Walmart’s Marketing Effectiveness
Marketing Effectiveness evaluation
There is a need to examine the five forces model being used by Wal-Mart in China using marketing tools like PEST and Porter’s Five Forces Model for evaluating its marketing effectiveness and to determine the situation of the company in the internal and external marketing environment.
In order to analyze the environmental aspects of Wal-Mart China, PEST analysis will also be used. PEST Stands for Political, Economic, Sociocultural and Technological factors that influence the overall performance of a business in the market place.
Five Forces
According to (1980), some industries tend to become more profitable and competitive than the others. Henceforth, an existing industry such as the Wal-Mart should always remember that their industry will only survive by utilizing a strategy that would enhance the competitiveness of the business. In Porter’s model it is assumed that there are five forces that particularly affect an industry. The model is useful if a manager who strives to get the better off rivals. The framework provides excellent understanding of the industry context in which the firm operates. Porter’s Five Forces Model includes threat of entrance of new industries.
The main objective of Wal-Mart China is stay in the competitive position in the global market Although, the company knew that this type of industry belongs to higher entry barriers, the management has been able utilize an approach to make sure that the company will still be competitive in the international level.
In order for Wal-Mart to compete and stay in the international marketing environment, the management team had provided a long term vision to be followed by the industry as a whole. The agreement made by Wal-Mart with other leading industries has strengthened their capabilities to compete in the global arena in terms of producing quality products and service. Moreover, with the existence of new entrants in this kind of business, the competition becomes tougher and tougher. Since, these new entrants can be a threat for the company in terms of substitute products, Wal-Mart have again utilizes a strategy that will enhance their product more. The company utilizes product differentiation approach as their marketing strategy to ensure that with these new entrants their product will still be different, unique and full of quality to satisfy their target market. The bargaining power of a supplier could be a threat for the profit of the company, and Wal-Mart management is aware of it. In addition, Wal-Mart also uses supply and distribution channel effectively. Porter’s also include in his model the concept of the bargaining power of Buyers. Hence, Wal-Mart sees to it that their clients will be satisfied of their products.
Since the competition of these industries worldwide is very strong, Wal-Mart utilizes all their resources to enhance the operation of the China branch and to be recognized as a leading industry. In addition, it also shows that part of the five forces of the company is product or service differentiation as Wal-Mart has been able to adapt to the marketing environment because of its strong commitment of providing quality products and services for both of their business operations.
Figure 2: Porter’s Five Forces Model
Upon close examination of the retail and department store industry, the researcher has assessed using Porter’s five forces model that firstly the competition in the specific industry is very strong as there are several numbers of rivals that can compete on one location as departments stores are a commodity and typically, there is also low switching cost upon opting for another department store. In addition, these rivals may also introduce new items or introduce a totally different service). It must also be noted that department store rivals can compete on price.
In terms of the threat for potential new entrants, it is rather weak as it is very difficult to establish another chain in China which will serve many international locations. Also, the cost of entry is very expensive especially if planning to expand globally. It must also be noted that it is also difficult to beat the brand name value of Wal-Mart as it has been established and well-known for decades already.
Next, as for the bargaining power of buyers, the researcher has assessed that in the department store industry, it is very strong. Basically there are a lot of other department stores to choose from because the market structure is competition. Moreover, buyers usually have no incentive to be loyal. So what if they choose another department store? Switching cost or opting for another department store is relatively low.
The bargaining power of suppliers is weak. Their suppliers are providing commodities with a market structure of strong competition as well; hence, there are still many suppliers to choose from. In addition, this competition among suppliers may facilitate driving down prices as well.
Finally, the threat of substitute product and services is strong. As mentioned earlier, there is a relatively low switching cost making it easier for customers to shift from department stores to other related commodity which may vary from discount stores to online shopping to anywhere which can cater to the buying needs of customers. Plus, it must be noted that it is rather very unlikely than individuals will shopping in only one department store and nothing else. Lastly, the location of the department store may also influence customers to try out a substitute.
Political Sector
A company will not be able to gain success, good reputation and trust if it will not consider legal and political sector as part of their strategy. Wal-Mart China has been able to follow the principles of business ethics. Hence, the company considers legality in all their actions. They make sure that all their products and services adhere to the standards and wills satisfy their client worldwide. Politically, the company had been able to follow all the standards set by China and other international organization satisfies their customers.
Economic Sector
Economically, it can be said that throughout the years, Wal-Mart, even before it came to China, had enjoyed being at the top of its competitors. The economic status of Wal-Mart is highly remarkable that it always give its consumers the best and quality products and services in the two business divisions. In addition, the company’s growth and expansion on different countries in the world is an obvious evidence that Wal-Mart has been able to have a stable economic capacity to sustain and maintain its competitive position in the market place.
Sociocultural Sector
Culture is an important factor in understanding an industry, because for any organization to operate effectively it must for some extent have a general set of believe and assumptions on how culture will influence the productivity and the success or failure of any company. Culture environment is one of the important principles that influence the organization. (1991) identifies that there are four dimensions that differentiate cultures at a national level (power distance, individualism-collectivism, masculinity-femininity, uncertainty avoidance), which help to understand that people arrive to organizations with their own national culture. In Wal-Mart, the management sees to it that they value the opinion of their employees no matter what is their nationality. Since, this company is competing globally; it cannot be denied that they need employees from different cultures to be in the company to help in the decision making. It is also indicated that the international managers has been able to create a positive relationship in the local managers. Moreover, the management of the company has seen to it that they would be fair in treating all their employees. In addition, as mentioned earlier, the company sees to it that their social commitment is being achieved by satisfying the consumers with their quality products and services in aviation and special material industries. Herein, the company values the consumer by knowing their demands and providing their demands and in MP3 manufacturing and special material products. The Wal-Mart core mission to provide customer satisfaction at a less price is also given emphasis. Accordingly the company’s mission and vision can only be achieved if and only if they would focus immensely on satisfying their customers and clients.
Wal-Mart has many consumers all over the world and the company is succeeding due loyalty given by their target market. To be able to serve their customer and clients better, Wal-Mart have initialized a strategy which includes a set strategies that greatly influence the whole corporation in achieving its goal.
Technological Sector
The complexities of achieving business success through increased efficiency, effectiveness and competitiveness, combined with innovative applications of modern technology, has heightened the awareness of both Technology and business managers towards more strategically oriented approaches for planning and management of any industry (1993). Wal-Mart has been able to use technological advancement for creating new and innovative products and services needed by its customers may it be from the aviation or the special materials business. Part of this is their utilization of modern technology in producing new products that will meet the demands of their target market. They also use the purpose of information technology by creating their own website to let their consumers have an easy access of knowing the company and the products and services that the company has made for them. In fact Wal-Mart in the United States and other countries have used technology in the form of online stores to be able to reach widely its customers.
Strategic Marketing Planning and Marketing
Now the world's largest and most profitable retailer, Wal-Mart used to be a small retailer in the southern states of the USA. Growth has been founded on a belief in the importance of information technology systems in building an efficient operation. Much of Wal-Mart's success has been ascribed to its stockless warehouse JIT distribution system. Goods delivered to the regional distribution depots are immediately picked for reshipment and sent on to stores. Economies of scale mean that Wal-Mart can purchase full truckloads from suppliers, gaining a critical 3 per cent cost advantage over competitors (2002).
Wal-Mart’s goal is to give our customers the best value they can find anywhere. Costumers trust Wal-Mart to have not only the lowest prices, but also the best selection of quality items that are relevant to their needs and the easiest, most convenient shopping experience. With the unbeatable prices and exciting surprises that Wal-Mart is offering customers, costumers know that they won't be disappointed by the value they can find at Wal-Mart.
The system is based on a private satellite EDI communications network that sends EPOS data to 4,000 suppliers. Employees, management and suppliers have access to real-time sales, stock and order information plus buying patterns (2002).
Every business is subject to factors that affect the firm’s function as a whole. These factors are the ones attributed for the success or even the failure of a business (1997). In light of this, there are certain ways or techniques that can be considered in order to emerge and continue to be competitive within the market place.
The marketing concept has been defined as ‘the key to achieving organizational goals’ and the marketing concept rests on ‘market focus, customer orientation, coordinated marketing and profitability’. In a profit making business the firm obviously has to try and achieve this level of customer satisfaction as a way of staying ahead of the competition and making a profit (1994).
Today, more and more people and organization are striving to be recognized in the business arena. With this objective, these organizations had been able to competently and effectively adapt to the situation in the market place by using generic strategies that enhanced their competitiveness.
There are five different generic strategies that a business can choose. These include cost leadership, differentiation, focused cost leadership and integrated cost leadership/differentiation. Each generic strategy helps the company to establish and exploit a competitive advantage within a particular competitive scope (2003).
Ansoff’s Growth Matrix
Existing Products
New Products
Existing Markets
Wal-Mart focuses on selling existing products into existing markets. These are products that are available also in the other branches of Wal-Mart.
Wal-Mart introduces new products into existing markets. These could be products that are unique only to the Chinese market.
New Markets
Sell its existing products into new markets, e.g., introduce Wal-Mart online shopping in China.
Wal-Mart markets new products in new markets. This can be done by offering new products that are available only online.
In market penetration, Wal-Mart focuses on markets and products it knows well for a long time. It is likely to have good information on competitors and on customer needs. The company can sell existing products to existing markets by the following objectives:
- Wal-Mart can maintain or increase the market share of current products offered in their location by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling.
- Secure dominance of growth markets.
- Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors.
- Increase usage by existing costumers – for example by introducing loyalty schemes.
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy including:
- New geographical markets, for example exporting the product to a new country
- New product dimensions or packaging
- New distribution channels
- Different pricing policies to attract different customers or create new market segments
Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets
Diversification is the name given to the growth strategy where a business markets new products in new markets. This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of risks.
Competitive strategies that are employed by Wal-Mart in order to stay ahead of the competition include the following:
· Customers will find the lowest prices on items in all the hottest gift categories -- toys, electronics, apparel, and home.
· Any Wal-Mart store will match any price featured on an identical product in a local competitor's print advertisement.
· As always, no Wal-Mart prices are based on rebates.
· Special values will be available in all Wal-Mart stores from specific hours.
· Customers can go to Walmart.com () to preview specials available at Wal-Mart stores.
This paper has strongly recognized the importance of understanding competitors in strategic marketing planning for the benefits that it gives to the successful planning of marketing activities. These benefits and advantages include the following. First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors. Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm. Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future. Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.
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