Amazon and Walmart Case Study 2019-2020

Competitive Strength Analysis

Amazon and Walmart are two big giants when it comes to sale and market share of their products; companies sell a large number of products both are competing in a large number of products as they provide number of products ranging from grocery, books, electronics and another number of products they are competing in their business domains. As 2018 started, Walmart has to pay attention to its future as Amazon captured the great help place of Walmart as the most valuable retailer company in the world. Amazon reported growth ten times in the past decade, and Walmart only shows a 20% growth in sales compared to Amazon. Amazon recently acquired Whole Foods for $13 billion; this shows that Amazon is moving to other offline businesses aggressively, which is a threat to Walmart’s most significant business of grocery.

Walmart is putting efforts to make their way as Walmart bought Jet.com for $3 billion back in 2016, and their US eCommerce revenues show growth as they made $11.5 billion sales through an online website, but still, Walmart is far behind than Amazon. Therefore, Amazon is making more money than Walmart, as sales levels of Amazon are higher than Walmart. Walmart is finding ways to expand in new horizons; Walmart reported profits three times Higher than amazon, but Amazon new buying of Wholefoods making it necessary for Walmart to think aggressively as amazon is targeting its share in the grocery sector.

Walmart is introducing same-day deliveries, and amazon is already doing that in several states, but Walmart is putting effort into initially to introduce it several in several countries. This paper will discuss Walmart’s strategies to have a competitive advantage over amazon by analyzing different aspects of financial, cultural, and strategic related to Walmart.

Walmart, compared to Amazon, is less diversified as Amazon has several new tech devices in the market and other businesses, which can be a threat. Walmart has stores in 28 countries, which, as an opportunity, can be exploited to diversify its business and have a competitive advantage over its most significant competitor Amazon.

Leadership strategy is cost leadership generic strategy, and company leadership does not make quick decisions as compared to Amazon CEO Jeff Bezos, who is aggressively engaged in diversifying their business. Walmart’s leadership should plan to have a competitive advantage over others by planning and implementation futuristic and quick decisions like their competitor. Corporate culture is also be improved as to implement strategies organizations need corporate culture for successful implementation of these strategies, organizational culture defines the organization, and Walmart can improve their HR management and quality standards to grow as an organization (Bhasin, 2018).

SWOT Analysis

            SWOT analysis of Walmart gives us insight into the company’s potential and threats to their businesses, which can be significant in advising the CEO of Walmart about their strategy to be competitive in the retail industry (Jurevicius, 2018).

Strengths

The strengths of Walmart come from its growth in the past years as the most prominent retail brand in the world in the retail business. Walmart’s strengths are related to its size and could enable them for further growth in the global retail market. They can use their organizational capacity, global supply chain channel, and high efficiency in supply chain management. Its size and organizational structure provide growth opportunities through investment in these global channels (Jurevicius, 2018).

Weaknesses

Walmart, although it is a global corporation and has several business subsidiaries, Still, its generic nature can be a weakness to face threats and grow their business Walmart uses a cost leadership generic strategy which is a threat directly related to its business model, they are generic. Their business model can be easily copied as Amazon come in with aggressive in the business by buying whole foods. Its thin profit margins due to its generic nature and market do not have diversified companies; Their organizational size can only be their advantage, which is not enough to cope with all the challenges which today’s businesses posses (Jurevicius, 2018).

Opportunities

Walmart’s opportunities lie in their business size, and they can expand hugely by having these strengths but to be competitive they have the chance to improve their business practices and expand their market in developing countries and improvement in their quality standards can be a big opportunity for Walmart (Jurevicius, 2018).

Threats

Threats to their business are aggressive competition and changing in consumers’ perspective as people prefer healthy lifestyles. Small scale online individual selling could also posses’ risks to their business model (Jurevicius, 2018).

Financials Analysis

Amazon                                                                                                          Walmart

Net Profit Margin     3033/177866 = 1.7%                                       9862/496761= 1.9%

Based on Current Market Price

PE Ratio         1516/18.03=84%                                                         95/1.74= 54.6%

Current Ratio 60197/57833=1.04times                                            59664/65253= 0.91 times

Subtracting Inventory from total current assets

Quick Ratio 44150/57833=0.76 times                                               15881/65253= 0.24 times

Amazon Market Cap 501 Million Shares * 1516 Share Price= $759516

Walmart Market Cap 2941 Million Shares * 95 Share Price= $279395

Based on this financial analysis, Amazon’s profit margin is a little less than of Walmart. Still, their all other ratios are better than of Walmart Price earning of Amazon is almost 30% higher than of Walmart which is significant difference, current ratio is also good as amazon have 1 times more assets than its liabilities compared to 0.91 times of Walmart, and quick ratio of Walmart is meager compared of Amazon as Walmart has higher level of inventory due to its business nature. Amazon has a greater market cap due to its higher share prices than Walmart’s financial analysis shows strong numbers for Amazon.

Conclusion and Recommendations

            Based on the current situation, SWOT analysis, and financial basis Walmart CEO should adopt aggressive policy and make strategies to overcome the challenges they are facing; they need to take and implement a new strategy and should make decisions based on financial analysis on leadership level to improve the condition of Walmart. Walmart should exploit their opportunities to expand into new markets and improve their HR management and inventory management strategies. They should invest in diversified businesses to increase revenue and market share. Walmart should enhance its supply chain management to reap profits and cut its fulfillment costs. They should develop their delivery system and expand its business in underdeveloped countries. Thus, adopting new strategies and implementing them can improve Walmart’s overall performance and help them overcome the challenges they face from Amazon’s aggressive business strategies.

References

Bhasin, H. (2018, January 14). SWOT analysis of Walmart. Retrieved from marketing91.com: https://www.marketing91.com/swot-walmart/

Jurevicius, O. (2018, September 17). SWOT analysis of Walmart (5 Key Strengths in 2018). Retrieved from strategicmanagementinsight.com: https://www.strategicmanagementinsight.com/swot-analyses/walmart-swot-analysis.html

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