Strategical Analysis of Walmart's Corporative Marketing

Executive Summary

Walmart is a thriving business thanks to the strategical style of Sam Walton. This mass producer of goods, with superb service has expanded from physically selling the lowest prices all over the globe as well as making headway in the new ecommerce world. Walmart is one of the leading competitors in selling goods and services and its thanks goes to their bargaining power. Walmart’s style of bargaining power pushed out mom and pop shops because of their great competitiveness. Having one of the biggest inventories in retail combined with some of the best technological advancements had put Walmart ahead of their competitors before they even had a chance. Because customer satisfaction is so important, in the future Walmart will strive to make online buying easier and more affordable. Shipping costs through Walmart are free when spending over $50. When buying items that do not need to be fitted like food, shampoo, trash bags, and cleaning supplies; people can save even more on time and money from not having to make trip to the store. Walmart is targeting the homebodies while still maintaining happiness from their physical buyers. “Walmart has two goals for the future. To be the destination for customers to save money, no matter how they want to shop and to be the best retailer in the hearts and minds of consumers and employees” (Walmart, 2019).

Background of the Company

If you did not know, the founder of Walmart is Sam Walton. He was born in 1918 in Kingfisher, Oklahoma. In 1942, at the age of 24, he joined the military. “Shortly after the military he married he wife, Helen. When his military service ended in 1945, Sam and his wife Helen, moved to Iowa and then to Newport, Arkansas” (Walmart, 2019). During this time, Sam gained early retail experience, eventually operating his own variety store. In 1962, Mr. Walton opened the first Walmart. Since then, Walmart has transformed into one of the world's largest companies and employers. Walmart has opened thousands of stores nationally and internationally. Walmart puts prominence on an increase of ease for their customers and manufacturing stores all over the world. Walmart has achieved this by always offering the lowest prices and the best customer service, wherever they go. According to Walmart’s Corporate website, (Walmart, 2019) “If we work together, we'll lower the cost of living for everyone...we'll give the world an opportunity to see what it's like to save and have a better life.” Walmart offers a wide variety of goods and services, while concurrently keeping the lowest prices. Walmart has a hierarchical structure, because each employee reports to a superior, except for the CEO. This works well due to the strong relationship between employees. Walmart continues to advance this structure and relationships as they expand internally and externally.

Company Research

Wal-Mart’s company is truly the powerhouse of the retail industry receiving close to 500 billion dollars in revenue and holding high dollar stocks that continue to increase and grow. From their value chain analysis, Walmart’s primary activities include: inbound logistics, operations, outbound logistics, marketing and sales, and finally services. Their support activities emphasize on firm infrastructure, human resources, technology development, and procurement. Wal-Mart’s inbound logistics focus on forming strategic partnerships with vendors so they can continue to focus on purchasing at low prices to keep their bargain power. Nevertheless, when a possible retailer is signed as a supplier, “Walmart offers a strategic partnership for long-term perspective and engages in high volume purchases, although for lower prices” (Research Methodology, 2016). “Walmart runs operations in a global scale with more than 11,000 stores in 27 countries serving nearly 260 million customers each week” (Research Methodology, 2016). For Walmart, operations will be used for supercenters, warehouses, and because they own it, Sam’s Club. That’s right, Walmart owns a large retail chain, Sam’s Club. The wide variety of operations can be categorized for the United States, internationally, and Sam’s Club.

The two most important operations for Walmart are designs of goods and services and supply management chain. “Walmart’s use of statistics technology and bargaining power over suppliers successfully addresses this decision area of operations management. The company’s supply chain is integrated with advanced information technology” (Smithson, 2018). The business can now focus on the efficiency of the retail service employees. Walmart also stresses marginal production costs like when buying brands similar to, “Great Value”. This connection to cheaper goods allows Walmart to overstock and sell at the low prices we all know and love.

Support activities that play huge roles include technology development and procurement. Procurement is the purchasing of raw materials, supplies, and other consumable goods. Walmart Global Procurement was founded in 2002 to enable the uninterrupted acquiring of commodities. “Headquartered in Shenzhen, China, the organization has over 1700 associates sourcing products from 50 countries” (Walmart, 2019). With the strategy of bargaining power and buying low-cost goods, Walmart can control competitors to match their prices or force them to lose some business. Other businesses might have even worse luck. Stores have always had issues with supercenters because it causes them great struggles to stay with the low prices. With a huge inventory and a smart procurement strategy, Walmart will be consuming all the lost business from dying stores attempting to compete. While Walmart’s procurement process is welly established, their technological advancement is even more impressive. Walmart now has an electronic business which allows them to commercially sell goods online. The replacement of physical business does not hurt the company rather than expanding the revenue/net sales for the different style of consumer. The technological advancements do not stop there. Walmart is technology driven from barcodes on all of their inventory. They have self-checkout lines but more importantly they have the ability to use the, “just-in-time” style for inventory because of the data processed from each sale of goods. The idea that every single item has a statistic on how many have been sold and how many are left, helps Walmart anticipate when to put on sales, clearances, and when to order more. Without the inventory technology, Walmart would lose many perishable goods and lose money when items are not properly stocked for consumers.

Customer Profile

The customer profile of Walmart can vary but in most causes it targets the poor to middle class. Because the higher class, “very wealthy” appreciates better quality goods that are most generally more expensive, Walmart’s consumers focus primarily to the other types of people. Walmart’s goods target anyone of a different race, religion, gender, and demographically through many countries worldwide. Billions of people fall into this targeted category which allows Walmart to have the multi-diverse consumer. This high profile market has allowed them to introduce multiple locations for supercenters and warehouse as well as being viewed and consumed via the internet. Walmart’s market is one of the biggest in the world. Walmart will continue to maintain this extremely wide customer profile. The ability to mass market and target the majority of consumers lets Walmart have a competitive advantage. Businesses like Banana Republic are made for people who have the extra money to look good. It’s not that people do not appreciate their designs of BR and customer care, but the target of people Banana Republic pertains too is none of the same that is of Walmart.

Competitive Situation

Even though Walmart has millions of customers and can target half of the population for goods, they still have competition in the market. Two of Walmart’s biggest competitors consist of equally gigantic corporations, Amazon and Target. Amazon is the largest ecommerce company that has many similarities to Walmart from large inventories to low prices. Amazon’s prime feature, gives customer’s free shipping while meeting criteria of buying so many goods and having a certain user rate. Because of this, in mid-May 2019, Walmart stated “it began offering free next-day delivery in Phoenix, Las Vegas and Southern California, but only for orders costing $35 or more” (Herrera, 2019). Walmart’s other big competitor, Target, offers free one-day shipping on orders of at least $35 to their loyal customers. Gaining the experience and doing the research from the two major industries, Walmart is pushing to help all customers on low-cost shipping instead of having these customers meet criteria to be considered, “loyal” consumers. Because the low shipping affects everyone, Walmart has just taken a giant leap against their competitors which could alter Amazon’s prime package and Target’s loyalty program. In the future, Amazon and Target will need to alter their shipping ideas to either match Walmart or even drop lower than $35 for free shipping.

External Analysis

External factors are huge when discussing economic challenges, environmental challenges, opportunities, and threats. Walmart is under substantial pressure from commercial changes. This change most generally can/will lead to the company’s revenues. Walmart can seize opportunity in expanding growth in developing countries and decrease unemployment in the United States by opening more stores, warehouses, and positions in these areas. “The emphasis needs to be put on the developing countries because they have an increased demand for goods from retail firms” (Frue, 2018). While the U.S. is Walmart’s biggest consumer, international sales generate over 100 billion in revenue. The percentage of money that people pay vs what they earn is much higher in the other countries. Understanding this can spark marketing campaigns in these lesser developed countries to accelerate this increase. The ecological factors important in Walmart’s business relate to environmental safeguarding apprehensions. This threat can cost Walmart a lot of money but it also makes them look better in the eyes of the people. Recycling, using cleaner energy, donating money to conservation (charity), and researching on ways to help the environment is costly but they pay off in a different way. “Walmart’s strategies to make improvements include enhancing the environmental sustainability of agricultural commodities, reducing food and product waste upstream or downstream, and working to improve efficiency of factories for pollution” (Walmart, 2019). Better-quality policies and values on goods sold at the merchandising stores, will build up Walmart in addressing these conservational factors. Another threat is the threat of new entrants. This puts very little pressure on Walmart because of how hard it would be to take them down. Walmart is leading all the other retail brands and it would take too much investment to come anywhere close in building a similar store. In order to have the distribution system like the one Walmart establishes, a company would need to be dispersed globally, have great technological services, a great mission statement that brings employees to work harder, be environmentally sound, have tons of raw materials, and exhibit low prices annually just for starters. “All these things require investment and apart from that skilled human resources are also required to manage and maintain them. Walmart’s financial capital and other resources diminish the risk from the new entrants” (Walmart, 2019).

Internal Analysis

Internal factors for Walmart include some pros and cons. Tactical approaches are meant to help a company but they do not always work that way. All of Walmart’s strengths are because of how big the business is. “These competitive strengths enable the company to withstand threats despite its weaknesses as a low-cost retailer” (Frue, 2018). Most businesses cannot get by with the low-cost strategy that Walmart holds but because they have the inventory to back it up, they are allowing themselves to be more than competitive. Walmart’s international structural magnitude gives the business the resources for growth and expansion. Walmart has a very good supply chain. In addition, Walmart’s supply chain has high proficiency because of innovative technologies for monitoring and scheming the movements of goods from contractors to its stores. Walmart’s weakness reverts to their generic strategy in business (Smithson, 2018). Small time earnings are a typical effect of exhausting the cost leadership strategy. “Because Walmart minimizes selling prices, it also needs to minimize profit margins and rely more on sales volume. Walmart is meant to target quantity buyers and not quality” (Smithson, 2018) This causes people to shop elsewhere for items such as shoes, jewelry, dress clothes and much more, high-dollar items.

Financial Analysis

Walmart’s financial status is clear. In the millions, “Walmart’s net sales in the United States for groceries, general merchandise, wellness products, and other categories include 184,202, 108,739, 35,788, 2,937, and 331,666 respectively” (Dybeck, 2018). Walmart approximately received $15.7 billion related to ecommerce for the fiscal year of 2019. Total revenue was $514.4 billion, an increase of $14.1 billion, or 2.8%. Excluding currency2, total revenue was $515.1 billion, an increase of $14.8 billion, or 3.0%. Walmart U.S. comp sale increased 3.6%. Grocery pickup and delivery are available in more than 2,100 and nearly 800 locations, respectively. “Walmart U.S. ecommerce sales increased 40%. Net Promoter Score and the company's Customer Value Index continue to improve” (Walmart, 2019). This makes Walmart the best company when it comes to revenue. Financially speaking, Walmart is looking to get even better. While their stock prices range from 83-103 dollars, Walmart has a goal set to 120 dollars per stock which will have the giant corporation needing over 520 billion dollars in revenue and having their online sales going up about 10%. This is one reason they are competing with Target and Amazon on shipping because when buying online this is a huge factor to consider.

Situational Analysis

Speaking again about strengths, Walmart has many including: customer loyalty, global expansion, strong market power over suppliers, and the low price strategy. Walmart sees its customer as the boss. This is that style Walmart’s founder, Sam Walton, developed. All of the Walmart associates are expected to serve the customer like their employer and ensure they meet or exceed the expectations of the customer. There are always multiple workers in each department ready to help a customer and they even have greeters to welcome in those customers. This type of hospitality is established in every Walmart across the globe. This consistency of low prices and appreciating workers’ sanctions Walmart to have a good reputation and good reputations attract customers. A problem they are facing is inventory to the stores itself. Past CEO Greg Foran, discussed the problem’s Walmart has with not having enough time to restock inventory in the supercenters which causes items to spoil. Walmart has grown so big that they thought they would not have enough inventory in their stores so they mass ship everything out and a lot of items are starting to go bad. The company has already started to implement some changes to fix these issues, such as marking down foods that are nearing their expiration date to reduce the amount of food that goes to waste. Selling items cheaper to focus on getting rid of them is the best solution to making money while also getting the product out of the store and into the consumer’s hands.

Alternatives

To stay competitive Walmart could minimize or eliminate some stores to create more space for inventory in the ecommerce field. Because Amazon does have the advantage in selling online goods, Walmart could cut back on 100-200 stores worldwide and help the matters in selling online goods while eliminating the wasted goods they are having problems with. “The strategy to downsize store and the strategy to increase inventory units would be exceedingly beneficial” (Favaro, 2015). Another alternative Walmart could use is creating a new position per store to help keep track of inventory going in and out. We rely on technology so much because essentially it is better but having a person type all of the data in and having managers look at the research conducted will give them a chance to pinpoint when items need to go on sale or be shipped in.

Recommendations

“In chapter 9 of, “Strategic Management: Competing in the Global Information Age” on page 386 and 387 it discusses briefly on the matters of how complex these alternative strategies end up being” (Blackford Digman, 2014). The alternative Walmart need to pursue is cutting back on store locations and show more prominence to online shoppers. I understand when a company has a strength it would be pointless to give up on it in an attempt at strengthening your weaknesses. Walmart has over 11,000 stores in over 25 countries, dominating the physical retail contestants. They do need to improve their efforts in the ecommerce world and they could do so by implementing the strategy to turn 100-200 stores into inventory units for online shoppers. This would allow them fix their problem of spoiled goods and it would not cost Walmart extra money due to the stores already being built but just turned over to a warehouse. This will structure the problem they are facing while still keeping all of the things people appreciate about Walmart.

Implementation

The strategic plan would move forward with ceasing 100 supercenter in the United States, spacing out the stores in all regions (North, South, West, and East). The next step is to cut back 10 stores in Mexico and Canada. Walmart will then shutdown 2 stores in Honduras, 4 in Chile, 10 in the UK, 15 in China, 2 in Brazil, 1 in Botswana, and 2 in Costa Rica. The stores will be gutted out for open space so inventory can maximize the large square footed areas. There will be little resources needed because of the previous stores but certain materials like forklifts, different workers, and more cooling units will be mandatory. All converted stores are spaced globally and have enough space geographically to still get the same amount of customers in stores while now pleasing online customers with faster average shipping rates as well as welly stocked merchandise. The success will be measured based off of net sales. If net sales drop more than 3% in stores and the increased percentage from online goods is not over 8% then changes will need to be made.

Contingency

When closing down stores, people are going to be nervous about one thing. Which stores are going to be shut down? The workers and consumers will be affected in certain areas for better and for worse. Worker will lose jobs but new jobs will arise when the factory needs shipping workers. These include drivers, operators, and your regular laborers. How to handle this situation is to focus on the pros while still recognizing the cons. Current CEO Doug McMillon, will host a conference administering the reasoning on why Walmart is so excited to implement this new strategy for our new aged online consumers. Many people are going to be upset but the goal is not to upset everyone, it is to have more good than bad overcome. “Upper management would be forced to exhibit a team on identifying every what if scenario as well as finding the trigger points” (Blackford Digman, 2014).

So, what are your thoughts on Walmart? Is it as good as it sounds or am I over selling? The importance of this paper is not to get people to shop at Walmart rather than inform the people on what this corporation does right, wrong, and what they need to do. Whether it be the best in customer service, inventory, or low prices; Walmart is exceeding satisfaction to its shareholders by increasing profits, locations, jobs, and a variety of goods and services. Whatever the customer wants, they will get. The people of Walmart, in and out, have the convenience of a lifetime. Being able to go anywhere around the world or shop from a device at home will create opportunity for customers to change their lifestyle for the better. The vision statement for Walmart wants people to have a better life. Saving money, time, and knowing one is valued are all contributing factors to this process. I am a Walmart consumer and I appreciate everything it has to offer. Environmentally, economically, socially, technologically, and competitively; Walmart will continue to improve their well above average business style and contend their title as one of the best retail industries across the world.