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CHAPTER 1: RESEARCH PROPOSAL AND INTRODUCTION
Section I: Introduction to the Organization
1.1 Corporate name, founding a date, founder leaders
Wal-Mart was started in 1962 by Sam Walton and has grown over the years to be the largest corporation globally (Wal-Mart, 2015).
1.2 Essential events and critical incidents in the history of Wal-Mart
The history of Wal-Mart is more than what the corporation has built, the partnerships they have made and the consumers they have served. In 1960s, the strategy of Sam Walton was to build a foundation that is unshakeable under the philosophy of lowest price anywhere and anytime. Sam Walton created Wal-Mart and began operating in 1962. In 1969 Wal-Mart had opened 24 stores. Through the 1970’s Wal-Mart was being traded on the stock exchange. In the 1980’s Wal-Mart opened their first wholesale club Sam’s Club. The 1990’s Wal-Mart became the largest retailer in the U.S. They also had started to open stores in neighboring countries (Wal-Mart, 2015).
1.3 Historical (initial) products, current products/services, and the evolution of new products
The company started by retailing general merchandise but has evolved over the years on the products and services it offers. Currently, Wal-Mart offers a variety of products and services to its customers ranging from grocery to entertainment to crafts and sporting goods. Wal-Mart Supercenters offer one-stop shopping for apparel, electronics, home furnishings and toys with the added convenience of grocery stores with bakery, fresh produce, meat and dairy products, and deli. The Wal-Mart supercenters also include specialty shops like banks and pharmacies, nail and hair salons, health clinics, vision centers, optical departments, tire and battery center, photo center, and restaurants (Wal-Mart, 2015).
1.4 Description of entry into new business lines
Wal-Mart entered into the Mexico market by 1991, Wal-Mart began its international expansion. They also created: Sam’s Club their wholesale club, Wal-Mart Supercenters which incorporate supermarkets, and most recently Neighborhood Marketplace a neighborhood supermarket. By Wal-Mart expanding and entering into new markets, the corporation aimed at increasing its sales to $400,000 billion so as to solidify its scale-based advantage (Wal-Mart, 2015).
1.5 Industry competitors
According to Roberts & Berg (2012, p. 78), Wal-Mart for many years has been known by consumers as a low-priced retailer in the United States. Considering its strategy of “Everyday Low Prices (EDLP),” the perception of price has been so strong to the point that it has position Wal-Mart as the leading retailer in United States (Roberts & Berg, 2012, p. 78). This leadership position is being challenged by its competitors who are also big retail players such as Target and other online retailers like Amazon. Many other small retailers who also offer competition to Wal-Mart include Family Dollar stress and Dollar General. The high competition is because consumers in United States are becoming sensitive to price and, therefore, look for retailers who can offer lower priced products. In 2012, the study conducted by Click IQ also indicated that online retail stores are offering very stiff competitions to the brick and mortar stores and despite the fact that consumers actually browses over the Wal-Mart stores, they actually buy from online stores like Amazon because of the offered low prices online (Porter, 2010, p. 114).
Section II: Statement of the Problem
Wal-Mart Corporation has the following corporate strategies:
1. Broadening their appeal to all their customers
2. Becoming a better place to work
3. Driving growth in their international business
4. Improving business efficiency and operations
5. Making contributions that are unique to the communities (Wal-Mart, 2015).
Despite Wal-Mart’s goals for their corporate strategy may lead them to achieve their objectives, it is not certain that they will lead Wal-Mart to continuous success. The company has successfully implemented their corporate strategies. Wal-Mart’s success although are driven by the goals, has major problems arising when implementing the goals. Some of the recommendations provided will be more at the local level, where some of the company’s goals need to be put into action globally. The company’s public image needed to be addressed. The way Wal-Mart treats its employees with regard to their pay scale in addition to traumatic treatment shown in the media also needs to be addressed. Additionally, corporate hunger for international expansion and additional market gain has clouded Wal-Mart’s judgment when it comes to hiring versus retaining to fill the head count. Furthermore, the company needs to address its perception on how to infiltrate, navigate and dominate the global discount of the retail industry (Richard & Wenti, 2007, p. 229).
The problem Wal-Mart faces is not implementing or lack of being able to implement the once believed philosophy that “customers are always right.” Wal-Mart needs to improve its customer service to its clients. The associates or the employees of Wal-Mart should treat the customers and the general public with admiration and respect. Improved services to the customer will increase the company’s profitability and increase their market share. The associates should take their customers into consideration. Wal-Mart would not be where the company currently is today without their customers loyalty.
Section III: Research Question
What are the consumer perceptions about Wal-Mart on its service to the customers compared to a competitor?
Section IV: Hypothesis
Wal-Mart could increase profitability and maintain market share by improving its customer service.
Section V: Research significance
The study is significant because by understanding the relationship between improving customer service and increasing profitability and market share of a company, it will allow the researchers to see if there is possibility of larger effect for companies when the factors are combined. This will make the Wal-Mart company more successful in its implementation of its corporate strategies. This study can be applied in other companies to improve their profitability and market share by simply improving their services to their clients.
Section VI: Purpose
The purpose of the study is to understand whether improving the customer service will increase profitability and maintain a market share of Wal-Mart compared to its competitors which include the online retailers. The study will also try exploring whether Wal-Mart will be the preferred United States retailer of choice to consumers when they improve their service delivery to their customers. Therefore, the study will explore the factors the factors that contribute to the profitability and increase in market share and the significance of improved customer service among other factors. Additionally, the study will try to find out the relationship between improved customer service and company profitability, and improved customer service to company’s market share.
Section VII: Data Collection/Research Methods
Relevant secondary & primary data will be extracted from different sources, and the findings will be explored and evaluated. The primary research will consist of onsite interviews and surveys using standard questionnaire. Secondary sources will consist of online articles and annual reports of Wal-Mart. Moreover, the researchers will review journal articles, read other pertinent literature, analyze onsite and online corporate records of Wal-Mart, government sites among others.
The study will adopt qualitative research method for completing the project. The qualitative research method is used in research with an aim of gathering an in-depth understanding information. It investigates the how and why of making of decisions. Therefore, samples that are smaller but focused are often used instead of large samples. According to Groves (2004, p. 14), qualitative research methods give information on specific studies cases and general conclusions on informed actions. Groves (2004, p. 14) observed that the qualitative researchers basically are concerned with processes and practices rather than the outcomes. The focus is mainly on the experiences and perceptions of the participants. Qualitative research involves fieldwork typically whereby observation and recording of events are done. The researcher goes to the site, setting and the people physically to observe the subjects naturally and normally.
Section VIII: Chapter Summary
The chapter is the project proposal on Wal-Mart Company on whether Wal-Mart could increase profitability and maintain market share by improving its customer service. A brief overview of Wal-Mart Company has been detailed in addition to the problem statement. The chapter also details the reasons for writing this paper by formulating the research question and the hypothesis. Furthermore, the chapter explains the importance of the project, why the paper researches on the subject and how the study plans to conduct the research. Primary (interviews and surveys) and secondary sources of information will be used in data collection.
CHAPTER 2: LITERATURE SEARCH
Section I: Literature search
2.1 Research on how improved customer service affects company profitability
Güngör (2007, p. 21) in his study enumerates many key benefits of improved customer services for a firm. Generally, high satisfaction of the customers should show increased loyalty amongst the firm’s current customers, insulation of their current customers from the external competitive efforts, reduced price elasticity, lower costs to attract new customers, reduced failure costs and an enhanced farm’s reputation. Increased current customers’ loyalty implies that more customers will be retained and will repurchase in the future. Decker & Crisp Learning, Inc. (2001) stated that if a company has a strong loyalty of customers, it should make a reflection in the economic returns of the firm because it ensures a steady cash flow in future.
According to Allen & Rao (2000, p. 116), the more the customers services are improved, the longer they are likely to continue purchasing from the same supplier. A loyal customer’s cumulative value to a company can be quite high. Increasing satisfaction of the customer increases the firms’ customer assets value and future profitability.
Improved customer services should also reduce the current customers’ price elasticity (Mohammadhossein et al, 2014, p.11-31). Mafini (2014, p. 116-135) also pointed out that customers who get improved services and are satisfied are more likely to be tolerant of price increase and are more willing to pay for the benefits they receive, which implies customer loyalty and high margins. On the other hand, low customer services translates to low satisfaction of the customers, and this results into higher replacement costs, higher turnover of the customer base, and because of the difficulty satisfied customers to do business with rival, higher costs of customer acquisition. Price elasticies that reduce to increased profits for a company providing superior satisfaction for the customer.
Rajagopal (2010, p.88) also observed that improved customer services should reduce transaction costs in future. If a company has a higher retention of customers, it does not need to expend much on acquiring new customers each period. Customers who get improved services and are satisfied are likely to buy frequently more and in greater amounts, as well as purchase other products offered by the company.
Providing goods and services consistently that satisfy customers increased a firm’s profitability and reduce failure costs. A firm that provides high customer satisfaction consistently have fewer resources that are devoted to reworking defective items, handling returns, and handling and managing complaints (Güngör, 2007; Decker & Crisp Learning, Inc, 2001; Allen & Rao, 2000).
According to Mohammadhossein et al (2014, p. 11-31), the cost of attracting new customers by a company should be lower for companies that have improved customer services. For instance, customers who get good services and are satisfied have a reputation of more likely engaging in a positive word of mouth, and have a lesser likelihood of engaging in damaging word of mouth that is negative (Mafini, 2014; Rajagopal, 2010; Güngör, 2007; Decker, 2001). Furthermore, media sources convey positive information to the prospective buyers. Higher customer satisfaction through improved services may make the media advertising more effective, and this may allow the company to offer more warranties that are attractive.
Improved customer services also enhances the overall reputation of a company. A reputation that is enhanced can aid in the new products introduction by providing awareness instantly and lowering the risk trial of a buyer (Allen & Rao, 2000; Mohammadhossein et al, 2014). Reputation can also be beneficial in establishment and maintenance of relationships with key distributors, suppliers and potential allies (Mafini, 2014; Rajagopal, 2010). Additionally, reputation provides a halo effect for the company that influences customer evaluations positively and provide insulation from environmental short-term shocks. Güngör (2007, p. 229) also stated that improved customer services plays an important role in building other significant company assets such as brand equity.
2.2 Improved customer services and the market share
Improved customer services and the market share g.............
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