Mission and vision:

Mission:

“Saving people money so they can live better” said Sam Walton, Wal-Mart’s founder, when
he first launched Wal-Mart

Vision:

Core competencies

Wal-Mart establishes a distribution channel that is hard to imitate. System gives the firm
competitive advantage over the competitors. Distribution channels were very efficient and
allowed for lower pricing. The company also develops unique resources like electronic data
interchange (EDI) system that improves communication with suppliers and distribution
centers and improves inventory control. Moreover, Wal-Mart everyday low pricing and
organic foods policy is useful in developing the customer loyalty that drives the company's
growth. This consistency in price and service allowed Wal-Mart to establish a reputation of
reliability. (Basker, 2007)

Constraints and key challenges

First constraint is about criticism of Wal-Mart. The firm dealt with a torrent of lawsuits and
issues regard to its workforce including low wages, poor working environment, sex
discrimination, restriction in supplier. This criticism may impact its corporate reputation. The
challenges here are how Wal-Mart can control the balance between low pricing system and
employee benefits. (Basker, 2007)

Second constraint is when Wal-Mart tries to grow in global market. The company faced with
differentiation in culture. The retail giant had some problems with consumers and had to
make some adjustments. Some research says that Wal-Mart is behind the locals in their
knowledge of taste. However, the road has not been without stumble, Wal-Mart has to
analyze carefully before going overseas (Kim, 2008)
Goals and objectives:

“No family should have to choose between food that is healthier for them and food they can
afford,” said Bill Simon, president and CEO of Wal-Mart U.S. Indeed, Wal-Mart now is
working with suppliers to bring fresh food with affordable price to customer. With this kind
of ideas, the first lady of US, Michelle Obama has supported a five-year plan to make family
especially children a healthy eating in order to reduce children obesity. There are some key
elements that program follows: adding nutrition to food and reducing some unhealthy
chemicals such as sodium; reducing unnecessary costs of supply chain like transportation,
logistics, sourcing and build relationship with farmers in order to add more income for
farmers and lower price for customers; helping customers to identify the healthier food option
and to save customer’s time to choose the healthy products. (Walmart Launches Major
Initiative to Make Food Healthier and Healthier Food More Affordable, 2011)

Value Chain

Wal-Mart is able to offer values for customers at lowest cost due to two factors – it is highly
automated distribution centres which reduce shipping time and cost, and its computerized
inventory system which speeds up the checking out time and recording of transactions.
(Chandran, 2003)

The company purchases goods directly from manufacturers to avoid intermediaries. It also
builds the long relationship with local and regional vendors to drive down cost. Wal-Mart is
able to provide replenishments twice faster than competitors because it has its own
warehouses which supply 85 percent of inventory. The distribution centres ensures a steady
and consistent flow of products to support the supply function. Wal-Mart applies technology
to manage the centre easier and more economical like barcode and hand-held computer
system. These systems help employees to check the right information of products such as
storage, packing, shipping of particular product so that it can save a lot of paperwork. The
systems also provide function for supervisors to monitor theirs employees and even give
them guide that help company to satisfy customer needs quickly. (Chandran, 2003)

In logistics management, Wal-Mart’s logistics infrastructure considers fast and responsive

transportation system. The distribution centres are serviced by more than 3500 company
owned trucks with experienced drivers who have more than 300,000 accident- free miles.
Wal-Mart keeps information of drivers through a book named “Private Fleet Driver
Handbook”. This book aims to educate drivers the code of conduct, safe exchange of trailers
with the store personnel and safety of Wal-Mart properties. In order to make the distribution
process more efficient, Wal-Mart introduces the logistics techniques called “cross-docking”.
By using this, the finished goods are directly picked up from the manufacturer of supplier,
sorted out and then directly supplied to customers. The purpose of this system is to reduce the
handling and storage charge of finished goods, and eliminate the role of distribution centres
and stores. (Chandran, 2003)

In inventory management, Wal-Mart set up its own satellite communication and use of
information technology (IT) systems to track sales and merchandise inventories across
countries to help communication in stores. As Walton, company’s founder, mentioned this
system enables him to “see the total of the day’s bank credit sales” or “something important
to communicate to the stores and distribution centres”. Wal-Mart then collaborated with P&G
for mutual benefit. There was linkage of computers between two companies for sharing
information of inventory. For instance, Wal-Mart sent “re-supply order” to P&G to inform
“item which was low in stock”, P&G then received signal then acknowledged by delivering
items to Wal-Mart distribution centre or stores. This helps Wal-Mart to get items fast from
P&G and reduce unproductive inventory. (Chandran, 2003)

Aside from support of IT in supply chain management, marketing also plays the main
strategic role to help Wal-Mart gain its value. Wal-Mart broadcasts itself through media
advertising with messages “We have lower prices than anyone else”, and then the “opening
price point”. These create customers’ perception that prices in Wal-Mart are much cheaper
than its competitors. Customers then keep shopping at Wal-Mart again and again when they
are convinced by this advertisement. (Zenith Management Consulting, 2005)

SWOT Analysis:

Strength

First strength of Wal-Mart is price. Compared to non- Wal-Mart grocery stores, Wal-Mart
stores charged lower prices. For instance, a 2002 UBS Warburg survey of 100 grocery and
non-grocery found that “Wal-Mart’s prices were 17–39% lower than competitors’ prices”
(Currie and Jain, 2002 cited in Basker and Noel, 2009, p 981). In every Wal-Mart store, some
products are shown as “Unbeatable” products with discount price for everyone, so it not
necessity for customers to have coupon or promotion code. In addition, customers who met
conditions of frequent-shopper program can be offered lower price with free “frequent
shopper” cards. (Basker and Noel, 2009)

To achieve low cost strategy, Wal-Mart gained advantages due to its large and early
investment in Information Technology which were applied to logistic, distribution, and
inventory management. Wal-Mart was an “early adopter of bar-code technology” to help
company control products better and save labour cost. In 1990, Wal-Mart launched “Retail
Link” software which provided connection between distribution centres, suppliers and stores
for sharing detailed inventory data so it makes product replenishment just in time. At store
level, it introduced “Radio Frequency Identification” system to facilitate tracking shipment,
inventory and sales. Moreover, Wal-Mart has its own the private satellite network
communication. (Basker, 2007)

Wal-Mart locates its stores in profitable places. It enters into market after analyzing various
demographic factors such as density of population, age and income and stores tend to locate
near one another as well as close to distributors. That helps to reduce the distribution, training
and advertising cost. (Basker, 2007)

At the supply chain management system, Wal-Mart has long term contracts with foreign
suppliers to import products at lower average cost than others. Wal-Mart shifted most of its
product purchasing to Asia in the early 1990s and China became its biggest supplier.
Therefore, it can get better prices from its suppliers than other retailers and maintain the fixed
cost products. (Basker, 2007)

“Wal-Mart as Globalizer” describes Wal-Mart’s density is everywhere around the world. It

started from a small town in Arkansas in 1962, and then it grew up to be not only the number
one retailer in US but also a symbol which everyone in other countries can recognize for
example, it acquired the UK supermarket Asda. The powerful retail brand name makes its
products, services become popular. (Lavallee and Boyer, 2006)

Finally, Wal-Mart has its e-commerce website which is convenient for customers to purchase
online. It is the second most visited retail site in US after Amazon according the research of
comScore (Mcintyre, 2010)
Weakness:

Lower price means not good quality, services and convenience. However, customers are easy
to forgive Wal-Mart for these drawbacks because its price is best compared to Target, Kmart.
Wal-Mart uses multimedia to promote its image by transferring messages such as workers are
happy during their working with Wal-Mart, citizens feel enjoyable to have Wal-Mart in their
neighbourhoods. In fact, more and more communities try to resist Wal-Mart’s growth
because its lower prices make customers away from other smaller business. (Zenith
Management Consulting, 2005).

Moreover, lawsuits by current and former workers against Wal-Mart of various illegal and
unethical practices including not paying enough wages, requiring employees work overtime
“after 10 p.m., workers were locked in the stores, no one could leave, even if they had an
emergency”, missing meal break and treating employees humiliating. Therefore, lots of
employees quit their job after working for Wal-Mart a few months resulting that “Turnover is
particularly high at Wal-Mart compared to the retail industry as a whole—35 to 45 percent a
year among full time workers; 56 percent among part timers”. Sex and race discrimination
are considered a culture of Wal-Mart. About of 70 percents of sales associated are women
and they get paid lower than men and excluded from higher position. (Rosen, 2005)

In a report from Columbus, OH-based Retail Forward Inc, a global management consulting
and market research firm, demonstrated that Wal-Mart's mistake in global operations to
"transplant its U.S. business model and management methods directly to a new market." And
it met resistant of local citizens to "foreign approaches".

Opportunities:

For international expansion, Wal-Mart can enter into joint venture, merger, or acquisition
with other retailers. The Wal-Mart stores website shows that it acquired Asda plc food chain
of UK for $10.8 billion, Massmart in South Africa, Seiyu in Japan etc. Wal-Mart has started
its operation in 15 countries including Mexico, Japan, Brazil, Italy, South Africa etc. since
1991 and the economies of Wal-Mart in countries outside US has grown significantly.
Moreover, Wal-Mart tends to go to countries with a sizable middle class. (Wikerson, 2009)
Wal-Mart attempts for new business strategy by focusing more on services such as health
care, banking, and broadband access aimed at its core customers. It helps to secure customers
who are more loyal. (Gogoi, 2007)

Wal-Mart wants to save more organic foods for better and healthier life (Walmart Launches
Major Initiative to Make Food Healthier and Healthier Food More Affordable, 2011)

Threats:

The New York Amsterdam news newspaper published on February 2011 has mentioned that
employees were fighting Wal-Mart for their better working environment. Employees are in
doubt of Wal-Mart promises like creating job, saving consumer money and helping business
thrives because in fact, Wal-Mart offers low paying job with no benefits (Applebaum, 2011).

To expand to overseas market successfully means that Wal-Mart has to understand other
culture of places which it wants to enter. Wal-Mart meets difficulty of culture differences.
One of a good example is when it entered South Korea in late 1990s. However, it left Korea
in 2005 because the Korean consumers had different taste and preferences compared to
American consumers (Kim, 2008)
Five forces model

Threat of new entrants:

“Always low prices” – that slogan creates a high barrier to entry which means the influence
of potential entrants to Wal-Mart is weak. Customers are likely stuck with Wal-Mart’s low
price image so it is very hard for new entrants to change consumers’ perception that Wal-
Mart is cheaper. As such a large firm, Wal-Mart achieves economies of scale. The firm
produces at larger volumes with lower cost because the fixed cost is spread over more units.
New entrants want to enter to markets must have plenty of capital. New entrants also cannot
compete with Wal-Mart for a better service because a research shows that customers prefer
“self service” model. Ken Stone of Iowa State University advised that new entrants are better
to provide differentiated goods and services including more specialized product lines and
more personalized services. (Zenith Management Consulting, 2005)

Additionally, the distribution channels with huge IT investment are very efficient and allow
Wal-Mart lower pricing, thus it creates barrier to entry for firms who wished to enter the
market. (Basker, 2007)

Rivalry among existing competitors:

“Without experts who know exactly how to counter these problems, Wal-Mart’s competitors
will not be able to significantly affect Wal-Mart’s growing dominance” (Zenith Management
Consulting, 2005). Existing rivalry has low influence on Wal-Mart. Its competitors are
divided into two categories: “local competitors” like grocery stores, apparel stores and “large
retail chain competitors” who compete with Wal-Mart in various markets. Some small
competitors did not affect much on Wall-Mart’s market shares. Some large competitors like
Target, Kmart are noticeable competitors of Wal-Mart. They always consider Wal-Mart’s
store location before deciding market to enter. (Basker, 2007)

Bargaining power of buyers

In Pew Research Center (2005) indicated that 50% of customers favour Wal-Mart for its low
price. The bargaining power of buyers highly influences Wal-Mart. Company maintains
reasonable prices for their products and service to satisfy the buyers. Customers can choose
to shop elsewhere or none shop if the price is not affordable.

Bargaining power of suppliers

Wal-Mart has relationship with a hundred of major suppliers which their offices near Wal-
Mart headquarter in Bentonville, Arkansas. Therefore, the bargaining power of Wal-Mart is
high. It has opportunity to switch among competitors and “push down wholesale prices”.
Wal-Mart also imported goods especially clothes from low cost countries such as Mexico,
Bangladesh, and China. It helps Wal-Mart to maintain large fixed cost with large volumes of
goods. Therefore, Wal-Mart gained much more advantage from global sourcing. (Basker,
2007)

Threat of substitute

Wal-Mart does not worry much about substitutes because there are no competitors offer
lower prices. The substitute can be in form of “brick and mortar” stores or online stores.
Since Wal-Mart website was developed, customers can order product online with delivery
services.
Reference:
Walmart Launches Major Initiative to Make Food Healthier and Healthier Food More
Affordable [online] (Updated 20 Jan 2011) Available at:
<http://walmartstores.com/pressroom/news/10514.aspx> [Accessed 14 Feb 2011]

Basker, E., 2007. The causes and consequences of Wal-Mart’s growth. Journal of Economic
Perspectives, 21(3), pp. 177–198

Basker, E. and Noel, M., 2009. The Evolving Food Chain: Competitive Effects of Wal-Mart’s
Entry into the Supermarket Industry. Journal of Economics & Management Strategy, 18(4),
pp. 997–1009

Lavallee, M.T. and Boyer, A.M., 2006. Globalization and Local Governance: Implications
from Wal-Mart’s Expansion. International Studies Perspectives, 7, pp. 254–266

Zenith Management Consulting, 2005. Case study: how to exploit Wal-Mart’s

weakness. [online] Available at: <http://zenith-consulting.com/research/walMart/Wal-Mart-
Strategy.pdf> [Accessed 25 March 2011]

Rosen, I.E., 2005. Life inside American’s largest dysfunctional family: Working for Wal-
Mart. New Labour Forum, 14(1), pp. 31–39

Applebaum, S., 2011. Fighting Wal-Mart and the Race to the Bottom. The New York
Amsterdam news: Union matters, 10 Feb- 16 Feb. p.6a.

Gogoi, P., 2007. Wal-Mart's New Growth Opportunities. [online] Available at: <

http://www.businessweek.com/bwdaily/dnflash/content/oct2007/db2007108_116420.htm>
[Accessed 10 March 2011].

Chandran, M.P., 2003. Wal-Mart’s supply chain management practices. Wal-Mart’s supply
chain management practices.

Wilkerson, M., 2009. The Wal-Mart Effect. Foreign Policy, pp.28

Kim, R.B., 2008. Wal-Mart Korea: Challenges of Entering a Foreign Market. Journal of
Asia-Pacific Business, 9(4), pp. 344–357
Mcintyre, D., 2010. Wal-Mart’s big goals are a huge challenge. [online] Available at: <
http://www.dailyfinance.com/story/investing/wal-mart-big-goals-huge-challenge/19504606/>
[Accessed 25 March 2011]
Recommendation:

Strategic marketing program marketing objectives, targeting and positioning

The Company needs to change its marketing objectives in such a way that they can attract a
different market segment. In the past, the company has been associated with the middle class
or low-income earners. Affluent clients tend to shy away from the retail giant due to the
misconception that Walmart's products are of lower quality. Most of them use the store for
pharmaceutical and grocery shopping and pay no attention to the stores when it comes to
other options. The Company has tried to establish this concept in the past. In the year 2006,
the company opened up stores with this objective in mind. They stocked a wide range of
sophisticated products such as jewelry, electronics, a sushi bar and a variety of electronics.
The affluent market is crucial in the company's efforts to secure new markets because they
have saturated current ones. Almost all middle class shoppers prefer Walmart. Therefore, in
order to sustain its position, the company needs to assess what competitors are doing to boost
sales. Target - Walmart's rival - has managed to attract affluent consumers. Consequently,
Walmart must try and give these shoppers a reason for shopping at the company. Affluent
shoppers appreciate quality and need to be assured that they can find it at Walmart. The
reason why the company failed in its 2006 efforts to target these clients is because it went
about implementing this goal in the wrong way. First of all, the company needs to improve
the appearance of their stores through creative store displays. This is particularly important
for stores allocated in affluent neighborhoods.
Walmart needs to work on the quality of its items. Some of the affluent consumers believe
that Walmart has failed in this regard. In instances where the perceptions about the company
are totally wrong, then the company can improve this image by marketing its products in a
different way. They could talk about the quality of their items with particular emphasis on
merchandise that affluent workers prefer. However, the company should be very careful
about the type of products they choose to sell. In the year 2006, the company wanted to
follow their rival- Target's product portfolio. However, this did not work very well because
they tried including designer labels in their apparel section. This is a very tricky item to sell
and may not necessarily give positive responses. Designer items fluctuate from season to
season and it may be difficult for the company to keep up with the trends. It would have been
wiser if the company stuck with electronic items as these are less susceptible to change.
Additionally, the company needs to make this transition slowly. All successful entrepreneurs
agree that there is no need to change a winning team. Therefore, even if Walmart plans on
targeting those affluent consumers. They must ensure that these changes do not scare away
current clients. Walmart should do a thorough market analysis to find out the most
appropriate manner of attracting these clients. Other retail stores that have made a name for
themselves among these affluent shoppers have been working on this image for centuries.
Consequently, Walmart should not imagine that they could do this overnight. (MSNBC,
2007b)
Additionally, the company should venture into other countries. Despite the fact that the
company has done very poorly internationally: it closes one in every three stores overseas,
there is need to expand operations. Since the company has reached saturated levels locally,
then there is a need to tap some of the internationally resources. First of all, the company
should exercise a lot of selectivity before choosing a particular country. Part of the reason
why the South Korean outlet had to be closed was that the company still used the same
marketing strategies applicable in the US. Different countries have different preferences, the
company's strategy of saving money to live better may not be feasible everywhere. The
company should not enter international markets directly. It could collaborate with local
leaders in those respective countries in order to work with a winning formula. Alternatively,
the company should test an international market by beginning with fewer and smaller stores.
If the response is good then it could proceed to expand. Countries chosen for expansion
should be economically secure. Therefore, increasing the number of stores in China and India
is probably a good idea. However, this should be done slowly and after thorough research.
(Pallavi, 2007)

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