry environment, such as the ones linked to external factors identified in this Five

Forces analysis of the business. Michael E. Porter’s Five Forces analysis model is a strategic

management tool that evaluates the effects of external factors that determine the competitive

landscape of the industry. These external factors define the bargaining power of customers or

buyers, the bargaining power of suppliers, the threat of substitution, the threat of new entrants, and

competitive rivalry. In this case, the five forces refer to the retail industry, where Walmart focuses

its operations. The company’s strategic direction is representative of strategic responses to

competitive forces in the retail industry environment.

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 Vision and Mission
Walmart’s Mission Statement
Walmart Inc.’s corporate mission is “to save people money so they can live better.” This statement

reflects the ideals of the company’s founder, Sam Walton. Strategic decisions in the business are a

direct manifestation of this mission statement, which is synonymous with the company’s slogan,

“Save money. Live better.” Based on this statement, it is clear that Walmart’s business strategies

involve using price as a selling point to attract target consumers. The significance of such a selling

point is exhibited in many of the company’s strategies. For example, Walmart Inc.’s marketing mix

or 4P involves low prices as a strategy. Other areas of the company are determined by the need to

minimize selling prices as a way to achieve competitiveness.

Walmart fulfills the “save people money” component of the mission statement through its low

selling prices. For example, consumers save money by spending less on buying goods from the

company’s stores, compared to buying the same or similar goods from midscale and high-end

stores. However, it is not yet clear if the company satisfies the “live better” component of this

corporate mission. There are criticisms regarding very low wages that pose challenges for

Walmart’s employees when it comes to improving their lives, in addition to various human

resource management issues in the organization. There are also criticisms about the long-term

economic effects of the company’s large-scale sales of cheap imported goods.

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 Vision and Mission
Walmart’s Vision Statement
Walmart Inc.’s corporate vision is to “Be THE destination for customers to save money, no

matter how they want to shop.” This vision was officially articulated in the company’s 2017

investment community meeting. The company’s previous vision statement was “To be the best

retailer in the hearts and minds of consumers and employees.” The change in the corporate vision

reflects strategic changes that Walmart implements in response to changes in the competitive

landscape and the overall condition of the retail industry.

In the past, the company’s corporate vision was to become the top player in the industry. At

present, Walmart’s vision statement includes the same aim, but with an emphasis on business

flexibility in accommodating customers. For example, the “no matter how they want to shop”

component indicates the company’s strategic objective of achieving leadership in traditional brick-

and-mortar transactions and online retail transactions. The same change, however, highlights the

removal of “employees” as a major component in Walmart’s vision statement. This shift represents

a possible reduction of support for employees. The shift could reflect human resource management

issues, considering that employees are a major stakeholder group relevant to Walmart’s social

responsibility strategy and stakeholder management.

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 Walmart’s Generic Strategy
Walmart’s generic Strategy for Competitive Advantage

Walmart Inc.’s generic strategy is cost leadership. Michael Porter’s model defines cost leadership

as a generic competitive strategy that focuses on achieving low costs. As a low-cost producer of

retail services and related business outputs, Walmart can compete based on low selling prices. Low

prices are a fundamental strategic objective used in the company’s pricing strategy. Low prices are

the main selling point of the retail business. The company uses various approaches to maintain low

costs and, consequently, low prices. For example, through automation and related technologies, and

minimized spending for human resources, the company achieves low costs in operations.

Cost leadership involves low product differentiation. With a focus on low prices as a selling point,

Walmart Inc.’s retail services are common and, thus, poorly differentiated from retail services from

other firms in the industry. Also, this generic strategy involves a low level of market segmentation.

For example, the company offers its retail services to every consumer in all segments of its target

markets. Doing so aligns with Walmart’s corporate mission and corporate vision, which aim for

leadership in the global retail market. To succeed in implementing its generic competitive strategy,

the company relies on process efficiency, management approaches, and other strategies, such as

intensive growth strategies, that help reduce costs. With the strategic objective of keeping costs

low, the corporation is known for large-scale imports of low-cost goods from countries like China.

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 Walmart’s Five Force Analysis-
Porter’s Theory
Summary and Recommendations: Five Forces Analysis of

Walmart Inc.

Summary- In determining the degree of competitive rivalry in the retail industry, a basic

consideration is market saturation. The retail services market is highly saturated. As a result,

Walmart Inc. faces tough competition, which warrants strategies and tactics that build on the

company’s strengths. The SWOT analysis of Walmart Inc. enumerates many strengths that the

business can utilize to maintain its industry position despite aggressive competitors. Based on the

external factors enumerated in Porter’s Five Forces analysis, Walmart experiences the following

intensities of the five forces in the retail industry environment:

1. Competitive rivalry or competition – Moderate to High

2. Bargaining power of buyers – Low

3. Bargaining power of suppliers – Low

4. Threat of substitutes or substitution – Low

5. Threat of new entrants – High

1. Intensity
of Competitive Rivalry or Competition – Moderate to
High Force
According to Porter, an intense rivalry is related to the presence of several factors, including:

a) Number of competitors- A large number of competitors such as Costco, Home Depot,

IKEA, Lowe’s, Best Buy, Amazon Go, Kohl’s, Kmart, etc.

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 Walmart’s Five Force Analysis-
Porter’s Theory
b) Rate of industry growth- In a slow-growth market, companies can only grow by capturing

market share from each other, which leads to increased competition. Walmart has experienced

tremendous growth in their domestic markets and has defined its niche quite effectively

c) Product or service characteristics- Products and services offered by Walmart and other

rivalry firms are very much the same so to stand out and win the competition race Walmart has to

invest and bring in some innovation now and then.

d) Amount of fixed cost- For Wal-Mart, fixed cost includes rent, property tax, payroll, utilities,

inventory, and administration cost which do not change by the sale level of the store.

e) Capacity- When economies of scale require large increases in capacity, it causes disruptions

in the industry supply/demand balance, which then leads to periods of overcapacity and price

cutting.

f) The height of exit barriers-Economic, strategic, and emotional factors can prevent

companies from leaving the industry, even when they are earning low or negative returns on

investments. Major sources of exit barriers are specialized assets, fixed cost exit, etc.

g) Diversity of rivals- Ikea operates in retail and wholesale of furniture. (Walmart faces stiff

competition from IKEA in the furniture section).

After analyzing the above factors, it can be concluded that rivalry among existing competitors is

moderate to high in the retail industry. However, if Walmart has the upper hand then it is because

of its pricing strategy. While Target and Costco are important contenders, the other brands do not

pose a significant competitive threat before Walmart, Kmart, Best Buy, etc. are not very strong to

pose a competitive challenge before the largest retailer. In this way, when it comes to competition

in the retail industry, Walmart is the king. The strength of competitive rivalry in the industry is

medium.

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 Walmart’s Five Force Analysis-
Porter’s Theory

2. Bargaining Power of Buyers (Walmart) – High Force

a)Large purchases- Bargaining power in Walmart’s case is much high due to the bulk

purchases it makes.

b)Backward integration-Walmart is well-versed in backward integration — in 2018, the

company opened a 250,000-sq.-ft. the milk bottling plant in Fort Wayne, Indiana, to supply

private-label milk to hundreds of Walmart stores.

c)Alternative suppliers- Due to the large market share every other supplier is ready to deal

with Walmart therefore the company has plenty of alternatives in the case of suppliers.

d)Low cost to change suppliers- The switching cost is very low or negligible for a big

company like Walmart.

e)Buyer earns low profits- Walmart keeps a very low margin therefore it makes it difficult for

suppliers to determine the price.

3. Bargaining Power of Suppliers – Low Force

As Walmart being a big retail giant, it provides lots of opportunities to the suppliers. So, the

power of bargaining of the suppliers of Walmart is low. Walmart holds a major market share of

the retail sector and purchasing in large quantity, gives a significant advantage of buying

power. The switching cost of Walmart is very low, so they have the advantage of the shift from

one supplier to another without incurring any additional expenses. Walmart gives a great

opportunity to its suppliers and they have a market position where they can impose special

demand in the market accordingly to the ethical guidelines and suppliers willingly agree to

lower their prices. It is easy for Walmart to change its suppliers that’s why the bargaining

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 Walmart’s Five Force Analysis-
Porter’s Theory
power of suppliers is low. Some suppliers of Walmart are Plug Power Inc., Funai Electric Co.,

CCA Industries Inc., Green Dot Corporation, Primo Water Corporation.

Walmart experiences the weak force of the bargaining power of suppliers, based on the

following external factors:

a) A large population of suppliers (weak force)

b) Tough competition among suppliers (weak force)
c) High availability of supply (weak force)

4. Threats of Substitutes Products or Services – Low

There are several other retail brands too, however, the number of retailers offering prices as low as

Walmart is not many. The only comparable brand is Costco which a membership-based retail

chain. There are other retail brands too where the customers can shop like Target and Best Buy but

when it comes to pricing, none of the other brands provides the same price advantage as Walmart.

Online retailers pose some challenges but still, they are not able to offer prices comparable to

Walmart on all the products. Online shopping does offer convenience where customers do not have

to pick the product from the stores.  The products they shop for are home delivered.  So, while

customers would like to shop online for convenience, the low prices of Walmart are still matchless.

These factors keep the threat from substitute products to the minimum.

This shows that Walmart has the advantage to remain competitive and increase its competitive

advantage because of its pricing and quality aspects. The retail industry is very much attractive for

the retail giant Walmart and the company has many opportunities for potential success and growth

by capitalizing on its competitiveness.

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 Walmart’s Five Force Analysis-
Porter’s Theory
5.Threats of New Entrants – High
New entrants in the industry bring new capacity and desire to gain market share that put pressure

on prices, costs, and rate of investments, necessary to compete. Simply said, existing players will

have to share the pie with new players.

The seriousness of threats depends on the barriers to entry in an industry. The higher these barriers,

the smaller the chance more players will enter the playing field and smaller the threats for existing

players.

Example of barriers to entry:

a) Economies of scale- Walmart has a n added advantage of this since it can provide its product

and service at low cost and give a cut throat competition to its rivals.

b) Customer Loyalty- Walmart is a well-known brand and is in market since ages hence

attracts customer loyalty.

c) Capital Requirements- To maintain a business-like Walmart need of capital is an important

part.

d) Government policies- A secret behind Wal-Mart’s rapid expansion in the United States has

been its extensive use of public money. This includes more than $1.2 billion in tax breaks, free

land, infrastructure assistance, low-cost financing, and outright grants from state and local

governments around the country.

e) Access to distribution channels- Walmart has a well-established supply chain and

distribution strategy. All along the year, Walmart's automated and centralized units operate this

helps the company to meet the demand of the customers in all of its target markets and even the

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 Walmart’s Five Force Analysis-
Porter’s Theory
company has set up multiple distribution centres in almost all the regional zones. For example, if

we take the case of the United States there are over 45 distribution units that mainly focus on the

import of goods from all around the globe and manage that each store has a sufficient supply of

goods to meet out the customer demand. Whereas all these 45 regional distribution units are in

direct contact with 150 distribution centres which are further connected to retail units across the

region. This ned to be further noted that each distribution centres meet the demand of around 75 to

100 retail stores.

If new players enter the industry, existing players might need to increase their investments in

product development or marketing to stay ahead of the game. This will increase the cost or lower

the profit margin. Or to prevent newcomers to enter, existing players might reduce their prices to

scare newcomers. Again, this will decrease the profit margin.

The threat of new entrants to Walmart is relatively not as high as it exerts a minimum level of

pressure on it. Walmart has an edge over here by brand recognition and providing almost

everything a buyer might need or even do not need. To compete with Walmart entrants may require

a huge amount of capitalization for building a brand like that. Walmart also has one of the biggest

and efficient distribution networks and the supply chain which requires huge investment and skilled

labour and Human resources to maintain and manage them. The existing players are already facing

a difficult time while dealing with price from Walmart.

This shows that there will be new entrants against giant Walmart Inc every time and if they have

financial outlays, they can be a potential threat to Walmart Inc.

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 Walmart’s Five Force Analysis-
Porter’s Theory
Recommendations- Walmart Inc.’s strategic planning must prioritize competition and a new entry

in the retail industry. Based on these Five Forces analysis, the business needs to continually

improve its capabilities to sustain its competitive advantages. Walmart’s generic strategy and

intensive growth strategies establish the basic approaches to grow the business and keep it

competitive. However, the company needs to develop additional enhancements. It is recommended

that the company increase its investment in the automation of internal business processes, including

its supply chain. This recommendation aims to improve overall efficiency and, as a result, improve

cost-effectiveness to satisfy Walmart’s corporate vision and mission statements. It is also

recommended that the company further enhance its human resource management. Such

improvement can contribute to workforce competencies that support business growth. These

resulting improvements based on these recommendations can help counteract the effects of the

strong forces of competition and new entry, which are the most significant issues determined in the

results of this Five Forces analysis.

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