A Review Of Marketing Strategy Of Wal Mart Marketing Essay

Marketing creates strong value addition in the organizational operations and revenues of companies increase remarkably by adopting latest marketing tools and trends. Demand of organizational goods and services is created by using marketing communication means. Marketing is important department of a company just like research and development, accounting, finance, and manufacturing. Chief executive officers have recognized the needs and importance of marketing activities so they appoint dedicated brand managers to promote individual brands. Particularly, CEOs appoint chief marketing officers having equal designation of chief operating officers and chief financial officers. Senior management of companies dedicate substantial resources to enhance value chain in organizational resource management, robust brand management, optimum utilization of resources and creating strong base of loyal customers (Kotler & Keller, 2009). Marketing management needs continuous change management and lack of change is recognised as demise of organization.

Well reputed brands charge premium price to customers and retain customer loyalty whereas brand marketing is important topic in marketing discipline. Marketing management is not only important for external purpose but it also yields internal benefits to organization. It secures customer attraction and trust and ensuring employee motivation and enthusiasm as well. Employees feel the proud to work for strong brands. Global economy has transformed from product to service orientation and customers want high quality services (Kotler & Armstrong, 2010). Brand and marketing management serves the customer what it wants. Brand makes value addition in the life of customer experiences. Organizations are adopting latest e-marketing tools over the internet while switching from traditional marketing means (Rana, 2009). Multinational organizations are approaching global customers by electronic marketing at cheaper costs.

Wal-Mart is the biggest retail store chain in the world. It was founded by Walton in the late 1940s. Wal-Mart offers all sorts of products which are divided into fourteen major categories of; apparel and jewellery, baby care, electronics, home decor, furniture, groceries, health and beauty, music and books, movie, photo, outdoor living, medicines, sports and fitness, toys and video games (Walmart, 2010).

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Wal-Mart focuses on various procedures to maintain its low cost strategy that is based on various sources. Wal-Mart does not base its supplies to an individual larger supplier but it adopts larger supplier base. By decreasing share of a single supplier in its inventory it manages to strengthen the bargaining power. It has a continuous focus on reducing costs through improvement in inventory control system and logistics system (McPhail, 2006). Likewise, Wal-Mart is determined to develop efficiency and output of its employees. Wal-Mart has positioned its products in market by adopting cost leadership strategy. Wal-Mart has ensured its success due to its lower prices. Thus, low cost leadership strategy is brand recognition of Wal-Mart and consequently serves as effective tool of organization. Wal-Mart adopts various TV ads at its discount or stores to promote and sustain its brand. Wal-Mart organization is selected being the leader in supermarket chain in order to evaluate its marketing effectiveness on the achievement of organizational objectives. Contrary to the Wal-Mart, Tesco the competitor of Wal-Mart is chosen for the sake of comparative purpose.

Research Objectives

This paper aims at discussing the different characteristics, advantages and disadvantages of its marketing strategies of Wal-Mart. We have selected Wal-Mart in order to focus on one organization. The global cultural differences that Wal-Mart was unable to manage are further discussed in the report as cultural alignment is necessary with the marketing strategy. It is emphasized that marketing management is beneficial; it generates fresh economic opportunities and diversity in culture. Marketing strategies have increased the competition between the organizations; in order to sustain in competition they have to build strong marketing tactics. Organizations which are going global have to keep in view many factors which include the cultural, demographical, technological changes etc. of the country they intend to enter.

The objectives of the research report are listed as follows:

To make detailed analysis of the process of marketing at Wal-Mart.

To analyse cultural and social differences in marketing management.

To consider the role of marketing in the company’s success.

To assess role of corporate social responsibility in strategic marketing and its impact on business.

Research Questions and Research Approach

Research questions are developed in order to lead the thesis in a goal directed way, which is listed below:

How has modern marketing changed the ways of running business operations?

What international marketing strategies have been applied by Wal-Mart?

What marketing trends and technologies are undergoing at Wal-Mart?

How have the cultural differences affected the marketing at Wal-Mart?

Whether marketing is wasteful activity at Wal-Mart?

In order to answer the above questions, exploratory and descriptive research approaches are important to analyse the marketing strategies of Wal-Mart and its business impact. The significance of descriptive approach is that it describes or visualizes the overall scenario of phenomenon (Johnson & Christensen, 2011). It depicts nature of relationship of variables occurring in the situation. Selection of sample from population, describing the features of sample, and formulating conclusions for population based on sample analysis. Descriptive approach is helpful in learning the behaviour of Wal-Mart customers, demographics, attitudes, and opinion. It makes break up of job into identifiable set of units. Exploratory research on the contrary explores new avenues of research area. Exploratory research is more dynamic in nature than descriptive one (Neelankavil, 2007). Qualitative research tools are effective aids of exploratory research design in identifying new thoughts and ideas. Exploratory research is primary data collection measure but cost effective in nature. Researcher is able to formulate problem statement by exploratory research approach.

Part B-Business Techniques used for data collection

Research Strategy

Primary data collection includes gathering information from source of information generation. Information gathered in this way is known as first-hand information. Primary information sources include interviews, pilot studies, questionnaires, and observation. Researcher adopts the primary data collection methodology to seek biased free information whereas it addresses problem statement in goal directed way. Usefulness of primary data collection tools is that it becomes flexible and tailor-made in nature to alter the research directions in intended ways. Primary data is collected in raw forms where quantitative and qualitative tools are applied to analyse and conclude it. Despite the usefulness of primary data, primary will be avoided in research study due to its limitations like non-availability of adequate resources required to gather substantial amount of data, limited resource range of primary data collection. Primary data is also optional according to OBU guidelines so only secondary data collection tools will be used.

Secondary data collection contains information sources that are already generated. It is second hand information. Research uses secondary data collection methodology due to its cost effectiveness and information availability. It serves as evidence for answering the research questions. Secondary data collection methodology would allow comparative analysis of Wal-Mart and Tesco as convenient. Corporate websites and annual reports of Tesco and Wal-Mart would be studied whereas Tesco plc. would serve as benchmarking company to critique on Wal-Mart marketing strategies. Effective evaluation of Wal-Mart’s marketing strategies would be conducted by benchmarking methodology.

Likewise, I chose retail industry to assess and evaluate marketing strategies of retailer giants so inductive approach is preferable to make generalizations. Critical analysis of Wal-Mart would be made including its individual cases and conclusions would be applied on overall retailing and super market industry (Jeffrey A. Gliner, 2000).

Case Study Approach

Case study method is useful in analysing various market competitive strategies of Wal-Mart and their impact on business. Companies create demand of their goods and services by virtue of marketing. Marketing is considered as wasteful activity that destroys organizational and individual resources. Likewise, the essence of marketing is to influence on consumers’ decision making and let them to pay for goods and services that are surplus to their needs. By adopting case study approach, researcher would analyse how Wal-Mart is creating value addition for customers or destroying their resources. Marketing is essential part of organizations’ strategic management. Here importance of marketing would be analysed along with adoption of latest trends and technologies at Wal-Mart.

Analysis of success factors of retailer giants based on traditional retailing channels and ecommerce models is also area of my study. Case study approach would consider different dimensions of marketing management like role of social and cultural values in marketing, role of corporate social responsibility as brand building or vice versa. Price competitive strategies, differentiation strategies, social media marketing, mobile commerce marketing, and traditional tools of marketing are studied.

I would test the following problem statement with the help of case study approach:

The success of Wal-Mart in the United States is not an indicator that the company will be able to remain number one in the global market because the trends of market differ from each culture and country. Fresh food items and a large variety of products are made available at large hypermarkets whereas a smaller variety of products is supplied by any store in the neighbourhood. The expansion of Wal-Mart in the international markets is enabled by this standardization of different products. Without a strong retail system, the expansion of Wal-Mart would not have been possible in the international markets. Low price strategy is one of the key factors for Wal-Mart’s success along with the variety of goods it produces and the service it provides to its customers.

The problem statement describes different challenges during international expansion like social and cultural factors; standardization of goods and services in addition to low prices strategy. Wal-Mart case study would describe how social and cultural challenges are hindering its international expansion.

Document Study

Document study is a good source of information but not widely accepted methodology because it based on the historical interpretation of information. In Document study the non-survey method of data collection used in which information is derived from analysis of documents, phenomenon and material collection. Primary data is known as the authenticated source of information because observer makes opinion on its studies of particular events, people and situation. Reading and analysis of primary data provides a base for secondary data analysis. The document study source is easy to access and cost saving method of data collection. Sometime document study reveals some aspects which are not easily available (Leedy & Ormrod, 2012).

It helps to determine the sample size and is easily available at minimum or no cost from the company’s centralized database department. The documents are full of biased information in the favour of the writer which takes away from the purpose of research that is negative point of document study. The comparability of data over time also creates problems because it may be data outdated to use in current situations. Document study is not widely used methodology because documents are mostly prepared for personal and business purposes which might not helpful in the research papers (Leedy & Ormrod, 2012).

Application of Models

Porter Five Forces

Porter five forces framework determines industry attractiveness whereas it would evaluate the market competitiveness of Wal-Mart. It accounts for five forces namely power of suppliers, power of buyers, threat of substitute products, threat of new entrants, and rivalry among competitors (Davies & Ellis, 2000). Porter five forces may suggest the Wal-Mart to adopt product differentiation strategy in addition to the price leadership to enhance its competitiveness. If industry forces are weak then Wal-Mart may incur expenditure on advertisement and research and development to boost up its market share. On the contrary, if industry forces are stronger then it may be feasible for Wal-Mart to quit the industry. It means that Wal-Mart can put barriers for new entrants by increasing its marketing campaign to enhance its customer loyalty.

Five forces framework of Porter is criticized on grounds that it ignores the core competencies of organization while analysing the industry forces. Assumptions of model are not valid that supports the classic model. Five forces framework can analyse simple industry structure but not supermarket chain affected by complex economic forces. Retail industry is affected by strong interrelationships with ecommerce retailing, banking industry, telecom sector, and automotive industry, which could not analysed simultaneously (Grundy, 2006). It means that model cannot deal with portfolio of organizations but can focus on just individual strategies of business. Figure-1D:BSC ThesesHamid RazasupportiveUntitled.jpg

(David, 2011)

Marketing Mix

Marketing mix model formulates marketing program to communicate, create, and make value addition for customers. Organizations seek their marketing objectives by applying marketing mix model. Marketing mix program is classified into four categories as price, place, product, and promotion named as 4Ps (Kotler & Keller, 2009). Wal-Mart would establish effective communication strategy for its targeted customers by events and experiences, direct marketing, personal selling, and sales promotion. Companies influence on appropriate mixture of goods and services and trade channels to prepare marketing mix. Usually, low income group is the target group of Wal-Mart so it would prepare appropriate communication mix to attract low income group. For instance, Wal-Mart’s slogan of everyday low prices aims to target low income group by offering them goods and services at discounted prices. However, marketing mix is not free from mistakes like it focuses on short term organizational campaign despite the equity building approach of Wal-Mart on long term basis.

Research Ethics

During the research process, ethical issue of plagiarism arouse and there was exposure of disciplinary action on the part of OBU. I consulted with project mentor to resolve this ethical issue; he recommended me particular guidelines to make the research work as original. I made practise of producing my own contents so issue of plagiarism was resolved. Moreover, there was issue of piracy or copy right that involves publishing someone else work with its own name. I made citation of source from which information was collected to acknowledge the author. I have used Harvard style of referencing to comply with University guidelines.

Limitations of Research

There was resource limitation in data collection, processing, interpretation and analysis of data (Thyer, 2010).

Information could not be made free from bias of researcher or author (Creswell, 2009).

Companies do not provide all required information due to confidential nature of information (Lancaster, 2005).

Goals of author and researcher are difficult to match that may limit the research process (Jones & Bartlett Learning, 2008).

Qualitative research analysis requires more usage of information technology (Myers, 1997).

Part C-Analysis, Conclusion, and Recommendations

Porters Five Forces Analysis

Porter’s five forces model to analyse the competitiveness and attractiveness of the industry in which Wal-Mart operates are as follows:

Threat of New Entrants

There are many big players in the market that are using aggressive pricing strategy to dominate. They create difficulties for new small entrants because huge investment is required that may not be afforded and make survival difficult in the competition with existing retail giants (Plunkett, 2010).

The customer loyalty to the existing brands is another factor which creates hurdles for new entrants. The customers always prefer the existing brands over new brands (Hubbard & Brien, 2006).

There is opportunity for new entrants in those areas where these large retailers do not have presence. In these areas they make their presence and then move towards highly competitive areas. For instance, big giants are not willing to open their discount or low price stores in low population areas. The small new entrants have an opportunity to take a start from low price or discount stores in that area (Bergdahl, 2004).

The start-up cost for low and medium sized retail stores is not too high in the market. There is less entry and exit barriers in this part of the market. The threat of new entrants is high in the lower level of the market (Entrepreneur Media, 2007).

Threat of Substitutes

The online presence creates a threat of substitutes for these big giants of retail industry because the online or e-commerce change the habits of people like Fresh Direct etc (Wikinvest , 2012). They provide a complete virtual experience of the products where the people order and get home delivery at low charges that is felt justified against the delivery of fresh grocery items. Especially mothers are preferred the online shopping of grocery items which delivered at home instead of going in the retail store and buy grocery items for the whole week. This is not the biggest threat because they are not big like Wal-Mart and other retailers (Hitt, et al., 2009). Some nutritional food providers and small shops at the corners are the substitute for the retail stores but overall the threat of substitute is low.

Rivalry among Competitors

The competitive rivalry in the retail industry is very high due to the existence of large players. Wal-Mart is using the low price strategy in the retail industry while the other retailers are trying to justify their higher prices with the provision of excellent service and quality products. The competition among big giants is becoming more intensified due to the aggressive pricing strategies in place (Hartley, 2008). The competitors of Wal-Mart focus on the providing limited range of products made with premium quality. However, the strong position of Wal-Mart as general merchandise sellers enables to generate more sales which offset the some quality issues.

Bargaining Power of Suppliers

Bargaining power of store suppliers is low in the retail industry due to integration requirements. All the big giants of the retail industry are using the vertical and backward integration strategies (Oyenuga & Bunn, 2007).

The suppliers deal with big giants like Wal-Mart who has low profit margins to almost zero level due to its high negotiation powers (Geylani, et al., 2007).

Normally the suppliers spend time in negotiation with low level retailers (Hill & Shane, 2008).

The big giants of the retail industry are not focusing on a single supplier. They adopt the strategy of multiple suppliers to reduce the dependence on a single supplier that lower down the bargaining power of suppliers. For instance, Wal-Mart, s largest supplier is the P&G but its suppliers only count 15% towards the total purchases (Hill & Jones, 2010).

Bargaining Power of Buyers

The bargaining power of customers in the retail industry is low because they already know about the retail stores which provide low cost products. The brand image is also another factor which forces customers to pay the price without any bargaining (Shuman, 2007).

Wal-Mart is using the EDLP strategy which enables it to offer customers the lowest possible prices and do not rely on the discount policy while the other discount stores focus on the discount rates and prices of the products (Deale, 2012).

However, these retail stores are still under pressure to further lower down the prices of their products and offer more discounts because the desire of customers to get products cheaply never ends (Spotts, 2005).

Positioning Strategy by Marketing Mix

Since its incorporation the Wal-Mart has adopted a strong market positioning strategy. The major features of its marketing mix are here under.

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Product

The product categories of Wal-Mart consist of more than 80,000 brands and goods (Chandran, 2003). The company has fourteen major categories of products including electronics, furniture, health and beauty, baby items, apparel and jewellery, outdoor living, photo, toys and video games, pharmacy, for the home, grocery items, sports and fitness, movie, music and books (Walmart, 2010). Now company enhanced its product portfolio and increased the number of major categories scorecard to 100 (Baier, 2012). The company has a policy to prefer the local suppliers over foreign suppliers due to this reason all products are mostly purchased from the local suppliers and manufacturers.

The company also has strong relationship with foreign suppliers. The products are delivered to the stores in reusable packing and pallets. The company has computerized inventory system that labels the products with prices and then they put it on the shelves. The company has integrated its inventory system with their associates and suppliers who get timely information about the inventory and its replenishment. The inventory is replenished twice a week and normally 48 hours are needed for replacement and delivery at stores (Chandran, 2003). The company also runs a membership program named “Sam’s Club”. The membership holders are able to spend more hours in shopping and get more discounts etc.

On the other side, Tesco is gaining its competitive edge in online retailing of cars at tescocars.com. Tesco is introducing online retailing, telecom, and banking services along with traditional retailing business. Club card membership promotional campaign is most popular campaign of Tesco. Tesco is acquiring customer growth in low paced European economy. Tesco is electronic leader in UK where it was first company to launch Amazon Kindle and Apple iPad.

Price

The company business model is based on the selling products “always low prices”. The company has an aggressive pricing strategy which makes it price leader in the retail industry and always tries to pass on the benefits to its customers by further lowering down prices and offer discounts on the special occasions like Christmas and football matches in USA (Parnell & Lester, 2008). The company’s bargaining style with suppliers uses its own low cost transportation system and gets the products at the lowest possible prices from suppliers and no one can get on that prices are the main drivers behind the price leadership strategy of the company (Chandran, 2003). The company has its own credit cards which allow customers to avail the credit facility and related offers. If the customers are the member of Sam’s club then they enjoy a special discount offers on the company stores all over the world (Walmart, 2010). Wal-Mart primarily relies on low price strategy but Tesco on the contrary lays down its business model low cost plus differentiation. Due to lowering down product pricing of 3000 product lines in recession by company, customers are switching to company while reaping membership benefits (Market Line, 2011).

Place

The company has more than 8400 retail stores which are located in more than 15 countries including USA (Walmart, 2010). The customers easily reach stores of company because all stores are located at the prime locations of cities covering over thousands of square feet areas. The stores structure included shelves, store docks and automotive transporting systems and all the products are delivered to the stores from company owned warehouses. More than 85% supply of inventory comes from company owned warehouses (Chandran, 2003). Currently the company has 40 distribution centres around the USA. The company has its own dedicated truck fleets which made the transportation easy and faster between the centres and stores. Wal-Mart is relying on traditional business models but Tesco is leading in ecommerce retailing (Market Line, 2011).

Promotion

Company mostly used digital, print and television channels for advertisement. The company spent over $2.5 billion (Walmart, 2011), $2.4 billion (Walmart, 2010) and $2.1 billion (Walmart, 2009) for advertisements in respectively in 2011, 2010 and 2009. These expenses are lower in comparison with competitors in proportion to revenues. The company website www.walmart.com also helps in advertising company products. Wal-Mart draws customer attention by traditional marketing means like weekly newspaper ads, monthly circulars, television and radio advertising. TV ads position the Wal-Mart in customer’s eyes as quality merchandise with everyday low prices. Radio ads are used to deliver particular product information having high customer demand. Monthly circulars and newspaper advertisement attract customers towards discounted items (David, 2011). Company controls marketing budget by avoiding expenditures on marketing consultants and advertising agencies. Wal-Mart gives autonomy to its managers and sales staff to use their own intuition in innovative marketing practices at its retail chain. Company also avoids pomp and show at its corporate headquarters to save costs.

Figure-2 (Walmart, 2011), (Walmart, 2010)

More than fifty thousand customers visit the company website that is inclining day by day. More than 2.2 million associates of the company are currently serving the more than 200 million customers and members each week (Walmart, 2012). The comparison of Wal-Mart’s revenues of 2009, 2010, and 2011 with advertisement expenses of three years is made in Appendix 1 to evaluate marketing effectiveness of Wal-Mart.

Green logistics

Company moves their focus towards the green logistic system that is designed to reduce waste and pollution from the environment and helps to improve the image of Wal-Mart. The company has its operations in China where legislation requires adopting the environmentally friendly means of transportation and logistics. Green storage, green packing, green technologies, green transportation and reverse logistics are the key components of this green logistic system. This approach helps to reduce the pollution and efficient use of energy resources in the logistic systems (Chang & Qin, 2008). Tesco is also competing in green logistics and green packaging industry (Market Line, 2011).

Price Competitive Strategies

Wal-Mart’s low price strategy includes providing easy access of expensive products that were difficult to buy for ordinary man. Price leadership of Wal-Mart is exemplary that achieves cost minimization by aggressive marketing tactics. Wal-Mart lets down its competitors by cost leadership where they cannot compete on prices (Stiving, 2011). Low priced grocery goods maintain steady stream of customers while considering Wal-Mart as inexpensive brand. Wal-Mart achieves low cost advantage from suppliers based on bulk discounts. It formulates timing and delivery system for suppliers suitable to it. The essence of cost leadership strategy is running business based on no-frill environment of store. The brand recognition of Wal-Mart is just like one stop shop for larger merchandise spectrum.

Based on cost leadership strategy, Asda the UK subsidiary of Wal-Mart offers 10% guarantee program to pay differential amount to customers if price difference of Asda and competitors is less than 10% (Thomson Reuters Inc, 2011). Low price positioning of Wal-Mart has allowed attracting large customers even in economic downturn. Successful low cost leadership strategy has enabled international rapid expansion in fast growing economies like South Africa and Latin America. Due to saturation of US market, Wal-Mart marketing strategy is focusing on international expansion. Target market of Wal-Mart is low income group where company changes its product mix and market positioning with the change in consumer trends. Wal-Mart is able to replicate its strategic practices in its international operations to sustain its competitiveness in global operations.

In order to leverage cost leadership strategy in effective manner, Wal-Mart is initiating ecommerce operations. It is transforming its structure from bricks and mortar stores to online retailing that efficient and cost effective. Wal-Mart acquired Kosmix the internet based retailer to establish online operations (Wal-Mart Inc, 2011). Wal-Mart is acquiring international operations based on online retailing. Online presence does not require large floor space but is crucial for expansion.

Contrary to the Wal-Mart, Tesco plc believes in the product differentiation as marketing strategy than price leadership. It develops broad range of product categories to give customer more options to choose among them. Tesco is specialized in non-food categories of grocery. It has established club card membership promotional program as part of customer loyalty program in more than 11 countries (Market Line, 2011). Widespread presence of Tesco enables it to adopt global best retailing practices in achieving efficiencies and sales growth. Tesco believes in sustainable business modelling to create value chain in global retailing. Tesco demonstrates to have more than 15 million club card members that are permanent customers of company. Club card membership promotional strategy is most successful as customer loyalty schemes (Claire, 2012).

Relationship Marketing

The company marketing strategy is based on the Walton’s vision. The company is still working on the Walton’s strategy in which customers have preference over other stakeholders but also focus on building the long-term relationship with suppliers and partnerships. The bargaining strategy with suppliers does not focus on getting the lowest prices. It builds up relationship with suppliers to create an opportunity for the company to get the lowest prices and pass on this benefit to its customers through shopping at Wal-Mart. The company’s main focus is to pass on its entire margins to its customers. The company also focused on building long term relationship with its suppliers by understanding their cost structure (johndoe, 2006).

The company currently has more than 2.2 million associates because company named its employees as associates (Walmart, 2012). The company has a policy to recruit talented, skilled and young employees for the serving at stores and other related areas of services. The company also provides opportunities to its employees for growth which increase the length of their careers at the company. The company provides health care and other facilities to its employees that help to maintain a pleasurable relationship (Ahmad, 2009). But some