Presentation

Final Project Paper – Walmart

Logan Tran, Xushan Li, Jazmine Lugo, Alyssa Byone

Department of Business Economics, California State University of Fullerton

MGMT 449

Professor Tsuhsiang Hsu

08/01/2023

Section 1

Indicate the company’s name and line of business, and define the industry in which it competes.

Walmart Inc was founded in 1962. It is a multinational retailer with its origins in the United States.Apart from the retail business, Walmart also engages in supplying products wholesale. Walmart is famously known for its everyday low prices through the various assortments of services and products it offers to consumers. Walmart United States segment operates as a consumer product merchandiser through various brands, for example, Walmart Neighborhood Market Brands, e-commerce brands, and the company has the Sam’s Club segment which is a member-only chain or retail warehouses.

Walmart is in the retail industry and is identified as an economic sector that focuses on selling products and services to consumers for household or personal use. There are a variety of retail stores globally, for example, department, leisure and sports, convenience, home, and furniture, Do It Yourself (DIY), and discount and electronics stores. With the onset of the internet, retail stores have moved online through e-commerce platforms, the biggest being Amazon with a significant market share. As a driver of the economy, the retail industry plays a significant role in offering millions of Americans employment, for example, Walmart currently has over 2.3 million employees.

Report the financial performance of the company within this business over the past five years.

For the past five years, Walmart has shown an overall positive financial trend. The table below shows a summary of financial performance from 2019 to 2023.

Summary of Walmart’s financial performance from 2019 to 2023 (CSUF Pollak Library, 2023)

Report the average financial performance of firms in the industry.  Identify whether the industry is above- or below-average in profitability

The average financial performance of the retail industry, of which Walmart is a part, is overall positive. The retail industry had an average of $461.5 billion in net sales, $17.2 billion in operating income, $10.5 billion in net income, and $203.7 billion in total assets in 2020, according to reports. This is significantly lower than Walmart’s current figures, indicating that Walmart is more profitable than the industry as a whole. To additionally show this point, Walmart’s working pay for the past five years has expanded by generally 20%, while broad working pay has expanded by just around 14%. Moreover, Walmart’s net gain has developed by generally 47% throughout recent years, while the business-wide total compensation has just become by around 22%.

Identify whether the company has a competitive advantage based on the difference between its performance and the industry average.

Walmart Company appears to have a competitive advantage based on the difference between its performance and the industry average. The organization’s net sales, working pay, net gain, and add-up to resources all surpass the business midpoints, recommending that Walmart has an amazing drive for development and consistent development in benefits (Dong, 2023). In addition, Walmart’s operating income and net income have grown significantly faster than the average for the industry, demonstrating Walmart’s advantages over the competition.

Provide a broad overview of the issues that the company is facing.

One of the key issues Walmart is facing is stiff competition from e-commerce platforms and the move of the retail economy from the brick and mortar stores to the digital space. Even though Walmart only has a 6.3% market share of the e-commerce retail business, with Amazon’s 38%, this still represents, in sales, $80 billion for the company. In addition, Walmart is also recovering from the disruptions of the supply chain during the COVID-19 pandemic as well as the current effects of high inflation. Inflationary pressure has had a positive impact in some instances for the company as higher-income individuals looking to spend less have flocked to the company. Supply chain issues have meant that Walmart overstocked in a bid to shield itself, hence having an excess of products that they are having problems selling.

Section 2

Describe the total revenues and profitability of the industry over the past few years

The retail industry has experienced steady growth in total revenues and profitability over the past few years. The sector reported an average of $453 billion in net sales, $15.6 billion in operating income, $8.2 billion in net income, and $188.1 billion in total assets in 2019. In 2020, the business announced normal net deals of $478.5 billion, normal working pay of $17.6 billion, normal overall gain of $9.6 billion, and normal absolute resources of $196.6 billion. In 2021, the business revealed normal net deals of $461.5 billion, normal working pay of $17.2 billion, a normal net gain of $10.5 billion, and normal all-out resources of $203.7 billion (CSUF Pollak Library, 2023).

The consistent development in all our incomes and benefits shows that patterns in the retail business are turning out to be progressively sure. The industry has benefited from rising consumer demand for goods and services, as evidenced by the nearly 10% increase in average net sales from 2019 to 2023. Working pay has additionally expanded by more than 10% from 2019 to 2023, showing that retailers have had the option to separate additional benefits from their deals. Net gain has increased by 27% from 2019 to 2023, showing that a greater amount of the incomes created by retailers are being applied to benefits, rather than expenses and costs. The financial trends of the retail industry as a whole are encouraging and point to the potential for continued expansion. However long as shoppers keep on purchasing labor and products, the business will probably keep on encountering an expansion in absolute incomes and productivity. This presents a chance for Walmart and different retailers to gain from this development and focus on any upper hands they might have over their rivals.

Explain the underlying driving forces that cause the profitability of the industry.

Various underlying driving forces cause profitability within the retail space, for example, customer demand and experience, technology and trends, operational efficiency, margins and pricing, and branding and marketing. Marketing and branding, for example, enable an organization not only to generate leads but also to differentiate itself in the consumer’s mind. Effective marketing and branding means an organization can have the much-needed competitive edge, hence enhanced profitability with increasing customers. When it comes to margins and profits, organizations in the retail space need to find a balance between offering their customers the lowest prices as compared to their competitors, but at the same time ensuring they are not sacrificing their margins which will adversely affect profitability.

Section 3

Analysis of Forthcoming Change in the Company’s Industry

Walmart, being one of the world’s largest retailers, is undoubtedly influenced by several major trends that can impact its profitability. One trend that is likely to improve Walmart’s profitability is the continued growth of e-commerce. As consumers increasingly prefer the convenience of online shopping, Walmart’s robust e-commerce platform and extensive supply chain can position the company to capitalize on this trend. Moreover, adopting advanced technologies such as artificial intelligence, data analytics, and automation can enhance operational efficiency, optimize inventory management, and streamline supply chain processes. By leveraging these technologies, Walmart can reduce costs and provide a more personalized shopping experience, ultimately improving profitability.

However, the retail industry as a whole faces challenges that could damage profitability. Economic downturns or fluctuations in consumer spending patterns can negatively affect Walmart’s sales, as customers may tighten their budgets during uncertain times. Additionally, the ever-growing competition from e-commerce giants and other retail players could lead to pricing pressure and reduced profit margins, forcing Walmart to find innovative ways to differentiate itself and retain customers. Another potential threat to profitability is the impact of rising labor costs. As the demand for higher wages and better working conditions increases, Walmart may face increased operational expenses, potentially eroding profitability if not managed effectively.

Yes, e-commerce and economic downturns are both likely to have a strong impact on Walmart. The continued growth of e-commerce has significantly changed consumer shopping habits, and Walmart, as a major retailer, cannot afford to ignore this trend. As consumers increasingly turn to online shopping for its convenience and vast product selection, Walmart must continue to invest in its e-commerce platform to remain competitive and capture a share of the online market. On the other hand, economic downturns can have a profound effect on Walmart’s profitability. During periods of economic uncertainty, consumers tend to tighten their spending, leading to reduced foot traffic in physical stores. This can result in lower sales volumes for Walmart, particularly for discretionary items. Additionally, during economic downturns, price-conscious consumers may shift towards lower-priced alternatives, which could pressure Walmart’s margins.

Yes, beyond the industry level, there are trends that can impact Walmart’s competitive advantage and disadvantage. Because Walmart is so big around the world, I don’t think there are major threats to the sustainability of the company.

Section 4

Analysis of the company’s competitive position

Walmart’s quantitative objectives includes tripling its overseas gross merchandise volume (GMV) to $200 billion in five years, to achieve this lofty objective through a variety of strategies (PYMNTS, 2023). The company intends to implement its omnichannel strategy on a global scale, expand its marketplaces in the 19 countries in which it operates, and create a complementary business ecosystem similar to the one it established in Mexico. Flipkart (Walmart’s Indian eCommerce operation) is projected to reach $135 billion in sales by 2025, tripling its sales from 2020 (PYMNTS, 2023). Walmart’s first-quarter results were better than predicted, with revenues rising 7.7% to $152 billion, thanks in large part to a 26% growth in e-commerce sales (Edgecliffe-Johnson, 2023). Despite the fact that some households were affected by the inflation in dry grocery and consumable prices, the company’s US general goods sales only dropped by a “low double digits” percentage. Walmart’s upbeat outlook, which includes an increase in full-year estimates, expected sales growth of 3.5%, and adjusted earnings per share of $6.10 to $6.20, shows it may be able to gain market share, particularly given its success in luring customers and boosting exports in a number of regions (Edgecliffe-Johnson, 2023).

Walmart’s success is largely due to its successful implementation of a reduced-cost approach. The company’s capacity to offer “Everyday low prices” and sell products at cheaper costs than its rivals gives it a competitive edge (Jake, 2022). With this strategy, Walmart is able to preserve its position as the market’s top retail brand while attracting a sizable consumer base (Pant, 2022). Walmart’s primary competitive advantage is its low prices, which sets its items apart from those of its rivals. Walmart differentiates itself from many rivals who might not emphasize such aggressive pricing by concentrating on providing a large selection of goods at consistently cheap costs (Hughes, 2022).

Walmart’s dedication to offering the best customer services through employee training and motivation, rules like a 90-day return policy without receipts, and the use of digital tools for a seamless shopping experience are among the crucial resources and abilities that set it apart from its rivals (Pant, 2022). Additionally, it has a substantial advantage in that it can retain cost leadership by maximizing people and knowledge resources, investing in technology, and creating economies of scale through effective management and well-placed stores. The success of Walmart is also attributed to its superior supply chain management, effective planning, and solid vendor connections (Pant, 2022).

Wal-Mart has a number of problems that could give them an unfair competitive edge. The lack of cleanliness and orderliness in many of its stores is one of the major problems. A cluttered and disorderly retail setting might turn away consumers and have a bad effect on their shopping experience (Peterson, 2015). Contrarily, rivals that place a higher priority on cleanliness and shop appearance could draw more consumers, impacting Wal-Mart’s foot traffic and overall sales. Slow shelf replenishment, which results in out-of-stock situations and unhappy customers, is another serious issue. Customers who find empty shelves may turn to rivals who can reliably supply the goods they want. Additionally, too much stock in the back rooms can result in inefficiencies, added expenses, and greater shrinkage. Competitors with more efficient inventory control methods could be better able to satisfy client needs quickly. Additionally, important elements impacting client convenience are store layout and design (Peterson, 2015). The whole shopping experience may suffer from poorly managed or aesthetically unappealing Wal-Mart shops. Competitors that have well-designed stores that prioritize user-friendliness and product presentation may have an edge. Another challenge for Walmart is to maintain its environmental initiatives, meet ambitious sustainability goals, and continue to drive positive change in the face of fierce competition and changing consumer demands (Petro, 2020). Walmart has been utilizing customer feedback and implementing sustainable packaging solutions.

Section 5

Recommendations

My conclusion from Section 2 is that the retail industry is doing well and has experienced steady growth in total revenues and profitability over the years. The underlying driving factors that cause the profitability of the market are customer demand, operational efficiency, technology, marketing, and pricing. My conclusion from section 3 is that Walmart is influenced by several significant trends such as the growth of e-commerce. If Walmart strategically uses this opportunity it could benefit them. A few trends that could damage profitability are economic downturns or fluctuations and working conditions. My conclusion from section 4 is that Walmart aims to expand, implement its omnichannel strategy globally. Walmart’s success is significantly due to its implementation of a reduced-cost approach. Walmart has a few problems, such as a messy retail setting. Walmart has slow-shelf replenishment, an overcrowded stockroom, and a not-so-great store layout and design.

Walmart can improve its financial returns over the next five years by fixing its inventory accuracy. There are many benefits to having inventory accuracy because it saves money and time. Inventory accuracy helps prevent overstocking and stockouts, minimizes operational overhead, and facilitates inventory forecasting. The best benefit is that orders are fulfilled faster and more accurately, resulting in happy customers that want to return and shop again. To please consumers, Walmart offers a mix of in-store and online experiences consisting of buy-online-pick-up-in-store, drive-through, etc. The omnichannel is a great business strategy that should be continued and improved because it provides a smooth shopping experience across all channels-online, mobile, and store. Walmart should keep promoting that people can shop online by promoting their app.

Walmart would be better if it were more organized. That would improve the shopping experience making customers want to come back. Walmart could  improve its inventory accuracy through better planning. For example, with food products that will expire soon, Walmart can reduce their prices. Walmart could store its products more organized if it improved its inventory accuracy, making it easier for the employees. Therefore, when they stock shelves overnight, it is easier for them. Happy, well stock shelves make the customers happy because there is nothing worse than buying a product, and you can’t find it forcing you to go to another location. Overall, Walmart has an organizational issue Walmart should focus on organization. They need to organize their inventory accuracy, the stocking of products, and layout and design. Walmart should concentrate on making the isles more accurate to what they say online.

My main strategic initiative/action fit with external (Steps 2 & 3) is inventory control and organization. Customer demand is high but can be improved if Walmart keeps its products organized and in stock. Many customers need help finding certain products when they get to the store that could be better. The employees would feel less stress if Walmart stood organized and made their company more housewarming. Having happy employees is good because they transfer their energy to the people. The organization is my strategic initiative/action fit with internal analysis (step 4). It would be way better if they fixed how the store looks. Walmart should promote their online ways more because, , more people know that they can order and just pick up outside or get stuff shipped as well. This would cause fewer people traffic inside the store. Making it quicker for customers to go in and out of the store.

Walmart needs to organize its organizational structure. They can do this by having a better system with better control of their environment and products. Next, they can better match their website to their isle on the store. They can change the layout and design of their stores making it easier for employees to find their products, making them happy as well as the customer. If they develop an organized layout and design, it would make the customers and employees more clear when finding an item.

 References

CSUF Pollak Lirbary. (2023). Walmart Inc (NYS: WMT). Pollak Library – Loading Your Proxied Resources.https://www-mergentonline-com.lib proxy.fullerton.edu/companyreports.php?compnumber=8865

Dong, R. (2023). Wal-Mart’s Financial Analysis. Highlights in Business, Economics and Management, 5, 312-316.

Edgecliffe-Johnson, A. 2023, May 18. Walmart raises guidance after first-quarter results top expectations. Financial Times. https://www.ft.com/content/2ecc5567-3b97-4146-9785-0ab021f5f50d

Hughes, J. 2022. Walmart Competitors Analysis – Business Chronicler. [online] Business Chronicler. Available at: https://businesschronicler.com/competitors/walmart-competitors-analysis/.

Jake. 2022, July 18. 5 Tips to Manage Your Walmart Marketplace Pricing Strategy More Effectively. Walmart Marketplace. https://marketplace.walmart.com/manage-your-pricing-strategy/

Pant, R. 2022. Walmart’s Business Strategy and Competitive Advantages. [online] Walmart’s Business Strategy and Competitive Advantages. Available at: https://managemententhusiast.com/walmarts-business-strategy-and-competitive-advantages/#:~:text=are%20discussed%20below%3A-.

Peterson, H. 2015. Wal-Mart CEO reveals the company’s 8 biggest problems. [online] Business Insider. Available at: https://www.businessinsider.com/wal-marts-ceo-reveals-8-main-problems-2015-4?r=US&IR=T.

Petro, G. 2020. Walmart Challenges Amazon On Sustainable Packaging. Forbes. https://www.forbes.com/sites/gregpetro/2020/02/17/walmart-challenges-amazon-on-sustainability/?sh=2704e6babb8a

PYMNTS 2023. Walmart Commits to 5-Year $200 Billion Global Sales Goal. [online] www.pymnts.com. Available at: https://www.pymnts.com/walmart/2023/walmart-stands-by-5-year-200-billion-foreign-gmv-goal/ [Accessed 21 Jul. 2023].