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Strategic Audit for Walmart, Essay Example

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Strategic Highlights of Wal-Mart Corporation’s Key Area Strengths

Key Area	Specific Activities
Administration	· Implementing management information systems · Dealing with legal problems and solutions
Costs	· Building new supercenters; new asset procurement · International growth and globalized negotiations
Customers	· Providing inexpensive, quality products · Establishing long-term customer relationships
Growth	· Opening new locations internationally and in U.S. · Increasing assets and decreasing total liabilities
Employees	· Selecting and training sales people, clerks, and managers · Increasing employee benefits upon public outcry
Marketing	· Engaging in-print advertising and TV promotion efforts · Recognizing customer needs; conducting market research
Production	· Improving manufacturing processes and policies · Maintaining and enhancing quality control

Finances

Total assets of continuing operations including cash, receivables, inventories and other tangible assets in 2009 was $163,234,000,000 as compared to $162,547,000,000 in 2008
Net sales for 2009 has increased to $401,244,000,000 which is a 7.2% increase in net sales from 2008
Increase in net sales is the lowest increase from previous year in over 5 years
Long-term debt has increased every year since 2005 to a total of $31,349,000,000 in 2009
Current liabilities of continuing operations has decreased from $58,338,000,000 in 2008 to $55,307,000,000 in 2009

Physical Assets

Discount stores have continued to decrease ever year since 2005 in lieu of an increase in supercenters offered in the United States
International store units have also significantly increased each year since 2005
Sam’s Clubs have also increased, although only marginally in 2009 from 591 to 602 stores in the United States
Wal-Mart continues to decrease costs in unnecessary or unproductive physical store locations to promote international growth and implementation of supercenters that increases profits

SWOT Analysis

Strengths

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.

Wal-Mart has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA).

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.

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

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.

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.

The company is global, but has has a presence in relatively few countries Worldwide.

Opportunities

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.

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.

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.

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

Threats

Being number one means that you are the target of competition, locally and globally.

Being a global retailer means that you are exposed to political problems in the countries that you operate in.

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.

Source: MarketingTeacher.com

Opposition

A 2007 study found that the opening of a single Wal-Mart store lowers average retail wages in that county nearly 1%. In the general merchandise sector, wages fell by 1% for each new Wal-Mart. And for grocery store employees, the effect of a single new Wal-Mart was a 1.5% reduction in earnings.
In October 2004, the United States Federal Government sued Wal-Mart for violating the Clean Water Act in 9 states, calling for penalties of over $3 million and changes to its building codes.
Opponents argue that Wal-Mart does not help people at home because 70% of the commodities sold in Wal-Mart are made in China.
According to Wal-Mart press releases, Wal-Mart salaried associates earned $207.6 million and $206.6 million in 2007 and 2006, respectively, towards their 401k and profit sharing plans. That’s about 23% of total contributions that go to managers and non-hourly associates. Meanwhile, Wal-Mart pays hourly employees roughly $9-10 per hour, which only attributes to roughly $19,000 annual income.

Source: WakeUpWalmart.com

Conclusions

Wal-Mart is able to provide hundreds of quality products to its millions of customers in the United States and internationally. Continued growth has been seen in total assets and financial profit margins. However, long-term debt also continues to increase. Opponents argue against Wal-Mart for its international import reliance upon China and for not providing quality employee benefits to hourly workers, while rewarding salaried or non-hourly employees. SWOT analysis provides information that Wal-Mart is likely to continue to grow through increased asset procurement and lower prices than most retail companies. These practices have forced competitors to change their ways and ultimately the strategy has caused many companies to close or file for bankruptcy due to inability to compete. Long-term strategy to decrease costs and improve upon international and local opportunities provides Wal-Mart with an excellent opportunity to continue to receive advanced growth opportunities and increase profit margins.

References

Compensation.BLR.com. (2004, January 14). Internal Wal-Mart audit finds possible violations. Retrieved from http://compensation.blr.com/news.aspx?id=153576

MarketingTeacher.com. (n.d.). SWOT analysis Wal-Mart. Retrieved on October 14, 2009, from Web site: http://www.marketingteacher.com/SWOT/walmart_swot.htm

WakeUpWalmart.com. (n.d.). The Real facts about Wal-Mart. Retrieved on October 14, 2009, from Web site: http://wakeupwalmart.com/facts/

WalmartStores.com. (2009). 2009 Annual Report. Retrieved on October 14, 2009, from Web site: http://walmartstores.com/download/3661.pdf