Harvard Case - Walmart
"Walmart" Harvard business case study is written by Frank T. Rothaermel, David R. King. It deals with the challenges in the field of Strategy. The case study is 18 page(s) long and it was first published on : Mar 18, 2017
At Fern Fort University, we recommend Walmart adopt a multi-pronged strategy focused on digital transformation, sustainable growth, and building a global ecosystem. This involves leveraging its core competencies in supply chain management, data analytics, and scale to navigate the evolving retail landscape and achieve sustainable competitive advantage.
2. Background
The case study focuses on Walmart's journey from a discount retailer to a global behemoth. It highlights its competitive advantage built on cost leadership and efficient operations. However, the case also explores the challenges Walmart faces in the digital age, with rising competition from online retailers like Amazon and evolving consumer preferences.
The main protagonist is Doug McMillon, Walmart's CEO, who needs to navigate these challenges and chart a course for future growth.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong Brand Recognition: Walmart enjoys a strong brand reputation for low prices and wide product selection.
- Efficient Supply Chain: Walmart's supply chain is a key differentiator, enabling it to offer low prices and consistent availability.
- Vast Store Network: Walmart's extensive physical store network provides a significant advantage in brick-and-mortar retail.
- Data Analytics Capabilities: Walmart has invested heavily in data analytics, providing insights into customer behavior and market trends.
Weaknesses:
- Digital Lag: Walmart has been slower to adapt to the digital shift in consumer behavior compared to competitors.
- Limited E-commerce Presence: Walmart's e-commerce platform is still relatively underdeveloped compared to Amazon.
- Negative Public Perception: Walmart has faced criticism regarding its labor practices and environmental impact.
Opportunities:
- Digital Transformation: Walmart can leverage its data and scale to build a robust online presence and offer personalized shopping experiences.
- Global Expansion: Walmart can expand its reach into new markets, particularly in emerging economies with growing middle classes.
- Sustainable Practices: Walmart can enhance its environmental and social responsibility initiatives to improve its public image.
Threats:
- Competition from Online Retailers: Amazon and other online retailers pose a significant threat to Walmart's market share.
- Shifting Consumer Preferences: Consumers are increasingly demanding convenience, personalized experiences, and sustainable products.
- Economic Uncertainty: Global economic instability can impact consumer spending and affect Walmart's sales.
Porter's Five Forces:
- Threat of New Entrants: Moderate, due to Walmart's scale and established infrastructure.
- Bargaining Power of Buyers: High, as consumers have numerous options and can easily switch retailers.
- Bargaining Power of Suppliers: Moderate, as Walmart has significant purchasing power but relies on a diverse supply chain.
- Threat of Substitutes: High, as consumers can choose from a wide range of alternative products and services.
- Rivalry Among Existing Competitors: High, due to the presence of numerous established players and emerging online retailers.
Value Chain Analysis:
Walmart's value chain is built around its core competencies in procurement, logistics, and distribution. It leverages its vast network of suppliers and stores to achieve cost leadership and offer low prices to customers. However, the rise of e-commerce has challenged this model, requiring Walmart to invest in digital infrastructure, customer service, and fulfillment capabilities.
Business Model Innovation:
Walmart needs to innovate its business model to adapt to the changing retail landscape. This involves:
- Digital Transformation: Investing in its online platform, enhancing customer experience, and expanding its e-commerce offerings.
- Omnichannel Strategy: Integrating online and offline channels to provide seamless customer experiences.
- Subscription Services: Offering subscription-based services like Walmart+ to enhance customer loyalty and generate recurring revenue.
- Data-Driven Insights: Utilizing data analytics to personalize customer experiences, optimize inventory management, and improve pricing strategies.
4. Recommendations
Accelerate Digital Transformation: Walmart should prioritize investing in its digital infrastructure, building a robust online platform, and enhancing its e-commerce capabilities. This includes:
- Improving the Walmart.com website and mobile app: Enhancing user interface, improving navigation, and offering personalized recommendations.
- Expanding online product selection: Offering a wider range of products, including niche categories and premium brands.
- Investing in fulfillment infrastructure: Expanding its warehouse network and optimizing delivery options to ensure fast and reliable shipping.
- Leveraging data analytics: Using data to personalize customer experiences, optimize pricing, and predict demand patterns.
Embrace Sustainable Growth: Walmart should focus on sustainable practices to improve its public image, attract environmentally conscious consumers, and reduce its environmental footprint. This includes:
- Investing in renewable energy: Transitioning its stores and distribution centers to renewable energy sources.
- Reducing packaging waste: Implementing initiatives to reduce packaging materials and promote reusable options.
- Promoting sustainable products: Offering a wider selection of eco-friendly products and partnering with sustainable suppliers.
- Improving labor practices: Implementing fair labor practices and investing in employee well-being.
Build a Global Ecosystem: Walmart should leverage its global presence to build a network of strategic alliances and partnerships to expand its reach and create new opportunities. This includes:
- Expanding into new markets: Targeting emerging markets with high growth potential and a growing middle class.
- Forming strategic alliances: Partnering with local businesses and entrepreneurs to gain access to new markets and customer segments.
- Investing in start-ups: Supporting innovative startups in areas like e-commerce, logistics, and sustainability.
- Developing a global brand: Creating a consistent brand experience across all markets and promoting its values of affordability and accessibility.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: The recommendations align with Walmart's core competencies in supply chain management, data analytics, and scale. They also support its mission of providing low prices and value to customers.
- External Customers and Internal Clients: The recommendations are designed to improve the customer experience, both online and offline, and to enhance employee engagement and satisfaction.
- Competitors: The recommendations address the challenges posed by competitors like Amazon and other online retailers by focusing on digital transformation and building a global ecosystem.
- Attractiveness: The recommendations are expected to generate significant returns on investment by increasing revenue, market share, and brand value.
6. Conclusion
Walmart faces a complex and dynamic retail environment. By embracing digital transformation, sustainable growth, and building a global ecosystem, Walmart can navigate these challenges and achieve sustainable competitive advantage. This strategy leverages its core competencies, addresses evolving consumer preferences, and positions Walmart for continued success in the long term.
7. Discussion
Alternatives:
- Focusing solely on cost leadership: This strategy could lead to a decline in market share as consumers demand more than just low prices.
- Acquiring a major online retailer: This could be a costly and risky strategy, with potential integration challenges.
- Maintaining the status quo: This would likely lead to a decline in competitiveness and market share.
Risks:
- Execution challenges: Implementing the recommendations requires significant investment and organizational change.
- Technological disruption: Emerging technologies could disrupt the retail landscape and require further adaptation.
- Regulatory changes: Government regulations could impact Walmart's operations and profitability.
Key Assumptions:
- Consumer demand for digital experiences will continue to grow.
- Sustainability will become an increasingly important factor for consumers.
- Emerging markets will offer significant growth opportunities.
8. Next Steps
- Develop a detailed implementation plan: Define specific objectives, timelines, and resources for each recommendation.
- Invest in technology and infrastructure: Upgrade online platform, enhance data analytics capabilities, and expand fulfillment infrastructure.
- Build a culture of innovation: Encourage experimentation, collaboration, and agility across the organization.
- Monitor progress and adapt: Continuously assess the effectiveness of the strategy and make adjustments as needed.
By taking these steps, Walmart can position itself for future success in a rapidly changing retail landscape.
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Case Description
The case details the changes Walmart CEO Doug McMillon implemented to address the competitive threat of e-commerce, including the closing of stores and the $3.3 billion acquisition of Jet.com. Walmart struggles with a maturing and over-saturated U.S. market, where it had to close almost 300 stores (in 2016), a first in Walmart's history. The e-commerce threat is continuing to gain in strength. Doug McMillon needs to develop future growth, and is contemplating a hybrid retail strategy between physical stores and an online presence. Finally, Walmart continues to struggle internationally, especially in China and Brazil, which are potentially huge markets.
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