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Walmart Business Model Assessment

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Walmart Business Model Assessment Introduction

The success of any business depends on a whole range of factors. Generally, the factors can be divided into two groups – internal and external. External factors are related to the surrounding environment of a business, including the overall macroeconomic situation, political situation, the degree of competition and technological development, etc. Internal factors are the factors, related to the company itself. These factors are organizational structure and culture, business model, qualifications of employees, etc. Usually, internal factors can be controlled and influenced by the company, while external factors are quite independent.

One of the main internal factors will be considered in this research, namely the business model of a company. Walmart has been chosen as the company for analysis. First of all, it is a well-known company. Thus, the information about its performance is easy to access. Second of all, it is a successful business, consequently, analyzing its experience may be useful for emerging companies trying to enter the market.

The first task set by this particular research is to provide the so-called business model canvas. The business model can be considered as to how a business is organized. That is why, as a rule, the business model includes the following elements: organizational structure, operation processes, cooperation with suppliers, relations with employees, relations with customers, etc. Simply speaking, the business model explains how a product is produced and sold to customers most effectively and beneficially for all the stakeholders.

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Strategic Analysis for Walmart by Laura Wei

The task of the research is to analyze the business model of the company. The analysis is going to be based on the article “Strategic Analysis for Walmart” by Laura Wei and other available information sources. Walmart is an American company that specializes in retail. The company was founded in 1962 and has become a large international business giant from that time. It has stores around the whole country and branches abroad. According to the well-known ratings Fortune 500, Walmart is the largest firm in the world by revenue. Its annual revenue was $485.7 billion in 2014. Also, the company employs more than 2 million people, which is more than some countries’ population:

“Walmart Stores is an irresistible (or at least unavoidable) retail force that has yet to meet immovable objects. Bigger than Europe's Carrefour, Metro AG, and Tesco combined, it's the world's #1 retailer with some 2.2 million employees. In the US, Walmart operates more than 4,000 stores, including 3,000-plus Supercenters that sell groceries and general merchandise, 620 Sam's Club warehouses, and a growing number of smaller format stores” (Walmart Company Profile).

Therefore, Walmart can be called one of the most successful and powerful companies in the whole world. Thus, it is a valuable practice to research the company’s business experience.

It is important to say a few words about overall trends in the retail industry. This industry extremely depends on the sufficient demand of customers. In turn, this demand depends on customers’ revenues and expenditures. Recently, these revenues have declined because of the global financial crisis and its consequences. Of course, it has affected retailers’ revenues.

However, many companies, including Walmart, have managed to smooth the negative influence of the crisis and its consequences by proposing different discounts and other promotional programs. In the end, people simply cannot get rid of their daily needs. Such needs are satisfied by products proposed in the stores of Walmart, which allows the company to expect a stable level of demand for its products and services. Thus, the overall industry conditions can be considered as quite supportive of the company’s performance and development.

The Company’s Business Model

The company’s business model is primarily based on its mission. This mission can be represented in the motto of the company’s performance, which is ‘Save money. Live better. Therefore, the company proposes to its customers an opportunity to improve their life for the appropriate price. Customers, their expectations, and their requirements are the main values of the company.

All the company’s strategies and business decisions have been always influenced by a need to follow the mentioned mission. For example, one of the main principles of the company’s performance is the principle of diversification. First of all, the company proposes the whole range of products to customers in its stores. Thus, a customer can buy practically everything he/she wants. Second of all, the company has implemented diversification in its distribution channels.

There are a lot of options on how to buy a product in the company. Walmart has paid much attention to the development of the online platform recently. Using this platform, a customer cannot only obtain information about the company but also order products. It is a great advantage for both the company and customers, who can save time and money doing purchases in such away.

It can be said that the company tries not only to meet customers’ requirements and expectations but even to exceed them. Of course, it increases the degree of customers’ loyalty to the company significantly. In the end, such loyalty is realized in better financial results.

Strategic Objectives

According to the article, the company is focused on two strategic objectives:

  1. To meet and exceed customers’ expectations.
  2. To treat all the stakeholders of the company in the best possible way.

As can be seen, Walmart is a customer-oriented company. Satisfying customers’ needs is the primary value for the company. Respectively, the strategic objectives of the company are customers’ satisfaction, attractive pricing policy, excellent service and social image of the company, etc.

However, it is a mission from the so-called external perspective. As to what concerns the organization’s mission from the perspective of the internal business process (IBP), the essence of mission and strategy can be described as follows. “The strategic focus of the IBP perspective is to determine the business processes an organization must excel at to satisfy both its shareholders and customers” (Internal Business Process, n.d.).

Thus, the internal business processes that require improvement should be determined for increasing the organization’s efficiency and customers satisfaction. Three main objectives for improving the organization's internal business processes are pricing, delivery, and post-sale services. These strategic objectives relating to the following measures: pricing – total cost to a customer; delivery – delivery on time; post-sale services – numbers of returned goods.

Also, all these objectives have some expected level of performance or target, in other words. The expected level of performance of pricing is the growth of the company’s turnover. The target of improvement of the delivery business process is the reduction of the logistic expenditures of the company. Finally, the expected level of performance of post-sale services is a growing number of constant clients.

Of course, to improve these business processes, some actions should be taken. For example, a new pricing strategy should be implemented and should be taken into account in the process of the development of the financial plan of the organization.

To improve the delivery area, the company has to adopt a new logistics strategy, using brand new econometric and other methods. Finally, post-sale services require a clear company policy in this sphere. The company has to clearly define the terms of such services, their scope, etc.

First of all, satisfying these objectives means satisfying customer-oriented objectives since the improvement of the internal business processes provides foundations for the improvement of the services for customers.

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Internal Strategic Objectives

In addition, internal strategic objectives increase the overall efficiency of the company. It means that they also provide financial stability thus only strengthening the financial strategic objectives. As it can be noticed, all the mentioned strategic objectives of the organization are interdependent. It only proves the fact that any organization is a single organism, where all elements are equally important.

An important element of the company’s business model is its organizational structure. The company has centralized headquarters, regional offices, and, respectively, stores. Also, the company’s departments are divided according to the different functional directions: marketing, finances, distribution, sales, etc. Regional offices and departments execute tactical objectives while strategic ones are realized by centralized headquarters. Such an organizational structure creates a great basis for effective monitoring and control, informational exchange, and operative execution of tasks. Generally, it leads to the growing inefficiency of the company’s overall performance.

It has been already mentioned that one of the components of the company’s motto is to save money. The company tries to propose lower prices to its customers. Such a possibility is reached, because of the so-called cost leadership, which is probably the main element of the company’s business model.

Cost leadership means that the company has lower costs than its competitors. Respectively, it can propose lower prices to customers and win a competitive edge. Cost leadership of Walmart is reached via the following factors:

  1. The company has effective supply chain management.
  2. The company has an effective system of logistics.
  3. The company follows the principle of just-in-time inventory.
  4. The company buys products in large blocks, which allows reducing the purchasing price.

All of these factors allow the company to reduce costs and propose lower prices. In the end, the business is prospering. A single business is also an important element of the company’s business model. The company specializes only in retail. It focuses all its financial and other resources on this area. As a result, the biggest efficiency of performance is reached.

The company’s major financial flows are concentrated in the United States of America. Generally, its business can be divided into several segments. On the one hand, it is a division into the U.S. and the world’s segments. On the other hand, it is the division into real stores under the Walmart brand and online segment (, n.d.).

Talking about stores, the company proposes products in several categories: entertainment, hardlines, apparel and home, grocery, health, and wellness. Walmart's international subsidiaries work in a bit different way than its headquarter. First of all, they propose retail, wholesale and other services. Clients can buy products in retail stores, wholesale dubs, discount stores, and online stores. Such a diversified and broad approach to the business has made the company a leader in a global retail business arena.

The Company’s Competitive Advantages

Therefore, Walmart is successful nowadays. To evaluate its full potential, the competitive advantages of the company must be studied. Among the company’s competitive advantages the following ones may be pointed out:

  1. Strong brand name and positive corporate image of the company.
  2. Extensive experience on the market.
  3. The broad range of regional branches.
  4. The fast development of the online segment of the business.

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However, the company also faces significant challenges. First of all, these are problems related to the fast growth of its business. Transaction costs are also growing, and it becomes more difficult to control and manage such a large business. Second of all, the overall economic conditions are not the best nowadays. Finally, the development of the online segment puts forward significant challenges to the company.

Generally, the company under consideration can be called one of the main successful ventures in the whole business history. Nowadays, it is a leading company not only in the retail industry but in the business world. That is why it may be concluded that its business model is effective and contributes to the tremendous success of the company. The main elements of this business model that have created foundations for successful development are cost leadership, effective organizational structure, customer-oriented approach, and business diversification, etc.

However, there is always a place for improvement and further growth. The surrounding business environment is constantly changing. The company’s business model also should change to meet new requirements. Some recommendations on how to improve the company’s business model are provided below.

  • First of all, the company’s business model must become more flexible. The business environment is constantly and surprisingly changing. The company must always be ready to react to these changes.
  • Second of all, the company must be ready to face the problem of growth and meet the economy on a scale. Although a significant pace of growth is great, the amount of challenges is increasing respectively. It becomes more difficult to monitor and control the business. Transactional costs are growing. Thus, the company will be forced to modify its business model according to these new requirements.
  • Finally, major attention should be paid to the development of the online segment of the business. It is going to be the main trend in the world in the nearest future. For this reason, an online platform must become the main store of the company.

Business Model Assessment Conclusion

In conclusion, Walmart is one of the most successful businesses in the history of mankind. Such great success has been reached because of an effective business model, the main elements of which have been considered in this research. This experience should be studied in more detail in the future.

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