Wal-Mart Case Analysis
The write-up is limited to twelve to fifteen double-spaced pages, not including a title page and exhibits
(include as appendices). For this assignment, students are required to address an issue or problem
faced by their company of choice and analyze it using the techniques taught in this course.
Incorporate saint leo values of respect, community, integrity, excellence and responsible stewardship.
The presentation should outline the Major Case Analysis submitted in Unit 7 and contain the major
topics that discuss the Major Case Analysis. It should also contain the critical-thinking topics
contained in this course: making claims, use of evidence, recognizing and validating assumptions,
causal claims, and being persuasive. Students are free to choose any company for the case however
they are strongly encouraged to choose a publicly held company that is listed on a major stock
exchange in the U.S. so adequate information may be obtained for the case analysis. The Saint Leo
core value of excellence will be assessed through a combination of the Major Case Analysis and the
Major Case Analysis PowerPoint or Prezi Presentation. Students are expected to incorporate an
integrated perspective of business utilizing critical-thinking techniques.
WALMART CASE ANALYSIS 2
Wal-Mart Case Analysis
A case refers to a scenario, which provides the opportunity for identifying problems,
applying appropriate theory, and recommending an appropriate course of action in a business
situation. The case itself be fictional or an actual one. When performing a case analysis, an
analyst identifies the problem in the scenario provided, analyzes the main issues, develops
and compares alternative solutions to the problem, considers the disadvantages and
advantages of different potential solutions, selects the most appropriate solution and makes
recommendations for action (Gerring, 2015). Case analyses are essential as they enable an
analyst to improve his/her analytical and critical thinking abilities. In this paper, case analysis
is conducted about Wal-Mart, which is the company of choice. The paper addresses a
particular problem or issue that faced by Wal-Mart. The issue/problem is then analyzed with
the use of various techniques.
Recognized as the most significant business organization in the world by revenue,
Wal-Mart is a multinational firm that operates wholesale, retail, as well as other units in
different formats worldwide. It offers a vast array of services and products at every day low
prices (Moreton, 2014). This Bentonville, Arkansas-based multinational carries out its
business operations via three different segments: Sam’s Club, Wal-Mart International, and
Wal-Mart U.S. (Reuters, 2018). The firm makes over 75 percent of its entire revenue in the
WALMART CASE ANALYSIS 3
United States market, with the remainder coming from major international markets such as
Central America, Africa, Britain, Japan, China, Canada, Mexico, Argentina, India, and Chile.
In the 2017 financial year, Wal-Mart posted revenues of $485.9 billion (Vault, 2018). Over
the last two years, however, its net income has dropped by over 15 percent, including a 7%
decline in the year 2017 to $13.7 billion (Vault, 2018). The strategy used by Wal-Mart
centers around technology, including internal technology for creating more efficient
operations and external technology for enhancing the shopping experience for shoppers
(Wahba, 2018). Its main competitor for online shopping is Amazon.com.
Identification of the critical Issue Facing Wal-Mart
The critical issue that faces Wal-Mart is a drop in profits or net income over the past
few years. The firm’s pre-tax income and net income have been on the decline since the year
- In the year 2014, Wal-Mart posted a Net Income of $15.92 billion, which increased to
$16.18 billion the following year in 2016. However, a drop in Net Income was posted in the
financial year 2016 when the Net Income was $14.69 billion. This was followed by another
decline in the 2017 Financial Year when the world’s largest retailer posted a Net Income of
$13.64 billion, and $9.86 billion in the 2018 Financial Year (Marketwatch, 2018). Wal-Mart
posted declining Net Income despite the fact that sales/revenues have been on the rise over
the same period. This is illustrated in the following table.
Table 1: Wal-Mart’s Net Income from 2014 Financial Year to 2018 Financial Year
(Marketwatch, 2018)
2014 2015 2016 2017 2018
Revenue/Sales $474.29
billion
$485.65
billion
$482.13
billion
$485.14
billion
$500. 34
billion
Pre-tax
Income
$24.66 billion $24.8 billion $21.64 billion $20.5 billion $15.12 billion
Net Income $15.92 billion $16.18 billion $14.69 billion $13.64 billion $9.86 billion
WALMART CASE ANALYSIS 4
Net Profit/Income refers to the amount of money that remains after an organization
has paid off all of its operating costs and debts for a given financial year, quarter or month.
Declining Net Profit/Income might be an indication of an unhealthy business. This could
negatively impact the financial welfare of the people involved with the business, for instance,
investors. A drop in Net Income or profits for the company is a significant issue given that it
makes investors concerned. Shareholders have invested substantially in Wal-Mart seeking to
gain and make profits from the company’s operations. A profit decline is something that will
make them worried.
The problem faced by Wal-Mart
The main problem that is causing a drop in Wal-Mart’s Net Income is the decline in
online sales. The world’s biggest company reported fourth-quarter online sales growth of
23%, which marked a substantial fall from 50% growth in the previous quarter (Gagliordi,
2018). On the whole, the pace of online sales has slowed more than anticipated. The 23%
online sales growth is also slower than the 40 percent growth that the company projected for
Financial Year 2018. Furthermore, Wal-Mart announced thinner profit margins as it had to
reduce the prices of its items more than expected to compete effectively with Amazon.
Thanks to the thinner profit margins, Wal-Mart reported a 42% decline in income for the 4 th
quarter; a quarter that also included the period for holiday shopping (Isidore, 2018).
In the last three months of the year 2017, Wal-Mart reported its profits as $2.4 billion,
which was a decline from a profit of $3.9 billion compared to the last three months of 2016
when it posted profits of $3.9 billion (Bhattari, 2018). Investors had expected more from
Wal-Mart, which has invested significantly over the past few years to compete against
Amazon’s online prowess (Bhattari, 2018). It is notable that after investors had this news,
WALMART CASE ANALYSIS 5
shares of Amazon stock fell to $94.84, which was the company’s worst percentage decline
since 2015 October (Bhattari, 2018).
Analysis of the Issues and Problems
The leading cause for the decline in online sales was the fact that the company had not
kept some essential product items in stock at a time when their demand was at the highest
levels; that is, during peak sales periods such as during holidays. During the holiday, the giant
retailer failed to stock more items in its warehouses such as televisions, toys, and various
electronics, which are always in high demand during holiday periods (Peterson, 2018). Doug
McMillon, the Chief Executive Officer for Wal-Mart, pointed out that the quarterly drop in
online sales was partly due to unanticipated operational challenges that had a negative impact
on the company’s growth. The operational blame, according to Doug McMillon, goes
particularly to inventory replenishment as well as out-of-stocks, which have been plaguing
Wal-Mart for some years now and have proved to be detrimental to sales especially during
significant shopping periods such as holidays (Gagliordi, 2018).
The other primary cause is increased competition primarily from Amazon, which has
a developed a highly personalized site basing upon the shopper’s current location and
browsing/shopping history. Also, Amazon has adequately localized the customer experience
by displaying trending products and the services that are available in the customer’s region.
This allows Amazon to draw many customers to its website from Wal-Mart (Wahba, 2018).
Overall, failure of Wal-Mart to quickly replenish its stocks meant that some products were
not available to online customers who wanted to buy them. The customers who could not find
the items they wanted on Wal-Mart’s website moved to Amazon’s website where they
purchased them.
A set of options/choices for Wal-Mart
WALMART CASE ANALYSIS 6
Alternative A: Intensify Marketing Campaigns to Boost Online Sales
There are two alternatives that Wal-Mart can undertake to revive its online sales.
These are as follows: firstly is to increase marketing efforts to boost online sales. Adopting
this choice requires Amazon to intensify the advertising and marketing of its Website in
various channels including outdoor advertising, adverting on radio and television, advertising
in print media such as newspapers and magazines, as well as advertising in various social
media sites.
Alternative B: Increase Investment in E-Commerce and Ensure Quick Replenishment
of Stocks
The second alternative is for Wal-Mart to increase investments in e-commerce by
redesigning its website to include an upgraded design and more personalization, and ensure
speedy replenishment of inventory so that products are never out of stock. The firm should
personalize its website basing upon the location and shopping history of its customers. The
redesigned website should localize the experience of a customer by showing trending
products as well as the services which are available within the customer’s region, for instance,
grocery delivery. It should also have new features, for example, a feature that will allow the
customer to quickly order items that they frequently buy, similar to Amazon’s Dash Buttons.
Also, the redesigned website should offer personalized recommendations basing upon the
customers’ purchase and browsing histories.
Evaluating those alternatives
Some aspects are taken into consideration when examining the selected alternatives during
the analysis. These include accounting, administrative studies, economics, finance, legal,
management, marketing, and MIS.
WALMART CASE ANALYSIS 7
Accounting
The first alternative, which requires Wal-Mart to intensify its marketing campaigns to
boost online sales, will have positive impacts on revenues and profitability. This is because
they will increase people’s awareness about online shopping at the Wal-Mart website and
persuade consumers to shop online at the site. An increase in online traffic at the website
would certainly increase sales. However, it will also cost the company about $135 million in
the advertisements.
The second alternative will most likely have a more significant impact on profitability
and revenues than the first alternative. It will also cost less amount of money. Redesigning
the Wal-Mart website to include an upgraded design and more personalization will cost about
$36 million per year. This option will have a more significant impact on revenues and
profitability because of two reasons: firstly, the redesigned website will improve customer
experience and increase customer satisfaction. This will increase customer loyalty. Secondly,
quick replenishment of inventory will mean that products are never out of stock and items
will always be available for the online shoppers. This will, in turn, increase sales and
profitability.
Administrative Studies
Expected value refers to the anticipated value for a particular investment. It is
computed by multiplying each of the likely outcomes by the probability each outcome would
happen and then adding each of those values (Gerring, 2015). As described earlier, Wal-Mart
has two alternatives to improve its net income: Alternative A is to intensify marketing efforts.
Alternative B is to increase investments in e-commerce and ensure speedy replenishment of
inventory. Keeping this in mind, probabilities are assigned to the two alternatives as follows:
WALMART CASE ANALYSIS 8
Alternative A: A 45% probability that Wal-Mart’s net income will increase by at least $800
million
Alternative B: A 55% probability that Wal-Mart’s net income will increase by at least $950
million
Based upon these probabilities, the expected values can be computed as follows:
Expected Value for Alternative A: $800 x 45% = $360 million
Expected Value for Alternative B: $950 x 55% = $522.5 million
From this computation, it is clear that Alternative B has the highest expected value.
Economics
Wal-Mart is a multinational corporation with operations all over the United States and
around the globe. At the moment, the United States and most other Western countries are
enjoying economic stability after having recovered from the 2007/8 global financial crises.
The first alternative is suggested to be implemented on the global scale, whereas the second
alternative is suggested to be implemented only in the United States. This is primarily
because it is not possible for Wal-Mart to use e-commerce and allow online shopping in most
countries. Overall, since the American economy and the economy of most other countries are
stable, they will potentially have a positive impact on the alternatives.
Finance
Neither of the two alternatives will have an impact on the evaluation of the stock and the
financial reporting of Wal-Mart. This, therefore, means that the evaluation of Wal-Mart’s
stock and the company’s financial reporting will remain unchanged.
Legal
WALMART CASE ANALYSIS 9
Regarding the legal and environmental concerns surrounding the options, there are
quite a few legal considerations about marketing and e-commerce. Different countries have
different laws and regulations about advertising and electronic commerce, and Wal-Mart will
be obligated to follow them when it pursues the alternatives. Wal-Mart’s e-commerce website
must conform to various legislations on e-commerce, including data protection and the use of
cookies (Moreton, 2014). When it carries out extensive marketing campaigns to increase
people’s awareness about its online shopping platform, Wal-Mart will have to be honest and
accurate and comply with all the relevant advertising codes of practice. It is a legal
requirement that the advertising has to tell the truth and not deceive the people (Gerring,
2015). The two alternatives do not have any potential environmental impact.
Management
The two alternatives do not have any impact on Wal-Mart’s organization structure. In
other words, the company’s organizational structure will remain unchanged no matter which
alternative is ultimately selected. However, Alternative A will have an impact on staffing,
which would have to be increased. More marketing personnel would be needed in the
implementation of Alternative A. Nevertheless, Wal-Mart will not need to employ additional
staffs in the implementation of Alternative B. The existing information technology (IT) staffs
can be assigned the role of redesigning Wal-Mart’s website.
Marketing
The target market comprises online shoppers who are young adults aged 18 to 34
years. They consist of millennial. This is a significant market segment considering that about
70 percent of young adults purchase products online. Young adults of the millennial
generation do not necessarily prefer to do their shopping online, but a vast majority of them
believe that online shopping is less time-consuming in comparison to going to a physical
WALMART CASE ANALYSIS 10
retail store for shopping (Henry, 2016). It is worth mentioning that more millennial than any
other generation do their shopping online (Henry, 2016).
Management Information System (MIS)
MIS refers to a computer system that comprises software and hardware, which serves
as the backbone of a company’s operations. It collects data from different online systems,
analyzes that information, and then reports data to help in management decision-making. To
manage the new effort and better integrate, the systems that Wal-Mart can use include
Customer Relationship Management (CRM) system which stores crucial information
regarding the online shoppers, including contact information and prior sales/purchases; and
Marketing Information System (MkIS), which can be utilized by marketing teams in
reporting on the effectiveness of marketing campaigns and utilize the lessons learned in
planning future marketing campaigns at Wal-Mart.
Chosen Solution: Alternative B
The chosen solution is for Wal-Mart to opt for Alternative B. This solution will
effectively solve the problem of declining profits/net income that Wal-Mart is currently
facing. This is primarily because Alternative B addresses the causes of the problem, namely
increased competition from Amazon which currently has a better e-commerce website that
attracts and retains more customers, and Wal-Mart running of stock resulting in goods
becoming unavailable for online shoppers.
Alternative B involves increasing its investments in electronic commerce by
redesigning its website to include an upgraded design and more personalization. It is worth
mentioning that personalizing order features and localizing web pages might help Wal-Mart
increase customer satisfaction and sales/revenues. The beauty retailer L’Occitane, for
WALMART CASE ANALYSIS 11
instance, was able to reap substantial benefits from localization: after designing region-
specific checkout pages, L’Occitane’s mobile sales increased by 15%, and sales went up by
10% after it implemented mobile advertisements which showed locally trending promotions
and items (Pandolph, 2018). Personalized product recommendations would be a crucial
aspect of Wal-Mart’s website upgrade, given that such product recommendations have
demonstrated to increase repeat visits and order values, and prevent retail stores from losing
clients to the e-commerce giant Amazon. Pandolph (2018) reported that if a brand does not
recommend a personalized listing of product items in marketing messages, many customers
will shift from that brand’s website to Amazon. Wal-Mart can increase the efficacy of its
personalization efforts through integrating online data with in-store data.
This alternative also involves ensuring fast replenishment of inventories so that the
company never runs out of stock for online shoppers. Online shoppers always want the
products they are buying online to be available, or else they will go online shopping
elsewhere for those same items. If the product is out of stock at Wal-Mart, they may move to
Amazon.com and purchase it from there (Pandolph, 2018).
Overall, Alternative B will ensure that Wal-Mart never runs out stock again for the
online shoppers. It will also allow the world’s largest retailer to have an e-commerce website
for online shopping which guarantees customer satisfaction and enhances customer
experience through such things as personalization and personalized recommendations basing
upon the customers’ purchase and browsing histories. The constant availability of products
and the use of an outstanding e-commerce website for online shopping will mean that online
shoppers will not have to shift to Amazon.com, which is Wal-Mart’s biggest competitor in e-
commerce. Wal-Mart’s online sales will increase, which will, in turn, boost the company’s
overall profitability and net income. In this way, Alternative B would have effectively solved
the problem and issue.
WALMART CASE ANALYSIS 12
Recommendations based on the outcome of the analysis
Wal-Mart should adopt Alternative B and implement it to solve the issue it is
currently facing, namely declining net profit or net income. Besides, Wal-Mart should
combine its online customer data with its in-store customer data to improve personalization in
its product recommendations and loyalty perks. When it combines data from the two
channels, the company would be able to have a complete view of the preferences of its
customers and also be able to develop very personalized customer experiences. This would
significantly boost Wal-Mart’s online sales where growth has been decelerating over the last
three quarters, ending in a steep decline to 23 percent year-over-year growth in the most
recent quarter (Pandolph, 2018). The action plan is illustrated in the table below:
Table 2: Action Plan to help Wal-Mart resolve the issue of declining profits
Goal: Increase profits/net income by at least 5% in the next financial year
Action Step Responsible Person Deadline (When
this action step
should be
completed)
Necessary
Resources
1 Redesign the website to include
an upgraded design
Wal-Mart’s IT
personnel
5 th August 2018 $3 million
2 Include more personalization in
the website
IT personnel 15 th November
2018
$2 million
3 Invest in additional personnel
and/or warehouse to handle
more stocks as customers
increase
Wal-Mart’s Human
Resources
department and
Procurement
department
10 th January
2019
Additional
employees and
warehouses,
$26 million
4 Set a minimum level of
inventory to know when it is
time to reorder more
merchandise so that products are
always available for online
shoppers
Wal-Mart’s
Purchasing Manager
15 th January
2019
–
5 Acquire inventory management
software to better manage the
levels of inventory and prevent
running out of inventory for the
Wal-Mart’s senior
management
February 1 st 2019 $5 million
WALMART CASE ANALYSIS 13
online shoppers. The software
should keep track of real-time
levels of inventory
The potential problem that might arise as a result of the recommendations includes
resistance from members of the organization, including both staffs and the top executives.
Their resistance might be because they may not fully understand the potential long-term
benefits of implementing the recommendations. The top executives might resist because they
think it costs too much to implement them. This problem would be resolved by explaining to
them the benefits of the recommendations to the company as a whole. Correctly, they will be
informed that the recommendations will increase profits.
Conclusion
In sum, case analysis of Wal-Mart has been performed in this paper. The issue faced
by this giant retailer since the year 2015 has been a decline in net profit. The company’s net
income dropped from $16.18 billion in 2015 to $14.69 billion in 2016, $13.64 billion in 2017
and $9.86 billion in 2018. The main problem that is responsible for causing a fall in Wal-
Mart’s Net Income is the decline in online sales in its e-commerce website. The causes for
the decline in online sales are the fact that the company had not kept some basic merchandise
in stock at a time when their demand was at the highest levels and increased competition
mainly from Amazon, which has created a highly personalized site basing upon the shopper’s
current location and shopping history. There are two alternatives for Walmart to resolve the
issue: Alternative A: Intensify marketing campaigns to boost online sales, and Alternative B:
Increase investment in e-commerce and ensure quick replenishment of stocks. The best
solution is Alternative B.
WALMART CASE ANALYSIS 14
References
Bhattari, A. (2018). Slowing online sales send Walmart’s stock tumbling nearly 10$. The
Washington Post.
