16 Jan 2021

Walmart Inc.’s Modified SWOT Analysis

SWOT denotes strengths, weaknesses, opportunities, and threats that all commercial ventures, including Fortune 500 companies, have or frequently face in the industry. In other words, it encompasses internal and external factors, which considerably influence the operational activities of an organization. For instance, Walmart Inc. falls among the top firms in the 2019 Fortune 500 list in the highly competitive sector. The famous organization traces its establishment in 1962 as a small, single-store business enterprise in the US by Sam Walton (Barberá, 2014). Since then, the organization grew, developed, and expanded gradually to different sections, nationally and internationally. Today, the giant retailer operates several affiliates widely spread in approximately twenty-seven countries (Brea-Solis et al., 2012). Generally, Walmart Inc. is a multinational that demonstrates a sustainable competitive advantage in the market and entire industry following its strategic business plans and actions, as shown hereunder.

Internal Factors and the Competitive Advantage

Internal factors usually encompass strengths and weaknesses, which an organization can manipulate to suit its objectives. Walmart Inc. enjoys and capitalizes on some strengths, an internal element, which enables it to grow, develop, and expand gradually to become the current revered market leader in the industry. Indeed, its physical location, an effective and efficient supply chain system, modern technology alongside material and financial resources usually give it a competitive edge in the industry (Barberá, 2014). Its present size gives it sufficient material and financial resources or muscle required to compete favorably and eventually outrival others locally, regionally, and internationally.

Additionally, Many organizations experience multiple disruptions in their supply chain systems, which fundamentally affect operational activities, productivity, and overall performance. Consequently, to counter this, it has an efficient and effective global supply chain system that typically cushions it from various market-specific hazards, thus resilience (Jatmiko et al., 2021). Moreover, being technologically compliant in its various activities and operations enables the multinational to monitor and control products movement from the suppliers to its stores, hence, a competitive edge. Furthermore, the organization has strength because it has a presence in almost all world regions. Therefore, it serves a relatively broader clientele base than its competitors; thus, increased revenues and profits are required for further expansion.

Aside from strengths, weaknesses are a significant internal factor that sometimes hinders organizations' substantial growth, development, and prosperity, including Walmart Inc., a global retail corporation. It has a corporate culture of low-cost pricing for its retail goods. Therefore, its overreliance on cost leadership as a generic business strategy breeds potential weaknesses that lag its projected growth and development (Shabanova et al., 2015). This generic business strategy significantly minimizes its profit margins because it sells many units or large volumes to generate meager profits, unlike its competitors. In other words, it experiences a competitive disadvantage in the industry compared to its high-end competitors, who typically thrive on quality connotation principles.

External Factors and the Competitive Advantage

External factors are prevailing conditions around a commercial enterprise, which seem beyond its control. They include threats and opportunities, which fundamentally influence the commercial activities of companies in different industries of which the retail industry is inclusive. The growth and development chances for Walmart Inc. typically hinge on improving its strategic business practices and expansion. Marked opportunities for this multinational corporation hinges around expansion, improving human resource practices, alongside product and service quality (Brea-Solis et al., 2012). There is an opportunity for this corporation to venture into the inappropriately exploited or virgin market segments, especially those in densely populated, underdeveloped, and developing world sections. Similarly, improving its human resource practices bordering on employment and other forms of workplace discrimination may enhance staff morale and public confidence for improved growth, development, and market expansion. Additionally, improving the quality of its supplies alongside services may tremendously contribute to its improved revenue base, profitability, and expansion, hence, an opportunity.

Apart from opportunities, threats are a significant external factor affecting Walmart Inc.’s operations. Indeed, stiff competition usually riddles the retail industry worldwide. Hence, stiff competition posed by established retailers, such as amazon, in different market segments proves detrimental to this organization's overall growth and development. Similarly, prevailing legislation alongside cultural beliefs and practices in different world sections poses a considerable threat to Walmart Inc. Furthermore, harsh cyclic conditions also hamper this corporation’s projected growth and development (Jatmiko et al., 2021). For instance, economic depression from multiple sources, such as infectious disease outbreaks and severe recessions, may negatively influence the firm's operational activities.

In summation, external and internal factors prevailing around a commercial venture may bring success or failure; consequently, the need to have appropriate strategic business decisions to realize corporate objectives. For instance, strategic choices that turn threats into opportunities and weaknesses into strengths are essential to ensure early growth and development. Honestly, Walmart Inc. has remained top in the list of Fortune 500 companies in successive years, hence, success.

References

Barberá Marcilla, L. (2014). Business analysis for Wal-Mart, a grocery retail chain, and improvement proposals (Doctoral dissertation, Universitat Politècnica de València).

Brea-Solis, H., Casadesus-Masanell, R., & Grifell-Tatje, E. (2012). Business Model Evaluation: Quantifying Walmart’s Sources of Advantage. Harvard Business School

Jatmiko, B., Udin, U. D. I. N., RAHARTI, R., LARAS, T., & ARDHI, K. F. (2021). Strategies for MSMEs to Achieve Sustainable Competitive Advantage: The SWOT Analysis Method. The Journal of Asian Finance, Economics, and Business, 8(3), 505-515.

Shabanova, L. B., Ismagilova, G. N., Salimov, L. N., & Akhmadeev, M. G. (2015). PEST-Analysis and SWOT-Analysis as the Most Important Tools to Strengthen the Competitive Advantages of Commercial Enterprises. Mediterranean Journal of Social Sciences, 6(3), 705

Purpose of the strategic plan

The strategies included service automation, the introduction of company e-commerce, improved customer support, increased marketing, and the acquisition of other businesses. The purpose of the strategic plan included the following:

To help the company enter new markets by acquiring other businesses and improving product delivery to the new and existing regions. The second purpose is to help the company attract new customers and enter new markets through improved marketing activities to improve the brand image and customer awareness about the product. The third purpose is to help the company improve consumer services to retain and attract customers.

Key objectives of the strategic plan

The key objective of the strategy is to help the company increase its sales by increasing market coverage, marketing, and business growth.

The second objective was to improve customer services through fast product delivery services and improved customer support services.

Market development

Since the company was already operating in other markets, entering these new markets should not have been challenging. However, creating resources to serve these new markets will be a challenge due to the time and financial demands to serve the new markets (Vemulapalli, 2019). Therefore, the strategy was to acquire the companies already in the market then use them as the distribution channels for the company products in the new region.

The acquisition strategy fits the business needs since the company will spend fewer resources on marketing and promoting brand awareness and reputation in the new markets. However, there is a need for more marketing in the new regions to improve customers' awareness about the new products, benefits, and the company offering the product.

Process Improvement

The main processes that require improvement include the company's marketing focus, service delivery, and new customer support services. Improving marketing processes requires shifting to digital marketing strategies such as local SEO, social media marketing, affiliate marketing, and paid ads. These strategies require new staff with knowledge in digital marketing to help the company. The second process improvement was to improve the product delivery process. The best solution is e-commerce to enable users to order products online. Improving product delivery processes also involves fast delivery and developing a reliable e-commerce website (Cambra-Fierro et al., 2015). Improving customer support requires developing multiple channels for communicating with the customers.

Development of people

The main development is training. The employees need to be trained on new aspects such as additional customer support channels, e-commerce platforms to supporting customers, and tracking customer shipments. There is also a need to motivate the employees to help achieve the new plans. The motivation can be through bonuses and awards. Finally employing new staff to help the existing employees achieve the new strategies.

Improving Product/service quality

Improved delivery process over time will require improving the shipment days. Currently, it takes 2-3 days to deliver customer orders; in the future, it should take 24 hours. The second improvement is an instant response to customer needs whenever they request support services.

Key performance indicators

The key performance indicators should include the sales and revenue generated by the new markets.

The customer review and comments after customer service support services. Reviews after product delivery are complete.

The number of individuals seeing company adverts.

References

Cambra-Fierro, J., Melero, I., & Sese, F. J. (2015). Managing complaints to improve customer profitability. Journal of Retailing, 91(1), 109-124.

Vemulapalli, K. V. (2019). Adapting management strategies to enter new global markets. Journal of international business studies, 35(5), 350-370.

JC Penney Analysis

External factors have a huge impact on the success of an organization. Competition is one of the biggest factors that can lead to the collapse of a huge corporation. Most of the businesses implement a competitive advantage that allows them to remain competitive. However, others have difficulties in fighting the competition and eventually become insolvent. JC Penney is one of the company’s that has survived two World Wars, the Great Depression, and financial crisis only to collapse due to the aggressiveness of the competitors. JC Penney is one of the oldest retailers having started in 1902 with its first store in Kemmerer, Wyoming (Kelly, 2021). It is one of the few retailers that have been trading for over a century. However, due to various factors like competition and the pandemic, the company had to file for bankruptcy as the debt kept on increasing.

Financial Plan

JC Penny had to file for bankruptcy protection as its debt kept on increasing. The company’s debt stood at $4 billion and its stock price was below $2 (Meyersohn, 2021). According to the Annual report (202), the net loss of the company for the five years dating from 2015, has been on the increase as the loss for 2019 standing at $268 million. 2015 saw the company post one of its worst losses which stood at $513 million. The debt-to-capital ratio for the financial year ended 2019 was 81.8%. These results are partly the reason why the company opted to file for bankruptcy.

The company has also opted to close down most of its stores and lay off the workers. JC Penny’s stores in the West were the first to lose down as the company wanted to reduce its operating costs (Tokosh, 2018). The closure of the stores would also allow the company to continue its operations in some of the stores that have improved their revenue. The plan could have worked if the cost of maintaining the debt was lower.

The revenue for the past decade cannot help the company sustain the debt. The measures taken by the company to reduce its costs and protect itself and can be effective in helping the company. Closing some of its stores and filing for bankruptcy can be useful strategies which will help the company fight another day.

JC Penney can implement various marketing and financial strategies which can ensure one of the oldest retailers stays in business. One of the issues highlighted as part of the failure of the company was outdated policies. The company has to change with the tide and implement strategies that will help them compete with some of the biggest retailers like Walmart. This will involve changing its technology strategy and adapting a stronger e-business model. The company faced technology problems when trying to implement its e-business strategy. The collapse of its website in 2014 was one of the signs that JC Penny was not prepared to adopt e-business model. Therefore, the company can learn from previous mistakes and adopt the model. The success of some of the retail giants like Walmart will be based on e-business.

The return policy and discount policies will have to be changed. This is based on complaints by customer about the company using outdated policies and having issues with the return policy. The only way out for JC Penney is recovering its sales. Sales recovery will help the company repay a chunk of its debt and remain competitive. Implementing marketing strategies that attract older customers and new customers will be one of the strategies that will help the company. Changing the discount and return policies will be the beginning of revamping the once retail giant.

Strategies for Competitive Marketing Advantage

JC Penney has already been saved from extinction. However, even with a new management team, the company will have to implement various strategies to remain competitive. Changing its business model will be an essential factor for the success of the company. The current B2C model has not been effective as the company has changed various features over the last decade. There are three features that have to be included in the new business model. The features include; competitive advantage, value proposition, and revenue model. Competitive advantage will include the unique features of the company’s products that cannot be copied by competitors. There are various retail companies in the market like Macys, Walmart, and Target. The company can use the experience it has in the retail industry especially in sourcing to create a competitive advantage. The experience in sourcing will also allow the business model to include B2B rather than having only B2C.

The most effective way of improving the financial performance of the company is to improve its revenue. The revenue model has to be changed to a model that identifies all the income sources in the market. The company cannot rely on brick and mortar business in the current information age. Implementing strategies to revamp and improve the company’s e-business will be effective in improving the revenue streams.

Plan to Implement Strategies

JC Penney has to change the business model to remain competitive. The retail industry is highly competitive with new players emerging daily. However, each company has several advantages over the others which can be used to improve the company (Brien & Scott, 1992). The plan will require SWOT analysis of the market before implementing the strategies. One of the strengths of the company is its experience in the market. JC Penney has been in the market for over a century where it has gained valuable experience in sourcing. JC Penney will have to leverage on the experience in creating and implementing a competitive advantage.

The company will define the business goals. The management will have to set short-term and long-term objectives. The current short-term objectives are to ensure the company returns to the market. The long-term goals include improving the financial position of the company. This has to be communicated to the departments with departmental goals being set. The staffing, financial needs and budgeting needs will be identified. The business goals will also ensure the right objectives are set and they can be achieved. The performance of the company has to be tracked and the use of key performance indicators will be effective in monitoring the performance.

An evaluation of both the customer and competition will help in determining the market. The company has lost its market share to competitors like Macy’s and has to implement the strategies to regain the market share. Evaluating the needs of the customers will help in identifying gaps in the market which the strategies will help in filling. A gap can be identified where the revenue sources will be increased. The management and the whole organization will then implement the strategies proposed. The strategies will ensure the revenue of the company is improved and the financial issues resolved.

References