WALMART BUSINESS ANALYSIS

Jay Suthar
Table of Contents
Introduction...........................................................................................................................................2
Current Strategy....................................................................................................................................2
PESTLE Analysis......................................................................................................................................3
Political..............................................................................................................................................3
Economic...........................................................................................................................................3
Social.................................................................................................................................................3
Technological.....................................................................................................................................3
Legal..................................................................................................................................................3
Environmental...................................................................................................................................3
Porter’s Five Forces Model....................................................................................................................4
Bargaining power of Buyers...............................................................................................................4
Bargaining power of Suppliers...........................................................................................................4
Threat of new entrants......................................................................................................................4
Competitive Rivalry............................................................................................................................4
Threat of Substitutes.........................................................................................................................4
Internal Resources and Competencies..................................................................................................5
Customer-centric...............................................................................................................................5
Assortment and Network..................................................................................................................5
Omnipresent Retailer........................................................................................................................5
The appropriateness of the selected strategy.......................................................................................5
Conclusion.............................................................................................................................................6
References.............................................................................................................................................6
Introduction

The scope of the report would examine the cost-leadership and use of technology as Walmart’s
current strategy. It covers the external analysis of Walmart, namely Porter’s Five Forces Model and
PESTLE analysis, to understand the power of Walmart and to comprehend macro-environmental
factors respectively in competitive situations. The report also encloses the internal resources and
competencies of Walmart. Lastly, the appropriateness of the selected strategy of Walmart by
considering a plethora of factors considered in the report.

Current Strategy

When it comes to strategy of organizations, Porter loosely talks about three types of strategies- cost
leadership, differentiation, and focus strategy. Walmart, one of the biggest retail chains in US,
majorly plays on two major strategies i.e., cost leadership, and use of technology. Walmart has very
efficiently worked on its supply chain by integration of IoT and blockchain which lead to increased
efficiency in its operations and better inventory management and demand forecasts. Walmart also
have one of the most scrutinized accounting systems. Walmart also wisely choose their projects and
new regions for stores by evaluating metrices like NPV or IRR for the project. All these strategies
used by Walmart plays in its favor of being cost leader by reducing on operating cost, excess
inventory cost and less wastage in the overall system. Walmart is continuously driving its prices
down and high-volume purchases and compete in the retail industry.
PESTLE Analysis

Political

Walmart has been criticised for its low prices and poor wages, but says that it pays its lowest-paid
workers the minimum wage. Walmart's support for raising the minimum wage has won over some
critics. Walmart can pay more. Walmart's competitors will have to pay more if the minimum wage is
hiked, eroding their margins.

Economic

Covid closed many non-essential businesses. Due to the economic condition in US, the company
experienced record sales in 2021. It has the world's biggest revenue and dominates global supply
networks. Walmart may control product placement through its supply lines.

Social

Walmart's rise and influence are sociologically significant. Walmart's presence and job opportunities
affect families in the U.S. and worldwide. Walmart creates direct and indirect jobs through its global
supplier network.

Technological

Amazon online is Walmart's largest tech threat. Walmart can improve, and could weaponize supply
networks. Walmart employs business analytics, data, and business automation to compete with
Amazon.

Legal

Walmart has enough capital to improve food safety and jobs. Walmart's competitors lack the money
to solve this legal issue and will face greater challenges. Tax reforms could hurt Walmart. Walmart's
lobbyists and accountants will likely find every legal loophole to avoid legal trouble.

Environmental

Consumers are becoming conscious about environmental health and shifting towards more eco-
friendly products. Walmart needs to practice sustainability to maintain goodwill and brand
recognition.
Porter’s Five Forces Model

Bargaining power of Buyers

The wholesale retail industry is competitive with majorly two channels- online and offline. The
competitive advantage of industry lies in low pricing to compete with online channels like Amazon.
Buyers also need differentiation and large assortment availability. This leads to high bargaining
power of buyers as they tend to go for low pricing and high quality.

Bargaining power of Suppliers

As discussed above i.e., low pricing which is achieved by bulk orders. There are instances by Walmart
where they buy whole of the products directly from manufacturers. Thus, be it intermediate supplier
or manufacturer as a supplier, they enjoy less power in the industry.

Threat of new entrants

The industry needs lot of capital, along with data to have insights of customers and demand
forecast. Also, since bargaining power of buyers is high, they need to play on loyalty of customers.
All this is hard to achieve for new entrants, i.e., to have global supply chain that too efficient to
maintain low prices. Thus, threat of new entrants is low for incumbent players.

Competitive Rivalry
Due to many incumbents already existing in industry, having their own customer base and supplier
relations. The competitive rivalry is high mainly from online retail channels. Also high exit barriers
need to be considered as incumbents won’t exit soon.

Threat of Substitutes
The main substitutes of industry are global retailers. The substitute effect is high for Walmart
because of existence because of high convenience of online global retailers like Amazon.
Internal Resources and Competencies

Customer-centric
Walmart's founding concept was "Sell more for less." Its strategy centres on "Everyday Low Prices"
Walmart has made tremendous efforts to purchase big volumes of items from its global supplier
networks to adopt and sustain a low-price strategy. It has also satisfied customers' need for retail
convenience and diversified product and service availability.

Assortment and Network

Walmart has always offered a wide assortment of food, apparel, tablets, etc. because of its vast
supplier network. This variety is available online and in-store.

Omnipresent Retailer
Walmart is a successful physical and digital retailer since customers can shop in stores or on mobile
apps. Walmart uses three store formats: Supercenters; Discount Stores; local marketplaces. Various
client segments like its supercenters' one-stop shopping. Walmart's e-commerce sites show it's
implementing technology developments in retailing. Through physical and digital omni-channel, the
American company has established a unique shopping experience. Walmart has boosted the speed
and efficiency of product distribution in recent decades due to the location of its distribution hubs
and automated inventory and distribution control.

The appropriateness of the selected strategy

After analysis external factors that affect retail industry, one of the major competition in the retail ,
specially groceries and FMCG, is the pricing along with quality. Talking of US retail market Walmart is
facing competition mainly from Amazon (online retail channel) and Costco in terms of prices. Buying
in bulk, reducing bargaining power of suppliers and selling at low prices, reducing bargaining power
of buyers and make them loyal is the mantra for survival in the retail industry specifically if we talk
about developed economies. Secondly use of technology is also important for incumbent
organization like Walmart, to fight the third force i.e., threat of new entrants. Thus, we believe that
Walmart is doing great by coming on its strength of cost leadership and leveraging technology.
Conclusion

Walmart uses a low-cost pricing strategy along with a resilient approach and technology at its core.
Analyzing the industry from an external perspective provided us that wholesale retail is a very
competitive industry, and there is pressure from online retail. Walmart leverages its core
competency of distribution and supply chain leading to low cost, making it the world leader in retail.

References
1. Alsharari, N.M., 2021. Management Accounting Practices and E-Business Model in the US
Walmart Corporation. Accounting and Finance Innovations, p.3.
2. Burbach, C., 2021. Walmart Strategic Analysis.
3. Crissone, C.D., 2015. Costco: A Strategic Analysis.
4. Toma, S.G., Grădinaru, C., Săseanu, A.S. and Ghiță, S.I., Viable Business Models in Global
Retailing: The Case of Walmart.
5. Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and
management, 15(1), pp.11-17.