Walmart Success Factors

| 17-08-2021
[RAND-1-100] Comments

Enterprise cloud application vendor Workday today confirmed that it has added retail giant Walmart to its customer list for HCM applications. While no details are known of the extent of the contract, Walmart's global employee base comprises around 2.2 million people.

The revelation came after the release of a note written by William Blair financial analyst Justin Furby, in which he speculated that a contract across the retailer's entire global workforce would make it five times larger than any of Workday's existing accounts — 'by far the largest company Workday has ever signed.'

As Workday's stock price soared over 8% on the report earlier today, trading was halted and the company was obliged to file a terse 8-K statement:

Workday, Inc. (“Workday”) announced that Wal-mart Stores, Inc., a worldwide retailer, has purchased a subscription to Workday Human Capital Management, Recruiting, Learning and Planning. Workday is not updating its financial guidance for the fourth quarter of the current fiscal year ending January 31, 2017 or for the fiscal year ending January 31, 2018.

Walmart currently uses SAP HCM and SuccessFactors. It signed up for a 2.1 million roll-out of SuccessFactors in 2010 after completing a two-year trial with 300,000 employees. It has been using SAP for back-office systems since 2007, although that implementation appears to be still ongoing — on stage at the SAPphire show in May 2015 to talk about its use of SAP HANA analytics, CIO Karenann Terrell joked that she hoped Walmart would finish its SAP implementation “in my lifetime.”

Free 2-day shipping. Buy SAP Successfactors Employee Central: The Comprehensive Guide (Hardcover) at Walmart.com. Finished goods are the main type of inventory used by Walmart and make the biggest impact on its overall success. These goods arrive at Walmart stores directly, are replenished regularly, and are always on hand in Walmart stores for consumers to buy.

We asked Workday for comment. We were told the company has 'nothing to add beyond the information in the 8-K' at this time.

[UPDATE] In what may be related news, The Wall Street Journal yesterday reported that Karenann Terrell is stepping down as CIO of Walmart, five years after she took up the role in February 2012. The company says it will announce new technology leadership 'shortly'. It's a year since Walmart brought its various tech and development teams under a single management structure, with a further shake-up after completion of the Jet.com acquisition in November.

My take

Given the two-year evaluation that SuccessFactors previously went through and Workday's statement today that there's no update to its financial guidance for the 2018 fiscal year that's about to start, it seems unlikely that Workday's going to roll out to anything other than a small proportion of the Walmart workforce in the near future.

Walmart Critical Success Factors

But the fact that Walmart has signed up not only for the core Workday HCM system but also the companion applications of Recruiting, Learning and Planning is still a major coup for the cloud pureplay, even if it's just a trial for now. Walmart has been investing strongly in analytics capabilities in recent years, which may explain why the relatively new collaborative Planning tool has been included in the deal.

The deal also provides further substance to Workday CEO Aneel Bhusri's assertion back in November that the company is winning deals from SAP customers, including some where implementations have failed to scale. Of course, that's an assertion that has to be backed up by demonstrating that Workday can scale. Walmart certainly provides sufficient scale to test its capacity.

This SWOT analysis of Walmart Inc. (formerly Wal-Mart Stores, Inc.) shows that the company’s leading position in the international retail industry is based on the utilization of organizational strengths and corresponding competitive advantages. These business advantages are used in countering the impacts of competing retailers and digital content distribution firms, such as Amazon, Target, Apple, and Google. In this case of Walmart, the SWOT analysis gives insights on the internal and external forces significant in the company’s strategy development in the retail industry. While these factors vary over time, the company’s growth depends on its ability to capitalize on its retail operational effectiveness and strengths. Also, in spite of the company’s weaknesses, its strengths are far more significant considerations. Walmart can use these strengths to exploit its opportunities in the retail market. The firm can also use its strengths to counteract the threats to its retail business, especially its e-commerce operations. Strategic implementations based on the SWOT factors are important in ensuring Walmart’s competitiveness and continued leadership as the biggest retailer in the world.

This SWOT analysis of Walmart shows that the company can have higher long-term success potential through aggressive global expansion, especially in retail markets in developing countries. The company’s internal strategic factors (strengths and weaknesses) represent capabilities for this kind of expansion. However, the firm’s external strategic factors (opportunities and threats) require the creation of more value through the retail service value chain, to overcome the hindering force of competitors, especially strong local and regional incumbents. These considerations are in line with the factors identified in the PESTEL/PESTLE analysis of Walmart Inc.

Walmart’s Strengths (Internal Forces)

In this part of the SWOT analysis, Walmart’s strengths are all related to the size of its business. These competitive strengths enable the company to withstand threats despite its weaknesses as a low-cost retailer. For exploiting global expansion opportunities, Walmart’s strengths for further global growth are:

  1. Global organizational size
  2. Global supply chain
  3. High efficiency of supply chain

Walmart’s global organizational size gives the business deep pockets to fund growth and expansion. The global supply chain also provides business resilience from market-specific risks, such as disruptions in local supply chains. In addition, Walmart’s supply chain has high efficiency because of advanced technologies for monitoring and controlling the movement of products from suppliers to its stores. In this SWOT analysis, such organizational and business strengths provide competitive advantage, especially against smaller retailers.

Walmart’s Weaknesses (Internal Forces)

Walmart’s weaknesses impose challenges on the firm’s ability to withstand the threats also identified in this SWOT analysis. These weaknesses are directly related to the company’s generic strategy and its implications in business development, capabilities, resources, and profit margins. Walmart uses the cost leadership generic strategy, which leads to the following weaknesses:

  1. Thin profit margins
  2. Easily copied business model
  3. Competitive disadvantage against high-end specialty sellers

Thin profit margins are a typical effect of using the cost leadership strategy. Because Walmart minimizes selling prices, it also needs to minimize profit margins and rely more on sales volume. The cost leadership strategy also makes Walmart’s business model easy to copy. The firm does not have significant competitive differentiators, except for its business size and prices. Furthermore, high-end specialty retailers have the upper hand in attracting quality-seeking buyers who have low sensitivity to price. Thus, the weaknesses presented in this SWOT analysis of Walmart reflect business vulnerability to innovative competitors and disruptions in the industry environment, especially in the presence of major e-commerce firms like Amazon.

Opportunities for Walmart (External Forces)

Walmart’s opportunities are mainly about expansion and improving business practices. These opportunities are linked to the global economic situation. Also, the human resources situation in the organization presents issues that are actually opportunities for the firm to improve. In this portion of the SWOT analysis, Walmart’s opportunities are:

  1. Expansion in developing countries
  2. Improvement in human resource practices to develop competitiveness in the labor market
  3. Improvement in quality standards

Walmart’s opportunity to expand in developing countries is based on their high-growth economic condition. On the other hand, the opportunities in HR practices directly relate to the criticisms on the company’s employment practices. Improving these practices can attract higher quality workers relative to other retailers. Walmart’s opportunity to improve quality standards addresses consumers’ concerns on the health effects of using low-cost and sometimes low-quality products. This part of the SWOT analysis presents some ways for addressing the company’s weaknesses and the threats to its retail business.

Threats Facing Walmart (External Forces)

The threats to Walmart’s business are linked to the retail market condition and the changes in consumer perceptions about the products they buy. These factors should compel the company to make some competitive strategic changes. In the context of this SWOT analysis, the threats to Walmart are:

  1. Healthy lifestyle trend
  2. Aggressive competition
  3. Online retailers of various sizes

The healthy lifestyle trend is a threat and an opportunity. It threatens Walmart’s business because many of the company’s goods are perceived as not healthful, not organic or not natural. It is an opportunity for the company to improve its quality standards. However, this factor is more of a threat because the retail giant currently does not prioritize healthful products in its stores. Aggressive competition is another threat because other large retailers could use aggressive marketing strategies to capture Walmart’s customers. Also, small-scale and large online sellers are a threat against the company’s retail business. Through the Internet, small sellers or individuals are able to compete and bypass the company’s presence by using their own websites to sell products to online consumers. Similarly, in this part of the SWOT analysis of Walmart Inc., large online retailers have the ability to attract and satisfy consumers, especially those who prefer the convenience of online transactions.

Recommendations based on SWOT Analysis of Walmart Inc.

Walmart Success Factors Survey

This SWOT analysis shows that Walmart must prioritize using its strengths to exploit opportunities in the global retail market. The company’s weaknesses and threats should be secondary priorities. Walmart can improve its HR management standards and product quality standards to improve firm performance. Also, the company must continue expanding its business to exploit economic opportunities in developing markets. Walmart’s strengths based on its global organizational size, global supply chain, and high efficiency of the supply chain can support aggressive global expansion in foreign markets. Still, the company must implement strategic changes based on the weaknesses and threats presented in this SWOT analysis, to prepare the business for the long-term developments of a globalized and increasingly online retail market.

Walmart success factors

Walmart Success Story

References

Sap Successfactors Walmart

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  • International Monetary Fund (2014). Emerging Markets Can Manage Evolving Mix of Global Investors.
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