Introduction
A business model refers to an organization’s ploy for making a profit. It identifies target markets and emphasizes the products and services offered for sale by an organization. A business model also includes the expenses anticipated by an organization, and they are crucial to both established and new businesses (Aversa et al., 2017). An effectively designed business model may help a new organization attract, recruit, and motivate management and junior staff. On the other hand, established companies risk failing to anticipate challenges and trends if they fail to update their business plans regularly (Wirtz & Daiser, 2018). Stakeholders and investors use business plans to analyze companies of their interest.
Walmart’s Business Model
Walmart’s business model has enabled the company to move from retail business to the largest supermarkets in the US. The company operates approximately 11500, including departmental stores, supermarkets, and hypermarket stores (Alsharari, 2021). Additionally, the retail giant has several websites (e-commerce) and banners in different countries (Alsharari, 2021). Walmart has more than 270 million customers and employs about 2.2 million associates globally, with 1,5 million employees in the United States alone (Alsharari, 2021). The company has an accumulated capital of $500 billion, making it the world’s largest company by revenue. Although Walmart is family-owned, it is publicly traded under the command of Waltons, and its business model is heavily dependent on brick-and-mortar retail. Sam Walton was the founder of Walmart, and it operates with the blueprint he laid down for the operations (Alsharari, 2021). From the beginning, the company adopted a price leadership marketing strategy under its mission statement, “saving people money so they can live better.”
Operations
Walmart operates in three different segments worldwide: the Walmart Unite States, Sam’s Club, and Walmart International. The company has branches in 50 states across the US and Puerto Rico. Sam’s Club is a warehouse club that serves only a limited number of people, members-only, in 44 states across the US. Walmart operates in 26 countries with supermarkets, hypermarkets, and e-commerce (Alsharari, 2021). Additionally, the company has been enhancing its operations using a mobile app for Android and iOS. This app allows customers to search, buy, and pay for goods and services online using their mobile phones.
Business Model Strategy
Walmart uses different business strategies to remain afloat in the highly competitive retail market, including price leadership, differentiation, and focus strategies. Price leadership is perhaps the company’s primary strategy since it is committed to providing the lowest process (Alsharari, 2021). Differentiation enables the company to be unique and stand out against its major competitors. Focus strategy drives the company to focus on its major brands and appeals to customers.
Business Model Canvas
Walmart’s Customer Segment
Walmart’s customer segment is based on a price leadership strategy. The majority of the customers are people looking for quality products at pocket-friendly prices (Alsharari, 2021). This group includes low-income earners and those looking for better bargains.
Value Proposition and Distribution Channels
Walmart use a widely known brick-and-mortar store, mobile app, website, and mass and social media (Alsharari, 2021). The company’s business policy portrays its value proposition. It boasts of providing various goods conveniently and at the most affordable prices.
Key Resources
Walmart’s essential resources are reflected in its storage system, distribution network, virtual infrastructure, and brick-and-mortar stores. Other vital resources lie with highly trained human resources, mobile phone applications, and e-commerce stores. The company also values its partnership with different suppliers because they help deliver value propositions (Alsharari, 2021). These associations make it easy for the company to establish a presence in different regions and provide affordable products and services rendered to their customers.
Revenue Stream
The structure of the company accommodates product revenues and service revenues. Product revenue consists of retail sales, which encompass the larger parentage of the company’s revenue. Most of the products are distributed under the company’s brand. Service revenue forms a small percentage of the company’s income (Alsharari, 2021). It includes prepaid cards, bill payments, and checks to cash. Other services include clinical services, preventive health checks, VUDU video streaming, and health insurance.
SWOT Analysis
Strengths
- Global presence
- Low prices
- Competent human resources
- Strong market power and presence
- Possibly the most recognized brand.
Weaknesses
- Poor working conditions
- Low employee wages
- Thin profit margins due to cost leadership strategy
- Vulnerability to imitation by close competitors.
Opportunities
- Expansion possibilities
- Powerful alliances and partnerships
- Competent workforce
- And quality standards due to low costs.
Threats
- Technical problems
- Newmarket and industry entrants
- Stiff competition
- Legal issues and controversies.
Amazon’s Business Model
Being a global trade giant, defining Amazon’s business model becomes difficult. The company has been increasing its operation both regionally and globally. Amazon was started in 1994 by Jeff Bezos, a visionary leader and a former Wall Street executive who knew the potential of e-commerce and the internet. The company hit 180,000 accounts in its first year of operation (Wadhwa et al., 2020). Three years later, it was listed as a public company and managed to reach 1 million subscribers by the end of 1997 (Wadhwa et al., 2020). It experienced rapid expansion and started selling various products, including software, videos, electronics, music, houseware, games, and toys. Customer reviews and personalized recommendations became the main customer attraction. Additionally, it allowed small companies access to their website to sell their products and services. It turned more of a technology giant than a retailer when it launched Amazon Web Services.
Mission Statement
Amazon’s operation is guided by the following principles: the passion for innovation, operational excellence, critical thinking, and customer obsession rather than competitor focus (Gatautis, 2017). The company strives towards creating the safest workplace globally, being the world’s best employer and the most customer-centric company in the world.
Revenue Stream
The company makes money through various means, with Amazon Marketplace being the primary source of revenue. The marketplace consists of subscribers who open accounts to utilize the website to sell goods and services (Wadhwa et al., 2020). The seller remits promotion and advertisement fees to the company. Other sources of revenue include Amazon Web Services, Amazon Prime, Amazon Patents, Amazon Advertisements, and Amazon Kindle.
Business Model Canvas
Amazon’s Customer Segment
Amazon has three main customer segments: developers, buyers, and sellers. Sellers are individuals and companies that sell their products and services through Amazon’s website and e-commerce platform. Buyers are customers who buy goods and services through the various channels provided by Amazon (Gatautis, 2017). Amazon has a mechanism for tracking individual customers’ interests based on their language, gender, age, and other personal information. Finally, Developers are the company’s customers dealing with Amazon Web Services. These customers are from different industries, the public sector, and enterprises.
Amazon’s Value Proposition
Amazon’s business model is based on the following value propositions: swift delivery of customer orders, a wide variety of products for customers to choose from, and affordable goods and services. Although all these prepositions benefit the consumer, a close look at the business model indicates that the company’s most significant value proposition is convenience.
Channels of Distribution
Amazon distributes its products and services through different channels. The company’s website may be the largest and most important distribution channel, but other media, such as Amazon Prime and the brand’s applications, are equally important (Wadhwa et al., 2020). Through email marketing, sponsored publications, and advertisements, the company does digital marketing.
Key Resources and Activity
The company’s technological infrastructure remains to be a vital resource. This infrastructure must undergo constant development to be secure and keep the company running. It calls for its expansion, maintenance, and growth as its key activities.
SWOT Analysis
Strengths
- Strong brand because of its position in e-commerce
- Customer orientation based on reasonable prices and personalized suggestions
- The company is highly innovative
- Low cost of operation since it has no physical stores
- An extensive product mixes
- Amazon Collaborates with many partners selling more than 2 billion products.
Weaknesses
- Imitable business model
- Dependence on distributors
- Adverse reports on workplace conditions
- Failures and flops, especially with fire phone and kindle fire.
Opportunities
- Ease of expansion into new and existing markets
- Physical stores- the company can engage more customers through brick-and-mortar operations.
- The company has acquired significant companies such as Zappos to reduce competition and increase market share.
Threat
- Cybercrime
- Fake review
- Recession
- Government regulations
- Exploitative labor.
Conclusion
According to Walmart’s business model, there is a need to update the available technologies and the market. However, the company still operates based on the initial ideas of its founder. Customers are happy with the company’s cost-effective products and services. Walmart has harmonized operations between the employees and the vision of the company. Moreover, their customers’ satisfaction has been their main priority with improved services and low costs for decades.
On the other hand, Amazon is a great company that makes the face of the current market. The gigantic company is digital, global, and constantly expanding into existing and new markets. Amazon has shown how profitable it is to adapt quickly to new demand (Wirtz & Daiser, 2018). Although the company faces competition from other online retail giants such as Alibaba, it still has an unparallel corporate umbrella, and it will lead the industry for many years.
References
Aversa, P., Haefliger, S., & Reza, D. G. (2017). Building a winning business model portfolio. MIT Sloan Management Review, 58(4), 49-54.
Alsharari, N. M. (2021). Management Accounting Practices and E-Business Model in the US Walmart Corporation. In the 21st Century Approaches to Management and Accounting Research. IntechOpen.
Wadhwa, B., Vashisht, A., & Phutela, N. (2020). The business model of amazon India-A case study. South Asian Journal of Marketing & Management Research, 10(1), 32-40.
Wirtz, B., & Daiser, P. (2018). Business model innovation processes: A systematic literature review. Journal of Business Models, 6(1), 40-58.
