Mgt 488 - Walmart Internal Risk Assestment

Internal Risk Assessment

MGT/488

Al Funderburk

Internal Risk Assessment

Wal-Mart operates throughout the world in various segments including super centers, neighborhood markets, discount stores, and the Wal-Mart website. Wal-Mart was founded by Sam Walton in 1962 and the headquarters is in the United States. Wal-Mart operates in the retail industry and offers products at low prices through its discount super stores and neighborhood markets. Wal-Mart's net sales for the 2010 fiscal year were approximately $405 billion, a 1% increase from 2009 (Walmart Annual Report, 2010, p. 15). Wal-Mart also experienced 5.1% increase in operating profit from $22,798 million in 2009 to $23,950 million in 2010 (Walmart Annual Report, 2010, p. 15). Further, net profits increased from 7% from $13,400 million in 2009 to $14, 335 million in 2010 (Walmart Annual report, 2010, p. 30). Although the financial reports illustrate much strength for the company, weaknesses are prevalent within the corporation as well.

Walmart Stores, Inc.: Strengths and Weaknesses

Wal-Mart has a reputation for providing convenience, low prices, and a variety of consumer goods. Wal-Mart has experienced tremendous growth because of this reputation and has expanded internationally. Therefore, Wal-Mart obviously possesses much strength.

Wal-Mart redefined discount retailing and outperformed the industry in profitability by 4.5 % of sales--a 200 % improvement. Four resources--store locations, brand recognition, employee loyalty, and sophisticated inbound logistics--allowed Wal-Mart to fulfill customer needs much better and more cost effectively than Kmart and other discount retailers (Pearce & Robinson, 2009, p. 173).

Wal-Mart has gained a competitive advantage in the market that will prove difficult for other businesses to overcome, especially during an economic downturn. Customers will continue to purchase goods offered at low prices while personal budgets are tight.

Although Wal-Mart possesses strengths, the company has weaknesses as well. Public opinion in some areas has expressed distain of Wal-Mart because of its ability to drive small businesses out of the market forcing closure for local retailers. Portland, Oregon, is known for its stance on Wal-Mart as the city has fought to keep the retailer from building additional stores. Currently, Wal-Mart has one store within the Portland's city limits, and plans to build a second store have been turned down repeatedly. The mayor of Portland, Sam Adams, is recorded as saying, "this is a company that has my enmity. They treat their employees poorly and the communities they go into with total disdain" (Frank, 2009, para. 4).

Marketing Strengths and Weaknesses

Wal-Mart's primary objective is certainly obvious; low pricing. Wal-Mart's purpose is simple, ""We save people money so they can live better" (Corporate, 2010, p. 1).Wal-Mart definitely has followed and achieved its purpose. Wal-Mart persistently has exhibited its ability to accomplish this objective and expanded the company to be the number one retailer in the world.

Wal-Mart experiences the most difficulty in expanding into market areas. Many small towns throughout the United States deny Wal-Mart from penetrating the local market because of the economic affects Wal-Mart is known for. Many small businesses are forced to close because of the inability to compete with Wal-Mart's pricing.

Human Resources Strengths and Weaknesses

Wal-Mart has implemented training programs and encourages furthering education to empower employees. This employee incentive had helped lead Wal-Mart in becoming the largest employer in the United States. Wal-Mart employs training and education programs to help improve employee efficiency and effectiveness. In return, this helps Wal-Mart sustain competitive advantage by increasing nonsubstitutable capabilities in knowledge, expertise, and experience. Further, Wal-Mart prefers to employ from within which provides additional incentive for employees.

Wal-Mart does experience an area of weakness in human resources. Recently Wal-Mart has experienced lawsuits that negatively affect employee relations. "After years of being embarrassed by lawsuits over its wage practices, the company agreed to settle 63 cases pending in federal and state courts in 42 states" (Greenhouse & Rosenbloom, 2008, para. 2). As a result of these settlements, Wal-Mart has agreed to "pay at least $352 million, and possibly far more, to settle lawsuits across the country claiming that it forced employees to work off the clock" (Greenhouse & Rosenbloom, 2008, para. 1). Therefore, Wal-Mart has earned a reputation "that the company achieves its low prices in part by cheating workers" (Greenhouse & Rosenbloom, 2008, para. 4). Wal-Mart's weaknesses in human resources may cause employees to require increased compensation. In addition, skilled employees may choose to work for competitors, which can result in losing competitive advantage.

Management Strengths and Weaknesses

Supply chain management is one of Wal-Mart's strengths and has proven to be cost effective. Wal-Mart maintains the ability to track products throughout the value chain using a well-organized inventory control system. Wal-Mart has the capability to track inventory from the manufacturer, through distribution channels, to store warehousing, on to the shelves, and even as the product is purchased and removed from inventory. This efficiency enables Wal-Mart to retain necessary inventory levels and recognize the products that sell from the products that do not. Further, Wal-Mart employs a practice called managing by walking around. According to Thompson, Gamble, & Strickland, 2006:

Wal-Mart executives have had a long-standing practice of spending two to three days every week visiting Wal-Mart's stores and talking with store managers and employees. Sam Walton, Wal-Mart's founder, insisted, "The key is to get out into the store and listen to what the associates have to say" (p. 340).

Although Wal-Mart possesses core values, the company lacks an official mission statement. As mentioned, the company does have a purpose to "save people money so they can live better" (Corporate, 2010, p. 1); however,

...