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Wednesday, June 4, 2008

SWOT Analysis -Wal-Mart .

V.Ratheeswaran

Diploma in Business Administration

(Student No –DBA 0707119)

Cyberlynx International College

June 03, 2008

SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. Normally firms use SWOT analysis to develop a competitive

Advantage.

Wal-Mart .

Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S. It also owns and operates the North American company of Sam's Club.

Wal-Mart operates in Mexico as Walmex, in the UK as ASDA, and in Japan as Seiyu. It has wholly-owned operations in Argentina, Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's investments outside North America have had mixed results: its operations in South America and China are highly successful, while it was forced to pull out of Germany when its venture there was unsuccessful.

Wal-Mart has been criticized by some community groups, women's rights groups, grassroots organizations, and labor unions, specifically for its extensive foreign product sourcing, low rates of employee health insurance enrollment, resistance to union representation, and alleged sexism.

Strengths.

A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage.

  1. Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.

  1. Wal-Mart has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA)
  2. The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.
  3. A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.

Weaknesses.

The absence of certain strengths may be viewed as a weakness.

  1. Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
  1. Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.
  2. The company is global, but has has a presence in relatively few countries Worldwide.
  3. In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities.

The external environmental analysis may reveal certain new opportunities for profit and growth.

1. To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.

2. The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.

3. New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centres, to local and mall-based sites.

4. Opportunities exist for Wal-Mart to continue with its current strategy of large, super centres.

Threats.

Changes in the external environmental also may present threats to the firm.

  1. Being number one means that you are the target of competition, locally and globally.
  2. Being a global retailer means that you are exposed to political problems in the countries that you operate in.
  3. The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat.

  1. 'Wal-Mart Stores, Inc. is the world's largest retailer, with $256.3 billion in sales in the fiscal year ending Jan. 31, 2004. The company employs 1.6 million associates worldwide through more than 3,600 facilities in the United States and more than 1,570 units . . .more?

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