The Success of Wal Mart in a Market - Case Study Example

Running header: Wal-Mart Table of contents Table of Contents Wal-Mart 2 1.0 Introduction 2 2.0 Strategic analysis 3 2.1 SWOT Analysis 3 2.1.2 Weaknesses of Wal-Mart 5 2.1.3 Opportunities 6 2.1.4 Threats 7 2.2 Porter’s Five Forces Model 9 2.2.1 Rivalry between Existing Sellers in the Market 9 2.2.2 Threat of Entry 10 2.2.3 Threat of Substitutes 10 2.2.4 Buyer Power 11 2.2.5 Supplier Power 11 2.3 Conclusion and Recommendations 11 References 13 Wal-Mart 1.0 Introduction Wal-Mart is a retail store which operates in the USA. It was established in 1962 and its first store was in Rangers Ark (Wal-Mart Corporate 2011 p.3). The retail store operates under the name Wal-Mart stores Inc and it is the largest retail store in the world. The store started trading its shares in the stock exchange in the year 1970. This was in a bid to make part of the company public in that way searching for capital to facilitate its development and expansion. According to Wal-Mart’s website, the retail store provides its services to over 200 million people weekly. The company has 9700 retail units in 28countries worldwide. The mission of the company is to provide cheap and affordable products to its customers all over the world. Due to the large amount of products it deals with, the company enjoys economies of scale hence it is able to sell its products at a far much cheaper price than other stores yet remain profitable. This explains the reason as to why the stores enjoy a large base of members and customers. According to (Cravens, 2006 p 645), for every Wal-Mart store that opens, two supermarkets will close in next five years. The company has found its strength in the efficient and visionary leadership from its management. The company has grown to be one of the retail stores for incumbent stores to reckon with in the retail business. The company also enjoys much strength coupled with many opportunities which propel it in the market. Needless to say, it has some very serious threats and weaknesses which pose a problem to it. In addition to the opportunities and strengths, the company enjoys good strategic management which has continued to boost its performance in the market. The following paper will take a deep analysis into Wal-Mart stores. The case study is being done as an assignment being part of marketing 2.0 Strategic analysis The success of a company in a market is contributed by many factors. There are internal and external factors that affect the company. The company has minimal or no control over external factors but on the other hand can control the internal factors affecting it. The company is also affected by microeconomic and macroeconomic factors. The best approach in studying the strategic analysis of a company is by the use of the strength, weakness, opportunities and threat analysis (SWOT) and also by the use of Porter’s Five Forces Model. The following section makes a analysis of both the SWOT analysis and Porters Five forces. 2.1 SWOT Analysis As the name states, SWOT analysis takes an analysis on the strengths of a company. These are the strong points and strongholds of a company. Weaknesses are the areas of a company that a company needs to improve on. Opportunities are the potential avenues of prosperity for a company. The threats are the potential barriers to the success of a company. 2.1.1 Strengths of Wal-Mart Wal-Mart has been inexistence since 1962. Through the eyes of expansion and development, the company has attained numerous strengths that often put it at an advantage when competing with other retail stores. The strengths enable the company to stay true to its purpose of providing its customers with cheap and affordable products worldwide. This explains the reason as to why it has the highest number of customers in the world. This has also enabled it to suppress competition from other supermarkets and retail stores. The strengths include: First, Wal-Mart is a strong retail brand. This gives the retail store an advantage since it has a wide variety of products in its stores hence making shopping under one roof a reality (Shahzadtc Trading & Consulting 2008 p.5). This makes the retail store a preferred shopping place for many consumers. The strength of the brand is also characterized by its many big stores in different countries of the world. The big stores translate to high economies of scale meaning that the company is able to get products at a lower price than its competitors due to its large purchases. This coupled with many other factors enable the retail store to offer value for money which is the main purpose of the retail store. This makes the strong point of Wal –Mart since it is able to offer neck break competition to its competitors leading to the kicking out of some retail stores out of business. Another strong point of Wal-Mart is that it has a strong market base. 82% of American households make some purchases from the store in a year (Cravens 2008 p 646). This means that the retail store commands a big percentage of the population hence making a big edge over its competitors. A strong and big market base enables the retail store to remain profitable and competitive. No wonder the fact that 30 supermarkets closed after the establishment of Wal-Mart in Oklahama city (Strategic Marketing p.646). This is contributed mainly by it main purpose of giving value for money to its customers. The expansion of the company in many countries worldwide has made the retail store an international brand. Strengthening its brand name and expanding its market. The third strength of this company is its qualified and efficient management system. for a company which operates many stores in the world, effective management is essential to ensure that the company is able to thrive without making any mistakes which might be caused by mismanagement. The company has a well defined management structure which is filled up with competent employees who ensure that the company is run well. The company also has integrated information technology (IT) in to its operations. Using IT, the company is able to monitor the performance of various products in all its stores hence being able to control the supply and maintain it at its optimum level. The company also cares for its public image and hence practices corporate social responsibility at its best for instance the company donated $500,000 to help rejuvenate urban ecosystems (Wal-Mart Corporate 2011 p.1). a good public image ensures that the company receives support from the market. 2.1.2 Weaknesses of Wal-Mart The company has faced many criticism and attention from labor organizations for its labour policies. Most of these criticisms are negative and tend to tear the public image of the retail store (Ratheeswaran 2008 p34). The company is known for its low remuneration to its workers. This is in contrast to the large amounts of money that the store makes annually. As compared to other retail stores, the employee at Wal-Mart makes far much lesser money. The company also has reported cases of gender discrimination in its job offers. It is hard for females to find employment in the retail store and moreover to get promotion in the store. This has elicited various criticisms from the public and labour organizations and affects the company since it is seen as not to practice ethics. Another weakness of the company is that it presents itself as an international company yet it does not have many stores to back up its international status. The company should strive to venture into the various markets in different parts of the world so that it can serve people internationally as it wants. As at today, the company has operations in 27 countries other than the United States. With its market aggressiveness, the company should be able to venture into the untapped markets of the world and in so doing provide value for money to its customers. The company has been able to venture into some markets by being a shareholder in retails stores in the specific countries but this is not enough considering the time the store has been in existence and also its big capitalization. Another major weakness of the retail a store is that due to its wide range of products, it is not able to specialize in specific products hence loosing over its competitors who have areas of specialization. This makes it hard for buyers who want to buy specific products to prefer other stores rather than Wal-Mart. The retail, store has a policy of preferences to consumer products. This has made the store one among some of the stores which desisted from stocking Preven, an morning –after contraceptive which was introduced by Gynetics Inc in 1999. This is one among the many products that Wal-Mart has desisted from stocking due to various reasons which are prescribed by consumer preferences. This is a major weakness for the retail store since it should offer what the customer wants especially some widely known drugs for instance Preven. The weakness is indeed a point for the Store to note and act upon. 2.1.3 Opportunities The company has many opportunities at its disposal. First, the company has a potential to explore new and ready markets worldwide. The world still has unexploited markets which can contribute to the stores revenues if ventured into. The store has taken the initiative to deal with its weakness of not going international. It has merged and bought shares from other big retailers in the world in a bid to go international. This explains the great expansion that has characterized the company in the recent years. The company also has made individual advances in various parts of the planet. The retail store is involved with the establishment of super centers. They are big retail stores which offer a wide range and specific types of products. They are characterized by large space and large product election for the consumer. The company has the ability to stock more products in its stores. Since the retail store enjoys a good integration of information technology in its operations, it is able to track the performance of various products in its stores. This has made it possible for the company to diversify its products on offered and also sits means of delivery. The Introduction of Neighborhood Markets and some malls have enabled the company to be more specific on the products it offers. This has been able to counter its weakness of unspecific products which it previously offered. With the introduction of such stores, Wal-Mart will be the store of choice for every consumer. The retail store also can change it’s public image by changing the manner in which it deals with employees. The company should realize the negative impact that this bad reputation is making on its public image. The retail store should become an equal employer which does not give preference to anyone with respect to any criteria save for qualification. With such a move, Wal-Mart will become a preferred retail store of choice when other factors are put into consideration. 2.1.4 Threats Several threats to the company exist. Key among the threats is the potential completion from its competitors. The emerging trends of more personalized provision of products have really affected the store. Previously, the store only stocked general consumer merchandise. This meant that consumers did not have a chance to get specific products which they desired for. For this reason specific buyers did not have a place in the store. Competiting stores offered specific products in their stores due to their small nature and area of operation which was a major tool that was used to offset Wal-Mart. However, Wal-Mart has risen up to the challenge and introduced malls and neighborhood markets. They have enabled the company to offer more specific products in its stores as opposed to the previous scenario where it only offered general consumer products. The company is also threatened by its own expansion rate. The establishment of new stores and their effective management calls for a lot of dedication, expertise and strategic management. Uncontrolled expansion has been known to cause the demise of some major business enterprises in the world. For this reason Wal-Mart should strategize effectively in it expansion programs. A thorough research on the markets stability to support the expansion should be made. An evaluation of the company’s budget should also be made so as to ensure that the company is able to support its expansion programs. Another threat to the company is the negative image that it has created on suppliers. Due to its purpose to offer value for money to its customers, the company has made it policy to offer low prices to manufacturers and suppliers. This explains the reason as to why the retailers state that signing a contract with the store is a second worst thing a supplier can do. On the other hand the store offers a ready and reliable market to the suppliers which make not signing a contract the second worst thing for a supplier to do. However, the company should evaluate its policies and relations with its suppliers since in the case of a better option, suppliers usually forego Wal-Mart for the better option 2.2 Porter’s Five Forces Model Competitiveness of the market at which an organization operates in is coupled with some forces which affect the operations of the company. Porter s identifies five forces which affect an organization’s behavior when it operates in a competitive market. The following section is a strategic analysis of Wal-Mart with respect to Porter’s model. 2.2.1 Rivalry between Existing Sellers in the Market The degree of rivalry in the market is determined by the type of products that are under transaction in the specific market (Smith 2010 p.65). The retail business in consumer products is a very common business in the market which deals with ordinary consumer products which are needed by each and every individual for survival and comfortable living. Due to this reason there exist many enterprises in the market which deal with the sell of these products. Wal-Mart is such an enterprise. The store is the largest consumer products retailer in the world. In the retail market, there exists stiff competition which explains the rivalry that exists in the market. Wal-Mart has not made it to the top easily; it has had to define itself in a competitive world, offering products at a cheaper price as per its purpose which has greatly propelled it to the top retailer in the world. Other factors that affect the rivalry in a market are the number of players in the market. For instance Wal-Mart faces stiff competition from retailers such as Kmart, Sopko, Meijer and Target in North America. Zellar’s, Hart and Tiger in Canada. Commercial Mexicana and Soriana in Mexico among many other stores in their area of operation. Rivalry is also affected by high costs of entry. 2.2.2 Threat of Entry Wal-Mart has risen to be the number 1 retailer in the world. The company faces competition from many retail stores in the country, big small, medium and big sized retailers. The entry of new retailers in the market is hampered by many barriers. The first one is the cost of entry. The cost of establishing an organization which will offer competition to a multinational store like Wal-Mart is not an easy. The competiting firm must be in a capacity to raise billions of dollars so as to be able to compete with Wal-Mart at an equal platform. This is the main barrier that has hindered the entry of big retailers in the market. This has reduced the number of potential competitors to Wal-Mart. Other barriers to entry include government policies and legislations for instance some taxes and policies may weaken the chances of a new organization venturing into the market. Economies of scale also affect competition. Large firms like Wal-mart are able to purchase many products at a cheaper price hence gaining an edge over firms which may be competing with it. 2.2.3 Threat of Substitutes This is the threat pose by products which are being offered by rival companies. Wal-Mart faces competition from stores which offer specific products. This affects the number of potential consumers who find their way into rival stores because they are looking for specific products to meet their needs. This has prompted an affirmative action from the company. It has seen the introduction of neighborhood markets and malls by the retail store. The two new entries in the retail chain of Wal-Mart stock specific products which are aimed at specific needs of the consumers. 2.2.4 Buyer Power The buyer power affects the volume of sales that a store makes. The buying power also dictates the price with which a customer is ready to pay for a commodity. Wal-mart provides consumer friendly prices for all its products and this have greatly raised the number of customers who shop at the store. at such times as today when inflation is making it a hard task to survive, Wal-Mart has continued to provide products at cheap provides which has enabled it to remain competitive in the market (Stewart 2008 p76). 2.2.5 Supplier Power The supplier power affects the terms and conditions with which the supplier enters into a contract a seller. Wal –Mart has succeeded in reducing the supplier power on its operations due to the large volume of products that it stocks and deals with. (Carlson 2004 p.13 ).the store has been able to revolutionize the buyer –supplier relationship and this has worked to the benefit of the company. The retail store has a chance in dictating the price with which the supplier supplies hi/ her producers at which has resulted to the reduced prices it offers to its customers. 2.3 Conclusion and Recommendations Wal- Mart has been a successful enterprise in the past. Offering stiff competition to its rivals and has always been in the forefront in providing the consumer with cheap and affordable products. However, there are some factors that the enterprise should put into consideration so a to ensure that it develops and expands further and at the same time remain competitive in the market. First, the organization should focus on its employees. The company has had a reputation of not being an equal employer. Cases of gender discrimination in its employment practices have real tarnished its name. Female normally find it hard to get employment in the organization and at the same time, they do not enjoy equal promotion chances as compared to their male counterparts. Wal-Mark should evaluate its employment trends and offer equal terms and conditions to all its employees irrespective of their gender. The company should focus on provision of specific products. The introduction of neighborhood markets in 1999 is a welcomed gesture which will go a long way into making Wal-Mart the retail shop of choice. Specific products ensure that the consumers are able to get their needs fully satisfied by the store. This trend will also enable the company to counter competition from its competitors. The company should also strive to go global. With respect to its strive to venture into international markets, the company should put all its resources in place so as to ensure that it is able to expand its market have in the international market. At present, the company has operations in 27 countries which is a low number as compared to the bigness of the organization. The new markets will boost its revenue in the long run and also enable the company to build a strong brand name for itself. In conclusion, Wal-Mart is a perfect example of a well managed company. It possesses major characteristics which are needed by a company in order to develop and remain sustainable. The organization has always stayed rooted to its purpose; providing value for money to its customers. This is a must do for any organization wishing to reach the ranks of Wal-Mart. An organization should always ensure that it maintains its operations in line with the objectives and the mission of the company. In so doing, it will meet its dream. Wal-Mart has also ensured that it has a well described and planned expansion strategy. It may seem sluggish but it has worked for the company. A company should ensure that it has a strategic plan in place to ensure that it does not get affected negatively by the expansion. The management of multi stores is also a taxing task. The management of Wal-Mart has been able to integrate information technology into its operations which has enabled it to track the performance of various products in the market. This has enabled the company to strategize its supply strategies hence ensuring that every store operates at its maximum capacity. The effect of the company’s activities cannot go unnoticed. It is estimated that the company saves its customer approximately $20 billion annually due to its discounted prices. This is a huge amount of money that goes into other activities like investments which upgrade the lifestyles of the consumers. This explains the high number of consumers that the organization enjoys. This is because people will certainly opt to shop at stores which offer consumer friendly prices like it is the case with Wal-Mart. References Carlson, s. 2004. Walmart Case Study, Journal Of Business, vol. 10, no.5, pp 10-45 Cravens, 2006. Comprehensive Cases, Strategic Marketing Management ( 2nd ed.) pp 644-650 Ratheeeswaran V, 2008. SWOT Analysis- Wal-Mart, Cyberlynx International College, vol.7, no.8, pp.30-45 (Shahzadtc Trading & Consulting, 2008. SWOT &TOWS Analysis, FZE Saudi Arabia (1st ed.) Smith, H, 2010. Porter’s Five Forces, Business & Finance,vol.8, no. 6, pp 50-73 Stewart, s. 2008. Analysis of Wal-Mart. Rapid Business Intelligence Success, vol. 12, no. 7, pp65-92 Wal-Mart corporate, 2011. Wal-Mart Donates $500,000 To Help Rejuvenate Urban Ecosystems. Viewed on 17th September. Retrieved from http://walmartstores.com/pressroom/news/10650.aspx Read More