Walmart inc. Takes on amazon Case Study Help
Walmart is considered one of the most valuable companies in the world. It was established by Sam Walton at the end of 1962. It has its headquartered in Bentonville, Arkansas. It is a family business as it remains in control of the family members who have 50 percent shares of the company. It has an extensive number of employees to perform operations that are over two million. Walmart is originated from America and is a multinational company that provides different products and services to customers. It is a retail organization that has intensive inventory in its warehouses and stores. The organization runs its superstores by facilitating customers with attractive discounts and operates large discount department stores and warehouse stores.
In 2013, according to the survey report of the Fortune Global, Walmart is considered as the second-largest company in the world in the industry. Walmart decided to go for public listing in 1972 and got itself registered on the New York Stock Exchange. By the year 2009, the corporation was earning more of its revenues from the United States of America as in 2009, its 51 percent of revenues were from the U.S that was $258 billion solely from grocery business. However, it has warehouses in North America as well.
Despite having huge revenues and competitive advantage, Walmart faced extraordinary competition with Amazon. In 1994, Amazon.com was founded by Jeffrey Bezos headquartered in Seattle to be the biggest bookstore on the earth. By 1997, the organization demonstrated rapid growth i.e. increasing sales to around $147.8 million and went public during the same year and raised around $42 million.
In 1998, Amazon expanded its products from books to the addition of electronics, toys, videos, and music to be the mass merchandiser of the online world. Amazon started to provide e-commerce technology for the retailers to those who were willing to outsource the web operations and lack their online presence such as Target Stores Corp. and Bebe Stores Inc, – a fashion retailer. By 2008, the organization had grown to around $17 billion in sales with a workforce of approximately 17,000 employees.
The entrepreneur of Amazon did not lose hope even after he generated no profit until the end of 2001 and did not bother about the criticism he was facing. In response to that, he developed a strategy to focus on expansion so that mass audience could be targeted and he was right about that. Jeff Bezos focused on innovative technology and invested a huge amounts to achieve a competitive advantage that is; flexible payment service, a variety of services under cloud computing, and application interface program.
This report revolves around the competitive threats faced by Walmart from Amazon as both are considered to be leading brands with different competitive advantages operating in the e-commerce industry. However, Amazon was founded after 30 years of approx. of Walmart, still it gave a significant competition to Walmart in terms of innovative technology, marketing strategies, and market share, and quality services. Walmart came under threat when, in 2007, Amazon decided to enter into the grocery market with e-commerce. However, there was no significant demand in the market it was expected that 43% of the population of the US will be utilizing e-commerce for grocery buying by the end of 2017.
Trends, Opportunities, and Constraints:
Significant growth in online sales has influenced both brick-and-mortar sellers and e-retailers. This is primarily because merchants in the retail industry tend to embrace e-commerce in order to boost growth. Between increased use of e-commerce platforms and adopting new digital technological approaches, there has been an increase in the emergence of alternative approaches such as brandless and direct-to-consumer brands leading to a shift in the focus in the direction of the overall experience of the shoppers. Despite such growth of ease in the shopping experience of the customers, there are many economic, political, and social factors with the threat of potential looming of recession. (eMarketer, 2020)
Although the e-commerce sector has represented double-digit growth of the retail industry per annum still the sales of online business are around 6 percent of the total sales of the retail industry. All the business organizations in the retail industry have been investing to develop new formats for the local retailing organizations in order to meet the industry challenges which leads to a change in the needs of consumers, increased urbanization, and the impact of the change in the consumer demographics. (Sievers, 2020)
Considering the continuous evolution of the retail industry, there has been a rapid change in the market dynamics that tends to be based on consumer preferences, attitudes, and demographic shifts. (ETRetail, 2020) Continuous change in consumer behavior is due to the explosive growth of e-commerce platforms i.e. the provision of multiple choices at the fingertips before making a purchasing decision. Similarly, owners of retail businesses are also presented with endless opportunities regarding the use of technological approaches that streamline and assist in scaling-up of business. (Officials, 2020)
An increased focus on customer-centricity is not based on the provision of great consumer services only but associated with the provision of great experience from the stage of awareness followed by the purchasing process through the facilitation of purchase with the initiatives such as customer offers and consumer finance. Thus, there is a requirement to evolve with the customers continuously due to a significant change in the change in aspirations and lifestyle needs leading to a reinvention of products to offer innovative products to the customers.
The future of the retail industry is mainly dependent on research and development but the consumers are more directed and prefer trusted and well-known brands. The companies that make continuous investments in research and development would lead the change and market position through the adoption of marketing strategy. (ETRetail, 2020) Similarly, the trend of the retail industry is also driven by the advancement in technological approaches but is not limited to the approaches such as blockchain in the efficient management of supply chain, the internet of things, artificial intelligence, and motorized robotic micro-fulfillment warehouses in order to bring improvement in the productivity and efficiency.
Considering the ability of the retailers to learn the adoption of new technological approaches, it is known to bring improvement in the store functions, the efficiency of back-of-shop, social presence, CSR policies representing every opportunity for both physical and online retailers to thrive to grow. (Hopkins, 2020) Additionally, in order to remain competitive in the market, retail organizations are finding the eco-friendly, cost-effective, and most efficient approaches to operate their business. Other than the concern to bring cost-reduction in the business operations, the first and foremost priority of the retail industry is to analyze if the advanced technological approaches would bring improvement in the retail product demand. (Hopkins, 2020)
Changes in digital marketing have enforced modern retail businesses to reach out to the potential consumer base through different marketing channels. The approach of multi-marketing represents the requirement of encompassing different approaches which mainly include traditional paid advertisements, social media marketing, and email marketing. The multi-channel marketing approach assists to captivate customers and keep them engaged in the POS (point of sale). Due to this reason, customers are likely to be more interested in building one-on-one engagement leading to the development of the personal relationships and build trust.Â (Officials, 2020)
Despite the growth trends and availability of opportunities in the retail industry, the penetration of the e-commerce platform is still growing and there has been a continuous price war among the leading retailers operating in the industry. Direct-to-customer brands have also demonstrated learning from traditional retailers i.e. recognition of the e-commerce potential and opening of physical stores to add value. Many of the DTC brands are opening brick-and-mortar locations because the acquisition of the cost of customers is high when an organization operates its online functions solely.
Liquidations in the retail have significantly led to the contribution of a flood resulting in the closure of stores i.e. no less than 9000 stores in the year 2019. Due to this reason, the presence of retailers with sagging sales has been increasing with loads of large debt or leading to the deterioration of finances. However the retail industry has thrived the post-Great Recession period, the fortunes of the retailers are primarily dependent on the ups and downs of the economy. For instance, the emergence of Barneys New York as a brand rather being a retailer. With an increased consciousness of customers about the environment, the adoption of the circular model would become particularly viable for retailing organizations. (Jansen, 2020)
The organizational structure influences everything from how the company operates to how well the workforce communicates with each other internally. A well-defined organizational structure helps employees to work passionately and competently, establishing the chain of command, laying the ground for the internal business operations as well as creating the organizational alignment.
The organizational structure at Walmart is hierarchical functional which has two features includingfunction-based and hierarchy based definitions. The hierarchy based definition tends to pertain to the vertical line of the authority and command throughout the structure of the organization. In contradiction to the hierarchy based definition, the function-based definition feature of the corporate structure of the company involves groups of employees fulfilling specific functions. Additionally, there is a distinct chain of command from the top to the bottom.The functional departmentalization provides various advantages to the company which includes clarity among employees related to their responsibilities and duties, clear lines of management, a specialism which means that the employees are skilled and competent in the task they do, and specialization which means that departments focus on one area of work.
The employee-driven organizational culture at Walmart contributes to the worldwide success since its establishment. Additionally, the company is be focused on employee engagement, culture, training, and development. The structure put in place by the company help improving execution and communication, streamline the process of decision making as well as accelerate the pace of change. Also, the company implements the new internal communication strategies as well as a practical tool such as corporate listening, which facilitates in the strutting environment.The company also broadens its efforts to embed inclusion and diversity to drive exceptional business outcomes. Also, the company is committed to foster the culture of innovation and a trust-based inclusion environment where the employee’s fee supportive & connected with each other and have unlimited opportunities to grow and develop.
The organizational structure of the company is similar to that of Walmart i.e. functional which focuses on the functions of the business as a basis for determining the interaction among the organization components. The organizational structure of the company enables extensive control of international e-commerce operations. A corporate structure establishes the system and design of interaction among the firm members. Such organizational structure helps the company in enhancing work productivity and efficiency due to the specialized technology and skills. The company employees must follow the leadership principles which include ownership, obsession, invent, and simplification. The company is open to ideas and innovation and the environment of the company is defined as hospitable to experimentation because the experiments lead to a high degree of innovation within an organization.
The workplace culture at Amazon celebrates the diversity of thoughts, transparency, opportunities and the opinion of all the enrich conversation. It should take the people’s to focus approach to engage the employees with listening to drive the cultural change, hence ultimately affecting the bottom line of the company.The self-formed teams with decentralized as well as autonomous decision making and trust allowed the agility & flexibility with an organization.
Amazon and Walmart are working in the same industry and environment therefore, there are external forces that are affecting the operations and financial performances of the companies .PESTEL analysis is based on analyzing all the favorable and unfavorable factors that have a significant impact on the company.
When it comes to Walmart, it considers political factors in the retail market to reduce the threats and avail the opportunities to enhance the financial performance of the company. There are government policies that are required to be followed to exist in the market. Amazon has the opportunity to work in a country and capture the market of countries that are stable politically. Besides that, there are no strict rules and regulations by the government of developed countries to prevent globalization.
However, there are major concerns for employees to protect their interests such as; higher wages that are a threat for the Amazon because it may increase the Administration cost and operational costs of the company and profit will decrease. In this case,the bargaining power of employees is high.
In the U.S there is a politically stable situation that is an opportunity for the corporation as it can expand the business to a large extent. In addition to that major diversifications can take place globally targeting developed countries such as; Germany, Australia, UK, Ireland, etc. government authorities have major concerns for cyber security that protects the e-commerce business and corporations threat in terms of hacking and cyber-crimes are insignificant. One way to expand the business is to increase the number of stores along with the e-commerce that can increase the market share and give tough competition to other firms. However, there is a threat to the entry of Chinese firms in the market.
In the case of Walmart, they have many opportunities in terms of economic conditions of the countries where operations are expanded. In developed countries, there is major economic stability which provides an opportunity for the company to diversify its business. There is a culture of continuous development in countries that has favorable impacts on company profit. In developed countries, there is full employment and because of that people spend or consume, therefore, if income will increase individuals will spend more.
Amazon faced economic factors as threats as well as opportunities for the corporation. Such that, the economic stability of U.S and European countries are a major opportunity for the firm because economic stability means residents in the country have high spending and consumption. Second major opportunity is that in developing countries where per capita income is high, individuals disposable income is also high that enables the customers to spend more. However, recession in China is a threat to Amazon as there is a potential recession in China that is preventing the corporation to target the market.
In the case of Walmart, increasing the culture of a healthy lifestyle around the world especially in developed countries is an opportunity for the company to attract customers by adding healthy products in the grocery list. Besides that, there is a culture of gender diversity and discouraging gender roles is increasing the number of users who utilize the online buying.
Social conditions play a major role to fluctuate the demand in the market. As in many countries, there is a culture of wealth disparity that means the company is in a threat. Wealth disparity means few people have huge amount of money and there are few people who have no money at all. In this condition, few people use the power to earn more and more and that ends up having fewer people to afford everything as there is a huge gap between the poor and rich.
However, the culture of empowering customers is great in developing countries and it is an opportunity for Amazon to attract more customers by satisfying them and fulfilling their demands. Besides that, there is an increasing culture of online buying because of gender diversification at the workplace, discouraging gender roles at home and strict routine therefore, online buying culture is an opportunity for Amazon.
Technological enhancement is extremely important to run the operations in e-commerce industry. Amazon focused on threats and opportunities related to technology in the environment in an efficient way. Constant technological change is a threat and opportunity both for the company as it can make huge losses for the company after obsolescence and the company could use this as an opportunity to make the first move in the market to adopt the new technology that can increase revenue. However, technology is prone to security threats that must be considered by the company to protect the confidential data and customer loss.
In the case of Walmart, there many opportunities in the external environment. Globally there is an increase of automation in business that helps the companies to bring efficiency in their operations with the help of innovation in technology. There is a major focus on big data and there are suppliers that provide equipment to use and save big data.
In developed and developing countries there is a culture of using mobile phones for various purposes and this is possible because of fast technology. For Walmart this a great opportunity as with one click, anyone can order for products and buy from Walmart. Mobile phones are also helpful for data mining and market the products and services.
In the case of Walmart, they have an opportunity to work in an environment where there are major concerns for environmentally friendly products and services to avoid harming the interest of customers. There is also a trend of business sustainability which is also an opportunity for the company and keeps it focusing alignment of goals with the operations and market trends.
In order to sustain in the market, giving priority to environmental concerns is very important for long term success and to protect the environment. There are many public organizations in the world that work to promote awareness about the materials and processes that are harmful to the earth and other living beings. This is an opportunity for Amazon to work with such organizations to promote their goals. Increasing the rate of carbon level is also an opportunity as a company can promote a low-carbon lifestyle and provide awareness to the public. As more and more people are becoming aware of this issue and its consequences, people have been attracting to e-commerce.
Walmart works in developed countries and there are legal requirements to follow to sustain in the market. These legal requirements are favorable for the company such as; regulations for food safety that is helpful for the company to avoid competition with firms that have low quality food. Besides that, there are employment policies that are required to follow such as; higher wages, suitable working conditions and casual leaves…………………………..
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