Walmart is among the largest retail companies based in the United States, with operations and chains located worldwide. The company’s strategy is based on price advantage by offering customers goods at the lowest price tags in the market. The given evaluation and review will primarily focus on assessing Walmart as a multinational business in terms of its company overview, strategy, business model, and competition with a comprehensive evaluation at the end.
Overview
Walmart was founded by Sam Walton in 1962 in the state of Arkansas. Currently, the retail giant employs more than two million individuals globally (Walmart). The company has more than ten thousand retail units globally, with the first half being predominantly located in the United States and the other half across the globe (Walmart). For the current year of 2021, the total revenue was equal to $555 billion, which is among the highest sales of any business or enterprise (Walmart Inc. 35). The chief executive officer of the company is Carl Douglas McMillon.
Strategy
One of the most defining elements of Walmart’s strategic management is cost leadership. The effectiveness of such an approach is evidenced by the fact that Walmart is among the largest corporations in the world and has the highest revenue values (Roy 10). In other words, cost leadership is a powerful measure, which made Walmart a global leader in retail. It should be noted that the cost leadership strategy of Walmart is highly effective due to the basic dynamics of demand and supply fundamentals of economic, where lowering the prices increases demand for the product, which is why the company is able to profit massively due to a sheer volume of sales.
However, leadership cost strategy reduces the differentiation factor of the business, which means that there is a wide range of alternative options in the market, making a low price a core appeal for the customers (Ferguson). In other words, Walmart is restricted by its own strategy in terms of offering new and creative products since such endeavors cannot be profited off without a change in the strategy.
Business Model
Since the core business model of Walmart is cost leadership, it is important to note that the company is an ultimate price negotiating middle man between suppliers and customers. Walmart operates in both B2B and B2C formats, and the latter involves suppliers as well as trade partners (Pereira). Walmart’s profitability is deeply rooted in its capability to buy products from its supplier at the lowest price ranges, where the company leverages its volume of purchase in order to achieve the lowest prices possible. By being able to negotiate such prices, the company can add small profit margins and resell to the customers. Each individual transaction is insignificant and minuscule, but the sheer volume of sales makes the total revenue and profits impressive.
Competition
It is important to point out that for a long time, Walmart dominated the retail market by slashing the prices to the lowest possible values making any form of competition economically impossible. However, in recent years, Amazon has become the number one threat to Walmart’s market domination due to the superior business model of the tech company. For example, in 2021, Amazon’s sales or revenue was higher than Walmart’s, which is a major turning point in the latter’s place in the retail market (Weise and Corkery). It is evidently and partly due to the pandemic and lockdowns, which heavily favored online retail and delivery of Amazon. However, it is also likely that the overall infrastructure of delivery and stock management of the main competitor is more efficient and more suitable for the current needs of the consumers.
Summative Analysis
It should be noted that Walmart is a massive corporate entity, which built its entire infrastructure and methodological frameworks of operations around the cost leadership strategy. Such an approach was and still is effective since it adheres to the most fundamental principles of economics of supply and demand. However, the company overlooked the rising threat of technology and the internet, which were in turn exploited by Amazon, which became the number one rival of Walmart.
The recent global events, such as the Covid-19 pandemic, created an environment, which favored Amazon’s business model and enabled it to have higher revenues than Walmart. Despite the increased rivalry, Walmart was far from dormant in the technological innovation and implementation of cutting-edge instruments (Morgan). In other words, Walmart is adopting strategies and changing its approaches with an emphasis on e-commerce. The company still lags behind Amazon in terms of customer loyalty and logistics (Deagon).
Conclusion
In conclusion, the review reveals that Walmart’s cost leadership strategy was highly effective, which made it a top retail leader with no real competition. However, the recent rise of Amazon is a prime threat to Walmart as of today since the business model of the competitor is superior, especially under the conditions of lockdowns and increased need for delivery. Despite the loss of competitive edge, Walmart is adaptable and capable enough to adopt innovative solutions in order to preserve its dominant position.
Works Cited
Deagon, Brian. “Amazon Vs. Walmart: The Epic Battle Of Retail Kings Gets Hot.” Forbes, 2021. Web.
Ferguson, Edward. “Walmart’s Generic Competitive Strategy and Intensive Growth Strategies.” Panmore Institute, 2018. Web.
Morgan, Blake. “Who Wins The Battle Of Walmart Vs. Amazon?” Forbes, 2021. Web.
Pereira, Daniel. “Walmart Business Model.” The Business Model Analyst, 2021. Web.
Roy, Suvendu N. ” Cost Leadership Strategy Enhancing Competitiveness: A Critical Study On MNC Retails.” Journal of Cross-Functional Business Research. Web.
Walmart Inc. “Form 10-K.” United States Securities and Exchange Commission, 2021. Web.
Walmart. ” Where in the world is Walmart?” Walmart. Web.
Weise, Karen, and Michael Corkery. “People Now Spend More at Amazon Than at Walmart.” The New York Times, 2017. Web.