The top management of Wal-Mart at the beginning of 2009 was tasked to provide solution to the question of whether the same strategy that it has been applying in the past can be used in maintenance of the company’s remarkable development and performance in the next several years (Cady et al 2006). In the past decade, Wal-Mart has obtained amazing and continuing development in net income and net sales. It has managed the top place in the U.S. retail industry and has become the biggest retailer worldwide. With the industry maturity, compounded with the extreme competitors from rivalry organizations, keeping the current stage of top rated becomes very challenging (Cady et al 2006).
Current issues affecting business
The Five Forces analysis of Porter’s has exposed that the competition among competitors is the motivation of the industry, in which the price is the most important aspect. The value chain resource and analysis centered view analysis demonstrated that Wal-Mart has been very efficient in applying the strategy as the low-cost chief by inculcating cost performance in its corporate life, style of management , and functions. Furthermore, It has been the first one in applying amazing technology to streamline its chain of supply, and to understand and timely respond to client need (Cady et al 2006). Wal-Mart has come up with many highly effective aspects that help guard its important place and open its door to many essential opportunities for improving the company. However, it also faces risks from expanding too big and in many places, which makes it vulnerable to lose of control, cooperation being weakened among regions and stores, and competition indifferent direction (Cady et al 2006).
Wal-Mart should be cautious in its development strategy, especially in the development of its global presence. Although its management methods, financial strength and efficiency of its functions allow it to get into many international markets, it should be choosy in selecting the destinations. Wal-Mart can concentrate on budding markets where customers are sensitive to price such as India and china. In Latin America, it should concentrate on Mexico and a few key areas that it previously achieved some success. In European countries, it can concentrate on areas that lack the use of huge retailers such as Carrefoure and Tesco (Cravens 2010). Although Wal-Mart’s common tendency of acquiring existing little regional stores to get into a industry has assisted Wal-Mart decreased its industry penetration expenses and quickly adapt to regional industry specifications and culture, this wal-mart’s practice also raises the problems of diluting corporate culture and making weak the company’s capability to reinforce efficient management methods and strategy. Therefore, global development should be implemented carefully and patiently (Cravens 2010).
Role of strategic marketing
Over the past decades, Cravens (2010) observed that Wal-Mart has obtained important achievements to become the world’s biggest retailer. The company has managed maintainable growth and development in a fiercely competitive retail environment in United States. It has been constantly improving both in the extensive variety of products or solutions, and in the number of retail stores in the U.S. and globally (Cravens 2010). While this development has generated handsome income for its stakeholders and placed the company in a financial position that is strong, it has also offered important problems for sustaining development as well as, and managing a company that is becoming bigger incessantly. Top management of Wal-Mart now is trying to find solutions whether the similar strategy the company has been applying is suitable for keeping and strengthening its current rate of development and industry position, as well as for steering the company into the next several years (Cravens 2010).
Evaluation of the approaches to internal environmental analysis
Wal-Mart’s objective is revealed in its developer Sam Walton’s statement, “If we together we work, we will reduce the everyone’s cost of living…we will grant the world an opportunity to see what it is like to have a better way of life and save” (Kollat at al 2012). Its objective statement is, “Saving money for people so they can better live.” Its objective statement is very brief and extensive, but it shows the objective of the company and its developer. With the way that objective statement is written, it can be regarded as the vision statement of the company because of its extensive sense (Kollat at al 2012).
Wal-Mart’s company strategy is to be a leader of low cost, which shows precisely the objective of the existence of the company. In the last decade, its strategy has been very efficient and effective. It has been improving in income revenues and net income from 1998 to 2009 (Kollat at al 2012). Relative to its competitors (e.g. Target, Costco and Dollar Common), it has greater percentages on returns on assets and equity return. Wal-Mart’s development strategy is expansion in solutions and products, as well as in regional areas. It has been successful and efficient in Canada and Mexico, and even established their presence in other nations (Kollat at al 2012).
Below is a value chain design analysis that examines the current activities of the company and evaluates the activities effectiveness. Moreover, the discussion wherever possible, will point out the variations from the competitive organizations and how value is added by these activities.
General administration: Wal-Mart has very exclusive methods. The communication flows are immediate between each personal retailer and headquarter in Bentonville. This method is different from its competitors who need their people from regional stores to go to their respective regional offices to report activities and talk about problems. This practice which is unusual makes a near connection between headquarter and regional stores (Mooradian et al 2012).
Human source management- Recruiting and communication methods between the company and its affiliates are depending on respect, near communication, high expectation, and clear advantages. Workers receive low pay but appreciate other advantages such as insurance options, retirement methods, and stock buy plans and profit incentives (Mooradian et al 2012).
Technology integration– Technological innovation have assisted integrate Wal-Mart’s whole supply chain so that each phase of the value chain is very efficient and effective, which allows it to provide promptly the right products at low expenses to its customers.
Procurement- Wal-Mart directly deals with producers, and purchase of goods is centralized at headquarter. It needs producers to cut their margin and fulfill its employment policies. It also has near collaboration with its main suppliers like P&G to facilitate stock management. All of these methods have made Wal-Mart to buy its inputs at the most cost-effective and to save stock holding expenses, which allow it to provide low cost products (Mooradian et al 2012).
Inbound and outbound logistics– Wal-Mart has excellent logistics program. It adopts the idea of distribution centers and arrangement of “hub and spoke”. This is very efficient for keeping the stock level at each regional retailer low and reducing transport cost (Mooradian et al 2012).
Operations– Wal-Mart’s objective is to provide a variety of top quality products at low expenses in a enjoyable shopping ambience. Mooradian et al (2012) pointed out that Wal-Mart’s function structure that is very distinctive is the decentralization of retailer management. Store supervisors are empowered to make decisions that are related to extensive variety of products, pricing and product display location.
Sales and marketing- Wal-Mart makes low cost appeal to its customers. Its strategy of marketing relies on communication by word-of-mouth and focuses primarily on everyday low expenses, which means that customers can purchase the products at the smallest cost all the time. This marketing strategy aligns well with the organization’s objective of minimizing the costs, and adds to the customer some value because the savings from promotion and advertising allow it to provide products at low expenses (Mooradian et al 2012).
Service- Wal-Mart’s objective is to create an enjoyable shopping experience for its clients. It has obtained this by having greeters at the entrance and applying 10-foot attitude that needs employees to greet a client within 10 feet. It also guarantees satisfaction of the customers’ by accepting products returned on a no-questions-asked foundation (Mooradian et al 2012).
1. Strong name of the brand
2. Bargaining power that is strong over suppliers
3. Integrated supply chain technology
4. Strong logistics system
5. Superior culture
6. Capable associates
7. Strong presence in Latin America and Canada
1. Only attract shoppers that are price sensitive
2. May lack sound strategy and lose control due to large plan for expansion nationally and internationally
1. Huge potential market in Asia and Europe
2. Sustenance of position of market leader
3. High completion from various fronts
4. Face potential cultural and political problems and differences in practice
5. Intense competition of price
6. Large foreign competitors getting into U.S. and international markets
Evaluation of the approaches to external environmental analysis
In this part, an analysis of the five forces of porter of the discount retail industry and Wal-Mart is offered. According to Wilson et al (2005), for each force, the discussion first gives a standard overview of the industry in the U.S., and then focuses primarily on Wal-Mart.
– Potential entrants: the possibility of prospective entrants is regarded low due to the following reasons:
- Discount retail store industry is a very competitive atmosphere with mostly big players competitive for industry shares.
- The main key aspect for competitors is price.
- Existing organizations have established amazing and stable supplier networks.
- Wal-Mart has an excellent logistics and distribution program, amazing technology to back up all phases of its function, a well-established product name, a large number of stores nationwide, and a deep cost-effective source.
- Wal-Mart also has cost advantages over its competitors due to its huge buy amount.
- Wal-Mart can prevent prospective beginners.
Substitutes: the possibility of alternative is low.
- Consumers can buy from little mom-and-pop stores or specialty stores, but these stores do not provide a extensive variety, nor do they provide huge reductions.
- On-line buy can be a alternative means for retailing; however, it may not be the best option for products that are consumed daily because distribution expenses may lead to greater final expenses, and distribution time can delay the need’s fulfillment.
- Industry competition: the competitors among existing organizations is excellent because:
- This is a mature industry.
- There are few but huge competitors, who dominate the majority of the industry.
- Price is the concentrate of competitors, and organizations are forced to cut cost to remain competitive.
– Bargaining energy of suppliers: the energy of retailers is low.
- In common, most retailers rely on retailers to distribute their products to the end consumers; therefore, the part of retailers in the submission channels is important.
- Wal-Mart not only has an extensive variety, but also owns many thousands of retail stores in United States and globally. This blend places the organization in a very amazing negotiation place with retailers and gives it excellent flexibility in selecting and working with a variety of retailers and retailers. As illustrated before, the Wal-Mart company is feared and desired by manufacturers.
- Because it has about 4000 trucks, the firm is able to function independently of its transport methods without relying solely on outside retailers.
- Wal-Mart also provides some of its own Excellent Value private-label products tailored to regional need.
- Bargaining energy of buyers: the energy of customers is regarded regular.
- Switching expenses of customers is very low.
- The buyers are sensitive in price. They can be lured easily to the competitors to purchase goods offered at a cheaper price.
- The difference in the products and brands among different cost retailers in the industry is very low.
- Because most of the offered products are commodity, customers usually choose a retailer that is closest to their home or their workplace for convenient purchasing.
- Wal-Mart provides an extensive variety and solutions, and provides very low expenses. Moreover, it has many stores serving different regional places. Hence, it has a huge and customer base that is loyal.
Groups that are interested like the environmentalists, labor unions that are organized and personal rights activists can interrupt the company. When a retailer expands globally, it can face government problems, as well as variations in way of way of life and methods which may assistance or prevent both the establishment and development of a company in a country (Wilson et al 2005).
The nature of the exterior atmosphere of the cost retail store retailer store industry dictates that prospective entrant organizations can only accomplish regular advantages. The motivation of the whole industry is the excellent competitors among competitive organizations, in which cost is the most important aspect. To live and be profitable, organizations have to provide huge reductions. Wilson et al (2005) observed that this translates into best top high top quality in function, low expenses of products that are sold, and operating expenses that are low. The market may also deject little traders, but because the U.S. is one of the world’s biggest retail store retailer store areas, it can entice prospective traders with amazing cost-effective durability, especially globally retail store retailer store stores, to get into the U.S.
How internal and external analysis are integrated
The exterior atmosphere shows that competitors among existing organizations in the marketplace, specifically cost competitors, are the most important motivation of the industry. The key achievements aspects include low cost, extensive variety of products and location, and fast response to advertise need (Cady et al 2006). Wal-Mart’s strategy of being a leader in cost reduction is in line with the exterior environment condition of the exterior atmosphere that it is in, and cost performance is embedded in its management methods and its company way of way of life. It has been constantly trying to get the most cost-effective in every aspects of its company. For example, Wal-Mart’s continuous efforts can be found in the investment and efficient applying of amazing technology in provide chain and methods techniques, making them one of the best modes worldwide (Cady et al 2006).
When given comparison to its competitors, the company has many highly effective aspects. It has a very amazing product name with reputation for low expenses and extensive variety. Its enormous income allows it to have very amazing talking about energy over its retailers. Incorporated technology in provide chain enables Wal-Mart to accomplish excellent function performance (Cady et al 2006). Due to its excellent logistic methods, Wal-Mart saves transport expenses and is independent from outside methods. Wal-Mart has able supervisors who improve the achievements of the company. However, able people may not be enough without a very amazing way of way of life and values that are shared among affiliates in all the levels. Furthermore, Wal-Mart has both and is the leader in the United States market, but also is very efficient in Canada and the United States and the United States and Southern the United States (Cady et al 2006).
Along with the highly effective aspects, Wal-Mart also has faults. It can only entice cost delicate customers; those who need better top high top quality will keep away from purchasing at Wal-Mart. For example, Wal-Mart’s Sieyes chain was unsuccessful in Asia because of its inability to entice quality-obsessed customers (Cady et al 2006). The development strategy in both service and product extensive variety and geographic places also comes with the cost of dropping management in some places and can negatively affect its capability to deal.
In terms of upcoming possibilities, Wal-Mart has big prospective areas in European countries and Japan. With its cost-effective durability, it can either create immediate investments through building its own stores or acquire little regional stores, or type ideal alliances with important stores in specific areas (Cady et al 2006).
Wal-Mart also encounters and faces several risks. It is always under stress to maintain its industry go place. Carrying a extensive variety makes it exposed to competitors from different techniques, especially from those competitors who are more focused on their merchandise offerings. Being an globally retailer, Wal-Mart also activities government problems as well as variations in cultures and methods globally (Cady et al 2006). The extreme cost competitors put all the players in the marketplace in a mode of constantly trying to cut expenses and achieving excellent function performance. Foreign giant retail store retailer store stores such as Tesco or Carrefour can contest with Wal-Mart in both the U.S. and globally areas.
Discuss the decision and choice at corporate level that will arise from strategic marketing analysis. Assess how these decisions will influence marketing at all level.
The value chain analysis has exposed that Wal-Mart’s primary capabilities include a provide chain with incorporated technology, an capability to generate huge income, excellent methods techniques, functions that are decentralized, a amazing and exclusive way of way of life, a near knit management style between the headquarter and personal stores, a management group that makes things happen with excellent independence, and efficient management workouts and methods (Cravens 2010).
Wal-Mart’s amazing way of way of life and management workouts and methods are very exclusive. Although at the person stage, many of Wal-Mart’s primary capabilities are short-term competitive advantages, but in combination, these capabilities form a maintainable primary skill for Wal-Mart’s excellent profitability (Cravens 2010). In order for a competitive company or a prospective entrant to deal, it needs a very amazing cost-effective capability to invest in incorporated technology of provide chain and excellent methods program. Moreover, it is not easy for any in the industry to get the huge income like Wal-Mart does to have such a talking about energy over retailers (Cravens 2010). The structure of the company’s management and communication styles, function independence inside Wal-Mart, and management group though imitable and substitutable but can hardly be the same. These primary capabilities create it difficult for competitors to identify which primary skills are important for Wal-Mart’s achievements. Therefore, the combining of these primary capabilities forms a maintainable primary skill for Wal-Mart for many years to come (Cravens 2010).
The strategy of Wal-Mart’s of providing low cost is very efficient. This same strategy should be managed and focused later on. To maintain its achievements, Wal-Mart should capitalize on its current highly effective aspects, reduce faults, capture possibilities, and limit risks (Kollat et al 2012).
The company’s applying of amazing technology to learn about client need and needs as well as to accomplish excellent function performance must be done on a regular and continuing foundation. Maintaining Wal-Mart’s way of way of life and methods is very important to maintain achievements. According to Kollat et al (2012), the trademark fun meetings of the company should resume to the weekly basis because it helps the company strengthen and has the spirit of association. The firm can get bigger and bigger, but the uniqueness of the company should not be replaced or fade.
Wal-Mart currently attracts, cost delicate customers, those who are more top high top quality passionate or product conscious are not purchasing at Wal-Mart. Wal-Mart should not change or do anything to reduce this weakness because the company’s strategy is being a low cost go, and it is impossible to satisfy all the places. It is believed that organizations that stretch thin in different places can easily be stuck in a place without a concentrate on audience (Kollat et al 2012).
Wal-Mart has amazing possibilities to get into more areas in European countries and Japan. However, its current development strategy of both widening product varies and improving geographically put the company at possibility of stretching its resources, dropping function management, and reduce strategy coherence. It is recommended that Wal-Mart focuses its development strategy on improving product varies to fulfill various specifications. As for globally development, it should only concentrate on the areas that it can do well, such as Canada and the United States and the United States and Southern the United States (Kollat et al 2012). It should consider dropping any globally areas that are not performing well (i.e. any unsuccessful areas in Latina America). Before coming into Japan and European countries areas, analyzing the industry should be done thoroughly and Wal-Mart should only concentrate on a few areas that have the best prospective and less competitors. The company’s previous globally development faced ideal and company problems, and therefore, its achievements has been inconsistent in globally areas. This is a sound evidence of dropping concentrate and dropping management (Kollat et al 2012).
By keeping its highly effective aspects, Wal-Mart can continue to beat the competitors and reduce its risks. Wal-Mart has responded well to the stress from the advocates of children and women rights, environmentalists, and the activists of anti globalization. Despite the fact that the pressures do not affect the firm primary point currently here, but achievements in responding to them have assisted type and have the company’s positive image. It should go ahead with the ecological sustainability and ethical sourcing programs (Kollat et al 2012). Regarding low wage issue, it should maintain its current pay methods. First, the prices are slightly above the normal retail store retailer store trade. Second, Wal-Mart provides other advantages along with basic salary, including advantages benefits, stock buy strategy, and promotion possibilities.
By constantly focusing on its highly effective aspects and finding ways to increase function performance, Wal-Mart will stand above the cost competitors from competitors, and prevent prospective competitors from coming into the areas (Kollat et al 2012).
In summary, ideal promotion is important to a company to gain more industry segmentation. Furthermore, key achievements aspects of a company include maintenance of low cost by having efficient and efficient functions, making bulk purchases from retailers have fun with amount reductions, and paying low wages. Creation of difference by having huge stores carry a extensive variety is important.
Cady, J. F., & Buzzell, R. D. (2006). Strategic marketing. Boston, Little, Brown.
Cravens, D. W. (2010) Strategic marketing. Homewood, Ill, R.D. Irwin.
Kollat, D. T., Blackwell, R. D., & Robeson, J. F. (2012) Strategic marketing. New York, Holt, Rinehart and Winston.
Mooradian, T. A., Matzler, K., & Ring, L. J. (2012) Strategic marketing. Boston, MA, Pearson Prentice Hall.
Wilson, R. M. S., & Gilligan, C. (2005) Strategic marketing management planning, implementation and control. Amsterdam, Elsevier/Butterworth-Heinemann. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=130095.