Walmart (WMT) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Grocery)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Walmart (Germany)
Based on various researches at Oak Spring University , Walmart is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing energy prices, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, wage bills are increasing, increasing commodity prices,
increasing transportation and logistics costs, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Walmart can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Walmart, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Walmart operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Walmart can be done for the following purposes –
1. Strategic planning of Walmart
2. Improving business portfolio management of Walmart
3. Assessing feasibility of the new initiative in Germany
4. Making a Retail (Grocery) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Walmart
Strengths of Walmart | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Walmart are -
Cross disciplinary teams
– Horizontal connected teams at the Walmart are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in Retail (Grocery)
– Walmart is one of the leading players in the Retail (Grocery) industry in Germany. Over the years it has not only transformed the business landscape in the Retail (Grocery) industry in Germany but also across the existing markets. The ability to lead change has enabled Walmart in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Walmart comprises – understanding the underlying the factors in the Retail (Grocery) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Effective Research and Development (R&D)
– Walmart has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Walmart staying ahead in the Retail (Grocery) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Walmart in the Services sector have low bargaining power. Walmart has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Walmart to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Walmart is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Walmart is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Walmart emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Walmart has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Walmart has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to recruit top talent
– Walmart is one of the leading players in the Retail (Grocery) industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Retail (Grocery) industry
– Walmart is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Walmart is present in almost all the verticals within the Retail (Grocery) industry. This has provided Walmart a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Walmart is one of the most innovative firm in Retail (Grocery) sector.
High switching costs
– The high switching costs that Walmart has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses of Walmart | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Walmart are -
No frontier risks strategy
– From the 10K / annual statement of Walmart, it seems that company is thinking out the frontier risks that can impact Retail (Grocery) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Walmart has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Workers concerns about automation
– As automation is fast increasing in the Retail (Grocery) industry, Walmart needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring in Retail (Grocery) industry
– The stress on hiring functional specialists at Walmart has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Walmart supply chain. Even after few cautionary changes, Walmart is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Walmart vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative at Walmart, in the dynamic environment of Retail (Grocery) industry it has struggled to respond to the nimble upstart competition. Walmart has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that Walmart needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Grocery) industry have deep experience in developing customer relationships. Marketing department at Walmart can leverage the sales team experience to cultivate customer relationships as Walmart is planning to shift buying processes online.
High cash cycle compare to competitors
Walmart has a high cash cycle compare to other players in the Retail (Grocery) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Lack of clear differentiation of Walmart products
– To increase the profitability and margins on the products, Walmart needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Walmart is one of the leading players in the Retail (Grocery) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Grocery) industry in last five years.
Low market penetration in new markets
– Outside its home market of Germany, Walmart needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Walmart Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Walmart are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Walmart is facing challenges because of the dominance of functional experts in the organization. Walmart can utilize new technology in the field of Retail (Grocery) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help Walmart to increase its market reach. Walmart will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions in Retail (Grocery) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Walmart in the Retail (Grocery) industry. Now Walmart can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Grocery) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Walmart can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Walmart can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Using analytics as competitive advantage
– Walmart has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Grocery) sector. This continuous investment in analytics has enabled Walmart to build a competitive advantage using analytics. The analytics driven competitive advantage can help Walmart to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Walmart can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of Walmart has opened avenues for new revenue streams for the organization in Retail (Grocery) industry. This can help Walmart to build a more holistic ecosystem for Walmart products in the Retail (Grocery) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Walmart can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Walmart to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Buying journey improvements
– Walmart can improve the customer journey of consumers in the Retail (Grocery) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Walmart can develop new processes and procedures in Retail (Grocery) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Walmart can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Walmart can use the latest technology developments to improve its manufacturing and designing process in Retail (Grocery) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats Walmart External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Walmart are -
Increasing wage structure of Walmart
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Walmart.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Grocery) industry are lowering. It can presents Walmart with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Grocery) sector.
Environmental challenges
– Walmart needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Walmart can take advantage of this fund but it will also bring new competitors in the Retail (Grocery) industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Walmart in the Retail (Grocery) sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Walmart will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Walmart can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Grocery) industry.
Regulatory challenges
– Walmart needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Grocery) industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Walmart business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Walmart may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Grocery) sector.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Walmart needs to understand the core reasons impacting the Retail (Grocery) industry. This will help it in building a better workplace.
Consumer confidence and its impact on Walmart demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Grocery) industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Easy access to finance
– Easy access to finance in Retail (Grocery) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Walmart can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Walmart Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Walmart needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Walmart is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Walmart is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Walmart to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Walmart needs to make to build a sustainable competitive advantage.