Wal-Mart

Strategic Audit

JoLena M. Perkin

MBA505

February 28, 2010

Wal-Mart
Strategic Audit
Executive Summary
Sam Walton actually started his career in 1940, as a management trainee with JC Penny.
Sam impressed with JC Penny’s ideology of doing business modeled their style with the
Wal-Mart chain. His marketing strategy was focused on prices that he was convinced
would be a success; “discounting.” Management conceived the firm as a “discount
department store chain offering a wide variety of general merchandise to the customer.”
By the end of 1979, there were 276 Wal-Mart stores located in 11 states. Wal-Mart
implemented an aggressive expansion strategy; they position the Wal-Mart stores in
communities of 5,000 to 25,000 in population in neighboring geographic areas. Upon the
discount operation having a competitive advantage, in a particular market area, amongst
competitors, Wal-Mart would move to a neighboring area. At the beginning of 1991, the
firm had 1,573 stores in 35 states, with expansion plans on the table. Customers perceive
Wal-Mart; as the slogan states: “Wal-Mart always low prices.
Mission Statement
The mission statement of an organization summarizes the relationship, offerings,
locations, and techniques of competence maintenance, economic and ethical policies, and
their distinctive individuality. The objective of the mission statement is to guide the
employees toward the goals and serves as concise information about the organization to
those in the external environment. Wal-Mart mission statement states: “working families
for Wal-Mart is committed to fostering open and honest dialogue with elect officials,
opinion makers and community leaders that conveys the positive contributions of Wal-
Mart to working families. “We believe that Wal-Mart provides value to its customers, to
its associates and to the communities it serves. An organization mission is the purpose or
reason for the organization’s existence. A well-conceived mission statement defines the
fundamental, unique purpose that sets a company apart from other firms. Wal-Mart’s
values and philosophy about how it does business and treats their employees leads in to
the next topics, situation analysis, strategic alternatives and recommended strategy,
implementation, and evaluation and control.

1
STRATEGIC MANAGERS
A. Board of directors
1. Consist of sixteen members
2. Four of which are Internal members
3. Operates Super centers such as Sam’s Club
B. Top management
1. Internationally known through the World
2. Considered Largest retailer in the World
3. Discount concept very unique
4. Operates as a key position in the value chain
5. Operates as an Aggregator, distributor, and retailer

Wal-Mart growth will come from multiple sources: more stores, more markets, and
more exploration with formats and mix. The firm’s goal is to grow square footage by at
least 8% yearly. The primary vehicle will be the Supercenter.

Wal-Mart has plans for its international division to account for one third of its sales
and profits in the coming years. Given that its sales account for only a small slice f the
vast USD 8.5 trillion global retail marketplaces, Wal-Mart has plenty of places around
the world to conquer.

Wal-Mart will have a broader portfolio of formats to satisfy more consumer needs
and shopping occasions. We believe several venues-convenience stores, dollar stores etc-
hold growth potential. None of these formats are foreign to Wal-Mart. It has been
operating these businesses within its existing concepts for years.

II. B. 2. Matrices to incorporate into your strategic marking plan

1: Macro-economic Factors: The Economy*

|Economic Factors |Statistics |Comments

|
| |(Actual measurements) |
|
|Current size of market in users, | |Wal-Mart is concentrating on penetrating
the largest markets either in size of |
|total units, both | |economy or population. It will take an
opportunistic approach to smaller markets, |
| | |snatching up local retailers or real estate when a
good deal arises. |
|Future size of market – 2, 5, 10 | |In the next 5 to 10 years, Wal-Mart will
run out of conventional location |
|years forward | |opportunities, i.e., suburban shopping centers
and small towns. Wal-Mart is |
| | |cautiously experimenting with a handful of urban
sites and mall locations. It will |

2
| | |have to develop more flexible site strategies and
smaller formats to fill in |
| | |geographic gaps.
|
|Buying ability, income of users, | |Whether it is speeding up inventory
turnover, lowering out-of-stocks, or reducing |
|sustainability of income | |costs associated with product handling
(RFID),Wal-Mart continuously looks for ways |
| | |to take inventory management to the next level.
Improving this capability will |
| | |enable it to continuously lower buying prices and
cost and remain profitable in |
| | |future.
|
|Correlation of purchase behavior | |Location and incentives can affect the
purchase behavior of the economy. |
|to economy | |
|

Though it was operating worldwide through its 6200 stores, claiming to be one of the
biggest global companies, its sales figures were declining alarmingly due to various
factors. Wal-Mart had faced criticism for focusing too much on driving prices down at
the expense of its suppliers and its employees.
The operations of Wal-Mart International comprise 2,700 stores in 14 countries
outside the United States. According to Wal-Mart's 2006 Annual Report, International
accounted for approximately 20.1% of fiscal 2006 sales. Wholly-owned operations are
located in Argentina, Brazil, Canada, South Korea, Puerto Rico and the United Kingdom.
Wal-Mart has operated in Canada since their acquisition of the Wool co division of
Woolworth Canada, Inc. Today, they operated 278 locations employing 70,000
Canadians, with a local home office in Mississauga, Ontario.
In addition to its wholly-owned international operations, Wal-Mart has joint ventures
in China and several majority owned subsidiaries. Wal-Mart's majority owned subsidiary
in Mexico is Walmex. In Japan, Wal-Mart owns 55.3% of The Seiyu Co., Ltd.
Additionally, Wal-Mart owns 51% of the Central American Retail Holding Company
(CARHCO) formed from more than 360 supermarkets and other store formats, operating
in 5 Central American Countries: Guatemala, El Salvador, Honduras, Nicaragua and
Costa Rica.
The retailer was drawing staunch criticism from labor unions and anti-sprawl
activists. Its critics were quick to dismiss any move by Wal-Mart to promote a more
favorable image of itself. However, the retailer's environmental initiatives had drawn
support. Some marketing experts supported the retailer's re-branding drive saying that the
simple communication would appeal to the American consumers.
At a time when the US economy was in the news for constant foreclosures and
collapses of mortgage business which prompted the stock market to go haywire, the retail
giant made a smart move in positioning itself as a retailer that helped people to save
money and improve their financial health. However, others felt that the new advertising

3
campaign left a lot to be desired. They felt that the new marketing communication would
only reinforce the perception that Wal-Mart was a place where poor people shopped.
The campaign was squarely hinged on a price claim and did nothing to build the
image of the brand or promote brand loyalty, they said. The debate notwithstanding,
industry watchers were keeping a close watch on Wal-Mart's re-branding exercise and its
impact, as the retail giant's customers were considered to be the true depiction of the
American buying behavior.
Wal-Mart considers all retailers to be their competitors. However, that's not really the
case. In the market sector Wal-Mart plays in, the full-line discounter, there are two
national-level competitors: Kmart and Target.
In the United States, Wal-Mart's chief competitors in low-end general merchandise
include Sears Holdings Corporation's Kmart chain and Target. Many smaller regional
chains, such as Meijer in the Midwest, are also competitors. Wal-Mart's move into the
grocery business has also positioned it against major grocery chains such as HEB,
Kroger, Albertsons, Public, Giant Eagle, Safeway, Winn-Dixie, Ahold and many other
regional chains and independents. A niche has been carved out of Wal-Mart's dominance
in the United States by several retail corporations. By focusing on a small number of low-
cost products, dollar store retailers such as Family Dollar and Dollar General have
successfully competed head-to-head with Wal-Mart for home consumer sales. Their other
lines are a different matter. They compete against AutoZone in oil and batteries, against
Toys R Us in toys, against Best Buy in electronics. Clothing is scattered around--there are
a LOT of clothing chains, but most have very small, targeted selections.
II. D Matrices to incorporate into your strategic marketing plan

SWOT Analysis*

|Strengths |Weaknesses
|
|R&D, high tech |Lead times
|
| | |
|Deep pockets |Differentiated models
|
| | |
|Infrastructure |Platform madness
|
| | |
|Luxury car/ truck dominance |Productivity, efficiency, costs
|
| | |
|Infrastructure/ small cars | |
| | |
|Distribution network | |
| | |
|Joint Ventures | |
| | |

4
|Opportunities |Threats
|
|Worldwide presence |Competition
|
| | |
|Expansion |Labor unrest
|
| | |
|Buy U.S. |Brand loyalty disappearance
|
| | |
|Leverage tech. and financial know-how. |Perception, quality, reliability, durability
|
| | |
|Better segmentation |Consumer social awareness
|
| | |
| | |

Strengths:
The strengths of a business or organization are positive elements, something they do
well and is under their control. The strengths of a company or group and value to it, and
can be what gives it the edge in some areas over the competitors. The following section
will outline main strengths of Wal-Mart.
Management:
Wal-Mart's policies and practices are designed to ensure an environment that is
equitable and inclusive. To that end, Wal-Mart solicits feedback from all of their
employees, annually, regarding their opinions of their work experience and the
company's implementation of Wal-Mart's basic beliefs and values. In addition, they
provide training on working with people, leadership skills, equal employment
opportunities, diversity and sexual harassment prevention.
Wal-Mart is committed to providing all employees state-of-the-art training
resources and development time to help achieve career objectives. They have a number of
training tools in place that keeps then out in front of the competition, including classroom
courses, computer-based learning, distance learning, corporate intranet sites, mentor
programs, satellite broadcasts, skills assessments, and job announcements. These tools
are successfully increasing advancement opportunities for women and minorities. Wal-
Mart has been ranked among Training Magazine's 'Top Training 100' companies for two
consecutive years. Respect for the individual, one of Wal-Mart's company's three core
values, is reinforced throughout their training process.
Wal-Mart is committed to the customers and communities they serve. Wal-Mart
hires locally, representing the diversity and uniqueness of everyone's hometown. As the
demographics of the nation have changed, so has the family of Wal-Mart's employees.
More than 15 percent of their employees are over the age of 55, and they are the nation's
largest employer of Hispanics and African-Americans.

5
 Wal-Mart also uses its respectable financial position to attract and retain
employees by offering stock ownership and profit-sharing programs. These programs are
available to all full-time employees of Wal-Mart and make a significant impact on the
earnings of employees. They are allowed to purchase shares of stock at reduced prices,
which allows them an immediate appreciation of their portfolio. With the profit-sharing
program, the employees receive bonuses at the end of the year based on the success of the
overall company. These also provide a significant amount of compensation to their
employees.
Wal-Mart also has very strong community-based initiatives. They have
continually gave college scholarships for high school seniors, raised funds for nearby
children's hospitals through the Children's Miracle Network Telethon, provided money
and manpower for fund raisers, school benefits and churches, Boy and Girl Scouts, park
projects, police and fire charities, food banks, senior citizen centers, and more. They also
educate the public about recycling and other environmental topics with the help of a
"Green Coordinator," a specially trained employee who coordinates efforts to make an
environmentally responsible store. Along this same line, Wal-Mart has created
Environmental Demonstration Stores in Lawrence, Kansas; Moore, Oklahoma; and City
of Industry, California. These stores serve as a "test tube" for environmentally friendly
building materials and experimental methods for conserving energy and water.
Finally, the corporate structure of Wal-Mart is very well rounded and managed
with three core values: respect for the individual, service to their customers, and striving
for excellence. The management of Wal-Mart is the backbone to the entire company and
these core-values have propelled Wal-Mart to the top of their industry and have allowed
Wal-Mart to be the world's largest company.
Marketing:
The nature of Wal-Mart's marketing is in its Every Day Low Price (EDLP) campaign.
This is what makes Wal-Mart successful. Sam Walton devised a system for which price
setting was to be followed. Sam wouldn't allow management to hedge a price at all. If the
list price was $1.98, but Wal-Mart had paid only 50 cents, they would mark it up 30
percent, and that's it. Sam's philosophy was "No matter what you pay for it, if we get a
great deal, pass it on to the customer."
The other major campaign Wal-Mart employs is the Rollback. This occurs when
Wal-Mart lowers the already lowered Every Day Low Prices. This has really been a
successful way for Wal-Mart to increase its patrons. When consumers shop, they are
always looking for the best deal, since Wal-Mart already offers low prices, when they
rollback prices, they are able to out-price all of their competition.
Wal-Mart has been known for their customer oriented approach. Wal-Mart
maintains one of the best satisfaction guaranteed programs, which promotes customer
goodwill. One can return virtually any product to Wal-Mart without any problems. They
simply take the product back and promptly refund the price of the product, nearly no
questions asked. They also promote goodwill among consumers by employing a tactic,
which Sam created known as the "Ten Foot Rule." This is simply the idea that if a
customer comes within ten feet of an employee, they are required to greet them and ask if
they can help them in any way. This is also evident through employees getting to know
customers on a first name basis.

6
 Finally, perhaps the single most important marketing aspect of Wal-Mart is that
they create the ideal one-stop shopping experience. Wal-Mart is organized into ten
distinct divisions. These include: Wal-Mart stores, SAM'S CLUBS, Neighborhood
Markets, International, walmart.com, Tire & Lube Express, Wal-Mart Optical, Wal-Mart
Pharmacy, Wal-Mart Vacations, and Wal-Mart's Used Fixture Auctions. Through these
divisions, Wal-Mart offers thousands of products. The Wal-Mart stores contain groceries,
clothes, healthcare products, toys, electronics, bedding, sports and recreation, automotive,
among other items. Because of this conglomeration of products, the typical consumer can
go into any Wal-Mart and walk out without having to stop at another store for anything
that they could need.
The strength of Wal-Mart is also shown through its ratios. Nearly all of Wal-Mart's
ratios are strengths when measured against the industry averages. Through our ratio
analysis, we have shown that Wal-Mart is the best-equipped company to succeed in the
marketplace.
Human resource:
Wal-Mart proudly states on its website that its culture is guided by the 3 Basic
Beliefs, Sam’s Rules, and the Sundown and 10-Foot rules. The company has consistently
appeared on Fortune’s 100 Best Companies to work for in the United States. It employed
more than 2.1 million associates worldwide.
Production/Operations:
Perhaps the strongest aspect of Wal-Mart is in its access to distribution networks.
Wal-Mart uses a system known as cross-docking. This is simply the process of
continuously delivering goods to warehouses where they are sorted and distributed to
their stores within one day. This enables Wal-Mart to take advantage of economies of
scale with shipping trucks with full loads. This also gives Wal-Mart the ability to increase
the speed of deliveries, a faster response to market demands, and a low inventory. This
system has allowed Wal-Mart to decrease its sales cost by 2 to 3 percent over the
industry.
This system is maintained through the most important aspect of Wal-Mart, its
employees. With over one million employees worldwide, Wal-Mart definitely has the
manpower to move goods. This is also facilitated with a proprietary satellite-based
communication system that enables managers and point-of-sale systems real-time
information on the needs of each store.
Research and Development:
Wal-Mart’s innovation keeps it a front-runner in retail as it is regularly turning
out new patents/proprietary technology. Development and innovation are high at Wal-
Mart with regard to their products/services, which is a sure strength in its overall
performance.
Computer Information Systems:
As discussed in the production/operation section, Wal-Mart uses a sophisticated
system of satellite-based communications. They also offer a safe, secure and complete
website where consumers can purchase all of the same products found in the store. The
website is strength because it is not only a means for purchasing products, but is also a
very thorough informational site. Consumers can log onto
http://www.walmartstores.com/ and do company financial searches, find employment,

7
learn about the grassroots of Wal-Mart, email the company about problems, and learn
about any recalls of products sold through Wal-Mart.
Weaknesses:
Weaknesses of a company or organization are things that need to be improved or
perform better, which are under their control. Weaknesses are also things that place you
behind competitors, or stop you being able to meet objectives. This section will present
main weaknesses of Wal-Mart.
Management:
The biggest weakness that Wal-Mart has in the management area is that it does not
have a formal mission statement. While they do have core values, they do not explicitly
tell their employees or consumers what their business is. This is a fundamental aspect of a
company and it provides not definition and direction, but it gives a company a statement
on which to rely on to stay strong and focused. Another weakness is that there are few
females in top management and there are few minorities employed. With such a societal
demand for equality, Wal-Mart is lacking in this category. This is not a very good ethical
decision for Wal-Mart to be making. They are really hurting their corporate image by
maintaining this position. The other area that Wal-Mart lacks in is with unions. Currently,
Wal-Mart does not have any union involvement. This is a problem because of the
perception of treating employees poorly. Unions are created to provide bargaining power
to employees on issues that involve their compensation, benefits, and working conditions.
This is also a weakness because of job security. With unions, job security is not as much
of a concern.
Marketing:
The biggest source of marketing weakness stems from Wal-Mart lobbying to expand
into new markets. There are thousands of towns across the United States that have tried to
block the introduction of Wal-Mart because of the economic impact that it has on small-
town stores and shops. Wal-Mart has a damaged reputation because when they move into
a location they end up "forcing" these types of businesses out of business.
Finance/Accounting:
Weaknesses in Wal-Mart's finances are seen in three of its ratios. The fixed asset
turnover, earnings per share, and average collection period ratios are not very good. The
fixed asset turnover ratio is telling us that they have made a lot of investments, but that
they are not being fully used at this point in time. The earnings per share ratio is not good
because when compared to the industry, they are not earning as much money for each
shareholder. However, this is most likely due to the sheer number of outstanding shares.
The average collection period is a cause for concern because it means that they are
allowing their debtors to carry accounts with Wal-Mart for an above average period of
time. This is not good because it increases the likelihood of non-payment.
Human resource: Non-Unionization:
Unlike its competitors in the retail industry Wal-Mart has remained non-
unionized. Its alternative is an open door policy which aims to encourage employees to
take their complaints beyond management. Wal-Mart employees commence at lower
wages than unionized corporations, quitting by the end of the first year
Low Wages:

8
 The average Wal-Mart associate makes between a paltry $12,000 and 17,000
annually suggest that the company cares more about keeping its prices low than to
increase employees’ wages and thus, in turn, their standard of living.
Opportunities:
Economic:
An opportunity available to the industry is the free trade zone. When the
government enters into new trade agreements with foreign countries, businesses in the
United States have the ability to offer products from these countries in their stores. This
simply increases the markets available to retailers.
Social, cultural, demographic, and environmental:
An opportunity facing the industry is that customers want ease of shopping. To
provide the ease of shopping the industry is guaranteeing that the customers will find
what they want when they want it. This is supported by convenient presentation and the
right level of service every time the customer shops.
Political, legal, and government:
An opportunity facing the industry is that the Asian market is virtually untapped by
the retail world. By having an untapped market it gives a huge opportunity for companies
to expand. It promises unlimited potential for growth and profits.
Technological:
An opportunity facing the industry is that internet shopping is growing. To take
advantage of internet shopping, the industry is focused around the customer. The
customer receives friendly site designs, efficient order fulfillment, fast delivery and
professional customer response. They process returns, refunds, and rebates quickly.
Competitive:
An opportunity facing the industry is that the value of money is weakening. The
weakening value of money will help the industry because it reduces the ability of foreign
manufactures to offer discounts.
Threats:
Economic:
A threat is that the economy is very slow right now. There is no way of
preventing it and no way to change it. This impacts all businesses and causes profit
margins to be reduced as price-cutting ensues to attract more consumers.
Social, cultural, demographic, and environmental:
A threat is customer theft. Manufacturers are fighting back against customer theft by
embedding paper clip sized antitheft tags, called electronic article surveillance labels,
inside products and packaging. Called source tagging, the process offers several major
benefits. For one, merchandise tagged on the factory floor during manufacture or
packaging lets retail employees spend less time in the storeroom applying labels and
more time on the show floor helping customers. Also, high-theft merchandise previously
displayed behind glass can now sit out in the open, boosting sales significantly.
Another social, cultural, demographic, and environmental threat is employee theft.
Along with antitheft labels there are radio-frequency circuits that are hidden in packages
and go unnoticed. The only time they will go off is when the bar code scanner does not
deactivate the circuit, which means they stole it. This helps to prevent the two forms of
employee theft, which are sweat hearting and sliding. Sweat hearting is when the

9
employee charges the customer less than the actual price and sliding is when the
employee covers the barcode at the point of sale.
Political, legal, and governmental:
A threat is the Chinese regulations. China has one of the largest populations in the
world; however, the Chinese government does not take kindly to opening their country to
foreign establishments. Also, there is rampant corruption among the Chinese, and they
have no generally accepted accounting principles.
Technological:
A threat facing the industry is that technological advances may make the products
obsolescent. As technology advances, products being sold today are gone tomorrow; this
provides fewer products for retailers to sell.
Competitive:
A threat is that the industry is not following consumer taste. To overcome the threat
of not providing consumers wants the industry is expanding rapidly in the urban centers
while traditional "wet markets" are being edged out as the middle-class enlarges and
young people flock to the cities.
Wal-Mart creates the ideal one-stop shopping experience. Wal-Mart is organized into
ten distinct divisions. These include: Wal-Mart stores, SAM'S CLUBS, Neighborhood
Markets, International, walmart.com, Tire & Lube Express, Wal-Mart Optical, Wal-Mart
Pharmacy, Wal-Mart Vacations, and Wal-Mart's Used Fixture Auctions. Through these
divisions, Wal-Mart offers thousands of products. The Wal-Mart stores contain groceries,
clothes, healthcare products, toys, electronics, bedding, sports and recreation, automotive,
among other items. Because of this conglomeration of products, the typical consumer can
go into any Wal-Mart and walk out without having to stop at another store for anything
that they could need.
Wal-Mart’s core value is their pricing strategy. Their main goal is what they call
EDLP, or Everyday Low Pricing. Their goal is to be the cheapest discounter, and hold a
huge competitive advantage because they have made that their goal, and successfully
kept their products cheaper than their competitors.
Wal-Mart has also been the industry leader in using technology to stay one step ahead
of their competitors. To start off, they developed EDI, or Electronic Data Interchange.
This system automatically took information from the cash registers about what was being
sold, and therefore keeping an active inventory count. When the inventory reached a
certain level, suppliers would be able to see that, therefore making sure that the product
was replenished before running out. This was all done without human intervention. The
result of this was a shortened distribution cycle, and a more efficient means of tracking
supply and demand. Wal-Mart also implemented RFID, or Radio Frequency
Identification. This technology eliminated the need for employees to scan the UPC
codes, and it also helped track products. This cut down on customers and employees
using the five finger discount (shoplifting). It was said that this saved Wal-Mart almost
eight billion in labor and two million in shoplifting. One last system they put in was
POS, or Point of Sale. This was also an inventory management tool, but it was also
useful for marketing purposes. It produced data that would assist in marketing strategies,
such as showing that people who bought kids movies usually bought more than one,
which allowed Wal-Mart to strategically put other kids’ movies next to the high seller
movies.

10
 Name brands will continue to rule in food. To retain price leadership, Wal-Mart must
do so through brand names. It will, however, continue to hone store brands to fill voids in
its assortment. But expect brand names to continue to dominate Wal-Mart shelves,
especially consumables and commodities. Expect more private label emphasis in apparel,
soft home, and hard lines to help create a differentiated offer and bolster margins. As
brand sales growth within Wal-Mart will increasingly come from existing, rather than
new store customers, effective merchandising will become increasingly critical to
capturing shoppers’ attention.

Private label has been an integral component of Wal-Mart’s CPG (Consumer

Packaged Goods) value proposition for the past several years. In fact, Wal-Mart’s private
label dollar and volume share now exceed industry averages. Private label is particularly
well-developed within healthcare at Wal-Mart –comprising nearly one-third of product
sales. At the category level, staples and healthcare items dominate the list of high-share
private label categories. After a period of share gains, however, Wal-Mart private label
share held steady over the past year.
With 85% of consumers shopping at its stores, Wal-Mart clearly has broad appeal
across consumer segments. The vast majority of company sales (80%) however, are
derived from the top one-third of shoppers. These heavy shoppers skew lower/middle
income and younger to middle-aged. Wal-Mart has served these segments exceptionally
well --earning 38.5% share of heavy shoppers’ total CPG spending, vs. 16.5% across all
households. Wal-Mart has developed a solid position among the growing young
adult/young family segment. Wal-Mart appears to be leveraging healthcare services as a
cornerstone in efforts to step up appeal to 55+ consumers. Individuals face a sharp rise in
the incidence of chronic disease as they age, and Wal-Mart’s in-store and online
pharmacy services targeting specific chronic disease conditions, such as diabetes, are
well-suited to this segment.
Wal-Mart has begun to explore store layout, product mix and advertising campaigns
to appeal to the higher-income, “selective “shopper. Manufacturers with brands targeting
this segment should explore opportunities to partner with Wal-Mart in these initiatives,
while retailers with a high mix of middle-to-upper income consumers in their stores will
likely face a new level of Wal-Mart competition.
Wal-Mart success showed that being aligned with customer’s expectations and wants
is important. At a time when consumer purchasing decisions shifted and centered more
on price-sensitivity and convenience, Wal-Mart was pushing itself towards the forefront.
It understood what the needs of the consumer and took advantage. This long time
success, has now given Wal-Mart the type of recognition that is not only beneficial but
indispensable at the current time because it can leverage its power to control many areas
of business to continue to enjoy that competitive advantage.
Wal-Mart has demonstrated key issues and areas that have led to its continued
success year after year. Effectively using strategies and correctly implementing them
into a corporation is a fundamental area for the success of a company. The strategies that
Wal-Mart employed (integrating the use of technology, cost saving, and understanding
the culture of your consumers) are replicated today by many other industries.

11
 The use of technology early on gave Wal-Mart an advantage with additional cost
saving strategies. Cost saving increased profit margins, which allowed the company
more options in the future. However, more importantly, it led to the competitive
advantage that it held for a very long time. This advantage was offering cost-effective
merchandise to consumers, which Wal-Mart continues to enjoy today.
Wal-Mart success showed that being aligned with customer’s expectations and
wants is important. At a time when consumer purchasing decisions shifted and centered
more on price-sensitivity and convenience, Wal-Mart was pushing itself towards the
forefront. It understood what the needs of the consumer and took advantage. This long
time success, has now given Wal-Mart the type of recognition that is not only beneficial
but indispensable at the current time because it can leverage its power to control many
areas of business to continue to enjoy that competitive advantage.
Companies have limited resources and budgets so it is important for companies to use
those resources on its best and most important opportunities. Segmentation is a technique
to group a company's customers so they can best identify and tackle these opportunities.
Segmentation is used by customer service, sales, marketing and product development
teams to maximize their effectiveness. For example, a company's customer service
department might segment customers based on how much they spend per year. The
customers who spend the most would receive the highest level of service, focus and
resources.
A company also needs an identity. An identity is important so it attracts customers.
An identity is also important so that a company's employees recognize how to drive value
for its customers. An identity is useful if it is unique and different from the competition.
This identity is formed in the minds of customers and is attributed a "position" relative to
competitive identities. For example, Wal-Mart is known for it "everyday low prices".
Customers believe Wal-Mart has the lowest prices relative to Kmart and other
competitors. Because it owns this position, customers want to shop at Wal-Mart.
Employees of Wal-Mart focus on keeping costs low so it can continue to better deliver
against this promise relative to Kmart.
There are limitless alternatives for a firm of this size. Wal-Mart has to assess, not
only what is important to their future, but also to the future of their customers. The first
alternative is to proceed along on their current path, while maintaining present missions
and objectives. The second alternative is to reevaluate their organizational culture to
ensure increased levels of employee morale and positive images of employee treatment
for to restore their public image. The final option that Wal-Mart can pursue is to
outsource temporary employees for positions with extremely high turnover and focus the
growth of the tenured employees to ensure long-term sustainability.
The first alternative of maintaining the current path, mission, and objectives is usually
an ill-advised approach to maintaining market dominance and sustaining the current level
of growth. However, Wal-Mart still has a viable world market to expand upon. With
some minor shifts in strategy, focusing on the on-line market for example, the company
could sustain or even increase their annual growth. The obvious negative, and the reason
this strategy is typically not utilized, is the absence of change or evolution means the
presence of stagnation or retraction. Put simply, if a company is not progressing it is
probably regressing. There is a strong tendency for companies to view maintaining their

12
organizational strategy is parallel to remaining consistent with their founding
philosophies.
The second alternative would include using various managerial style options, in
conjunction with the formation of a company-wide “employee unionization” to control
employees and ensure their loyalty and protection. A company as large as Wal-Mart
would actually benefit from implementing employee unionization. It would not only
increase employee morale, but also act as a global rulebook and mandate for all
employees. Although it would increase employee leverage and probably result in
increased pay across the board, the trickledown effect would be staggering. Lowered
turnover, increased output, lowered accident and incident rates, and improved public
image.
The last option is to outsource the job tasks with the highest turnover ration to
temporary employees. This option will lower the rate you pay, decrease benefit costs,
and avoid backlash from disgruntled employees. The problem with this option is does
nothing to reduce the public’s image of the tyrannical Wal-Mart and their disregard for
the low-level employees.
The objective that injects the most sustainable life, while maintaining a staggering
level of growth, is to spearhead a labor union. The clear prevalence of lawsuits,
widespread consumer distaste, and the 65% turnover rate has the potential to doom the
retail giant over time. Although, people shop their stores worldwide and their growth has
been unprecedented, the backlash from employee mistreatment, underpayment, and
intimidation could impact future hiring and the addition of loyal customers. Wal-Mart
maintains low prices to ensure that a particular socio-economic groups can and will shop
at their stores. However, those same groups tend to make up a large percentage of Wal-
Mart’s target employee groups. If the company has a 65% yearly turnover rate the actual
reduction in numbers of shoppers is astronomical. They represent families, friends, and
even new employers who are warned of the evils that lurk inside of the corporate giant.
The effect is minimal at first, but bad P.R., spread through your target consumer base
could destroy the image and credibility of the entire corporation. Drastic measures are
necessary to ensure lasting sustainability as the number one retailer, and in turn number
one adversary, in the world.
Marketing uses positioning to communicate what the customers want the company to
be. A company strategy is designed to deliver against this position, attract customers and
ultimately drive revenue. Positioning is the act of designing the company's offering and
image to occupy a distinctive place in the minds of the target market. Positioning to a
great extent is pursuit of differential advantage.
Analyses that marketers use to position a brand begin with identifying a frame of
reference for a particular product/service to indentify which brands this particular brand
would be competing with. After this, marketing analysts need to identify similarity and
differences between the competing brands. After this there is a need for identifying the
ideal points of parity and points of difference brand associations.
Effective brand positioning requires not only careful consideration of a brand's points
of difference, but also of its points of parity with other products. Points of parity and
point of difference are the main criterion for evaluation of the right positioning approach
for a brand. A brand needs to well establish itself in the points of parity before stressing
on its differences.

13
 Wal-Mart stores Inc. is in the retail industry offering products like discount stores,
neighborhood markets, supercenters neighborhood markets and warehouse membership
of Sam' club in the United States as well as walmart.com. Wal-Mart has usually taken a
low prices positioning approach.
While targeting a new potential market, Wal-Mart should being with deciding a
frame of reference for that market. Frame of reference would decide which retail
services/segments Wal-Mart would be competing in that market. After deciding frame of
reference, Wal-Mart should decide whether consumers identify the category to which
Wal-Mart belongs especially if it is targeting to open stores in new country. If the
consumers in the potential market does not identify it as one belongs to the retail
category, first of all it would have to communicate category membership. For this, Wal-
Mart can announce category benefits, compare to exemplars in that particular market and
can rely on the product on the product descriptor.
After this, a thorough analysis of point of parities and point of differences should be
done by Wal-Mart in the new chosen market. Based on this analysis, company should
decide on which point of parities and point of differences, it wants to stress on. Based on
the above analysis, Wal-Mart should develop a positioning statement for the new
potential market and accordingly position its product/service.
Wal-Mart maintains a strong, sustainable, competitive advantage in the retailer’s
industry based on its pricing philosophy of providing “everyday low prices”, and its one-
stop-shop business model, the Supercenter. Wal-Mart, as the world’s largest retailer, has
a tremendous buyer power to demand volume discounts from suppliers and is able to
pressure its suppliers to meet its pricing philosophy. Unlike many other companies,
Wal-Mart is able to avoid the problems of labor unions in their business. In addition,
Wal-Mart is able to eliminate its competition and subsequently driving the competition
out of business due to its pricing strategy.
We all know Wal-Mart, the industry giant that often headlines the news with jaw
breaking prices that out-perform other retailers in the industry. It is important to discuss
the industry structure to truly understand the Wal-Mart edge and authority in the
retail/electronic and consumer industries. Wal-Mart accounts for 29.9% of the global
general merchandise stores sector, Target, Wal-Mart’s industry counterpart accounts for a
mere 5.10%.12 (Exhibit 1) Shortly after entering the grocery business, Wal-Mart now
accounts for 10% of the grocery market. It is predicted by some that Wal-Mart will soon
hold the top spot of the grocery chain, leading by 16.6% by 2010. Wal-Mart is the largest
retail company in the world; it successfully operates retail stores in various formats
including supermarkets, discount stores and neighborhood markets. By the end of
January 2008, Wal-Mart had over 2,447 supercenters, 132 neighborhood markets and 591
Sam’s Club’s in the US alone. Internationally, it operates in Argentina, Brazil, Canada,
Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico,
the UK and China. Wal-Mart has annual sales of $405,607.00M and employs 2,100,000
employees. Target currently operates 1,698 stores in 49 states. Target has annual sales of
$64,948.00 M and employs 351,000 employees. K-Mart has annual sales of $16,219.00M
and employs 8,500 employees. Based on this data it is easily determined that Wal-Mart is
the leading retailer trailed by Target and K-Mart. Wal-Mart has a broad range of
competition in the industry, particularly Target and K-Mart. All three stores emerged in
the early 1960’s following the success of grocery store chains. Interactive analysis of the

14
three giants has determined that Wal-Mart prefers to enter markets that consists of lower
retail wages and more households with vehicles and children but is more or less
concerned with income wages. Target has the exact opposite dimensions while K-Mart is
more or less like Wal-Mart just less systematic. Wal-Mart strength comes directly from
its ability to weather competition to a greater extent than its rivals. Even as a monopolist,
Target requires a substantially larger population than Wal-Mart to succeed, making its
campaign to overpower Wal-Mart virtually impossible. Wal-Mart can succeed over
Target and K-Mart even when entering their territory. Due to these findings, Wal-Mart
can be deemed the ultimate player of the industry. Wal-Mart also operates a much
greater percentage of Superstores (stores that feature deli’s and grocery departments) and
thus has a competitive advantage as a one stop shop over Target and K-Mart. However,
it does need to be addressed that Wal-Mart services not only the merchandise industry but
also the electronics and grocery industry as well. Therefore, competitors also include
Grocery chains (King Soopers, Albertsons and Safeway in Colorado), as well as
Electronics Superstores. Another unlikely competitor of Wal-Mart is Costco (the
counterpart to Sam’s Club which the Wal-Mart Corporation runs). Costco operates as a
wholesaler, and ultimately offers the same products as Wal-Mart just in bigger quantities
and perhaps greater quality. The important thing to note here is that consumers may not
wish to purchase all merchandise in bulk. Nonetheless, Costco holds a 25.90B market cap
as compared to Wal-Mart’s 197.66B.18 By providing merchandise, electronics and
groceries, Wal-Mart offers a one stop shop that often exhibits lower prices than the
leading grocery, electronics and retail stores. Because of this attribute Wal-Mart exhibits
fierce competition to not only its industry rivals but also local chains that offer one type
of product (King Soopers for groceries or Best Buy for electronics).
Based on these observations, it can be determined that Wal-Mart is an Oligopoly. The
industry is mostly dominated by Wal-Mart, Kmart, and Target. They all produce
homogeneous or unique products (clothing vs. electronics, ect). There are blockades to
entry/or exit because these large corporations dominate the industry in a way that makes
it virtually impossible for any firm to penetrate the market. There does exist an imperfect
dissemination of information, buyers are not informed of cost, price and product quality.
And these firms do have opportunities for economic profits. While there are a few firms
in the industry, it can be deemed that Wal-Mart is the largest firm leading its industry.
However, another important factor to note is that while Wal-Mart sees competition in
Target and K-Mart, their presence does not severely impact Wal-Mart sales. In fact, both
Target and K-Mart find markets in which a Wal-Mart is present as unattractive. The
effect experienced by Target as a result of Wal-Mart’s presence is much larger than the
converse. 15 It can be noted that for both Target and Kmart, the implied effect of a Wal-
Mart is more than twice the reverse effect of those firms on Wal-Mart. These findings
would point to the ideology that Wal-Mart is an Oligopoly that monopolizes the industry.
Through its presence it prevents entry into the market based on geographical location and
Target as well as Kmart focuses on locations where a Wal-Mart is not yet present.
Companies that operate in the merchandise industry offer a variety of product in order
to appeal to a number of consumer tastes and preferences. This type of diversity increases
the customer base of companies, while reducing overall buyer power. With this said
suppliers will enter into contracts with major players and reduce overall entry into the
market.13 Supplier power here is strengthened in that manufacturers and distributors are

15
not generally “wholly reliant” on merchandise stores for their revenues. Supplier power is
weakened by the fact that players have a great deal of bargaining power. The fall of
tariffs, particularly in the US has allowed retailers to source goods produced in areas of
low cost labor, and for Wal-Mart has ultimately meant outsourcing directly to China.
Wal-Mart has huge economies of scale as they purchase quantities to supply all of their
stores.12 The nature of the buyer supplier relationship is often defined by the buyer’s
power in the industry. Based on Wal-Mart’s large size and huge demand for products,
Wal-Mart dominates the buyer scene. Because of its sheer size and extraordinary buying
power, Wal-Mart is able to pressure suppliers in offering rock-bottom prices as these
suppliers depend on Wal-Mart for a high percentage of their sales.19 An example of this
type of relationship is the Dial Corporation Supplier, who sells 28% of its manufactured
goods to Wal-Mart annually. In order to replace Wal-Mart’s sales, it would have to
double sales to its next nine customers in order to eliminate Wal-Mart from its buyer list.
Chairman of the Board of Wal-Mart and son of the founder often defines the supplier
relationship as “supplier-partners.” Walton also states that Wal-Mart wants to offer good
value to customer through low prices and therefore does not accept slotting fees, display
allowances or deal money from suppliers. Typically speaking, by shopping around for the
lowest bidder, Wal-Mart is able to pass along the deal breakers to consumers. Walton
also contends that long-term relationship sustainability with supplies is a practice that
benefits small and medium sized supplies. Wal-Mart has the power, as an industry giant
to either hurt or help the suppliers in their concessions. Past data has determined that
Wal-Mart’s suppliers that hold a small share of their respective markets do not perform as
well as other small share suppliers that do not identity Wal-Mart as a primary customer.
However, large share suppliers perform much better when listing Wal-Mart as a primary
customer. This implies that suppliers have the power to benefit from the successes of
Wal-Mart, rather than become victims. Due to these supplier relationships Wal-Mart
continues to dominate the global market, with its transition to online retail; Wal-Mart
now dominates internet commerce as well. Wal-Mart continues to dominate the market,
superseding the current economic situation that encompasses most nations. Ultimately,
Wal-Mart has become corporate America's recessionary resource in a time when it's most
needed. 22 Demand for Wal-Mart is analytical. It is deemed that over 200 million
shoppers visit the Wal-Mart US stores each year. They use over 60,000 suppliers and
have 55+ countries in their network, the demand for while Wal-Mart has made the
company the largest company in the world. And because Wal-Mart holds its position as a
power buyer in the industry it is able to effectively and efficiently supply the demand for
its products, as the economy worsens, more individuals turn to money saving deals and
thus to Wal-Mart. Net sales are on a gradual increase ($344,759 in 2007, $374,307 in
2008 and $401,244 in 2009 in millions) and therefore demand is also on the rise. Wal-
Mart is able to meet demand with its abundant supply of merchandise that they are able to
obtain at low prices due to their supplier relationships. By overpowering the suppliers in
this industry, Wal-Mart has a competitive edge that is unattainable by most companies.
This can be related back to the discussion of Wal-Mart holding a monopoly over the
industry. Because they are able to maintain discretion over suppliers they can virtually
control the market and create entry barriers. Therefore, Wal-Mart is able to meet demand
as it comes up and has outsourced suppliers to China and India, where labor is much
cheaper. Unfortunately, this also makes Wal-Mart susceptible to currency changes, ie; the

16
value of the dollar drops as compared to Chinese Yuan, when the dollar weakness as
compared to the Yuan, the price of imports rises for Wal-Mart.
One issue facing Wal-Mart today is that the consumer’s opinions, needs and goals
are ultimately changing. The lowest price is no longer the only demand to attract
consumers. Wal-Mart is now encountering problems that have long plagued its rivals
such as Kmart; clustered stores, unattractive merchandise and ultimately poor service are
just a few of the problems. Target, which is significantly smaller, is able to unionize the
store in such a way that the aisles are attractive and organized for consumers. Wal-Mart is
failing to bring in products that attract today’s consumers, particularly in apparel, home
furnishings and consumer electronics, while Target is bringing designers into the apparel
department to attract higher income consumers. The current economy has also hurt the
Wal-Mart stores. With rising gas prices and job uncertainty, lower income consumers are
spending less on average. Employee and consumer morale for the Wal-Mart brand is not
as high as it once was because Wal-Mart has had to defend itself from unions and
community activist groups. These groups contend that Wal-Mart takes advantage of
workers and hampers competition. Wal-Mart has also found itself in highly publicized
lawsuits, some of which contended that underage workers operate dangerous machinery
and others that the cleaning contractors had hired illegal immigrants. Another major issue
facing Wal-Mart is the continued allegations of gender discrimination. Lastly, another
issue currently facing Wal-Mart, as mentioned earlier, is its high dependence on Chinese
suppliers. This makes Wal-Mart susceptible to currency changes and ultimately price
uncertainty. This goes hand in hand with the ideology that because Wal-Mart is so
dependent on foreign suppliers, it is also susceptible to tariffs and taxes on foreign
imports. If taxes are increased, price increases will be turned over to the consumers.
Wal-Mart has taken over America. With its financial and structural standing in the
consumer community, Wal-Mart has taken the industry by storm. Its history and current
standing with suppliers, consumers and competitors Wal-Mart leads both intellectually
and financially. The following is a discussion of Wal-Mart’s financial status.

With the help of a distribution channel, which is an interdependent organization,

products are available to the customers for use or consumption. In this distribution
channel, there are various channel intermediaries who help move a product from
producer to the final consumer. The distribution channel of Wal-Mart consists of retailers
and the final consumer.
In other words, we can say that distribution channel of Wal-Mart is a retailer channel
in which the producer of the product (Wal-Mart) sells the products to the retailers i.e. the
different retail outlets of the company, which include discount department stores,
supercenters and the neighborhood markets, and the retailers sell the products to the final
consumers. There is no role for wholesalers and agents to play in this channel as the Wal-
Mart is basically engaged in the retail operations.
The whole buying and selling process and its related negotiations are broken by
different distribution channels into various managerial tasks. After having being broken,
these tasks are performed by those companies, which have expertise. An ability to
compensate the hurdles present within a supply chain is another advantage of the
distribution channel.

17
LOGISTIC CHANNEL OF WAL-MART
Wal-Mart, a beigest retailer has more efficient technique to manage the distribution
and logistics channel in comparison to other wholesalers and retailers. It insists sales
directly to the manufactories instead of wholesales. The company uses land and shipping
transportation to obtain the materials from manufactures. It is dependent upon the
location of the manufactures. It is also remembers that Wal-Mart is a giant retail store,
which has already invested a large portion of money to make the distribution and logistics
channel more effective.
In case of perishable items in the grocery business, the company targets local
manufactures and uses only land transportation so that they can serve the customer with
good quality without any delay or loss.
By increasing the phone order services and support services, which the company is
providing with category products, it will be able to provide more and better facilities to
their customers at less cost. These services include providing exchange service on
different category apparels, home delivery services with the home appliances, repair
services in electronics items, and registry services on the gift items for babies, etc. in
which the customers can create registry, edit registry, add items, find registry on top baby
items, baby registry tour, tips and tools, etc. All the services are located in the stores as
per the customer’s facility and comfort. The interior and employee services of the store
boost the customer’s feeling to purchase the products again and again. Excellent
customer services also provide a competitive advantage for the company.

COMPETITIVE ADVANTAGE OR ISSUES WITH DISTRIBUTION CHANNEL

Wal-Mart has certain issues which are responsible for causing vertical conflicts.
Vertical conflicts are those conflicts that occur between different levels of the same
channel i.e. conflict between the producer and the retailer and vice versa.
The organization and its channel members have individual goals and objectives that
are not compatible with other. Conflicts also arise due to the reason that the channel
members are margin focused in their approach while Wal-Mart focuses on customer
satisfaction as a whole. The conflicts are also present because both the organization and
its channel members are fighting for the same market; therefore, there are chances that
growth of one member can affect the growth of the other. Another issue for such conflicts
between the Wal-Mart and its channel members is the lack of clearly defined
responsibilities.
A part from this there is a competitive advantage of distribution channel of the
company with its competitors such as K-Mart and Costco Wholesale Corporation. In the
United States, Wal-Mart is the largest grocery retailer with approximately 20% of the
retail grocery and consumables business. In the United States, Wal-Mart has three retail
formats or stores i.e. discount stores, supercenters and neighborhood markets that provide
products and services to customers according to their needs and requirements. This is the
competitive advantage of the company over K-Mart and Costco Wholesale Corporation.
All over the world, the organization operates in North America, Mexico, UK, Japan,
Argentina, Brazil, Canada, Puerto Rico and China with different names.
Thus, the distribution and logistics channel of the company is very effective and
strong to serves the customer various products and services on time.

18
 Wal-Mart has distribution centers in different geographical places in US. Wal-Mart’s
own warehouses supplies about 80% of the inventory. Each distribution centre is divided
in different groups depending on the quantity of goods received. The inventory turnover
rate is very high, about once every week for most of the items. The goods to be used
internally in US arrive in pallets & imported goods arrive in re-usable boxes.
The distribution centers ensured steady flow & consistent flow of products. Managing
the center is economical with the large-scale use of sophisticated technology such as Bar
code, hand held computer systems (Magic Wand) and now, RFID. Every employee has
access to the required information regarding the inventory levels of all the products in the
center. They make 2 scans- one for identifying the pallet, and other to identify the
location from where the stock had to be picked up. Bar codes & RFID are used to label
different products, shelves & bins in the center. The hand held computers guide employee
to the location of the specific product. The quantity of the product required from the
center is entered in the hand held computer, which updates the information on the main
central server. The computers also enabled the packaging department to get accurate
information such as storage, packaging & shipping, thus saving time in unnecessary
paperwork. It also enables supervisors to monitor their employees closely in order to
guide them & give directions. This enables Wal-Mart to satisfy customer needs quickly &
improve level of efficiency of distribution center management operations.

Logistics Management

This involves fast & responsive transportation system. More than 7000 company
owned trucks services the distribution centers. These dedicated truck fleets enables
shipping of goods from distribution centers to the stores within 2 days and replenish the
store shelves twice a week. The drivers hired are all very experienced & their activities
are tracked regularly through “Private Fleet Driver handbook”. This allows the drivers to
be aware of the terms & conditions for safe exchange of Wal-Mart property, along with
the general code of conduct.

For more efficiency, Wal-Mart uses a logistics technique called “Cross Docking”. In
this system, finished goods are directly picked up from the manufacturing site of supplier,
sorted out and directly supplied to the customers. This system reduces handling & storage
of finished goods, virtually eliminating role of distribution centers & stores, because of
“cross-docking” the system shifted from “supply chain” to “demand chain” which meant,
instead of retailers ‘pushing’ the products into the system, the customers could ‘pull’ the
products, when & where they required.

Inventory Management

Considering the rapid expansion of Wal-Mart stores, it was essential to have a very
good communication system. For this, Wal-Mart set up its own satellite communication
system in 1983. This allowed the management to monitor each and every activity going
on in a particular store at any point of the day and analyze the course of action taken
depending on how the things went.

19
 Wal-Mart ensures that unproductive inventory is as less as possible, by allowing the
stores to manage their own stocks, thereby reducing pack sizes across many categories
and timely price markdowns. Wal-Mart makes full use of its IT infrastructure to make
more inventories available in case of items that customers wanted most, while reducing
overall inventory. By making use of Bar-coding & RFID technologies, different
processes like efficient picking, receiving & proper inventory control of the products
along with easy packing and counting of the inventories was ensured.
Wal-Mart owns the “Massively Parallel Processor (MPP)”, largest & the most
sophisticated computer system in private sector, which enables it to easily track
movement of goods & stock levels across all distribution centers and stores. For
emergency backup, it has an extensive contingency plan in place as well.
Employees use “Magic Wand”, which is linked to in-store terminals through a Radio
frequency network, to keep track of the inventory in stores, deliveries and backup
merchandise in stock at the distribution centers. The order management and store
replenishment of goods is entirely executed with the help of computers through Point of
Sale (POS) system. Wal-Mart also makes use of sophisticated algorithm to forecast the
quantities of each item to be delivered, based on inventories in the store. A Centralized
inventory database allows the personnel at the store to find out the level of inventories
and location of each product at a given time. It also shows the location of the product like
distribution center or transit on the truck. When the goods are unloaded at the store, the
inventory system is immediately updated.

Some of the major suppliers of Wal-Mart are:

Gillette, Hewlett-Packard, Johnson & Johnson, Kimberly-Clark, Kraft Foods, Nestle,
Purina PetCare Company, Procter & Gamble and Unilever.

Kimberly-Clark

Kimberly Clark is a manufacturer of paper goods products that include Kleenex,

Huggies and Depend. In April 2004, Kimberly Clark tagged its Scott paper towels
shipment with RFID tags to be shipped to Sanger, Texas.

Kraft Foods

Kraft Foods, the largest food company employs RFID system to improve handling of
its bulk containers. Kraft has outsourced its RFID system to TrenStar to handle the
complete supply chain.

Gillette

Smart razor blades have been introduced to the supermarkets. Gillette has ordered
half a billion tags to track razors. The Gillette Company uses RFID for both pallet and
case applications. All the cases in a pallet are scanned with RFID readers as they move
along the conveyor belt. In a trial at Tesco's new market Road branch in Cambridge, the
packaging of Gillette Mach3 razor blades has been fitted with tiny chips.

20
 Integrated Marketing Communications is an approach to marketing that unifies all
aspects to work together, rather than independently. Integrated marketing
communications intent is to maintain a consistent message and use complementary
media. The concept includes online and offline marketing channels. Using an integrated
approach maximizes the impact of the message, maximizes profit, and minimizes cost.
Each advertising medium has its own unique niche. Television provides the power of
emotion, while radio spurs consideration, especially during drive time. Direct mail drives
consumer response, and print is best used to reinforce branding with supporting
information.
Over the last 10 years the internet has grown into this mix, incorporating a little bit of
everything. In fact, more than a third of all web users watch television while they use the
internet. The combination of web and TV is a potent tool; imagine a compelling
commercial with a call to action that immediately drives viewers to the website.
The internet has changed the way marketing works and some doomsayers have
proclaimed online advertising as the death of newspaper, phonebook, radio, and
television. The reality is each media is still uniquely important, and by embracing an
integrated approach the savvy business can stretch their marketing dollars farther and
make their business more profitable.
Integrated Market Communication Services is a significant trend in the advertising
industry is to combine all of the above services under one roof. These one-stop service
agencies bring together service providers so that the client needs only to use their firm to
receive all of the marketing support s/he requires. Specific advantages and disadvantages
of these arrangements have been cited:
A. Pros and Cons of Integrated Services—It has been argued that IMC is nothing new,
particularly in smaller companies and communication agencies that have coordinating
promotion tools for years. The text discusses the advantages and disadvantages of the
one-stop shop.
1. Advantages of integrated services
• Greater control of the promotional process allows for more synergy among each of the
communication program elements
• More convenient for clients to coordinate all promotional efforts with one agency
• Agencies with IMC capabilities can create a single image for the client
2. Disadvantages of integrated services
• Synergy and economies of scale are often not achieved by a single agency handling all
communication areas
• Internal conflicts often arise within various departments within a large agency over
areas such as advertising, public relations or sales promotion.
• Limits client’s ability to take advantage of specialists in various IMC areas
Wal-Mart develops communication channels primarily through television, direct mail,
radio, and internet. These forms of media are used to express the value that consumers
will have by shopping in their stores. The product proposed is another form of media that
can be used to develop communications with consumers, in much the same way as
employees are meant to express the value to consumers who enter the store. A kiosk
enables consumers to have instant access to information about the products available, the
sales, other methods for getting out-of-stock items, and location of in-store products. This
type of service requires communication to bring awareness and knowledge of the service

21
to the consumer; therefore increasing the value of Wal-Mart to consumers. Wal-Mart,
concerned about its public image, is using a consultant to analyze that image and has
commissioned radio and television ads to try to reverse criticism from local officials,
consumers and others.
One of the important things in making your stores sales boost is by advertising. It’s
the reason why lots of store owners spend an ample amount of money for an
advertisement as it will make the store name popular among others. Popularity that will
bring more profit whenever they see an advertisement referring to the wonderful goods
that you offer to the public
Advertisement plays a major role on the success of a small store in becoming the
biggest mall in town. It even makes a mall more popular as time goes by, just like Wal-
Mart. Wal-Mart is the world’s #1 retailer and also ranks as the largest corporation in the
world as it has branches worldwide with its discount stores, groceries, and supercenters.
Its product ranges from personal needs, home furniture, clothes, toys, foods, electronics
and almost all products you see in a mall or grocery. As a retailer, consumers trust buying
at Wal-Mart because of its promotions and discounts.
Wal-Mart started using discount coupons for the benefit of online shoppers. This is to
engage more customers to patronize their products whenever they shop online. Consumer
avails the discount coupon easily just by viewing the products on sale with their
particular coupon codes and redeeming their discount upon their purchase. You can
choose a variety of discounted items online that contains promo codes, as almost all
products you need are available in Wal-Mart. There are even rebates and cash backs aside
from those discount coupons. You can get as much as 25% cash back on all purchases
and hundreds of exclusive coupons and free shipping offers that online shoppers loved
most.
Sponsorship helps Wal-Mart stores increase its popularity. An example of this was
sponsoring a star-studded awards event as its exclusive retail sponsor. Wal-Mart launched
a substantial advertising campaign for a month regarding the said event wherein their
campaign built excitement to the consumers about the TV event and products in store.
With that, all levels from different walks of life do their shopping at Wal-Mart as inspired
by the said event
Another thing that boosts up store’s sales is through tying up with other companies. A
certain product company lowers its product prices whenever these things happen.
Therefore, allowing Wal-Mart to give prices less than other malls or what other discount
stores could offer. This kind of promotion is certainly what the consumers wanted when
buying a certain product as they can save for other things to buy. This will probably help
increase the store’s popularity as well as a boost for that company brand to be well
known. This kind of Wal-Mart promotion can be called as special offers.
Promotional raffle is a classic advertisement every store does. This is possible when a
store vendor contributes or enlists its name as a sponsor for the said promo that runs until
a specific date. This is probably for the benefit of the store, the company sponsor as well
as for the benefit of the winner who patronized that certain product brand that can be
bought only at Wal-Mart. It is definitely a prize of loyalty as you’re not only happy about
its service and products but as well as the incentives Wal-Mart store can give its
consumers.

22
Wal-Mart is concentrating on penetrating the largest markets either in size of economy or
population. It will take an opportunistic approach to smaller markets, snatching up local
retailers or real estate when a good deal arises.

Progress is likely to be methodical and measured as Wal-Mart applies lessons from its
mixed international experience so far. Growth could come in spurts. Acquiring a large
international retailer could give a foothold across many countries at once. Among the
more attractive opportunities are Spain, Russia, France, Italy and Australia. Spain and
Russia offer strong growth opportunities. France, Italy and Australia look more modest,
but these markets are characterized by high living standards and low political and
economic risk.

Capabilities

Wal-Mart’s innovative use of IT gives it a competitive leg-up. The IT mantra is how

to make it easier, faster and more efficient. Wal-Mart relies on data to run its business. It
depends on technology as the enabler to meet customer needs. It leverages IT to fine-tune
the supply chain from factory floor to the store itself. Wal-Mart has developed its systems
in house. The close alignment between the capabilities of Wal-Mart and its business
processes make it very difficult for competitors to get the same benefit from similar
technology. Because it does not outsource technology, it can deploy new technology at
lightning speed. Several technology initiatives will drive Wal-Mart through many years
to come.

Whether it is speeding up inventory turnover, lowering out-of-stocks, or reducing

costs associated with product handling (RFID), Wal-Mart continuously looks for ways to
take inventory management to the next level. Improving this capability will enable it to
continuously lower buying prices and cost and remain profitable in future.

Wal-Mart is huge and becoming increasingly global. It will rely more heavily on
global sourcing to drive growth. The idea behind global procurement is to find newer,
cheaper sources of goods giving an edge over competition in any corner of the world.
Global sourcing is now Standard Operating Procedure.

23
References:
http://www.hollywoodreporter.com/hr/content_display/news/
e3ic85eae03c2abe696538cc60e6e4325ee Retrieved 21 February 2010
http://btlmkt.egloos.com/1290530 Retrieved 21 February 2010
Wal-Mart Sustainability, http://walmartstores.com/microsite/walmart_sustainability.html

www.walmart.com retrieved 14 February 2010

www.joc.com/node/413748 retrieved 14 February 2010
www.zenith-consulting.com/research/walMart/Wal-Mart-Strategy.pdf retrieved 14
February 2010
“Channels of Distribution, Logistics, and Wholesaling”. N.D. retrieved 14 February
2010. http://ww2.nscc.edu/gerth_d/MKT2220000/Lecture_Notes/unit13.htm
“Competitors List for Wal-Mart”. 2009. Hoover’s Report. retrieved 14 February 2010.
http://www.hoovers.com/wal-mart/--ID__11600--/free-co-competitors.xhtml

“Distribution: Channels and Logistics”. 2008. retrieved 14 February 2010.

http://www.consumerpsychologist.com/intro_Distribution.html

Wal-Mart.com USA, LLC and Wal-Mart Stores, Inc. (n.d.). General Information.
Retrieved on
January 31, 2010 from http://www.walmart.com/
www.finance.yahoo.com Retrieved January 31, 2010

Wal-Mart and Organizational Culture (2001). Retrieved January 24, 2010 from
http://academic.emporia.edu/smithwil/001smmg443/eja/ardmg443ej.htm

Wal-Mart's New Communication Plan (2007, March 19). Retrieved January 24, 2010
from
http://millerwoodcommunications.typepad.com/millerwood_communications/
2007/03/walmarts_new_co.html

www.finance.yahoo.com Retrieved January 24, 2010

www.walmartfacts.com Retrieved January 24, 2010

Wal-Mart.com USA, LLC and Wal-Mart Stores, Inc. (n.d.). General Information.
Retrieved on

24
 January 24, 2010 from http://www.walmart.com/
Goldschmidt, Alex. June 2008 At Wal-Mart, marketing and environmentalism go hand in
hand.
Retrieved January 24, 2010 from http://watchingwalmart.greenoptions.com/
Kothler, P., & Keller, K. L. (2009). Integrated Marketing. In P. Kothler, & K. L. Keller,
Marketing Management. New Jersey: Pearson Prentice Hall.

Appendix

Assignment 1.2: Project, Market Potential and Goal Setting for Wal-Mart

Wal-Mart growth opportunity consist of To take over, merge with, or form strategic
alliances with other global retailers, focusing on specific markets such as Europe or the
Greater China Region. The stores are currently only trade in a relatively small number of
countries. Therefore there are tremendous opportunities for future business in expanding
consumer markets, such as China and India. New locations and store types offer Wal-
Mart opportunities to exploit market development. They diversified from large super
centers, to local and mall-based sites.
There are multiple external societal forces that can and do have an effect on the Wal-
Mart industry today. Economic forces such as the current interest rates, unemployment
levels, disposable income, and so on play key factors in the operations of all major retail
companies. In order to stay on top of business it is important for the company to
continually monitor these factors as well as how their direct competitors are reacting to
these changes. It is also important for an international company such as Wal-Mart to stay
in contact with foreign markets and up to date on what other areas such as Asia are doing
as all of the individual economies throughout the world are becoming interconnected into
a single global economy. This creates excellent opportunity for Wal-Mart in the form of
international expansion and world trade. Along with this are the technological forces that
make it possible to expand the customer access worldwide and make global networking a
possibility. This opportunity can be attributed largely to the internet and online stores
and their effective use.

Market Attractiveness of Product Category

| Criteria |Weight (W) |Rating (R) |

Score (W*R) |
|Total Market Size | .20 |4 | .80
|
|Market Growth Potential | .15 |3 | .75
|
|Degree of Differentiation | .10 |3 | .30
|
|Industry Profit Margins | .20 |4 | .80
|
|Industry Capacity | .15 |3 | .75
|

25
|Market Attractiveness | .20 |4 | .80
|

Wal-Mart long term environmental goals are to be supplied 100 percent by

renewable energy; create zero waste; and to sell products that sustain our resources and
environment. Wal-Mart Short term goals included eliminating 30 percent of the energy
used by stores.

Competitive Position within Market

|Criteria |Weight (W) |Rating (R) |Score (W*R)

|
|Market Share | .20 |4 | .80 |
|Customer Loyalty | .20 |4 | .80 |
|Differentiation | .15 |3 | .75 |
|Profit Margins | .15 |3 | .75 |
|Financial Resources | .20 |4 | .30 |
|Competitive Position | .10 |3 | .30 |

26