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Friday, July 29, 2011

Essay on SWOT Analysis of Wal-Mart

There is no question that Wal-Mart is still the biggest retailer in the United States.  It is also one of the biggest corporations in the world today.  However, it does not take a genius to recognize the fact that it is no longer the highest earning retailer. Economic observers say Wal-Mart’s growth has slowed down.  After decades of operation, it would seem that Wal-Mart’s glory days are over.  According to Anthony Bianco (2007), Wal-Mart, which has been around for 45 years, will eventually struggle to sustain its growth rates (p.2).  He added that: “In Wal-Mart's case, this difficulty is exacerbated by its great size and extreme dominance of large swaths of the U.S. retail market. Wal-Mart already controls 20% of dry grocery, 29% of nonfood grocery, 30% of health and beauty aids, and 45% of general merchandise sales” (Bianco, p.2).

Has Wal-Mart saturated its market? Is there no more room for future growth? Has Wal-Mart reached its limit? I do not think so.  Wal-Mart still has the brand name, capitalization, size, legacy and history to dominate its competition.  To continue its dominance, Wal-Mart has to evaluate itself.  It has to know its strengths and its weaknesses.  It also has to know the external environment, including the existing opportunities and threats.  Knowing how to respond to these changes will help it compete better.  It has to employ the right strategies to be able to utilize these strengths and remedy its weaknesses, take advantage of its opportunities and limit the threats to continue to thrive in the extremely competitive retail industry.

A.  Strategies to Take Advantage of Opportunities
In time of economic difficulties and uncertainty, more consumers from low-income groups to middle-income groups and even the high-income groups are expected to flock to Wal-Mart.  In fact, economic experts say that Wal-Mart is in a good position to succeed not only within the short-term but also in the long-term.  This is affirmed by Lee Scott, Wal-Mart’s president CEO, who said that Wal-Mart will even become “a tougher competitor” in these times (Anne D’ Innocenzo, 2008, p.1).  Wal-Mart has been using the same strategy ever since Sam Walton opened the Five and Dime which is to lower its prices.  It has continued with its “Everyday Low Prices” strategy which has endured the tests of time.  It is even expected that this strategy may work better nowadays.  According to MMR (2008), Wal-Mart seems to be unaffected by the tough economic conditions as it continues to rake it earnings better than the previous fiscal year, to wit: “For the fiscal year ended January 31, 2008, Wal-Mart posted net earnings of $12.73 billion, up from $11.28 billion in the preceding year. Overall revenue rose 8.6% to $378.8 billion from $348.65 billion a year ago, while net sales rose to $374.53 billion from $344.99 billion.” (p.1)

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The company, however, should not rely exclusively on its “Everyday low prices” strategy.  It has to continue giving its consumers more benefits and more advantages.  It bears stressing that its other competitors have been able to reduce their price difference with Wal-Mart.  This gave them the opportunity to compete with Wal-Mart better.  One of the strategies that Wal-Mart can employ which will generate savings for them is to remodel its existing locations and to create smaller centers and stores.  It will be better for the company to slow down on its expansion of bigger supercenters and instead focus on building smaller stores.  What is important here is that these stores are nearer to the communities and will be able to offer to the consumers the basic commodities.

Because economic difficulty is a world-wide phenomenon, it will be better for Wal-Mart to look for potential locations overseas for expansion.  In fact, international expansion has been one of the company’s strategies that started early in the 1990’s.  This is considered as one of the company’s key decision that will continue to propel its growth.  It is even said by Wal-Mart executives that it may be possible that in the future, Wal-Mart’s revenues and profits from its international operations may even exceed its revenues in its US operations.  According to Mya Frazier (2007), Wal-Mart has been operating in developing countries such as Brazil, Russia, India and China where it operates either in its own brand name or in different brand names. 

B. Strategies to strengthen weakness
One way to counteract the effect of the decrease in value of Wal-Mart’s shares because of its anti-union and anti-employee policies is to develop a strong public relations campaign to improve its relationship with the public.  Wal-Mart has been running PR campaigns in the past and they have benefited from it.  In 2006, Forbes Magazine reported that 20% of the consumers think that Wal-Mart is the most socially responsible corporation (Matt Woosely, 2006, p.1). 

Wal-Mart, currently, is supporting programs that strengthen communities and provide them with better opportunities for the purpose of enhancing economic development.  Among the recipients of the economic assistance was Technical College of Lowcountry (TCL) which received $86,000 grant from Wal-Mart Foundation Inc (US Newswire, 2008, p.1).  The TCL is only one of the community colleges nationwide that Wal-Mart Foundation seeks to extend assistance.  It plans to give out grants totaling $2 million in direct funds and technical assistance.  Also, Wal-Mart Foundation recently partnered with the Food Bank Association of New York and granted the latter $577,000 to further its humanitarian objective (PR Newswire, 2008, p.1). These strategies will help improve Wal-Mart’s image in the public.

These PR campaigns may provide short-term benefits for the company and endear Wal-Mart once more even to the public and some advocacy groups.  However, it is suggested that the most effective PR campaign that Wal-Mart can employ is to improve its human resource policies.  Changes will have to be made primarily with its treatment of women by providing them with equal terms and conditions of employment.  If their women employees perform the same or substantially the same nature of work, then there should be no reason to pay them less than men.  Changes will also have to be made with its compensation policies.  Wal-Mart has long been criticized for its anti-employee policy of providing rock-bottom wages to its employees, failure to pay additional compensation for overtime work, and lack of health-care benefits.  A company which desires to improve its corporate image and which aims to promote long-term changes should address the problem at its roots.  In the case of Wal-Mart it can only be done by improving its human resource policies.
Another strategy that may aid Wal-Mart in its quest for continued growth is to limit its expansion rates.  In its desire to achieve its target of opening new stores and supercenters, Wal-Mart has committed the mistake of failing to give enough spacing for each supercenter.  In effect, existing Wal-Mart supercenters are competing against each other (Bianco p.3).  As a result, these new supercenters are not making enough sales to offset the costs of building and constructing them.  It even has affected its reputation and hurt its image because others think that Wal-Mart’s customers have transferred to its competitors.  As a solution, Wal-Mart should take into account, constructing smaller grocery stores.  With proper storage facilities and efficient store management, Wal-Mart can place in these smaller stores enough supplies needed by its customers without having to spend so much for its construction. 

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