Marketing Strategies of Walmart

Wal-Mart is one of the most successful retail chains in the world. In the year 2010 it has generated revenue of 405,046 million dollars which is more than the GDP of a quiet a few countries. There is a huge success story behind this feat that Wal-Mart has achieved. Its achievement may be attributed to two factors- Supply Chain and Marketing Strategies. This paper makes an effort to analyze to the marketing strategies. It does so by first analyzing the market situation using various models. Then by actually describing the strategies that are being used and implemented by Wal-Mart.

Table Of Contents

Acknowledgement

Abstract

Table Of Contents

Introduction

Purpose of Study

Significance of study

Review of literature

Summary Conclusion And Recommendations

Introduction

This paper makes an effort to analyze the strategies that an organized retail to push products into the market. As it is said one must learn from the best – This paper deals with the strategies used by Wal-Mart that ensure that it is the market leader in this field.

Purpose of Study

The purpose of this study is to gain in-depth knowledge about Wal-Marts market situation and how it has manages to maintain its undisputed market share. All the practices it follows both in-house and promotional.

Significance of study

This study in significant because it helps us to understand the excellent practices in the industry that are actually working. One may even take out a leaf out of Wal-Mart’s book to help them capture the market.

Organized Retail Wal-Mart

Wal-Mart Stores.Inc is an American Public Cooperation. It runs a chain of large discount stores and a chain of warehouse stores. The company was founded by Sam Walton in 1962 and publically traded on New York Stock Exchange in 1972. Its headquarters are at Bentonville, Arkansas, and is the largest grocery retail and the largest private employer in the United States.

It has 8500 stores under 55 various names in 15 different countries. It operates under a variety of names in various countries. It retains its name in United States and Puerto Rico, and is called Walmex and Seiyu in UK and Japan respectively.

Wal-Mart Stores in US have 3 different Retail format-

Discount Stores-

They hold inventories of general Merchandises and groceries. They also have optical centers, garden centers, pharmacy, one hour photo processing labs etc.

Supercenters-

It has all the facilities of a discount store and also consists of a full service super market

It has food outlets, gasoline distribution points etc.

Neighborhood Markets –

These are smaller in size and are basically grocery stores but cater to a few other general needs. It fills the gap between Discount and super centers.

Various Marketing Model used for Analyzing Market Situation For Wal-Mart

1. SWOT Analysis

Internal Aspects

Strengths

The company has a good brand name in the retail business. The brand emulates both value and quality of product. This helps it retain its existing customer’s loyalty and be a magnet for new customers.

The company provides a whole range of products that can satisfy most of his needs, hence it being convenient to the customer.

The company pays attention to its employee by giving them various incentives like stock options to keep them motivated so as to perfom to the best of their ability. Also a lot of investment is made on staff training and development, which helps them to obtain a loyal workforce.

Since Wal-Mart has gone global, it is now got an expertise of operating in both global and local scenario. This may be termed as strength as the size of the company increases so does its market coverage and ethnic diversity.

Wal-Mart has acquired some major retail companies like ASDA from UK- this gives them an easy way into another country.

Wal-Mart makes an optimal use of technologies to manage its logistic operations both local and international. Information technology helps to smoothen the task of procurement for the company. With the use of state of arts technologies, Wal-Mart has acquired an ability to defeat strong competition . At the same time cater to the need of its

Large market.

Weakness

It is still limited to a few countries and is finding it difficult to enter in others. For example, Wal-Mart in iIndia operates as a cash and carry with bhariti and is not allowed to set up its own retail chain in india.

Wal-Mart does not cater to the same number of product lines as a single brand retailer would.

There exists a wide diversity in the suppliers of Wal-Mart, hence making its supply chain more complex. Therefore, the frequency of logistic problems increase.

External Factors

Opportunities

The internet site that deals with taking online orders- This facility should be extended to other countries other than US.

Also, by acquiring or merging with other local or global retail would help the company acquire local knowledge easily and not make common ethnic mistake that may prove to be disastrous. This will help them strengthen their operations and prevail over their competitors.

Threats

Wal-Mart being a global company has its own set of problems that it faces. It faces stiff completion from both local and global players. This put a continuous pressure on the company to maintain its customers and develop new business strategies and implement those throughout the business.

It has to adapt itself to foreign regulations and standards. Not only is this it must also look at the culture of the country it setting up in, so as to avoid ethnic errors.

Since out sourcing option is available to most of the manufacturing firms, the cost of the products have been drastically been brought down. So this leads to a price war among retailers.

Porter’s 5 forces Model

New Entrants

Grocers could organize themselves into retail under one name.

There is a high level of barrier as walmart already has an efficient and effective distribution system in place. Also it has a good brand name and financial strength to scare away the competition.

It has a cost advantage over its competitors because of the shear volume they buy.

Established Competitors

Wal-Mart’s major competitors are -K-Mart, Sears and Target. Out of which Target is the strongest.

Target has a nich in the market and has experienced high growth in the domestic market (US).

Wal-Mart already has a mature industry life cycle so has a stablished base of loyal coustomers.

Buyer’s Power

Individual buyers cannot apply much of pressure on Wal-Mart. But Wal-Mart focuses a lot on the need of the buyer and caters to the best service possible. The company’s value is well defined in the company’s vision and mission statement.

Suppliers

Wal-Mart holds a great slice of market share and hence have the capability to offer humongous volume deals to suppliers and manufactures.

At times it can also make giants like P&G supply products at their prices.

It has vertical Integration

5. Substitute Products

There are not many substitutes in this category.

But online shopping, has a potential to eventually replace existing retail or shop. With the advent of internet, in today’s world everything require to have a virtual presence.

But first Brick and Mortar model is a substantial threat.

4P -Marketing Mix

Product

The retail house provides a wide variety of product range from a variety of brands. It may be described as a one stop shop where a person may shop for anything he/she needs. The products available range from daily utility items to exclusive items.

Place

Wal-Mart has managed to saturate the local market in the Unites States. It has also made an entry into the international market e.g.- best buy in India. It has to tactfully choose economically secure and booming countries. Also, Wal-Mart has had a good history of locating its stores strategically and this should be followed in other countries.

Price

The company already follows winning formulae of low costing by keeping a very efficient supply chain. Price is one of the strongest points of Wal-Mart in the Marketing Mix.

Position

The Company markets itself as a community based firm, which is also an induction to its origin. Product Promotion in Wal-Mart is job of the store manager. The Store manager is given autonomy over how he/she manages the store. This give them a chance to show their creativity and prove their capability. Wal-Mart offers a vast variety of promotional schemes, which varies from store to store and time to time. Some of the best promotional schemes have come from Wal-Mart.

Porters Game Plan:

Wal-Mart follows the Porters third game plan- that is, Cost Leadership Strategies. It achieves this by bulk buying to enjoy quantity discounts. Wal-Mart is famous for squeezing its suppliers to gain cost benefits.

BCG Matrix of Wal-Mart Stores:

Question Mark

Neighborhood Markets: They are conveniently located between the Supercenters and Discount stores. They come in the question mark category as they are not generating enough revenues in proportion to the growth the market is experiencing.

Stars

Supercenter are one stop shop- All facilities from eateries to gardening equipments are available here. It is a star because both market growth and revenue generated are favourable.

Cash Cows

Sam’s club is in this category as it is a whole sale store- Members only. The growth in this section is limited but returns are high.

Marketing Strategies

Wal-Mart base strategy has always been to push huge volumes of product at a lower price. This may even be termed as the core competency of Wal-Mart. It delivers this by maintaining an efficient supply chain, motivated employees, strategic placement of products in in-house stores and by following a culture that accepts new innovations in technology which improves efficiency. Wal-Mart has a set of cooperate values by fulfilling which it manages to achieves its vast profits. The value set encourages employees to constantly Improve, ensure that the customer is the focus, speed up the delivery, improve basic operations and community Involvement.

The company motivates its employee to make a commitment to excel in business. This may be seen in the quality of customer care services provided at the store. This is achieved by ensuring that employees become a part of the business goal. The company’s culture is defined in a way every employee makes a continuous effort that they always maintain the top position the company holds. Wal-Mart’s marketing manager states that Wal-Mart’s business objective is to ensure that their sales are always increasing.

It is relatively easy to get to the top but remaining there is a different story all together.

Wal-Mart believes in continuous growth and no stagnation. Other companies have a tendency to relax but not Wal-Mart. They believe in sustaining the competitive advantage by a process of continuous Innovation. To achieve this, the company peruses continuous improvement in technology in all area. The company’s objective is to add creativity and innovation where ever required. It directs its employee’s potential to achieve its goal.

The Company is also valued as an important community partner. The mission policy of the company is ‘saving money to live better’. This image has worked in the favor of the company. It is considered as a consumer friendly retailer by its customers. The company nourishes this image by using a variety of methods –

They have fairy priced items and the consumer believes that he/she is getting value for money,

By providing suitable customer service,

Being a one stop shop they provide convenience too to the coustomer.

Some strategies of Wal-Mart that help them market:

Reducing Cost By Efficient Use of Supply Chain

Managing cost is one of the most effective tools used by Wal-Mart to gain business success. It has to compete in this low cost war with all the other retailers. Cost may be categorized as: Fixed cost, which includes- rent, property tax, pay role etc. these remain unaffected by the sale of the store, and variable cost, which includes- Investment in technology, travel cost etc. are reduced for effective utilization.

Mal-Mart manages to reduce cost by budgeting payroll. The store managers at Wal-Mart are required to maintain a budget of the turnover of the store. They are required to see to it that the payroll cost doesn’t exceed the budget under any circumstances. If under any circumstance the payroll cost exceeds the budget, immediate steps must be taken to reduce it.

Wal-Mart save a handsome amount of money by cutting down on the business travel cost. It does this by ensuring that all the managers and executives travel by the economy class and not first class. Also employees are made to stay 2 in a room when on business visit. Only those meals which are at regular restaurants are reimbursed.

All unnecessary cost are eliminated in Wal-Mart. Any cost investment by Wal-Mart or by one of its suppliers must add value to the product. If does not then that cost is eliminates. Eg- Wal- Mart proposed to eliminate cardboard packing from powder fresh and other unscented product. Now suppose that one nickel was saved on every box sold. Now suppose if wal mart was able to push 100 million boxes then 5 million dollars would be saved.

Wal-Mart invests in technology to minimize cost. Technology in Wal-Mart is not implemented for the sake of it. It is first assessed as how would it enrich the coustomer’s experience or how will it help them reduce cost. If any technology can sail through these two questions then it gets a green flag for implementation. Investing in computer systems which was originally Sam Walton’s Idea, has helped Wal-Mart improve its supply chain by reducing data processing time, improve customer service and gathering data from all divisions. Also, Wal-Mart has made investment in solar power generation to reduce the cost of electricity in the long run. Also Wal-Mart stores are equipped with sawtooth roof, radient heat melt snow, light powered infrared sinks and evaporative cooling help to maintain the temperature at the stores at low cost. To reduce inventory cost Wal-Mart has invested in technologies like RFID- Radio Frequency Identification which helps to control the flow of products.

All these steps have helped Wal-Mart to not only to create a more effective management system but also to reduce cost which then enables it to give discount to its customer.

Consumer-centric Sales

The first customer centric policy that Wal-Mart follows is Every Day Low Pricing Policy. This delivers products at lowest cost possible offering them a value of money proposition. It uses captions like- “We sell for less” and “Satisfaction Guaranteed”. Also, every item if proven defective is returnable. Also, they have photo and gift services. Sam Walton has asked his employees to follow the 10 foot rule which states that the employee must offer the customer his/her services if a customer passes with in 10 foot of the employee. He/She must look customer in the eye, greet them and ask if they can be of any assistance.

Location

Location plays a very important role for a gaint retail store like Wal-Mart. It looks for best possible site for the store. The criteria for a good locaton range from- geography to other factors like distance from the distribution center and the cost. By doing this the cost of delivery of product is greatly reduced. Also the location of the store must close to the community so that people are easily able to access it. Also, parking for the customer has to be arranged at the store in a manner so he/she may easily drive in or away.

There has to be a balance or a trade off between all these parameters so as to gain an optimal location for the store.

Co-operated Suppliers

Wal-Mart runs a very tight inventory when it comes to suppliers. It believes in JIT. And ensures that its suppliers are able to fulfill all their demands on time. They make efficient and effective use of ERP, CRM and other technologies.

Retail-tainment & Shop-ability: Aisles, Lighting & Signs

Wal-Mart is one of the pioneers in the field of retailtainment. Retailtainment events engages coustomers in a variety of event like game shows, contests etc to drieve the customer traffic to a specific location in the store. This would generally be a location where a particular product is stocked.

Wal-Mart pays a lot of attention to Shop-ability of a product. Promotion of a product is the job of the store manager. Stating an instance – Phil Green an early Wal-Mart manager , once bought 3500 giant cases of Tide detergent. To promote this he ran a statement saying $1.99 a box, off from the usual $3.97. Then he built a pyramid of these boxes that ran 12 to 18 boxes high, it was 12 feet wide and one could hardly get past it. Not to mention all the boes were sold easily.

Store-manager Autonomy

The position of a store manager is a very lucrative post in today’s scenario of retail industry. At Wal-Mart the store manager get a full autonomy in the manner he/she wants to handle the store. They just have to meet the budget requirements in the stipulated time.

One- Stop Shopping

Wal-Mart has majorly been promoted as a one stop shop. All the products from utility items to portrait studio to bank are present here. It’s a complete mall where everything is available (in reference with Wal-Mart Supercenter). Also there are eatries that have been opened in here the cater to the various needs of the people.

Complete Product Line

Wal-Mart ensures a complete product line of all the brands, i.e. all product in all packaging according to the volume. This Ensues a better shopping experience in terms of availability of product. Also, during an emergency need when a customer just wants to pick up a particular item, he/she comes in the store with an assurance that his demand will be fulfilled.

Private Branding

Wal-Mart offers store brands they are also referred to as home brands, or generic brands. They are low price alternatives to other name brands. It consists of Sam’s Choice – which is a premium retail brand for food and selected hard goods. Great Value plays a role in helping walmart brand grocery items. Equate brands beauty and Parma products. Ol’Roy brands dog food.. There are various other brands. Wal-Mart derives various advantages from this- They get the freedom to price the product , may get a higher margin and it eliminates manufacturers cost spent on promotions.

Summary Conclusion And recommendations

Via this paper we have learned:

Wal-Mart is an undisputed leader in the retail industry. It has set or benchmarked multiple practices that help it maintain this position. It should lay more emphasis on these practices.

They are one of the best when it comes to supply chain management (SCM) and marketing via promotional strategies.

Also now that Wal-Mart is a global played it should try and avoid cultural mistakes like what happened in Germany- It made employees there sing the national anthem of US. This proved to be disastrous for them.

It is recommended that since Wal-Mart’s current practices seem to be working it should follow them. Also, it must keep up with its culture of innovating and improving in the field of SCM and promotions to be ahead of market at all times.