Harvard Case - Walmart in 2019
"Walmart in 2019" Harvard business case study is written by Mary M. Crossan, Ken Mark. It deals with the challenges in the field of Strategy. The case study is 16 page(s) long and it was first published on : May 5, 2020
At Fern Fort University, we recommend Walmart adopt a multi-pronged strategy focused on digital transformation, global expansion, and sustainable practices. This approach will leverage Walmart's existing strengths, address emerging market opportunities, and solidify its position as a global retail leader.
2. Background
This case study examines Walmart's position in 2019, a pivotal year marked by the rise of e-commerce, changing consumer preferences, and increasing competition. Walmart, the world's largest retailer, faced challenges in adapting to the digital landscape and maintaining its competitive advantage. The case highlights key issues such as:
- E-commerce Dominance: Amazon's rapid growth and dominance in online retail posed a significant threat to Walmart's traditional brick-and-mortar model.
- Shifting Consumer Behavior: Consumers increasingly preferred online shopping experiences, demanding convenience, speed, and personalized services.
- Global Expansion: Walmart's international operations faced challenges in adapting to local markets and competing with established players.
- Sustainability Concerns: Growing environmental concerns and consumer pressure for ethical sourcing and sustainable practices put pressure on Walmart's supply chain.
The main protagonists of the case are Doug McMillon, Walmart's CEO, and his leadership team, who had to navigate these challenges and formulate a strategy for future growth.
3. Analysis of the Case Study
To understand Walmart's situation, we utilize a combination of frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in e-commerce and the emergence of new online retailers.
- Bargaining Power of Buyers: High, as consumers have access to a wide range of choices and online platforms for price comparison.
- Bargaining Power of Suppliers: Moderate, as Walmart's large scale gives it some bargaining power, but dependence on global supply chains exposes it to vulnerabilities.
- Threat of Substitute Products: High, as consumers can easily switch to alternative products or services available online.
- Rivalry Among Existing Competitors: Intense, with Amazon, Target, and other online retailers vying for market share.
b) SWOT Analysis:
Strengths:
- Strong brand recognition and customer loyalty
- Extensive global reach and distribution network
- Large scale and economies of scale
- Expertise in supply chain management and logistics
- Strong financial position
Weaknesses:
- Dependence on brick-and-mortar stores
- Slower adoption of e-commerce compared to competitors
- Limited personalization and customer experience in online channels
- Challenges in adapting to local markets in international operations
Opportunities:
- Growing online retail market
- Expanding into emerging markets
- Leveraging technology and data analytics
- Focus on sustainability and ethical sourcing
Threats:
- Competition from online giants like Amazon
- Changing consumer preferences and shopping habits
- Economic fluctuations and global uncertainties
- Regulatory changes and potential trade wars
c) Value Chain Analysis:
Walmart's value chain needs to be re-evaluated to incorporate digital capabilities and enhance customer experience. This includes:
- Inbound Logistics: Optimizing supply chain for faster delivery and online fulfillment.
- Operations: Investing in automation and technology to improve efficiency and reduce costs.
- Outbound Logistics: Expanding delivery options and partnerships with logistics providers for faster delivery.
- Marketing & Sales: Leveraging digital marketing channels, personalized recommendations, and targeted promotions.
- Customer Service: Providing seamless online and in-store customer support with personalized solutions.
d) Business Model Innovation:
Walmart needs to adapt its business model to incorporate:
- Omnichannel Strategy: Integrating online and offline channels for a seamless customer experience.
- Subscription Services: Offering membership programs with exclusive benefits and discounts.
- Data-Driven Personalization: Utilizing customer data to personalize product recommendations and promotions.
- Partnerships and Acquisitions: Collaborating with technology companies and acquiring promising start-ups to enhance digital capabilities.
4. Recommendations
Walmart should focus on the following key areas:
a) Digital Transformation:
- Invest heavily in e-commerce: Enhance website functionality, improve user experience, and expand online product offerings.
- Develop a robust mobile app: Offer convenient shopping, personalized recommendations, and seamless payment options.
- Leverage data analytics: Utilize data to optimize inventory management, personalize marketing, and improve customer experience.
- Embrace AI and machine learning: Implement AI-powered chatbots for customer service, personalize product recommendations, and optimize pricing strategies.
b) Global Expansion:
- Focus on emerging markets: Target high-growth regions with a strong focus on local market needs and preferences.
- Adapt to local cultures: Customize product offerings, marketing campaigns, and store formats to resonate with local consumers.
- Build strategic partnerships: Collaborate with local retailers and distributors to expand reach and leverage local expertise.
- Embrace globalization strategies: Develop a global brand identity while respecting local cultural nuances.
c) Sustainable Practices:
- Implement ethical sourcing: Prioritize sustainable and ethical practices throughout the supply chain.
- Reduce environmental impact: Implement energy-efficient practices, reduce waste, and promote sustainable packaging.
- Engage with stakeholders: Communicate sustainability initiatives and engage with customers, employees, and communities.
- Embrace corporate social responsibility: Invest in community programs and initiatives that promote social good.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Walmart's core competencies in supply chain management, logistics, and global reach can be leveraged to drive digital transformation and global expansion. This aligns with the company's mission of providing low prices and value to customers worldwide.
- External customers and internal clients: The recommendations address the changing needs of consumers by providing a seamless omnichannel experience, personalized services, and sustainable products. They also empower employees with new technologies and opportunities for growth.
- Competitors: The recommendations aim to differentiate Walmart from competitors by focusing on digital innovation, global expansion, and sustainability, creating a competitive advantage in the evolving retail landscape.
- Attractiveness: The recommendations are expected to generate significant value through increased revenue, improved efficiency, and enhanced customer loyalty. The focus on sustainability will also attract environmentally conscious consumers and enhance brand image.
6. Conclusion
Walmart's success in 2019 and beyond hinges on its ability to adapt to the changing retail landscape. By embracing digital transformation, expanding globally, and prioritizing sustainability, Walmart can solidify its position as a global retail leader. This multi-pronged strategy will leverage its existing strengths, address emerging market opportunities, and create a sustainable competitive advantage for the future.
7. Discussion
Other alternatives not selected include:
- Focusing solely on e-commerce: This approach could alienate existing customers and neglect the potential of brick-and-mortar stores.
- Merging with a competitor: While this could create a dominant player, it carries significant risks and regulatory challenges.
- Maintaining the status quo: This would likely result in declining market share and competitive disadvantage.
The key assumptions underlying these recommendations include:
- Continued growth of the online retail market: This is a key assumption for the success of Walmart's digital transformation strategy.
- Consumer acceptance of sustainable practices: This is crucial for the success of Walmart's sustainability initiatives.
- Favorable regulatory environment: This is important for Walmart's global expansion and operations.
8. Next Steps
Walmart should implement these recommendations through a phased approach:
- Phase 1 (Year 1): Focus on digital transformation, including website and mobile app enhancements, data analytics implementation, and pilot programs for AI and machine learning.
- Phase 2 (Year 2): Expand global presence by entering new markets, building strategic partnerships, and adapting operations to local needs.
- Phase 3 (Year 3): Integrate sustainability initiatives across the value chain, focusing on ethical sourcing, waste reduction, and community engagement.
By following this roadmap, Walmart can successfully navigate the challenges of the evolving retail landscape and achieve sustainable growth in the years to come.
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Case Description
In 2019, Walmart Inc. (Walmart) was the largest retailer in the world, with over $500 billion in revenues and thousands of stores in the United States and international markets. It was in the midst of a transformation to compete in the online shopping and home delivery space, an industry that was dominated by relative newcomer Amazon.com Inc. (Amazon). While Walmart had continued to expand its physical stores and discount centres over several decades, its online presence had needed attention; its investment in online sales between 2013 and 2018 had brought about a significant reduction in the operating income margin in its largest and most profitable segment, Walmart US. However, by February 2019, the company had achieved growth in online sales of 43 per cent. Would the strategic changes that had brought about this growth enable the company to maintain its position in the United States?
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