midterm_WalmartCaseStudy

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University of California, Riverside *

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MGT 222

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Marketing

Date

May 14, 2024

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pdf

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9

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2 Introduction This paper examines Walmart's transformative journey in response to changing consumer behavior and the rise of e-commerce. Analyzing the challenges Walmart faced in a rapidly evolving retail landscape, this case study explores its strategic shift toward digital transformation and the impact of those changes on its market position. Key terms and insights from organizational change theory emphasize the importance of aligning strategy and structure (Palmer, 2022). Walmart's response illustrates the critical role of change management models in addressing both internal and external pressures. The paper delves into Walmart's response to challenges in the retail sector, drawing on insights from McKinsey & Company (2019) regarding the importance of organizational readiness and cultural alignment in digital transformations. It examines Walmart's strategic shift towards omnichannel retailing, informed by Deloitte Insights (2020), emphasizing customer-centricity and digital innovation. The significance of modernizing technology infrastructure, as highlighted by The Gartner CIO Agenda 2021, is discussed in the context of Walmart's digital transformation efforts. Overall, the abstract provides a preview of the paper's content, highlighting Walmart's successful adaptation to digital disruption and offering insights for other companies embarking on similar transformation journeys.
3 References: McKinsey & Company. (2019). Unlocking success in digital transformations. McKinsey Digital. Deloitte Insights. (2020). Creating a digital-first organization: Turning strategy into reality. Deloitte. Gartner. (2021). The Gartner CIO Agenda 2021. Gartner. Company Background and Industry Walmart Inc., founded in 1962 by Sam Walton, has established itself as a global leader in retail, operating a vast network of stores and e-commerce platforms. With a focus on everyday low prices and customer convenience, Walmart has reshaped the retail landscape and set industry benchmarks. Walmart is a retail powerhouse, offering a wide range of products, from groceries to electronics. The retail industry is known for its rapid shifts, driven by evolving consumer preferences, technological advancements, and fierce competition. In recent years, the rise of e-commerce has disrupted traditional retail, compelling established players like Walmart to adapt to maintain market relevance. Analyzing the Situation and Problem Walmart encountered mounting challenges as the e-commerce revolution, led by Amazon, fundamentally altered consumer shopping habits. By 2015, Amazon's dominance in online retail had severely impacted Walmart's sales, as customers increasingly preferred the convenience of online shopping. Walmart's digital sales growth lagged behind Amazon, which enjoyed double-digit growth year-on-year . Moreover, Walmart's in-store traffic steadily declined due to consumer migration to online shopping. Recognizing the need to enhance its digital
4 capabilities and embrace omnichannel retailing, Walmart embarked on a strategic transformation journey. The company's leadership understood that failure to adapt to the digital era could result in declining relevance and market share loss. We'll examine key data and evidence that illustrate the extent of the problem faced by Walmart: Declining Market Share in E-commerce: Data from industry reports and market research firms such as eMarketer and Statista indicate Walmart's relatively low market share in the e-commerce sector compared to competitors like Amazon. For instance, according to eMarketer's data, in 2015, Walmart's share of the U.S. e-commerce market was around 3.5%, while Amazon's share was significantly higher at approximately 27%. (McKinsey & Company, 2019) Limited Digital Presence: Walmart's online platform faced challenges in terms of user experience, product assortment, and fulfillment capabilities compared to leading e-commerce players like Amazon. Customer reviews, online forums, and social media platforms often highlighted issues such as website navigation difficulties, limited product availability, and longer delivery times. Changing Consumer Behavior: Shifting consumer preferences towards online shopping and convenience-driven shopping experiences posed a threat to Walmart's traditional retail model. Surveys and studies conducted by research firms like Nielsen and Deloitte revealed a growing trend of consumers preferring to shop online for a wider selection of products, competitive pricing, and convenience factors such as home delivery and click-and-collect options. Revenue Growth Disparity:
5 Walmart's revenue growth trajectory in the early 2000s showed signs of stagnation compared to historical performance and industry benchmarks. Financial reports and analyses by investment firms and financial media outlets highlighted the need for Walmart to diversify its revenue streams and accelerate growth in emerging sectors such as e-commerce to sustain shareholder value. Competitive Landscape: Walmart faced intense competition from both traditional retailers and digital-native e-commerce platforms. Quarterly earnings reports and industry analyses often compared Walmart's performance to that of its key competitors, with a focus on market share gains or losses, revenue growth rates, and strategic initiatives undertaken to capture market opportunities. Reason For Change Walmart needed to embrace digital transformation to address the challenges of changing consumer behavior and online competition. Internal organizational change drivers, such as stagnant revenue growth and rising e-commerce, created pressure for Walmart to pivot towards digitalization. The external environment, marked by technological advances and the globalization of retail, intensified these pressures (Palmer, 2022). Several key factors contributed to the necessity for change: Evolving Consumer Preferences: Consumer shopping behavior was shifting towards online channels, driven by factors such as convenience, product selection, and competitive pricing. Walmart's traditional brick-and-mortar model was becoming insufficient to meet the changing demands of consumers who increasingly preferred the convenience of shopping online.
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