Business Model of Walmart ~ Business Plan, Revenue Model, SWOT Analysis

Introduction

Walmart operates a worldwide network of retail stores as well as an e-commerce business. The company is known for its “everyday low prices” strategy in selling a wide variety of merchandise, including home goods, apparel, electronics, food, and more. The Business Model of Walmart involves its business plan, revenue model, its competitors, SWOT Analysis and many more.

The core pillar of Walmart’s success is its business model. Sam Walton had focused on some key factors when he laid the foundation of Walmart and one of them was managing operations and prices in a manner to benefit the customers the most.

Business Plan

Walmart’s strategy is to make every day easier for busy families, operate with discipline, sharpen their culture and become digital, and make trust a competitive advantage. Making life easier for busy families includes our commitment to price leadership, which has been and will remain a cornerstone of their business, as well as increasing convenience to save our customers’ time. By leading on price, they earn the trust of our customers every day by providing a broad assortment of quality merchandise and services at everyday low prices (“EDLP”). Everyday low cost (“EDLC”) is Walmart’s commitment to controlling expenses.

Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

It comprises three major categories:

Retail,
Wholesale
And other

These categories consist of many formats, including:

Supercenters,
Supermarkets,
Hypermarkets,
Warehouse clubs (including Sam’s Clubs) and cash & carry,
As well as eCommerce.

Sam’s club is the third and final segment of the business model of Walmart, which operates in 44 states in the U.S. and Puerto Rico. This segment takes care of membership-only warehouse clubs. It also works the samsclub.com. They provide a subscription service to individual customers as well as business owners.

Revenue Model

The revenue avenues of the business model of Walmart include an array of products and services for the individual in the U.S. as well as internationally. They have a range of these commodities and amenities. Walmart only provides segment profits measured by operating income, which is a profit metric that excludes several expenses, such as taxes and interest on loans, that are included in overall profit, called net income.

Competitors

Being on the top isn’t a cakewalk. Here is the list of some of the competitors of Walmart.

Alibaba Group Holding Limited
Amazon.com
Best Buy Co.
Costco Wholesale Corporation
Kmart Corporation
Schwarz Group
The Kroger Company
Target Corporation
Walgreens Boots Alliance

SWOT Analysis

Strengths

Brand recognition – With millions of customers visiting Walmart every day, it is the most recognized retail brand in the world. There are over 60 million items available at the Walmart online store. According to Forbes Global 2000, Walmart is ranked 19th globally and is the largest public company in the world in terms of sales with a whopping $524.40 Billion in revenue for FY2020.
Global expansion – Walmart has recently purchased ASDA, the UK based retailer and Indian e-commerce giant Flipkart. Besides, it has created a joint venture with India’s biggest retail store Bharti. These global expansions have proven to be a great success for the company.
‘Every Day Low Prices’ strategy – Walmart is based on economies of scale agenda that’s why it can offer low prices. It has fixed costs for thousands of products. Thus, it’s one of the cheapest shopping places in the world.
Global supply chain and logistics system – The distribution and logistics systems are the core competencies of Walmart. It uses Information Technology (IT) to efficiently monitor the performances of every product in each store in each country.
Effective resource management – Walmart efficiently manages its resources including information systems, supply chain networks, distribution facilities, knowledge, and other skills. It has excellent operations in all the locations.
Strong market power over suppliers and competitors – Its large organizational size and global reach have made Walmart capable enough to exercise market power over suppliers and competitors.

Weakness

Employee treatment and working conditions – Walmart has received criticisms and lawsuits several times regarding its workforce. Low wages, inadequate healthcare, and poor working conditions are few of the issues that have been publically criticized.
Large span of control – Its highly extended size and massive span of control could leave Walmart weak in some areas.
Gender discrimination – A lawsuit was filed against Walmart in 2007 that allegedly claimed gender discrimination in job opportunities at Walmart. Female employees are discriminated in regards to promotions and pay scale as per this lawsuit.
Employee safety concerns – Walmart is being sued for disregarding safety measures during the recent health crisis leading to the death of two employees.
Overdependence on the US market – As of April 2020, Walmart has about 11,500 stores globally and 4,700 stores are located in the US. Its global sales amounted to around $120 billion compared to $341 billion from the U.S. market.
Negative publicity – Walmart’s reputation was tainted by the allegation of bribing foreign officials in Mexico, China, and so on. In 2019, it agreed to pay $282 million to settle the bribery case.

Opportunities

Expansion to other markets – Walmart can gain the opportunity by expanding its business to the markets which are not yet ventured. These may include China, Middle East countries, and Latin America.
Strategic alliances – Walmart has the opportunity to create strategic partnerships with major firms or merge with other global retailers. Acquisitions of small companies can also be a profitable opportunity for Walmart.
Enhancing human resource practices – Bringing advanced improvements in human resource practices can be a favorable opportunity for Walmart. As it highly relies upon its workforce, bringing innovation in its human resource management is a crucial opportunity.
Improving quality standards – Low-cost products render low quality sometimes. Walmart has the opportunity to enhance the quality standards of its products to address the health concerns of consumers.
Strengthen online sales – The number of consumers shopping online has increased drastically in the recent past. Walmart can strengthen its online sales channels to exploit this opportunity. In July 2020, Walmart announced that it will lead a $1.2 billion investment in its e-commerce unit Flipkart based in India.

Threats

Impeach 45 Controversy – Recently, Walmart was publicized for “Impeach 45” controversy. It sold T-shirts printed with the words ‘Rope. Tree. Journalist. Some Assembly Required’. These shirts claimed to imply promotion of violence. However, Walmart overturned the controversy claiming that the T-shirts were sold by third-party sellers on Walmart’s Marketplace instead of Walmart itself.
A primary target of competition – The world’s largest grocery retailer, Walmart is always a primary target for competitors. Target, its direct competitor, offers similar products but with higher quality. Similarly, Costco offers customers to buy items in bulk. Additionally, these companies have a relatively good reputation for treating their employees well compared to Walmart. Both companies are also publicly supported in these areas.
Political and legal Issues – This is also a threat to Political and legal affairs can always hinder the company to operate in some countries.
Small-scale online e-commerce companies – Many small-scale and individual online selling companies have entered the market offering similar products at similar prices on their websites. It can be a threat to the company’s future standing.
Technical issues on the website – Customers have complained many times that there are some technical issues with Walmart’s website. The products are not listed in an organized way on the website, and it runs slowly. However, Amazon is known for its fast, effective, and organized website, making an excellent online shopping experience for customers.

Conclusion

The company has made its mark over the entire world with 11389 stores worldwide. This proves that the strategies supporting the company are working in harmony to achieve the revenues and provide high returns on all the money and hard work invested. All the efforts help the business model of Walmart to “develop, open, and operate units at the right location and to deliver a customer-centric omnichannel experience.