Comprehensive Analysis of a Fortune 500 Company: Walmart

Abstract

This Individual Project is aimed at analysing publicly available information about a Fortune 500 Company and developing an assessment of the corporate strategy and its ability to increase competitive advantage. The Fortune 500 list of the leading companies designed by Fortune Magazine provides much important information of the company’s total revenue for their respective fiscal years. The Fortune 500 Company selected for the comprehensive analysis is Wal-Mart Stores, Inc. (or Walmart). This paper provides the proper analysis of the information at the company, industry and market levels and gives a chance to draw relevant conclusions on the company’s ability to increase competitive advantage.

Introduction

            This Individual Project is aimed at analysing publicly available information about a Fortune 500 Company and developing an assessment of the corporate strategy and its ability to increase competitive advantage. The Fortune 500 list of the leading companies designed by Fortune Magazine provides much important information of the company’s total revenue for their respective fiscal years. The Fortune 500 Company selected for the comprehensive analysis is Wal-Mart Stores, Inc. (or Walmart). The proper analysis of the information at the company, industry and market levels gives a chance to draw relevant conclusions on the company’s ability to increase competitive advantage. Walmart is found at the top of the list as its revenue is $485, 873. The total number of employees is 2,300,000. The company’s rank is the highest in the list of Fortune 500 Companies. This fact means that Walmart has made a progress in the global market due to its heavy investments in technology, effective price reduction strategy and other strategies that allow competing with its key rivals – Amazon and Target.

Review of the company’s most recent SEC Form-10k Annual Report and Form DEF-14A Proxy Statement

            The analysis of the in-depth review of the company’s most recent SEC Form-10k Annual Report and Form DEF-14A Proxy Statement shows that in 2016, Walmart is focused on enhancement of economic performance. Due attention is paid to the risk factors and uncertainties that may affect the company. Walmart recognizes these risks and developed the proper strategies to a address the effects of these risks on business operations. Among these risks are currency exchange rate fluctuations, change sin economic markets and trends, increased energy prices, increased costs of transportation, unanticipated changes in tax laws, and other factors (Walmart SEC Form-10k Annual Report, 2016).

            In addition, Walmart is aimed at assisting customers across the world to save money and improve the quality of life. Walmart retail stores and e-commerce are designed to meet customer expectations through innovative ideas, customer-centric experience, integration of  digital and physical shopping capabilities. Physical retail sector can be found in each market where the company operates, while digital retail sector is based on the functioning of specially developed e-commerce websites and mobile applications. According to statistical data, each week, the company serves “nearly 260 million customers who visit over 11,500 stores under 63 banners in 28 countries and e-commerce websites in 11 countries” (Walmart SEC Form-10k Annual Report, 2016).

            Besides, the Walmart’s strategic approach is to be a leader on price reduction, provide differentiation on access, provide a huge assortment of goods and guarantee customer satisfaction. The idea to be a leader on price reduction means to establish trust relationships with customers, guarantee high quality products and services through the so-called EDLP (everyday low prices). This pricing philosophy helps the company to attract new customers and retain old ones (See Fig.1). The company’s price leadership in the market is the key priority target, which allows customers to control their expenses, ensure cost savings and have a chance to access a huge assortment of goods (Walmart SEC Form-10k Annual Report, 2016).Moreover, Walmart is based on conducting business operations in there segments that include  Our operations comprise three reportable segments: Walmart U.S., Walmart International and Sam’s Club (See Fig. 2). This division guarantees the proper control over the major operations, generation of total revenues and net sales data. In fiscal 2016, Walmart’s total revenues was $482.1 billion, including $478.6 billion net sales. The company is head quartered in Bentonville, Arkansas, USA. Currently, the company operates across the globe, including African countries, Argentina, Brazil, Canada, Central American countries, Chile, Mexico, China, India, Japan, the UK.  Due to regular reviews of the company’s performance and the proper allocation of resources, Walmart is able to adapt to the market changes in trends and customer demands (Walmart SEC Form-10k Annual Report, 2016).

            Actually, the company’s financial framework can be characterized as effective due to continuous and efficient growth, well-established operating discipline and strategic allocation of capital. Walmart uses specific approaches to achieve success in the market, such as increasing the total amount of comparable store and club sales, e-commerce sales, but at the same time, decreasing the rate of growth of new retail stores and clubs. The company ‘s strategy to invest in new facilities should be changed in order to promote the long-term growth of business based on existing facilities. Currently, Walmart is targeted at allocation of capital to technological progress, e-commerce and supply chain management (Walmart SEC Form-10k Annual Report, 2016).

            Reviewing Form DEF-14A Proxy Statement, it is possible to conclude that the company is focused on the implementation of its enterprise strategy – “working to win with stores, deepening digital relationships with customers, and bolstering critical capabilities such as our next generation supply chain, technology and data, our talent, and how we work” (Form DEF-14A Proxy Statement, 2016). The Walmart Board makes this strategy effective in order to position the company’ sustainability  in the competitive market. Due to certain changes, such as tracking business operations, comparable sales, and assessing customer satisfaction scores, it is possible to provide monitoring of the key aspects of strategy implementation (Form DEF-14A Proxy Statement, 2016).

            In fact, Walmart’s compensation program is developed to align with its strategic approach. The Walmart Compensation, Nominating and Governance Committee provides evacuation of  the company’s performance metrics that can be found in incentive plans to ensure that they are aligned with the interests and expectations of shareholders.

Evaluation of stakeholders

            A thorough analysis requires evaluation of various stakeholders that influence the strategic direction of the company’s segments. Stakeholders may have both direct and indirect impact on the company. As Walmart has a large organizational size which leads to operating at the global level, there is a need for providing evaluation of the key external stakeholder groups.

Evaluation of various external stakeholders

•Competitors

Walmart has several influential competitors in the market that affect its business operations’ outcomes, including Target and Amazon. In addition, Walmart has to compete with global chains, which are specialized in retailing business and e-commerce.

•Industry

The industry is influential as it provides opportunities to Walmart for achieving success in business. The retailing industry affects the level of competition because it requires companies to set the proper strategies to sell products. The retailing industry determines the size of the markets and the performance of the national and global economy.   

•Vendors

Vendors’ role in Walmart’s business operations is crucial because the company depends on their practices. Currently, Walmart is satisfied with the vendors’ compliance with the organizational policy and the company’s key principles. Vendor Partners conform to standards of business operations, legal requirements of the industry under the legislation of the countries, in which vendors operate. 

•Customers

Customers have a considerable impact on Walmart’s business operations as they affect the amount of sales. Evaluation of customer satisfaction shows that Walmart’s services are provided with excellence, high level of responsibility and commitment.  

•Governmental entities

Various governmental entities provide control of strategic resources necessary to conduct effcetive business operations, such as materials, labour force, taxes.

•Communities

Community affect Walmart’s operations across the world; therefore, this group of stakeholders play an important role in promotion of the products through social media networks and other sources. Communities have their own interests, such as the ability to obtain high quality products and services at low prices.

Evaluation of various internal stakeholders

•Shareholders

Shareholders affect the company’s strategy implementation. Annually, the company holds shareholders meeting in order to resolve important issues and improve business operations. Shareholders participate in election of the Board of Directors through the voting procedure.

•Board of Directors

The Walmart Board of Directors affect the company’s performance due recognition of the duties and responsibilities hold by each Board member. Walmart’s Board of Directors consists of highly skilled and experienced professionals who contribute to the company’s  success in the market, applying their knowledge to practice. The members of the Board are involved in decision making and problem solving processes in the areas like risk management, financial services and accounting, brand management, engineering, product development, corporate strategy development, and others.

•Management

Managers are consider to be one of the key internal stakeholder groups as they affect the company’s performance to a great extent. They oversee and supervise the key business operations and employee performance. Managers help to keep employees aligned with the established organizational goals.

•Employees

Employees play an important t role in the company as they use their skills, knowledge and experience to follow the mission, long-term and short term goals, and expectations of the company. As Walmart invests in employee training and professional development programs, each employee is competence in the selected area. Walmart employees are highly motivated due to well-developed compensation packages, benefits, performance evaluation and associate engagement. Employees are engaged in various programs which help to increase productivity and job satisfaction. 

SWOT analysis

Strengths

Walmart’s strengths are multiple. The company holds the leading position in the global market due to the large size of business. Global supply chain management is properly developed to deal with the challenges faced by the company in the competitive market. Expansion of the company contributes to its sustainable development. Effective global supply chain management system, as a source of competitive advantage for Walmart, helps the company to address risks associated with allocation of resources, security matters, transportation, and others (Barney, 2012). The use of new technologies guarantees positive results in monitoring of the key business operations. Walmart’s business model helps to improve performance through low pricing strategy, business expansion, technology application  and increased product variety (Brea-Solis et al., 2012). The use of technology allows the company to keep up with the times.

Weaknesses

Walmart’s cost leadership generic strategy is inefficient as it leads to thin gross profit margins. When cost of sales is rather high relative to sales, the company may have thin gross profit margin. Walmart uses low price strategy in order to attract more customers. As a result, the company has to reduce profit margins and become dependent more on sales volume. In addition, the cost leadership strategy implemented by the company in its key operations makes the business model very popular. The company fails to use its competitive differentiation in a proper way, except for its large organizational size and strong brand image.

Opportunities

Walmart has massive opportunities due it leading position in the market. The company is focused on continuous expansion and improvement of the quality of services it provides to customers. These opportunities are linked to changes in business practices. The company is targeted at the developing countries, which have low level of economic development. Low prices will attract customers with low incomes. Due attention should be maid to HR management practices which allow the company to prepare highly qualified personnel and increase sales due to compliance with quality standards.   

Threats

There are several threats faced by Walmart in the market. These threats are associated with the retailing industry growth, as well as considerable changes in the demands and needs of customers. Some products become less popular due to their inefficiency. The impact of healthy lifestyle trend on purchasing decisions of customers in our society should be considered by Walmart. Organic products should be promoted by Walmart to attract more customers (Ngobo & Jean, 2012). Huge competition in the retailing industry is another threat that should be addressed by implementation of effective strategies, such as advertising, promotion practices, social media networking. In addition, the growth of e-commerce is a threat for Walmart because online selling can decrease on-site sales. 

            The SWOT analysis is performed relative to the Company’s ability to improve its competitive advantage.

Evaluation of the Company’s ability to improve its competitive advantage

            The company’s ability to improve its competitive advantage can be evaluated as positive. Walmart’s corporate strategy is designed in a way that allows transferring knowledge sharing and learning opportunities among the key segments. The company provides measurement of the results of performance of its segments applying the information about net sales and operating income. Walmart’s corporate strategy is implemented at all organizational levels (Walmart SEC Form-10k Annual Report, 2016). It is necessary to strengthen corporate social responsibility in order to improve competitive advantage through enhancing the company’s reputation in the global market (Kampf, 2007). Through the sharing of knowledge, the company’s information, profits and risks, Walmart is able to position itself in an advantageous way, enhancing operational efficiencies and promoting financial cost savings (Arli et al., 2013).

            In addition, sustainable competitive advantages is linked to the company’s position in the global arena. Walmart’s employees are well-trained to work collaboratively and assist in managing multi-stakeholder systems. Due to innovations, Walmart is able to manage the flow of products effectively, engaging suppliers in supply chain management processes. Both internal and external stakeholders are aware of the company’s vision to provide the best customer value in retailing business operations. The mission is to deliver high quality, cheap products to address the needs and demands of customers. Walmart’s strategy aimed at ensuring cost savings to customers based on EDLP principle (Walmart SEC Form-10k Annual Report, 2016). There is a need for providing the proper control of the HR management practices that inform employees of the company’s mission, vision, goals and values. This approach will be useful as it will help the company to improve its competitive advantage.

            Besides, the opportunities provided by technology for business growth are multiple. Walmart is a leader in the retailing industry; therefore, the company is focused on continuous development of its business operations. According to researchers, Walmart fosters shopper marketing  activities that have a strong impact on customers’ decisions as they enable “a win-win-win solution for the shopper-retailer-manufacturer” (Shankar et al., 2011, p.29). The following innovations are utilized in the Walmart’s shopper marketing: “digital marketing activities, multichannel marketing, store atmospherics and design, in-store merchandising, metrics, and organization” (Shankar et al., 2011, p.29). These facts mean that Walmart should continue its focus on innovations.

Conclusion

            Thus, it is necessary to conclude that Walmart is a successful global company, which operates in today’s highly competitive environment. The analysis of the company shows that Walmart’s strategy to maintain competitive advantage is effective. Nevertheless, it would be better to strengthen corporate social responsibility, provide the proper control of the HR management practices and utilize innovations extensively. Stakeholders consider Walmart to be a reliable partner and a socially responsible organization. Hence, the Company’s ability to improve its competitive advantage is based on continuous improvements in the areas like HR management, supply chain management, corporate strategy and exploitation of technology.

References

Arli, V., Dylke, S., Burgess, R., Campus, R., Soldo, E. (2013). “Woolworths Australia and Walmart US: Best Practices in Supply Chain Collaboration,” Journal of Economics, Business & Accountancy, 16(1): 1-12.

Barney, J. B. (2012). “Purchasing, Supply Chain Management and Sustained Competitive Advantage: The Relevance of Resource-based Theory,” Journal of Supply Chain Management, 48(2): 3-6.

Brea-Solis, H., Casadesus-Masanell, R., Grifell-Tatje, E. (2012). “Business Model Evaluation:

Quantifying Walmart’s Sources of Advantage,” Harvard Business School, Working Paper 13-039.

Kampf, C. (2007). “Corporate social responsibility: WalMart, Maersk and the cultural bounds of representation in corporate web sites”, Corporate Communications: an International Journal, 12 (1): 41-57.

Ngobo, P. & Jean, S. (2012). “Does store image influence demand for organic store brands?” Journal of Retaining and Consumer Services, 19(6): 621-628.

Walmart SEC Form-10k Annual Report. (2016). US Security and Exchange Commission. Retrieved from:<https://www.sec.gov/Archives/edgar/data/104169/000010416916000079/wmtform10-kx1312016.htm>

Form DEF-14A Proxy Statement. (2016). US Security and Exchange Commission. Retrieved from:<https://www.sec.gov/Archives/edgar/data/104169/000130817916000359/lwmt2016_def14a.htm>

Shankar, V., Inman, J. J., Mantrala, M., Kelley, E., Rizley, R. (2011). “Innovations in Shopper Marketing: Current Insights and Future Research Issues,” Journal of Retailing, 87(1): 29-42.

Appendices

Fig 1. Walmart Business Strategy

Fig. 2. Walmart segments

List of Figures

Fig. 1 Walmart Busienss Strategy. Walmart Official Website. Retrieved from:<http://stock.walmart.com/investors/our-strategy/>

Fig. 2. Walmart Segments. Retrieved from:<https://seekingalpha.com/article/240232-wal-mart-stock-priced-below-intrinsic-value>

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: March 29, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
Available at:

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 29, 2024]
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