Introduction
Strategy has many different meanings; in business, it refers to the mechanism that an organization uses to create and reach its objectives (Poctor 1). Marketing serves as a concept of business that exists within the mechanism that the organization uses to achieve its objectives. Marketing concerns efforts by an organization to satisfy customer wants and needs as part of the purpose for the organization existence (Poctor 2).
Business environments are competitive and organizations have to ensure that they satisfy customers, at least, as good as their competitors. An organization’s aim is to ensure that its products are positioned in the mind of the customers as different from the others.
In this regard, competition dictates that an organization’s goods and services be more than physical entities, rather, they should claim value on the benefit they offer consumers beyond their physical entity (Poctor 2-3).
Concisely, an organization’s marketing strategy will depend on five key factors. They are the emergence and disappearance of strategic windows, the sway of market drivers, the characteristics of the competitive environment, the position of the market in the industry life cycle and the skill base accessible to the organization (Poctor 4-10).
This essay examines the strategic marketing of Wal-Mart, the world’s largest retailer by annual revenue records (Fernie and Arnold 92).
Wal-Mart’s Strategic Marketing
According to Parry (186), the effectiveness of the Wal-Mart strategy is visible in the case where Gitano Group Inc. lost its high fashion appeal by collaborating with Wal-Mart.
Although the partnership intended to increase the sales of Gitano Jeans brand through the mass-market distribution strategy, the brand reputation backfired because Wal-Mart’s brand associates with economy rather than affluence. While this is a sad incidence, it nevertheless highlights the strength of the Wal-Mart brand and its position in the market as a mass distribution retailer for low prices.
Wal-Mart started in 1962 in Arkansas and has since grown into a worldwide mass-market retailer with over 1650 stores. Over the years, the company has relied on its formula of creating support services that ensure that it reduces its operational costs and passes the savings to consumers.
On the other hand, the company has pursued growth paths that ensure it increases the volume of customer traffic to its stores. Because of the combination of high volume and low prices, Wal-Mart has successfully grown into a brand associated with its nametag of “everyday low prices”.
An examination of the strategic marketing at Wal-Mart reveals that the company embraces a thinking strategy, as described by Fodness (20), to drive its foray into the market. The company uses critical thinking techniques to solve problems that arise with its expansion. Wal-Mart incorporates the critical thinking strategy within its lateral strategic marketing and vertical strategic marketing to ensure that it meets its marketing objectives.
Another aspect of the strategic marketing at Wal-Mart is to employ decision-making techniques that ensure the company’s quality strategy is the best. Wal-Mart also accesses its competencies to ensure that they enable it to remain relatively abreast with any changes in its marketing environment.
Lastly, Wal-Mart has an effective communication infrastructure and principle that allows its management to share the details of the company marketing strategy rather than the outcome to ensure that implementation happens simultaneously across all its operational levels (Fodness 20).
At the beginning, Wal-Mart challenged the existing orthodoxy that the rural neighborhoods of the extensive rural south area of the United States were unprofitable for a mass merchandise retail store.
This is an example of literal thinking explained by Edward de Bono as the departure from old patterns to uncover unique approaches. The choice not to follow the orthodox may be serendipitous; nevertheless, it serves as Wal-Mart’s first successful strategic marketing principle that has influenced any further development and growth of the company.
The analogy of ‘everyday low prices’ informs the modus operandi of Wal-Mart. Growing from a small regional company that offered low prices to its consumers to a global company that still offers low prices to its consumers, Wal-Mart continues to hold to the basics of strategic marketing. It concentrates on creating a perception to the consumer of the value of the company and its brand beyond the retail products it sells.
An analysis of the Wal-Mart’s way of operation reveals that the company understands and concentrates on the decision-making processes that result to its marketing strategy.
The company dedicates substantial resources to ensure that its managers make timely and industry appropriate decisions, which signifies their importance in the company. At Wal-Mart, it is the duty of each marketing manager at every level of the company to move away from the status quo and ask how prices can be lowered, losses reduced and sales volumes increased at the lowest cost (FlaviaÂn and Polo 567).
The company approaches the retail business environment as a laissez faire where customers rule based on the choices they make with their wallets. In this regard, the company does not seek to engage in marketing campaigns to announce its presence or defend its brand.
Moreover, the company does not seek to conform to industry practices that are rather costly and jeopardize its commitment to offer low prices. Instead, as echoed by its founder, Wal-Mart seeks to contribute to the betterment of its employees and customer welfare by offering the purchase savings that they can then use as they please.
The success of the strategic marketing at Wal-Mart derives its credit from the capacity of the company to separate alternative realities of its customers. The company focused on the concept of the consumer as an individual seeking value for their money rather that a demographic group with different tastes and preferences.
Thus, the company’s strategy is to provide all kinds of goods that any retail customer would require at an affordable price to the customer. Incidentally, Wal-Mart constructed a lifestyle niche for itself by driving prices so low that its customers now identify its prices with the level of inflation of their respective countries.
Wal-Mart has done well in identifying new environmental changes in its retail business. For instance, the company readily embraces technology not only as a cost cutting measure but also as a way to ensure that its customer service remains unrivaled. It extensively uses technology to link up its stores, manage its extensive distribution system and eliminate any hiatus in its management decision-making process.
Innovative technology used by Wal-Mart provides marketing intelligence in a real-time basis that allows top management to execute a competitive strategy that ensures the attainment of the organization’s objectives (Trim 244).
Wal-Mart’s size in its market is enormous. The second biggest competitor in each of its markets worldwide barely reaches half its operational size. The company commands over 30 per cent of the American retail market for everyday goods (Bianco and Zellner 46-47). After a well establishment in the USA, Wal-Mart expanded internationally.
The company has operations in diverse countries and continents such as Canada, Mexico, Brazil and India (Halepete, Iyer and Park 702).
The long-term strategic marketing of Wal-Mart is to expand into new markets using multiple formats, open new stores within already existing markets and increase sales in its international stores. This strategy informed the company rapid increase in its international presence especially in Latin America. The company’s expansion into Germany and South Korea were not fruitful.
Failures of Wal-Mart’s Strategic Marketing
Not all strategic marketing attempts by Wal-Mart are successful. When the company was expanding its retail store into Germany, it lowered its prices before it could activate a computerized inventory system that would provide real-time market intelligence. However, the company seems to have learnt of its mistake and now approaches new expansions into foreign countries cautiously.
For instance, in Japan Wal-Mart acquired a major retailer, Seiyu, and started rebranding its stores one at a time and gradually reduced commodity prices. The approach seeks to adapt to the fact that Japanese customers are weary of sudden low prices that they associate with substandard quality goods.
In Japan, Wal-Mart appears to have met its match in term of quality. Japanese retails stem from the post war industrious nature of Japan, to create quality and to be swift at learning from the West (Bianco and Zellner 48-49).
Wal-Mart expansion strategy is by acquisition of existing companies in a new territory. In Germany, the company acquired 21 Wertkauf and 74 Spar Handel stores (Pioch, Gerhard and Fernie 205). In UK the company acquired 219 stores from ASDA but did not change their name (Pioch, Gerhard and Fernie 206).
Contrary to other acquisitions where Wal-Mart proceeded to transform its retail business and assumed top market share position, in Germany the company failed and subsequently exited the market. Theoretically, Wal-Mart’s failure to capture the German market was because of its reliance on a strategic marketing model that failed to accommodate store patronage behavior.
Germany has a consumer culture attaching qualities to retail stores. The only way that Wal-Mart would have successfully penetrated the German retail business is by extending its strategy beyond the everyday low prices slogan. As highlighted in the beginning of this essay, organizations must make the customer perceive their products are more than physical entities for their marketing strategy to work.
What failed Wal-Mart in Germany is an inadequate capacity to blend into the German consumer culture and convince consumers that it can cater for their preferences better than competitors can (Pioch, Gerhard and Fernie 207).
In South Korea, Wal-Mart used a natural approach of providing a store setting based on the warehouse model. A similar approach exists in the United States. However, the approach was unsuccessful in South Korea where the retail culture is different from the United States.
Korean consumers value fashion trends and personalized service over costs, therefore the price assault by Wal-Mart without the support of personalized services did not effectively capture the South Korean market. Moreover, South Koreans have a culture that includes a lot of festivities and social settings. The warehouse model in comparison to this culture was very bare and did not resonate with South Koreans.
Eventually, Wal-Mart stores had to exit the country because they failed to make the customer perceive a value beyond the physical product entity. A final blow to the Wal-Mart operations in South Korea was the patriotic call by Korean retailers to their customers to ‘buy Korean’, which implied that shopping at Wal-Mart was unpatriotic (Halepete et al, 705).
Successes of Wal-Mart Strategy
What differentiates Wal-Mart from its competitors is the fact that the company builds an ecosystem around its operations in any country that it operates. Competitors focus on beating it at its hyperactive center retail stores that have acres of parking space. On the other hand, Wal-Mart continues to focus on its suppliers ensuring that their collaboration has mutual benefits.
The company creates platforms that other companies can rely on in managing their inventories and strategies. One instance of this arrangement is where Proctor & Gamble integrates its ERP system with that of Wal-Mart to ensure that the success of Wal-Mart largely extends as its own success.
This strategy enables Wal-Mart to enjoy a competitive advantage of having low prices in the market because it can directly negotiate with its worldwide suppliers. The direct arrangement with suppliers also allows the company to save substantial costs in intermediary charges.
Lastly, the direct relation with suppliers coupled with Wal-Mart’s just-in-time inventory technology allows the company to eliminate waste, by always having the right amount of inventory in its warehouses as required by customers.
A mutual beneficial outcome for Wal-Mart’s ecosystem is that millions of people and hundreds of firms are able to improve their competitive advantage without undertaking expensive investments. In return, they dedicate their loyalty to manage better the ecosystem presented and this works in favor of Wal-Mart, presenting it with more financial advantage to cut costs and drive prices lower.
To extend its generosity to its suppliers, Wal-Mart does not charge for the service of preferential slotting of suppliers products in its shelf contrary to the industry wide standard. Moreover, Wal-Mart ensures that suppliers have access to its sales data in a much intricate way that other competing retail chain stores cannot match (Bianco 85).
The extended ecosystem and the huge market share of the retail business that Wal-Mart controls give the company powers to dictate to some suppliers the terms of engagement. Sometimes the company asks suppliers to come up with a product that meet its specifications, leaving them with the choice of walking away and forgoing the lucrative market penetration or play by Wal-Mart’s rules.
Wal-Mart understands that its strategic marketing success hinges on its ability to sustain a healthy platform for its supplier’s relations. Therefore, the company instinctively demands quality products to enabling suppliers’ brands to maintain or grow their strength in the market and safeguarding its brand (Fodness 24-26).
Wal-Mart seems to be succeeding at its strategic thinking approach by focusing on its role in ensuring that customers get products from suppliers at fair prices (Fodness 22). The success of Wal-Mart strategic marketing has been in its home country and in cultures that are similar to the American culture. These include North American countries like Mexico and Canada.
For foreign cultures, learning from failure in Germany and South Korea, the company relies heavily on partnerships in new market to enable it to penetrate local cultural preferences. Thus, Wal-Mart’s new strategic marketing has to go beyond price and supplier partnerships and include other key factors such as capturing consumer perceptions about the products it offers and demystifying its brand abroad (Halepete et al, 709).
Emerging concepts in Wal-Mart’s Strategic Marketing
Other than low prices and innovativeness, Wal-Mart also thrives under the concept of a store within a store that allows it to reconstruct operations to fit local markets (Arnold 48). Besides that, the company is strongly customer focused.
Arnold (49) elucidates that Wal-Mart strategy to dominate its market relies on its claim of both the food and non-food retail business. The company stocks 40 percent hard lines and 20 percent apparels. It allocates the remaining space on both fresh and dried foods.
Inside the company stores, the company lures customers with low priced goods that are placed strategically deep inside so that customers pass through high valued goods in an attempt to induce them to buy.
The company faces a lot of negative press about its care for employees and a collapse of local business, however it weathers these storms by sticking to a value preposition that leaves consumers satisfied on the money they spend in its stores (Arnold 51).
Wal-Mart has finally started to feel the effects of bad press reports on its markets. It sales volumes have shown signs of stagnations signaling a normalization of the company’s rapid growth rate in previous years. In addition, the company’s market strategy has failed to beat that of a smaller but potent rival, Costco. In the warehousing retail business, Wal-Mart faces Costco in the United States market.
Costco is more efficient that Wal-Mart and on a comparable scale, beats Wal-Mart on several benchmarks. Briefly, Costo has half the staff turnover of Wal-Mart and manages to double the sales-per-foot figure of Wal-Mart in many of its stores (Serpkenci and Tigert 97).
Raising from setbacks and gearing for more assaults in its traditional and new markets, Wal-Mart is embracing several organizational restructurings. The company has started to experiment with the use of online shopping technologies to extend its services beyond traditional stores. It has set up a subsidiary to handle the internet purchases and delivery division on a pilot basis.
On the traditional front, the company continues to add registers and new counters in its stores to endure that customer handling during checkout are faster contributing to its pledge of customer service.
The main challenge now facing the company is the task to ensure that inventory in the online stores syncs to the current inventory in physicals stores. In addition, the company has to ensure that its shipment system for online goods is robust enough to build customer trust.
The company is getting a hold of its inventory by investing on technology to minimize customer and employee thefts that are hard to notice in its hyper centers. The use of Radio Frequency Identification (RFID) tags also enables the company to have a real-time tracking of goods in its stores to ensure that supplies are optimal according to the popularity of the good (Malhotra 8).
To improve its bad image with press and to woo customers who are sensitive on environmental matters, Wal-Mart adopts a principle of abolishing wastes by reducing, recycling and reusing supplies that pass through its stores. The company has embraced green technologies in its new stores to appeal to the green conscious consumer. Its embrace of reusable bags hopes to cut plastic use by a third in 2013 (Anon para.1-4).
Recommendations
The success of the strategic marketing by Wal-Mart largely depends on the company having a leading market share in the country of operation for it to benefit substantially from low unmatched prices.
Although the company has a relentless pursuit for sales growth and leverages that with an IT supply chain and partnerships that work in its favor, without being the market leader in UK and Germany, the company brand suffers (Bianco 85). Another area in which Wal-Mart’s strategic marketing seems to fail is in its aggressiveness to drive sales by opening new stores.
There exists a huge disparity in the revenues obtained from its best-managed stores and the worst performing stores. According to Bianco et al, (7), the company should go slowly on its expansion drive. Currently the company opens a new store almost too soon.
It would be more appropriate for the company to pursue a more skeptical expansion drive that only targets high volume sale location where it has a clear change of being the major market player.
The strategy to hold the perception of the consumer on the value of the retail change needs redefining. The laissez faire approach to business is facing challenges because the industry has developed and competitors are shaping up to the Wal-Mart strategy. Therefore, it is no longer sustainable.
Technology alone will not solve Wal-Mart’s predicaments. At the advanced stage of the retail business, quality of service and identification with customer preferences is becoming more important than prices. The enormous size of Wal-Mart worldwide makes it difficult to apply a single strategy to all its business units.
Furthermore, the company increasingly faces cultural diversity problems better handled with a knowledgeable local management than an offshore management. Thus, Wal-Mart needs to increase the autonomy of its subsidiary operations in other countries.
The everyday low prices concept of Wal-Mart is no longer its competitive strategy. Moreover, measurement of the strategy has become ambiguous. The company uses the concept as a disguise to let in customers and influence them to buy on impulse some of its pricey items.
However, the company lacks a measurement of the actual conversion rate of such customers into buying the pricey items. Therefore, the company should adopt a more specific approach of targeting market segments more aggressively with tangible offers analyzable to indicate the performance of the strategy.
Wal-Mart succeeded before in undercutting the prices of its competitors and moving to occupy the number one market position, which also allows it to bully suppliers into agreeing to its terms. However, with the growth of the company relative to the industry, there is no longer a room for a similar kind of market conquering strategy.
Instead the company has to be humbled enough to accept not being the market share leader in the country it operates in. On the contrary, to market share leadership, the company should focus on increasing the sales per square foot of its struggling stores outside North America.
This subtle strategy saves its competitor Costco, huge investment finances in unnecessary expansions that are liabilities to the company. Moreover, the focus on increasing sales per square foot provides a faster and easily measurable benchmark to rate the performance of the company (Serpkenci and Tigert 97).
Conclusion
Wal-Mart strategic marketing and its organizational objectives drives the company’s expansion into new markets. The company overall strategy is to offer everyday low prices through an extensive partnership with suppliers that allow it to dictate terms of engagement. This strategy follows Porter’s Five Forces model strategy of positioning the firm where it can gain competitive advantage by minimizing the power of suppliers.
However, Wal-Mart strategy fails where the company has no majority market share as the case in Germany and South Korea. In addition, the company suffers from criticism of its business practices and risks losing its existing customers. To remedy this, the company is embracing new technology to increase its efficiencies and to redeem its brand image.
Furthermore, it now explores partnerships in its foreign market entry to prevent loyal customer walkouts. The growth momentum relative to company revenue has fizzled out for Wal-Mart. The company needs to focus more on increasing the existing customer spending rather than seek to expand its market share.
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