Wal-Mart stores operate retails stores in many locations globally. In the US, the retail formats operated by Wal-Mart, include discount stores, supercenters, neighborhood markets, marketside and Sam’s Clubs. The company is the largest retailer with unprecedented scale which will enable it to maintain its market position and continue to gain marker share from competitors. With over 2 million employees, rising labor and healthcare, costs will significantly affect Wal-Marts profitability in the future
Strengths–A market leader with unprecedented scale gives a competitive advantage Low cost leadership enabling Wal-mart to offer products at low price points Internationalization strategy–a strong foundation for growth as the US market matures Wal-Mart is the largest retailer in the world. The scale of its operations is unprecedented and there is no competitor of comparable size. the company has been expanding its clout; international operations contribute between one fourth and one half of these metrics. Wal-mart US is an integral part of consumers’ budgets. Wal-Mart offers a large variety of products Its dominant position and range of products allows the company to quickly shift the product mix to meet demand and benefit from increased sales.
Weaknessess–Big box retailing format led to low penetration into urban areas Litigation affect labor relations adversely Target’s superior merchandising capabilities to appeal more to the customers as the US economy revives Trends now suggest that big stores are less attractive. The housing market crash also means new neighborhoods are not springing up to support retails centers. Smaller formats might not be able to complement the current business model of Wal-Mart Wal-mart has been facing several charges of law suits with respect to labor relations. In FY2009 the company settled 63 wage-and-hour class action lawsuits.
Opportunitites—Outperformance of the retail sectors in emerging markets Concentration on grocery and food will benefit as eating at home, health and wellness trends continue to emerge Wal-Mart has presence in several emerging economies and the positive retail trends in these economies will positively impact revenue growth. Asia’s retails sales are estimated to increase with China driving the growth. Wal-Mart’s bigger focus during the downturn has been on wringing out costs to drive down prices. Wal-Marts low income core, customers are paying with food stamps and unemployment benefits than a year ago. Eating at home and eating healthy are important trends that are likely to increase the demand for grocery.
Threats—Two million employees increases exposure to increasing wages and high healthcare costs Volatility in commodity prices and cost inflation will pressurize margins The labor costs for companies have been rising as the healthcare costs and wages increase in the recent times. Tight labor markets, increased overtime, government mandated increases in minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs. The inflation for producers has been increasing at a faster pace than consumer’s inflation leading to higher costs for producers. The cost inflation returned and the food and grocery industry has little pricing power, the factors whic have been pressurizing margins.
The company will gain competitive advantage through meeting the demands of the consumers that it supplies, as well as expanding to different areas of the world. Wal-Mart although a huge retail center must be able to open markets in places that are not necessarily able to complement the area by thinking of ways it can. In order to maintain and or exceed their competitive advantage, Walmart must keep with up and be creative in ways to exceed their current demands for different products.