WALMART INC

SWOT ANALYSIS OF WALMART Inc.

Topic : SWOT ANALYSIS OF WALMART INC .

Subject : MANAGERIAL ECONOMICS

Submitted TO : Professor Suganda

Submitted By : Sravana karthik.ch

Section : B

Roll number : 09M102

MANAGERIAL ECONOMICS Page 1


TABLE OF CONTENTS:

1. Introduction of WALMART Inc.

2. What is SWOT

3. Why should a company do a SWOT

4. SWOT Analysis of WALMART Inc.

a. Management

b. Marketing

c. Finance

d. Human resource

e. Research & Development

f. Production/Operations

g. Computer information system.

5. Over all SWOT analysis

6. Competitive analysis

7. Conclusion

8. References



Wal-Mart Inc

Introduction:

Wal-Mart's milestones began in 1962 when the first Wal-Mart was opened in Rogers, Arkansas. Seven years later the company incorporated as Wal-Mart Stores, Inc. Then a year later they opened the first distribution center and home office in Bentonville, Arkansas, and also went public on the New York Stock Exchange. Several years later, in 1988, the first super center was opened. Then in 1991, the first international unit was opened in Mexico City.

Wal-Mart Stores (Wal-Mart or ‘the company’) is the largest retail company in the world; it operates retail stores in various formats including supercenters, discount stores and neighborhood markets. On January 31, 2008, Wal-Mart operated 891 discount stores, 2,612 supercenters, 153 neighborhood markets and 602 Sam’s Clubs in the US & units outside the United States 3,615. Internationally, the company operated units in Argentina, Brazil, Canada, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, the UK and China. The company is headquartered in Bentonville, Arkansas and employs about 2.1 million people.

Wal-Mart creates the ideal one-stop shopping experience. Wal-Mart is organized into ten distinct divisions. These include: Wal-Mart stores, SAM'S CLUBS, Neighborhood Markets, International, walmart.com, Tire & Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, and Wal-Mart's Used Fixture Auctions. Through these divisions, Wal-Mart offers thousands of products. The Wal-Mart stores contain groceries, clothes, healthcare products, toys, electronics, bedding, sports and recreation, automotive, among other items. Because of this conglomeration of products, the typical consumer can go into any Wal-Mart and walk out without having to stop at another store for anything that they could need.

By the turn of the century, Discount Store News had named Wal-Mart "Retailer of the Century" and made Fortune magazine's lists of the "Most Admired Companies in America" and the "100 Best Companies to Work For." They were also ranked on Financial Times' "Most Respected in the World" list. In 2002, Wal-Mart became number one on the Fortune 500 list and was presented with the Ron Brown Award for Corporate Leadership, a presidential award that recognizes companies for outstanding achievement in employee and community relations. Wal-Mart is currently at no.8 at global 2000 companies rating in Forbes magazine.

What is SWOT analysis :

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.



Why do we do SWOT:

To evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a projects or in a business venture.

Helps in matching the firm’s resources and capabilities to competitive environment

Helps marketers to focus on key issues.

Helps in strategy formulation, position and direction of a company.

To know state of your business and your expectation for the future.

SWOT ANALYSIS :

Internal Analysis:

Strengths:

The strengths of a business or organization are positive elements, something they do well and is under their control. The strengths of a company or group and value to it, and can be what gives it the edge in some areas over the competitors. The following section will outline main strengths of walmart.


SWOT Framework


Management:

Wal-Mart's policies and practices are designed to ensure an environment that is equitable and inclusive. To that end, Wal-Mart solicits feedback from all of their employees, annually, regarding their opinions of their work experience and the company's implementation of Wal-Mart's basic beliefs and values. In addition, they provide training on working with people, leadership skills, equal employment opportunities, diversity and sexual harassment prevention.

Wal-Mart is committed to providing all employees state-of-the-art training resources and development time to help achieve career objectives. They have a number of training tools in place that keeps then out in front of the competition, including classroom courses, computer-based learning, distance learning, corporate intranet sites, mentor programs, satellite broadcasts, skills assessments, and job announcements. These tools are successfully increasing advancement opportunities for women and minorities. Wal-Mart has been ranked among Training Magazine's 'Top Training 100' companies for two consecutive years. Respect for the individual, one of Wal-Mart's company's three core values, is reinforced throughout their training process.

Wal-Mart is committed to the customers and communities they serve. Wal-Mart hires locally, representing the diversity and uniqueness of everyone's hometown. As the demographics of the nation have changed, so has the family of Wal-Mart's employees. More than 15 percent of their employees are over the age of 55, and they are the nation's largest employer of Hispanics and African-Americans.

Wal-Mart also uses its respectable financial position to attract and retain employees by offering stock ownership and profit-sharing programs. These programs are available to all full-time employees of Wal-Mart and make a significant impact on the earnings of employees. They are allowed to purchase shares of stock at reduced prices, which allows them an immediate appreciation of their portfolio. With the profit-sharing program, the employees receive bonuses at the end of the year based on the success of the overall company. These also provide a significant amount of compensation to their employees.

Wal-Mart also has very strong community-based initiatives. They have continually gave college scholarships for high school seniors, raised funds for nearby children's hospitals through the Children's Miracle Network Telethon, provided money and manpower for fund raisers, school benefits and churches, Boy and Girl Scouts, park projects, police and fire charities, food banks, senior citizen centers, and more. They also educate the public about recycling and other environmental topics with the help of a "Green Coordinator," a specially trained employee who coordinates efforts to make an environmentally responsible store. Along this same line, Wal-Mart has created Environmental Demonstration Stores in Lawrence, Kansas; Moore, Oklahoma; and City of Industry, California. These stores serve as a "test tube" for environmentally friendly building materials and experimental methods for conserving energy and water.



Finally, the corporate structure of Wal-Mart is very well rounded and managed with three core values: respect for the individual, service to their customers, and striving for excellence. The management of Wal-Mart is the backbone to the entire company and these core-values have propelled Wal-Mart to the top of their industry and have allowed Wal-Mart to be the world's largest company.

Marketing:

The nature of Wal-Mart's marketing is in its Every Day Low Price (EDLP) campaign. This is what makes Wal-Mart successful. Sam Walton devised a system for which price setting was to be followed. Sam wouldn't allow management to hedge a price at all. If the list price was $1.98, but Wal-Mart had paid only 50 cents, they would mark it up 30 percent, and that's it. Sam's philosophy was "No matter what you pay for it, if we get a great deal, pass it on to the customer."

The other major campaign Wal-Mart employs is the Rollback. This occurs when Wal-Mart lowers the already lowered Every Day Low Prices. This has really been a successful way for Wal-Mart to increase its patrons. When consumers shop, they are always looking for the best deal, since Wal-Mart already offers low prices, when they rollback prices, they are able to out-price all of their competition.

Wal-Mart has been known for their customer oriented approach. Wal-Mart maintains one of the best satisfaction guaranteed programs, which promotes customer goodwill. One can return virtually any product to Wal-Mart without any problems. They simply take the product back and promptly refund the price of the product, nearly no questions asked. They also promote goodwill among consumers by employing a tactic, which Sam created known as the "Ten Foot Rule." This is simply the idea that if a customer comes within ten feet of an employee, they are required to greet them and ask if they can help them in any way. This is also evident through employees getting to know customers on a first name basis.

Finally, perhaps the single most important marketing aspect of Wal-Mart is that they create the ideal one-stop shopping experience. Wal-Mart is organized into ten distinct divisions. These include: Wal-Mart stores, SAM'S CLUBS, Neighborhood Markets, International, walmart.com, Tire & Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, and Wal-Mart's Used Fixture Auctions. Through these divisions, Wal-Mart offers thousands of products. The Wal-Mart stores contain groceries, clothes, healthcare products, toys, electronics, bedding, sports and recreation, automotive, among other items. Because of this conglomeration of products, the typical consumer can go into any Wal-Mart and walk out without having to stop at another store for anything that they could need.



Finance/Accounting:

Wal-Mart has many assets at its disposal, reporting a net income of $13.04 billion in the 2009 financial year with a growth rate of 5.3%. In terms of profitability Wal-Mart



performed behind retailers Home Depot, Dell and Target, and ahead of Costco and Kroger . It has thousands of stores not only in the US, but also wholly owned operations in Mexico, Argentina, Canada, Puerto Rico, Brazil, China, United Kingdom, Japan, Germany, South Korea, Costa Rica, El Salvador, Guatemala, Honduras and Montenegro . The company approximately 2.1 million employees , whom should be from a variety of different cultures and backgrounds, and has strong links with charities, organizations and schools.

Net sales in fiscal 2009 were a record $405,607 billion, Up 7.2% from fiscal year 2008.

Income growth: 5.3%

Sam’s Club 11.80%

International 24.60%

Wal-Mart U.S.63.70%

Key numbers for fiscal year ending January, 2009:

(Amount in US dollars)

Revenue Gross profit Operating income

Total net income

Diluted EPS(Net income)

Jan 09 405,607.0 99,449.0 23,082.0 13,400.0 3.39

Jan 08 378,799.0 92,284.0 22,301.0 12,731.0 3.13

Jan 07 348,650.0 84,498.0 20,777.0 11,284.0 2.71

The share value of walmart Inc. as on September 2,2009 is 50.92$

Wal-Mart Quarterly Statements:

(Amount in million $)

year Revenue Gross profit Operating income

Total net income

Diluted EPS(Net income)

April 09 94,242.0 23,834.0 5,268.0 3139.0 0.77

July 09 100,910.0 25,757.0 5,924.0 3,549.0 0.88



The strength of Wal-Mart is also shown through its ratios. Nearly all of Wal-Mart's ratios are strengths when measured against the industry averages. Through our ratio analysis, we have shown that Wal-Mart is the best-equipped company to succeed in the marketplace.

Human resource:

Wal-Mart proudly states on its website that its culture is guided by the 3 Basic Beliefs, Sam’s Rules, and the Sundown and 10-Foot rules. The company has consistently appeared on Fortune’s 100 Best Companies to work for in the United States. It employed more than 2.1 million associates world wide.

Production/Operations :

Perhaps the strongest aspect of Wal-Mart is in its access to distribution networks. Wal-Mart uses a system known as cross-docking. This is simply the process of continuously delivering goods to warehouses where they are sorted and distributed to their stores within one day. This enables Wal-Mart to take advantage of economies of scale with shipping trucks with full loads. This also gives Wal-Mart the ability to increase the speed of deliveries, a faster response to market demands, and a low inventory. This system has allowed Wal-Mart to decrease its sales cost by 2 to 3 percent over the industry. This savings is then priced into the products with the earlier discussed EDLP programs.

This system is maintained through the most important aspect of Wal-Mart, its employees. With over one million employees worldwide, Wal-Mart definitely has the manpower to move goods. This is also facilitated with a proprietary satellite-based communication system that enables managers and point-of-sale systems real-time information on the needs of each store.

Research and Development:

Walmart’s innovation keeps it a front-runner in retail as it is regularly turning out new patents/proprietary technology. Development and innovation are high at walmart with regard to their products/services, which is a sure strength in its overall performance.

Computer Information Systems :

As discussed in the production/operation section, Wal-Mart uses a sophisticated system of satellite-based communications. They also offer a safe, secure and complete website where consumers can purchase all of the same products found in the store. The website is strength because it is not only a means for purchasing products, but is also a very thorough informational site. Consumers can log onto http://www.walmartstores.com/ and do company financial searches, find employment, learn about the grassroots of Wal-Mart, email the company about problems, and learn about any recalls of products sold through Wal-Mart.



Weaknesses:

Weaknesses of a company or organization are things that need to be improved or perform better, which are under their control. Weaknesses are also things that place you behind competitors, or stop you being able to meet objectives. This section will present main weaknesses of walmart.

Management:

The biggest weakness that Wal-Mart has in the management area is that it does not have a formal mission statement. While they do have core values, they do not explicitly tell their employees or consumers what their business is. This is a fundamental aspect of a company and it provides not definition and direction, but it gives a company a statement on which to rely on to stay strong and focused. Another weakness is that there are few females in top management and there are few minorities employed. With such a societal demand for equality, Wal-Mart is lacking in this category. This is not a very good ethical decision for Wal-Mart to be making. They are really hurting their corporate image by maintaining this position. The other area that Wal-Mart lacks in is with unions. Currently, Wal-Mart does not have any union involvement. This is a problem because of the perception of treating employees poorly. Unions are created to provide bargaining power to employees on issues that involve their compensation, benefits, and working conditions. This is also a weakness because of job security. With unions, job security is not as much of a concern.

Marketing :

The biggest source of marketing weakness stems from Wal-Mart lobbying to expand into new markets. There are thousands of towns across the United States that have tried to block the introduction of Wal-Mart because of the economic impact that it has on small-town stores and shops. Wal-Mart has a damaged reputation because when they move into a location they end up "forcing" these types of businesses out of business.

Finance/Accounting :

Weaknesses in Wal-Mart's finances are seen in three of its ratios. The fixed asset turnover, earnings per share, and average collection period ratios are not very good. The fixed asset turnover ratio is telling us that they have made a lot of investments, but that they are not being fully used at this point in time. The earnings per share ratio is not good because when compared to the industry, they are not earning as much money for each shareholder. However, this is most likely due to the sheer number of outstanding shares. The average collection period is a cause for concern because it means that they are allowing their debtors to carry accounts with Wal-Mart for an above average period of time. This is not good because it increases the likelihood of non-payment.



Human resource:

Non-Unionization : Unlike its competitors in the retail industry Wal-Mart has remained non-unionized. Its alternative is an open door policy which aims to encourage employees to take their complaints beyond management. Wal-Mart employees commence at lower wages than unionized corporations, quitting by the end of the first year

Low Wages : The average Wal-Mart associate makes between a paltry $12,000 and 17,000 annually. suggest that the company cares more about keeping its prices low than to increase employees’ wages and thus, in turn, their standard of living.

Discrimination against Women : Wal-Mart has been accused of discriminating against women by its actions of denying training and promotion opportunities that are generally offered to men. Men are also paid more than women. In June 2001 a group of six current and former female Wal-Mart employees filed a sex discrimination lawsuit (seeking to represent up to 500,000 current and former Wal-Mart workers) against the company . The suit was filed because Wal-Mart failed to provide equal employment opportunities for women. Women comprise 72% of the workforce but only small percentages are in supervisory or managerial positions. In addition, “Wal-Mart is the nation's largest employer of women, but unfortunately they are being treated without dignity and respect." (Cookson, 2001). The data also shows that women are rated higher in performance evaluations across all positions except cashier.

Summarizing the research of Richard Drogin (Anon., 2003d) are that:

Women are disproportionately employed in lower paying hourly jobs Total earnings paid to men is about $5,000 more than paid to women Women are on lower hourly rates but have been employed longer than men Women scored higher in performance ratings Over 95% of Store Managers and Co-Managers change stores at least once upon entering the positions. 80% of Support Manager promotions did not appear in job posting data . Wal-Mart's (Anon., 2003d) treatment of its female employees is characterized by a sexually demeaning atmosphere, where female employees are told that "women do not make good managers", that "a trained monkey" could do their jobs, and that women with kids couldn't be managers.

Production/Operations :

The largest source of concern for this functional area is the slowing speed of checkout lines. This is simply a product of Wal-Mart's success. Because more and more people are going to Wal-Mart, and the number of checkout lines is staying constant, the only way to compensate is for the time to checkout increase. This is a problem because it can and will



cause people to choose other stores that are less congested. They are basically losing sales due to this fact.

Research and Development :

This is a weakness because they do not actively engage in any research and development. Specifically, they do not do any prior site research before opening a store. They simply approach a local government and build.

Key strengths:

The key strengths are Financial position, employees, customer oriented, one-stop shopping, satisfaction guaranteed programs, employee stock ownership and profit-sharing, well-rounded business, ease of website, good reputation, and favorable access to distribution networks.

Key weakness:

The key weaknesses are some ratios are not sufficient, non-unionization, no formal mission statement, few women and minorities in top management, undifferentiated products and services, site research, slow speed of checkout service, and finally a damaged reputation.

External Analysis: Opportunities :

Economic :

An opportunity available to the industry is the free trade zone. When the government enters into new trade agreements with foreign countries, businesses in the United States have the ability to offer products from these countries in their stores. This simply increases the markets available to retailers.

Social, cultural, demographic, and environmental :

An opportunity facing the industry is that customers want ease of shopping. To provide the ease of shopping the industry is guaranteeing that the customers will find what they want when they want it. This is supported by convenient presentation and the right level of service every time the customer shops.

Political, legal, and government :

An opportunity facing the industry is that the Asian market is virtually untapped by the retail world. By having an untapped market it gives a huge opportunity for companies to expand. It promises unlimited potential for growth and profits.



Technological :

An opportunity facing the industry is that internet shopping is growing. To take advantage of internet shopping, the industry is focused around the customer. The customer receives friendly site designs, efficient order fulfillment, fast delivery and professional customer response. They process returns, refunds, and rebates quickly.

Competitive :

An opportunity facing the industry is that the value of money is weakening. The weakening value of money will help the industry because it reduces the ability of foreign manufactures to offer discounts.

Threats:

Economic :

A threat is that the economy is very slow right now. There is no way of preventing it and no way to change it. This impacts all businesses and causes profit margins to be reduced as price-cutting ensues to attract more consumers.

Social, cultural, demographic, and environmental :

A threat is customer theft. Manufacturers are fighting back against customer theft by embedding paper clip sized antitheft tags, called electronic article surveillance labels, inside products and packaging. Called source tagging, the process offers several major benefits. For one, merchandise tagged on the factory floor during manufacture or packaging lets retail employees spend less time in the storeroom applying labels and more time on the show floor helping customers. Also, high-theft merchandise previously displayed behind glass can now sit out in the open, boosting sales significantly.

Another social, cultural, demographic, and environmental threat is employee theft. Along with antitheft labels there are radio-frequency circuits that are hidden in packages and go unnoticed. The only time they will go off is when the bar code scanner does not deactivate the circuit, which means they stole it. This helps to prevent the two forms of employee theft, which are sweat hearting and sliding. Sweat hearting is when the employee charges the customer less than the actual price and sliding is when the employee covers the barcode at the point of sale.

Political, legal, and governmental :

A threat is the Chinese regulations. China has one of the largest populations in the world; however, the Chinese government does not take kindly to opening their country to foreign establishments. Also, there is rampant corruption among the Chinese, and they have no generally accepted accounting principles.



Technological :

A threat facing the industry is that technological advances may make the products obsolescent. As technology advances, products being sold today are gone tomorrow; this provides fewer products for retailers to sell.

Competitive :

A threat is that the industry is not following consumer taste. To overcome the threat of not providing consumers wants the industry is expanding rapidly in the urban centers while traditional "wet markets" are being edged out as the middle-class enlarges and young people flock to the cities.

Key opportunities:

The main opportunities that we identified were increasing internet shopping, ease of shopping, free trade zones, the Chinese market, and the value of the dollar.

Key threats:

The main threats that we identified were technology making products obsolete, customer and employee theft, slow economy, the Chinese regulations, and not offering what the consumer wants.

OVER ALL SWOT:

STRENGTHS(INTERNAL) OPPORTUNITIES(EXTERNAL)

R&D, high techDeep pocketsInfrastructureLuxury car/ truck dominanceInfrastructure/ small carsDistribution network Joint Ventures

Stores in all 50 states

New concepts(Hypermarkets, supermarkets)

Wide variety of merchandise

Nationally advertised merchandise

Worldwide presenceExpansionBuy U.S.Leverage tech. and financial know-how.Better segmentationCompetition

No formal mission statement

Management resisted putting women on board of directors

Hiring illegal minorities to clean

Growth for employees only in division



Limited lines of merchandise – made in USA

Point-of-sale bar code scanning

Great employee benefits

Extensive labor relations problems, Community Relations Problems, Miscellaneous PR Problems. WEAKNESS(INTERNAL) THREATS(EXTERNAL)

Lead timesDifferentiated modelsPlatform madnessProductivity, efficiency, costsBureaucracy/ leadershipIncentive systemVertical integration

Cold storage market.

Increase consumer purchase power.

Better segmentation.

Worldwide presence.

CompetitionLabor unrestBrand loyalty disappearancePerception, quality, reliability, durabilityConsumer social awarenessRising costsSupplier backlash

Competitor Analysis: Competition against Wal-Mart comprises of similar discount retail stores as well as grocery supermarkets. Its key competitors are Target, Costco and to a lesser extent companies such as Sears and Kohl’s (Robbins, 2004).

Conclusion: In conclusion, Wal-Mart is the number one retailer in the United States and is at the



top of the Fortune 500 listing. Wal-Mart operates in many countries world-wide and is moving into new countries every year.

Wal-Mart is also expanding as a retailer. They have expanded into many other sectors of the marketplace, including groceries, gas stations, electronics, and auto maintenance. Each year, Wal-Mart finds new ways to grow and offer more services to their customers.

Each year, the number of people who have a stake in Wal-Mart also grows. Each year, more claims are made against Wal-Mart by the unions and other businesses that have been forced out of business. Wal-Mart is often able to uncut many other local industries and more and more local businesses are shutting down when Wal-Mart moves into town. The unions are filing more court claims against Wal-Mart because they encourage their workers not to join unions.

As a result of Wal-Mart's ever growing size and variety of services they offer, their public affairs department is going to become more and more important. And as the animosity against Wal-Mart becomes more widespread, here and in foreign countries, Wal-Mart is going to have to work harder to maintain their good reputation. Wal-Mart's foundation will become increasingly more important for giving things back to the community.

In order for Wal-Mart to stay at the top of their game and follow the company strategy and achieve their key policy goals, they are going to have deal better with their stakeholders and make sure they guard their reputation well.

References:

www.walmartfacts.com


http://www.walmartfacts.com/


www.hoovers.com

www.gartner.com

www.wikipedia.com

www.finance.yahoo.com

www.walmartstores.com


http://www.walmartstores.com/

http://www.finance.yahoo.com/

http://www.wikipedia.com/

http://www.gartner.com/

http://www.hoovers.com/





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WALMART INC