S.W.O.T Analysis of Wal-Mart

Strengths

Wal-Mart undoubtedly possesses some of the strongest characteristics of any major retailer in the world. The sheer size of the retailer, with a worldwide store-count in excess of ten thousand, places it in a dominant position among competitors (Wal-Mart, 2013, p. 62). Additionally, a retailer of this magnitude can secure costs far, far below those of small-town retailers, and even well below rates of other national chain retailers that do not quite match up to Wal-Mart in terms of its scale of operations. Wal-Mart is also unique in that its operations span the globe, with more than six thousand stores internationally (Wal-Mart, 2013, p. 61). As such, the retailer is afforded unprecedented growth potential. Lastly, the brand itself, Wal-Mart, is an exceptionally strong one. Wal-Mart inspires images of a store that carries everything and more, and always at the lowest price possible. Over the last decade, it has positioned itself as a retailer of clothes and home goods to an all-in-one mega store that carries groceries, toys, home and garden products, and sporting goods. As a retailer, Wal-Mart is simply in a league all its own.

Weaknesses

Despite the powerhouse attributes surrounding its retailing capabilities, Wal-Mart is not without certain disadvantages. While it also functions as one of the retailer’s preeminent strengths, the immense size of Wal-Mart outlets resulted in relatively weak penetration into certain urban areas, especially in the United States. So while the overall size of the retailer is beneficial to the corporation’s bottom line, the size of Wal-Mart stores is often viewed as too large for smaller, less densely populated areas. Another issue that plagues the company is frivolous litigation. In the period from 2011-2013, the company recorded nearly $700 million in settlements (Wal-Mart, 2013, p. 48). Lastly, Wal-Mart Corporation’s generally standardized business model is applied to operations all across the world, with little thought for individualization in regards to a particular region’s preferences or tastes. Companies like McDonald’s have long understood this concept, offering items like the Filet-O-Shrimp and the Juicy Chicken Akatougarashi at it’s Japan locations. It is somewhat naïve to assume that every culture will have similar tastes as those of Americans, and this is one area that Wal-Mart desperately needs to consider is its future plans of expansion.

Opportunities

Notwithstanding the weaknesses of the corporation, Wal-Mart is faced with a number of opportunities. Perhaps the opportunity that holds the most potential for the retailer lies in its recent string of acquisitions. In just the last two fiscal years, Wal-Mart reported acquisition expenditures in the neighborhood of nearly $4 billion (Wal-Mart, 2013, p. 30). There comes a point in time for many retailers when building additional locations, while still a valid avenue for growth, trails the potential of revenue growth via acquisitions of other businesses. Another opportunity that the Wal-Mart Corporation would be wise to take advantage of is the continued expansion of its grocery component in Wal-Mart Supercenters. Since current trends have recently shifted towards eating at home and cooking well-balanced, healthier meals, this particular segment of the retailer is ripe with opportunity.

Another major opportunity for Wal-Mart lies in the expansion of its online marketplace. While customers can order online nearly every product available in Wal-Mart’s physical locations, many customers simply do not. And related to the opportunities associated with the expansion of their grocery business, their online grocery delivery program, Wal-Mart To Go, also stands to deliver significant revenue streams from further augmentation. With the advent of franchises like Jimmy Johns catering to people who would rather not leave the comfort of their own home when it comes to food-related errands, it seems that this particular component of Wal-Mart has great potential.

One additional opportunity that Wal-Mart should be encouraged to pursue is expansion into a greater number of international markets. Despite the presence of more than ten thousand stores worldwide, the company only does business with a relatively small number of countries around the globe. As such, reaching out to even more countries around the world stands to produce significant revenue streams for the international conglomerate.

Threats

One of the biggest threats facing Wal-Mart is the sheer number of employees for which rising insurance and wage exploitation must be accounted. With nearly 2.2 million employees worldwide, one can imagine how the rising costs of this magnitude could severely affect the profitability of Wal-Mart. Additionally, though the grocery business component of Wal-Mart may hold the potential for profits, a related aspect of the sector may pose certain risks. Raging commodity prices could very well spell trouble for a retailer still familiarizing itself with the grocery business. Yet another aspect of Wal-Mart’s business with somewhat duplicitous tendencies is the company’s plan for expansion. While expansion on the international level holds some promise, there are many rural areas that have historically resisted the company’s attempts at growth. In addition to threats surrounding expansion and their grocery component, Wal-Mart is also at risk from the numerous other retailers of similar proportions, like Target and K-Mart. There are also worries concerning political turmoil in international countries since Wal-Marts in those countries are subject to the laws that govern that particular nation. Perhaps the most dangerous threat to the success of the Wal-Mart Corporation is the recent developments concerning the bribing of government officials in third world countries. One article in The Nation recently reported that “the retailer’s largest foreign operation, Walmex, had paid more than $24 million in bribes to Mexican politicians” (Featherstone, 2012, p. 4). Not only are such profits a waste if bribery fails to produce results, but the exposure of a corporate culture willing to engage in such activates only bodes ill for the image of Wal-Mart.

Conclusion

Ultimately, Wal-Mart remains a powerful retailer, but still, one that faces a myriad of threats for all the opportunities available. From opportunities surrounding expansion and the grocery business to threats that center on political unrest and fellow competitors, Wal-Mart is in a position to either advance its operations or succumb to the dangers of capitalism. Its direction, of course, is contingent on decisions from senior management and stakeholders and, as such, is difficult to determine.

References

Featherstone, L. (2012). Walmart Exposed. Nation, 294(21), 4-6

Wal-Mart. 2013 10-K Report. Web. http://stock.walmart.com/financial-reporting/sec-filings/ 3 November, 2013.