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DISTRIBUTION AND PRICE MANAGEMENT OF WALMART

 

Table of Contents

1. Executive Summary. 3
2. Introduction. 4
3. Situation Analysis. 5

3.1      External Analysis. 5

3.2      Political Factors. 5

3.3      Economic Factors. 6

3.4      Social Factors. 6

3.5      Technological Factors. 7

3.6      Ecological Factors. 8

3.7      Legal Factors. 9

3.8      External Analysis Summary. 9

4. Industry Analysis. 10

4.1     Competitive Rivalry. 11

4.2     Threats from Substitute Products. 11

4.3     Threats to New Entrants. 11

4.4     Bargaining Power of Suppliers. 12

4.5     Bargaining Power of Buyers. 12

4.6     Industry Analysis Summary. 12

5. Competitor Analysis (2020) 13
6. Internal Analysis. 14
7. Conclusion. 16
8. Recommendation. 16
9. List of References. 18

 

 

 

Executive Summary

Walmart INC. is an American-based multinational retail company that manages a chain of hypermarkets, grocery stores, and discount departments. The company has been one of the leading retailers globally but is currently facing significant competition from other retail companies. Using the PESTLE analysis the report established that Walmart’s macro-environment has been determined by the apparent opportunities such as ecological, economic, social, and technological factors. Relatively, the threats affecting the company experiences have been propped by political and legal factors. Alternatively, the competitor analysis established that Walmart’s current position has been propagated by its illustrious brand. In line with the company’s internal analysis, the apparent strengths and opportunities are as a result of its unmatched scope and size while the threats and weaknesses are characterized by the current state of the global retail market. As a recommendation, it was proven that Walmart should capitalize on the present opportunities to increase its market share.

 

 

 

 

 

 

 

 

Introduction

Walmart Inc.’s pricing and distribution revolve around the situation of the industry, its strategic goals, and retail business. The adopted situation offers opportunities for the company to adopt effective marketing strategies that follow local, regional as well as international retail industry conditions (Banerjee, 2015). The company’s intensive growth strategy along with cost leadership generic strategy for operative competition influences the definition of its apparent marketing mix. Walmart’s pricing and distribution are linked to its strategic marketing choices as one of the largest retailers in the world. Respectively, the marketing strategy is the key strategic plan for the global growth of Walmart.

To further understand how Walmart operates, this report will describe the eternal as well as industry analysis for the depiction of opportunities as well as threats in conjunction with potter’s five forces and PESTLE analysis. The report will then describe Walmart’s competitor analysis to clarity its current position through distribution, financial, pricing strategy comparison with its competitors, and the utilization of the positioning map (Ellickson, 2016). Respectively, an internal analysis of the company will be conducted to establish its strengths and weaknesses followed by a summary of the SWOT analysis. The final step of this report will be reflecting on the recommendations obtained from the SWOT analysis to prop the business in establishing and maintaining a strong position in the global market.

 

 

 

Situation Analysis

External Analysis

An external analysis of Walmart needs to help identify both opportunities and threats. The analysis will include specifically political, economic, social, technological, ecological, and legal factors that affect its operations (Martínez, Galván and Alam, 2017).

Political Factors

Walmart INC. considers political determinants in the retail market, for the most part, accustomed to government policies (Seenivasan and Talukdar, 2016). In the company’s PESTEL analysis model, politically dynamic vested parties are relatively critical. There are three political external factors in Walmart’s local and international environment.

The first is political sustainability in major economies. Prior to extending its business to the international market, the management ensured that it was familiar with the political situation in a different locale (Seenivasan and Talukdar, 2016). By virtue that many of its targeted regions had good policies, the company has the opportunity to expand its network to these regions. Analysts suggest that this factor has helped the company to gain universal recognition hence supporting its apparent growth.

The second entity is political support from various governments. Walmart’s mode of operation has been deemed as an effective tool in the modern business market and many countries have permitted the company to conduct its business overseas. This opportunity has not only established good relations with its stakeholders but also helped the company to attain significant revenue (Banerjee, 2015). Nevertheless, there are countries such as China, through its political policies, which have imposed have imposed hefty taxes for importing this business. These actions, instigated by the economic rivalry between the U.S. and China, have threatened the company’s wages. Reports from analysts suggest that the current remote factors indicate that the company ought to address the threats associated with the high wages. This threat should be addressed effectively since it burrs the cost maximization essential in the company’s cost leadership generic strategy.

Economic Factors

Walmart INC. is under momentous pressure from the economic changes present in the current market. Any change in economic policies directly leads to an alteration in Walmart’s revenues. From the PESTLE analysis model, Walmart is influenced by three remote factors. The first is the stability of major global economies. Scholars have established that the current economical state of many developed and developing countries is relatively stable. This suggests that the purchasing power of many potential clients is relatively high (Ellickson, 2016). Ostensibly, Walmart has embarked on this opportunity to increase revenue from its sales. The second factor is the continued economic growth of developing nations. This has provided a big market for Walmart to invest in and reap the benefits. The third factor is decreasing rate of unemployment in the United States. Owing to the increase in employment opportunities, many American citizens can comfortably buy consumer products. This aspect has presented Walmart with the opportunity to maximize its sales in the local market.

Social Factors

The social, also known as the sociocultural factor established in Walmart’s business environment instigate consumer perception as well as preferences. In line with the PESTLE analysis, three factors affect the social external factors in Walmart’s macro-environment.

Studies indicate that the global demand for healthy living has increased sporadically. This has been propagated by the human desire to stay fit and avoid illnesses that affects a person’s financial status. Healthy lifestyle trends have provided the company the opportunity to sell merchandise associated with healthy living (Martínez, Galván and Alam, 2017). From healthy food to exercising tools, the company has recorded an increase in sales suggesting that the firm will be able to sustain its consumers and itself. Another social aspect is the increase of cultural diversity in many developing and developed nations. In 2020, analysts were able to determine an increase in cultural diversity to 45% from 20% nearly a decade ago. The increase in cultural diversity has enabled Walmart to open more franchises in different countries to satisfy the increasing demand for consumer products. Lastly, urban migration has also contributed to the success of Walmart. In the U.S. Urban migration has been increasing steadily to over 80% in 2020, down from 60% in 2010. This upward trend suggests that the market for consumer products would be even higher in the next decade.

Technological Factors

With the current increase in technological inventions, it would be paramount for Walmart to invest in technological models that would impact its competitive landscape (Martínez, Galván and Alam, 2017). This opportunity will allow the firm to exploit new ventures that not only incur profits to the company but also support consumer experiences.

Another initiative that Walmart should bank on the availability of big data analytics. This program has enabled many retailers such as Coca-Cola, Amazon, etc. to effectively manage their data. Big data analytics would enable the business to protect both its interests and that of its customers.

Similarly, the usage of mobile devices in the current age has increased significantly. In 2020, analysts indicated that the number of mobile users stood at 3.6 billion, down from 3.4 billion in 2019. Furthermore, the number is expected to increase to 4.3 billion in 2023. With a majority of people using mobile gadgets, the chances of online shopping would increase (Ellickson, 2016). Since Walmart has an established e-commerce system, the probability of attracting potential clients would also increase allowing the company to increase its revenue.

 

Fig 1: Number of mobile owners

Ecological Factors

The environmental or ecological factors associated with Walmart’s business plan relate to environmental concerns. Globally, the issue of environmental conservation is considered a popular principle (Banerjee, 2015). Walmart has been at the forefront of promoting a green environment by offering an environmentally friendly product. This venture has helped the company to increase its marginal returns.

To achieve business sustainability, the firm must enhance operational efficiency. By using technological inventions that support a green environment Walmart will be more efficient in business. Alternatively, the company should enhance policies and standards of products that are to be sold in its retail stores.

Legal Factors

Similar to other forms of business, Walmart is subjected to a mirage of requirements established by laws and regulations. In line with the company’s PESTLE analysis model the apparent external factors mostly impose limitations on major retail firms (Seenivasan and Talukdar, 2016). One of the factors considered in this entity is food safety regulations which determine the production, trade as well as handling of the food. Currently, Walmart has the most effective food regulation policies which have made it a favorite for potential consumers who desire food products. This factor has enabled Walmart to increase its revenues.

Another legal factor affecting Walmart’s macro-environment is employment regulations. Walmart has been able to utilize this opportunity by employing a diversified taskforce. This venture has helped Walmart to become more effective in terms of offering ample services (Seenivasan and Talukdar, 2016). Respectively, this move has enabled the business to be considered as the most unbiased working environment, which has attracted adept workers from all over the world. However, the newly initiated tax reforms both locally and internationally have threatened its upward progress. Many nations have imposed hefty taxes for multinational companies making them susceptible to incurring losses.

External Analysis Summary

All the stated economic factors suggest that Walmart ought to exploit the apparent opportunities on a global scale. Regardless, the company should focus more on emerging economies considering that the demand for goods and services from retail businesses would increase exponentially.

The proposed social external factors present significant opportunities for Walmart INC. With this, the firm can enhance its array of healthy consumer products. Also, the company can increase the variety of products to satisfy different cultural preferences. In connection to this, Walmart could adjust its marketing strategies to exploit the ever-increasing consumer demand in both the local and international markets.

Regarding technological factors, Walmart can enhance its investments in the three fields. By exploiting the opportunity in the usage of mobile devices, the firm ought to boost its online platforms. Online sell and online marketing will increase the company’s revenues.

To achieve business sustainability, the firm must enhance operational efficiency. By using technological inventions that support a green environment Walmart will be more efficient in business. Alternatively, the company should enhance policies and standards of products that are to be sold in its retail stores

With legal factors, tax reforms have imposed a potential threat to the progress of Walmart owing to the proposed high tax rates. Nevertheless, the company has to capitalize on food regulations as it will provide a niche for improving one’s quality standards. Similarly, supporting its human resource management practices will enable Walmart to exploit opportunities related to employment regulations.

Industry Analysis

Evaluating the industry that Walmart operates is another vital assessment that is required for an insight into business attractiveness (Lu, 2019). In this case, Porter’s five forces will be utilized to examine factors such as threats of new entrants, competitive rivalry, bargaining power, the threat of substitutes, and bargaining power of suppliers.

Competitive Rivalry

Currently, the competition for market share in the retail industry is relatively high. Despite having a big market share of 26% in the global retail industry, Walmart has been experiencing significant pressure from a competitor such as Costco with 17.7% and Kroger 10%. Additionally, there has been an influx in the number of new retailers in the market hence increasing the level of competition (Tan et al., 2018). However, Walmart has imposed significant strategic decisions such as being aggressive and increasing more stores hence making it successful in determining its rank in the global market as one of the best retailers.

Threats from Substitute Products

Walmart INC. is among the leading retailers dealing with diversified items and offers a wide variety of each product. The firm deals with multiple categories such as home furnishing, house appliances, apparel, accessories, stationery, hardiness, pharmacy, health, hardware, groceries, and entertainment (Colacicco, 2018). Currently, the threat to substitute products is weak as well as irrelevant for a company like Walmart, which has a wide range of items, to experience a laxity in the retailing process. Nonetheless, there are other competitors such as Target who are operating under the same Walmart and could easily attract consumers.

Threats to New Entrants

The current percentage of new entrants into the retail business stands and 19%. Despite the ever-increasing number of start-up ventures, the pressure exerted on big companies like Walmart is relatively low. This is because Walmart had established its brand and it will take huge investments for new companies to rival the brand (Lu, 2019). Currently, the company has the biggest as well as efficient distribution networks, with an effective supply chain. For a new entrant to reach these standards, they will have to set aside huge investments to secure ample skilled personnel and human resource to manage them.

Bargaining Power of Suppliers

In Walmart’s case, the bargaining power of the suppliers is negligible, mostly because of the size and scope of the business. The company has always tried to set the least possible prices for the products they acquire from suppliers. This initiative was considered as it promised to sustain the cost of management and gain a competitive advantage. In 2015, Walmart paid $3.5 billion to its suppliers (Colacicco, 2018). Other than selling the products a low price, every Walmart supplier is required to adhere to some requirements that are linked to food safety, employee health, employee insurance, and other factors. All in all, the company has been able to maintain a good relationship with its suppliers hence being considered first before others are given similar items.

Bargaining Power of Buyers

With Walmart, the bargaining power of its buyers is low, since individual consumers hardly go for big purchases. In line with conveniences as well as prices of shopping are the key factors which reduce the buyers bargaining power. For customers, the switching costs are rather live despite finding the same products at lower prices and more conveniently (Lu 2019). As for Walmart, the set pricing strategy shrinkages the buyer’s bargaining power. Therefore, individual customers exert little or no influence on the brand.

Industry Analysis Summary

To summarize, Walmart experiences a strong rivalry. Although the firm still leads in the retail business the firm needs to set up measures that will enhance its competitive advantages. As for the buyer’s bargaining power, Walmart is experiencing a weak force. The prices set by the company further weakens the bargaining power of clients. As for the suppliers, the forces exerted on Walmart are also low (Colacicco, 2018). The increased number of suppliers makes it challenging for monopolistic suppliers to affect Walmart’s strategic growth. The threat of substitutes is also very low. Walmart’s capability of increasing the variety of items has not been countered by any start-up company. Ultimately, the threat to new entrants is also low considering that Walmart had already established its brand.

Competitor Analysis (2020)

Company	Market Share	Positioning	Sales	profits	Revenue
Walmart	26%	Low price High quality	$559 billion	$129 billion	$520 billion
Amazon	37%	Low price High quality	$125,56 billion	$21.33 billion	$368 billion
Costco	17.7%	High price High quality	$163.22 billion	$21 billion	$163 billion
Kroger	10%	High price High quality	$132.5 billion	$2.6 billion	$122 billion
Walgreens	18.9%	Low Price High quality	$141 billion	$28 billion	$139 billion

 

From the above data, Amazon appears to be having a significant mark share of 37 as compared to Walmart’s which stands at 26%. This is a clear indication that Walmart is facing high competition in the retail market. On sales, Walmart appears to have outdone its competitors and $559 billion while Costco, its closest rivalry standing at $163.22 billion. Similarly, Walmart also outperformed its competitors by registering a net profit of $129 billion while Walgreen’s was $28 billion.

Internal Analysis

Walmart’s internal analysis will not only focus on its strengths and weaknesses but also how its resources are compared to that of its competitors and how the company has been able to manage as well as develop sustainable resources. Therefore, an internal analysis is paramount for the company to stain and thrive in competition as well as develop its resources. Walmart’s internal analysis will be described using strength, weaknesses, opportunities, and threat (SWOT) analysis.

Strengths

In this area of the SWOT analysts, the company’s strengths are linked to the scope and size of the business. The suggested competitive strengths enable Walmart to withstand any threat irrespective of its weakness as a low-cost retailer (David et al., 2019). To maximally exploit the global expansion opportunities, the company’s strengths for future growth have been pegged on global organization scale, high efficiency in the supply chain, and global supply chain. Walmart’s size offers the company the opportunity to acquire more revenue and support its growth as well as expansion. The global supply also helps the business to be resilient from market-specific risks, like delays in the local supply chain.

Opportunities

The opportunities for Walmart are mainly related to expansion and enhancing the business practices (Xinyang, 2019). The apparent opportunities are linked to the current global economic situation. Some of the opportunities presented for Walmart include expansion of markets in developing countries, upgrading in the quality standards, and improvement in the labor market.

Weaknesses

The company’s weaknesses foist challenges on its ability to contain any threat in the business environment (Nwagwu, 2020). The weaknesses are directly linked to Walmart’s generic strategy and its impact on business development, profit margins, resources, and capabilities. Considering that Walmart still uses the generic leadership strategy, it could hardly avoid the following weaknesses, easily copied business model, thin profit margins, and competitive disadvantage in the presence of high-end sellers.

Threats

Walmart’s threats are connected to the retail market condition as well as alterations in consumer perceptions regarding the products being bought. These factors ought to force Walmart to introduce some competitive strategic factors (Nwagwu, 2020). The threats affecting Walmart include online retailers with relatively big size and market scope, aggressive competition, and healthy lifestyle trends.

Internal Analysis Summary

Walmart’s size offers the company the opportunity to acquire more revenue and support its growth as well as expansion. The global supply also helps the business to be resilient from market-specific risks, like delays in the local supply chain.

Using the cost leadership strategy will always affect the profit margins of the company. Thus strategy also makes Walmart’s business model easy to duplicate and enhance it hence making startup companies gain a competitive advantage over it.

A healthy lifestyle trend has been a threat and an opportunity. A majority of the company’s goofs are considered to be unhealthy, inorganic, or unnatural, hence threatening the business. Conclusively, the SWOT analysis determines that the company ought to focus more on using its strengths to exploit the apparent opportunities in the retail market. The company’s weaknesses, as well as strengths, should be its secondary priorities.

Conclusion

In conclusion, the external environment helped to identify the opportunities and threats surrounding Walmart’s macro-environment in conjunction with the political, economic, social, technological, ecological, and legal factors that affect its operations. With the availability of a technological system, stable government, and a growing economy, Walmart has a significant opportunity to expand its operations in the global market. Competitor analysis helped in substantiating Walmart as a string competitor considering its strong financial performance against its rivals. Lastly, the internal analysis revealed Walmart’s strengths to be attached to a renowned brand.

Recommendation

In recommendation Walmart ought to focus more on using the suggested strengths to exploit any opportunity present in the global retail environment, Walmart’s strength of brand awareness is a key to contain the threat of buyer power, considering that the brand is well established. Therefore, the company can take the advantage of its recognition by increasing product distribution through marketing camping on its websites and other social media platforms.