Question

Please describe Walmart business environment and challenges the company faces in at least 2 pages.

**Please include sources**

Answer 1

Wal-Mart establishes a distribution channel that is hard to imitate. System gives the firm competitive advantage over the competitors. Distribution channels were very efficient and allowed for lower pricing. The company also develops unique resources like electronic data interchange (EDI) system that improves communication with suppliers and distribution centers and improves inventory control. Moreover, Wal-Mart everyday low pricing and organic foods policy is useful in developing the customer loyalty that drives the company’s growth. This consistency in price and service allowed Wal-Mart to establish a reputation of reliability. “No family should have to choose between food that is healthier for them and food they can afford,” said Bill Simon, president and CEO of Wal-Mart U.S. Indeed, Wal-Mart now is working with suppliers to bring fresh food with affordable price to customer. With this kind of ideas, the first lady of US, Michelle Obama has supported a five-year plan to make family especially children a healthy eating in order to reduce children obesity. There are some key elements that program follows: adding nutrition to food and reducing some unhealthy chemicals such as sodium; reducing unnecessary costs of supply chain like transportation, logistics, sourcing and build relationship with farmers in order to add more income for farmers and lower price for customers; helping customers to identify the healthier food option and to save customer’s time to choose the healthy products.First constraint is about criticism of Wal-Mart. The firm dealt with a torrent of lawsuits and issues regard to its workforce including low wages, poor working environment, sex discrimination, restriction in supplier. This criticism may impact its corporate reputation. The challenges here are how Wal-Mart can control the balance between low pricing system and employee benefits. Second constraint is when Wal-Mart tries to grow in global market. The company faced with differentiation in culture. The retail giant had some problems with consumers and had to make some adjustments. Some research says that Wal-Mart is behind the locals in their knowledge of taste. However, the road has not been without stumble, Wal-Mart has to analyze carefully before going overseas.

SWOT Analysis:

Strength

First strength of Wal-Mart is price. Compared to non- Wal-Mart grocery stores, Wal-Mart stores charged lower prices. For instance, a 2002 UBS Warburg survey of 100 grocery and non-grocery found that “Wal-Mart’s prices were 17-39% lower than competitors’ prices” (Currie and Jain, 2002 cited in Basker and Noel, 2009, p 981). In every Wal-Mart store, some products are shown as “Unbeatable” products with discount price for everyone, so it not necessity for customers to have coupon or promotion code. In addition, customers who met conditions of frequent-shopper program can be offered lower price with free “frequent shopper” cards.To achieve low cost strategy, Wal-Mart gained advantages due to its large and early investment in Information Technology which were applied to logistic, distribution, and inventory management. Wal-Mart was an “early adopter of bar-code technology” to help company control products better and save labour cost. In 1990, Wal-Mart launched “Retail Link” software which provided connection between distribution centres, suppliers and stores for sharing detailed inventory data so it makes product replenishment just in time. At store level, it introduced “Radio Frequency Identification” system to facilitate tracking shipment, inventory and sales. Moreover, Wal-Mart has its own the private satellite network communication.

Weakness:

Lower price means not good quality, services and convenience. However, customers are easy to forgive Wal-Mart for these drawbacks because its price is best compared to Target, Kmart. Wal-Mart uses multimedia to promote its image by transferring messages such as workers are happy during their working with Wal-Mart, citizens feel enjoyable to have Wal-Mart in their neighbourhoods. In fact, more and more communities try to resist Wal-Mart’s growth because its lower prices make customers away from other smaller business. Moreover, lawsuits by current and former workers against Wal-Mart of various illegal and unethical practices including not paying enough wages, requiring employees work overtime “after 10 p.m., workers were locked in the stores, no one could leave, even if they had an emergency”, missing meal break and treating employees humiliating. Therefore, lots of employees quit their job after working for Wal-Mart a few months resulting that “Turnover is particularly high at Wal-Mart compared to the retail industry as a whole-35 to 45 percent a year among full time workers; 56 percent among part timers”. Sex and race discrimination are considered a culture of Wal-Mart. About of 70 percents of sales associated are women and they get paid lower than men and excluded from higher position.

Opportunities:

For international expansion, Wal-Mart can enter into joint venture, merger, or acquisition with other retailers. The Wal-Mart stores website shows that it acquired Asda plc food chain of UK for $10.8 billion, Massmart in South Africa, Seiyu in Japan etc. Wal-Mart has started its operation in 15 countries including Mexico, Japan, Brazil, Italy, South Africa etc. since 1991 and the economies of Wal-Mart in countries outside US has grown significantly. Moreover, Wal-Mart tends to go to countries with a sizable middle class. (Wikerson, 2009)

Wal-Mart attempts for new business strategy by focusing more on services such as health care, banking, and broadband access aimed at its core customers. It helps to secure customers who are more loyal. (Gogoi, 2007)

Wal-Mart wants to save more organic foods for better and healthier life (Walmart Launches Major Initiative to Make Food Healthier and Healthier Food More Affordable, 2011)

Threats:

The New York Amsterdam news newspaper published on February 2011 has mentioned that employees were fighting Wal-Mart for their better working environment. Employees are in doubt of Wal-Mart promises like creating job, saving consumer money and helping business thrives because in fact, Wal-Mart offers low paying job with no benefits