Swot Analysis Walmart

SWOT Analysis: Wal-Mart Inc.

A. Internal Environment

Strength Weakness Remark

I. Management Infrastructure + + + Wal-Mart has been able to install and maintain a management team that is performing superiorly over its entire existence. This is foremost a consequence of the remarkable leadership abilities of its founder Sam Walton. He is often described as having been a very charismatic figure. The challenge that lies ahead is to perpetuate this spirit and not to become an ordinary organization like many of its competitors servicing top level management more than the customer. For that task it will need an equally outstanding and humble leader on its own.

1. Corporate Level Management

+ + + The credo of "always low prices" is the corporate mission and is had proved to be successful. In fulfilling this mission, Wal-Mart always emphasized not to increase margins but to pass on its benefits and advantages received to its customers in order to offer them the best price. Because the war over the retail customer is mainly a price war, this should be the route to success in the future, as well.

2. Business Level Management + + + Wal-Mart operations are split into Wal-Mart Stores, Sam's Clubs and International Wal-Mart. As of mid 2005, the Company had 1,289 Wal-Mart stores, 1,816 Super centers, 555 Sam's Club and 92 'Neighborhood Markets' in the United States of America. Internationally, the Company operated 11 units in Argentina, 152 in Brazil, 261 in Canada, 47 in China, 89 in Germany, 16 in South Korea, 706 in Mexico, 54 in Puerto Rico and 291 in Great Britain. These are stocked by 110 distribution centers around the world.

Wal-Mart's success is based on its concentration of a single-business strategy, namely low prices, service, and "a smile". This strategy has achieved superior performance over the last three decades without relying upon diversification in other fields to sustain its growth and competitive advantages. The inherent risk is that all eggs are put in one basket.

This risk is mitigated by diversifying internationally, which Wal-Mart is now emphasizing. Thereby it can profit from its strong domestic base. As in the US, Wal-Mart tries to utilize its superior supply chain management and their superior logistics. With its computer system Wal-Mart can track how much of one item has been sold on any given day, and if an item is not selling well, they will ship it out to another store where it might be sold faster. Contrary to common industry standard and as Wal-Mart has done in the past in the US, it will, if possible, build the warehouse first, preferably in a free trade zone, and then group the retail outlets accordingly. Opportunistic buying of merchandise is equally important to deliver on the right price. Service from when the customer walks in the store to when he/she leaves rounds up the picture.

All of these strategies are not proprietary, they are even common sense, and may easily be copied. However, as opposed to many of their competitors Wal-Mart's management was able to actually implement these policies, which principally seems to be the result of a high morale in its workforce and accordingly good work ethics.

It appears to be essential to hold this spirit up in the future and not to rest on the laurels of the past. The enormous size of Wal-Mart is believed to its biggest asset as it gives Wal-Mart leverage over its suppliers and envied economies of scope and scale, however such economies are not endless and the bigger they are the less they will increase significantly. The key to success for management is not to be overwhelmed by the bureaucracy that inevitably comes with any large organization. One may not remember well but General Motors seemed invincible in the past, too.

3. Functional Level Management + + Wal-Mart refers to its employees as "associates", and encourages managers to think of themselves as "servants". Each shift at every store starts with a store-wide meeting at which managers discuss with hourly "associates" daily sales figures, company news, and objectives for the day. The Wal-Mart spirit is legendary, including things like the cheer ("Gimme a 'W' ..."), however that suits, perhaps, the American mindset better than, for instance, the European.

Wal-Mart has done only an average job in caring about the details of its foreign operations lacking a feel for adapting the assortment of its goods to local taste (not acceptable, but justifiable) and even worse local standards and regulations. The latter should be obligatory for a global company that sees itself as a local player in each market.

II. Human Resources

1. Recruiting, Staffing, Training + + According to its own mission statement it was founded on the "belief that open communications and the highest standard of ethics is necessary to be successful". This resulted in the "open door" communication policy that helps management to become aware of and address issues in a timely and effective manner. Secondly, Wal-Mart has adopted a statement of ethics to guide its employees in the "continued observance of high ethical standards such as honesty, integrity and compliance with the law" in the conduct of Wal-Mart's business. Extended codes of conduct apply for senior management, in particular for financial personnel.

In sum, Wal-Mart still possesses the ability to recruit, train and unify its workforce behind one strong idea, the Wal-Mart way, much the same way a start-up company often does. This is a unique capability in the industry.

2. General   As said before, Wal-Mart refers to each of its employees as "associates," (thereby borrowing from J.C. Penney, as freely admitted). This is supposed to give each employee the feeling of being important to the entire organization. In the same line of thought Wal-Mart does not engage professional models for photo shootings in their brochures but exclusively uses its own employees. Yet, in stark contrast hereto, the majority of Wal-Mart's employees earn below the so-called poverty line, often no more than $250 a week. In addition they are asked to pay more than twice the industry average for health care.

This inconsistency may backfire some day when the employees seek not only spiritual but secular support from their employer.

III. Research and Development

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