Wal-Mart was founded in 1962 by Sam Walton when he and his brother James Walton opened the first Wal-Mart Discount City in Rogers, Arkansas. Since then, Wal-Mart has grown to be the second-largest company in the world (Wal-Mart Stores, n.d., p. 1). In the United States, the company includes Wal-Mart discount stores, Supercenters, Neighborhood Markets, and Sam’s Club warehouse membership clubs.
The company also has many international operations. Wal-Mart is considered a variety store which focuses on low prices and has been committed to upholding their basic value of customer service.
Wal-Mart employs three basic beliefs which are respect for the individual, service to its customers, and striving for excellence (Hayden, 2002, p. 2). Wal-Mart’s corporate management strategy involves selling high quality and brand name products at the lowest price possible.
Prices start at $12
Prices start at $11
Prices start at $14
Prices start at $12
In order to keep low prices, the company reduces costs by the use of advanced electronic technology and warehousing. It also negotiates deals for merchandise directly from manufacturers, eliminating the middleman. Wal-Mart’s new slogan is “save money, live better” (Wal-Mart Stores, n.d., p. 1).
According to the company’s website, “saving money is a means of helping our customers live better. By offering the best possible prices on the products our customers need, we can help them afford a little something extra” (Wal-Mart Stores, n.d., p. 1). For each strategy that Wal-Mart promotes in flyer ads or television commercials, they measure the return on investment from these promotional strategies.
If a strategy does not have a return on investment of a certain percentage in sales, those strategies are revamped or discarded. Backward expansion strategy is another key to Wal-Mart’s success. Unlike other retail stores, Wal-Mart opens their stores in a small town first before entering into metropolitan areas. “Wal-Mart spreads out like molasses from its Arkansas base by constructing new stores strategically located near distribution hubs and smaller towns, rather than leapfrogging across the nation like the other retailers” (Harper, 2004, p. 2).
The driving force behind every Wal-Mart initiative is the continued growth and profitability of its operations. As Wal-Mart developed over the decades, it continually sought ways to become more efficient and for new avenues in which to pursue profitable growth. One of Wal-Mart’s competitive advantages is its remarkable logistics system. They are able to ship merchandise from any of their numerous distribution centres in order to provide the cheapest and most efficient route possible. They even have their own distribution centre for their online orders. Most of Wal-Mart’s stores are usually located within 200 miles from its distribution centres. This allows their trucks from the distribution centres to be fully loaded saving on the cost of fuel.
The invention of sharing sales data with suppliers through computer programs has allowed Wal-Mart to consistently keep their shelves stocked with popular items. To Wal-Mart, a supplier is not merely a commodity provider, but a true partner that helps contribute to the company’s business success. Wal-Mart is known for negotiating tremendous price breaks with suppliers. They do this by researching every aspect of a supplier’s product. They look into details such as the cost of ingredients, packaging, shipping, and advertising.
Wal-Mart can handle suppliers in an aggressive manner because it sells a huge volume of each supplier’s product. Even though a supplier may not make its usual margin when dealing with Wal-Mart, they will almost certainly make up for it in volume. The price breaks that Wal-Mart obtains from its suppliers are passed onto the customers.
Wal-Mart also works with its suppliers to ensure that the items it sells are of the highest quality. Wal-Mart uses a third-party testing laboratory called Consumer’s Testing Lab. This company runs a battery of tests on all apparel, food-related, and electronic products. At its discretion, Wal-Mart can request testing on any of the products it sells. By doing this, Wal-Mart can assure its customers that they are buying only the highest quality items.
Wal-Mart utilizes both detailed market research and customer segmentation to better deliver against their customer’s needs and expectations. They do this by identifying the needs of their customers and deciding if or how they will implement their findings. They also tailor their merchandise assortment and store experience to meet the specific needs of a broader customer base. The use of customer data has allowed for an increase in segmentation in order to better serve the customer.
The use of radiofrequency id tags and electronic check conversion has improved inventory management, reduced cost, and it has boosted operational efficiency. According to a recent AC Nielson Company survey, “the strongest sales increase has come from high-income shoppers. Wal-Mart shoppers making more than $70,000 account for the biggest sales increase – about 12 per cent higher than a year ago” (Morrison, 2008, p. 2). Wal-Mart is not a store for one specific age or income group. It has something to offer for all ages and income groups. All of these factors are extremely important in their success because, without the loyalty of its customers, Wal-Mart would not be one of the most successful retail operators today.
Because of Wal-Mart’s low prices and well-known name, they have been able to capture the sales of an unbelievable number of customers, and have therefore made it extremely difficult for small retailers to survive. Ethical shoppers, those who are concerned with the well being of small retailers, are angry at the monopolizing power Wal-Mart has been able to gain in the past few decades. Most small shops have been forced to close due to the lack of sales.
Some people refuse to shop at Wal-Mart because of these issues. Furthermore, there are negative feelings towards Wal-Mart because of issues concerning wages, health care, and the environment. To combat some of these issues, Wal-Mart announced a new health care plan which would increase benefits to employees, and recently, Wal-Mart donated $2.5 million to victims of Hurricane Ike and Gustav.
Wal-Mart promotes relationship marketing. As Sam Walton once said, “let them (your customers) know you appreciate them” (Wal-Mart Stores, n.d., p. 2). Wal-Mart uses one-to-one relationship marketing tactics. This is executed by the famous Wal-Mart greeter. The Wal-Mart greeting was the original method used by the company to show customers that they are appreciated. A greeter at the door thanks customers for coming in, assists with a shopping cart and provides a “goodbye, thank you” upon departing the store.
The associate is dressed in a blue vest which conveys warmth and personality to every customer entering or exiting a Wal-Mart store. Wal-Mart also employs the 10-foot rule. Whenever a Wal-Mart associate is within 10-foot of a customer, they must look the customer in the eye, greet the customer, and ask the customer if they can be of some help to them (Wal-Mart Stores, p. 1).
By obtaining the lowest prices for their customers, Wal-Mart has steady seen increases in their overall profits. The company has effectively implemented operational strategies in its quest to continually lower its costs and deliver products and services with minimal difficulty or inconvenience. Whether it is through reducing costs with its various relationships and practices with suppliers or controlling energy consumption by monitoring energy output at its headquarters, Wal-Mart’s strategies continue to reduce costs for its customers.
Internally and externally, Wal-Mart has effectively eliminated non-value-added production steps as it redefines its integrated relationships with manufactures. Wal-Mart has also successfully incorporated convenience in its strategies, as some stores are open 24-7, this makes Wal-Mart’s everyday low prices available to customers all of the time. A great deal of Wal-Mart’s success can be attributed to the fact that the company is focused on identifying, knowing, and understanding exactly what customers want from a retailer.
Gimein, M. (2002). Sam Walton Made Us a Promise. Fortune Magazine. Retrieved from http://fortune.com/
Harper, L. (2004, August 20). Wal-Mart: Impact of a Retail Giant. Online News Hour. Retrieved from http://www.pbs.org/newshour/bb/business/wal-mart
Hayden, P. (2002, April). A Case Study on Wal-Mart Stores Inc. Greenville News. Retrieved from http://greenvillenewsonline.com/subpage/docs/walmartcs
Morrison, K. (2008, September 19). Marketing Firm Looks at Wal-Mart Shopper, Trends. The Morning News. Retrieved from http://www.nwaonline.net/articles/2008/09/22
Peter, J. P., & Donnelly, J. H., Jr. (2007). Marketing Management (8th ed.). New York: McGraw-Hill/Irwin.
Reibstein, D. J. (2007). Understanding Market Share and Related Metrics. The Economist. Retrieved from http://www.theeconomist.com/articles
Wal-Mart Stores (n.d.). Retrieved September 30, 2008, from www.walmartstores.com
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