Current Marketing Situation
Walmart is the biggest retail corporation of discount department and warehouse stores in the world. In 2017, the company’s global net sales total roughly $481.32 Billion U.S. dollars. These figures have increased expressively over the last few years; increasing about 0.8 percent in 2017 equated to the prior fiscal year. Walmart’s market share in 2017 was up to 5% in electronics & media.
As of the 2017 fiscal year, the company operated more than eleven thousand stores through the world and this figure will most likely increase as the company continues to develop into emerging markets. Walmart is mainly broken down into three divisions: Sam’s Club, Walmart International and Walmart U.S., with the latter producing most of the company’s incomes. In 2017, the U.S. segment of Walmart alone produced over $300 Billion U.S. dollars, which compares to about 60% of total revenue.
Walmart operates across several different store types (super centers, discount stores and Neighborhood Markets – defined as smaller format stores) and offer a wide range of products to address the general merchandise, health and wellness and grocery needs of its customers.
Walmart looks to differentiate itself from its competitors based on: location, pricing and convenience. They operate in a low margin industry so cost and innovation are their primary business levers and they both message this to their customers and have completely incorporated it into the operating philosophy.
For the competitive review the company I chose was Target and will cover their strengths and weaknesses. Target is the third largest “big box” store in the United States after Costco and Walmart. Dissimilar from Costco and Walmart, Target has no noteworthy operations outside of the United States. Target grieved heavy losses from a unwell planned and badly executed expansion into Canada, its first attempt to function outside the United States.
Target allegedly lost $5.4 billion in Canada. The retailer’s status was badly damaged when it was forced to shut down 124 stores and pull entirely out of the country in April 2015. Target is still suffering momentous losses from the Canadian disaster; it reported a net income of -$900 million on July 31, 2011. Target presently operates 1,799 stores and 38 distribution centers in the United States. It reported a TTM (trailing twelve months) revenue of $72.71 billion on July 31, 2015, unlike Walmart Target has experienced uncertain revenue growth in recent years. Target’s revenue grew at a rate of 2.77% during the third quarter of 2015, while Walmart’s grew at a rate of .09%.
Target is a deep-rooted and recognized brand name that is highly valued by customers. It seems to aggravate none of the resentment and hostility that other stores often face. Target is seen as a fun place to shop. It has strong proficiency in marketing and in highly profitable segments of the retail market, including fashion and household furnishings. It has respectable relationship with customers that has assembled a high level of brand loyalty. Target can create an enjoyable shopping experience for customers. Target has long had an ability to present itself as hip, fashionable and more interesting to younger customers. Target can present itself as a middle-class brand. This allows it to attract shoppers that find traditional discount stores like Walmart lower class or unpleasant.
Its business model is based on supercenters and other big box stores. Many consumers seem to prefer the suitability of smaller neighborhood stores. Target has unsuccessfully changed its business model to adapt to fluctuating times. It has plans to open just eight smaller Target Express locations in 2015. Walmart was planning on opening 270 to 300 smaller stores in the same time frame. Target has only recently made an aggressive push into online retail. Its hard work in ecommerce still lag aggressive competitors like Amazon and Walmart. Target is not as big or as diversified as other retail goliaths, including Walmart, Kroger Inc., Costco and Amazon. This makes it more exposed to economic downturns and changing shopping patterns than those retailers. Target has failed to tap some theoretically lucrative areas of retail, including filling stations and financial services, unlike Walmart and Kroger.
Walmart’s SWOT analysis gives insights on the internal and external forces significant in the company’s strategy development in the retail industry. While these factors vary over time, Walmart’s growth depends on the firm’s ability to capitalize on its strengths. Also, in spite of the company’s weaknesses, its strengths are far more significant considerations. Walmart can use these strengths to exploit its opportunities in the retail market. The firm can also use its strengths to counteract the threats to its business. These are important factors in ensuring Walmart’s continued leadership as the biggest retailer in the world.
In this part of the SWOT analysis, Walmart’s strengths are all related to the size of its business. These strengths enable the company to withstand threats despite its weaknesses. Walmart’s strengths for further global growth are:
- Global organizational size
- Global supply chain
- High efficiency of supply chain
Walmart’s global organizational size gives the firm deep pockets to fund growth and expansion. The global supply chain also provides business resilience from market-specific risks. In addition, Walmart’s supply chain has high efficiency because of advanced technologies for monitoring and controlling the movement of products from suppliers to its stores.
Walmart’s weaknesses impose challenges on the firm’s ability to withstand threats also identified in this SWOT analysis. These weaknesses are directly related to the company’s generic strategy. Walmart uses the cost leadership generic strategy, which leads to the following weaknesses:
- Thin profit margins
- Easily copied business model
Thin profit margins are a typical effect of using the cost leadership strategy. Because Walmart minimizes selling prices, it also needs to minimize profit margins and rely more on sales volume. The cost leadership strategy also makes Walmart’s business model easy to copy. The firm does not have significant competitive differentiators, except for its business size.
Walmart’s opportunities are mainly about expansion and improving business practices. These opportunities are linked to the global economic situation. Also, the human resources situation in the organization presents issues that are actually opportunities for the firm to improve. In this portion of the SWOT analysis, Walmart’s opportunities are:
- Expansion in developing countries
- Improvement in human resource practices
- Improvement in quality standards
Walmart’s opportunity to expand in developing countries is based on their high-growth economic condition. On the other hand, the opportunities on HR practices directly relate to the criticisms on the company’s employment practices. Walmart’s opportunity to improve quality standards addresses consumers’ concerns on the health effects of using low-cost and sometimes low-quality products.
The threats to Walmart’s business are linked to the retail market condition and the changes on consumer perceptions about the products they buy. These factors should compel the company to make some competitive strategic changes. In the context of this SWOT analysis, the threats to Walmart are:
- Healthy lifestyle trend
- Aggressive competition
- Small-scale/individual online selling
The healthy lifestyle trend is a threat and an opportunity. It threatens Walmart’s business because many of the company’s goods are not healthful, organic or natural. It is an opportunity for Walmart to improve its quality standards. However, this factor is more of a threat because the firm currently does not prioritize healthful products in its stores. Aggressive competition is a threat because other large retailers could use aggressive marketing and strategies to capture some of Walmart’s customers. Small-scale or individual online selling is a threat against the company’s retail business. Because of the Internet, small sellers or individuals can bypass Walmart and use their own websites to sell products to online consumers.
This SWOT analysis shows that Walmart must prioritize using its strengths to exploit opportunities in the global retail market. The company’s weaknesses and threats should be secondary priorities. Walmart can improve its HR management standards and product quality standards to improve firm performance. Also, the company must continue expanding its business to exploit economic opportunities in developing markets. Walmart’s strengths based on its global organizational size, global supply chain, and high efficiency of the supply chain can support aggressive global expansion in foreign markets.
Positioning, Segmentation, and Targeting Strategy
Walmart segmentation, targeting and positioning is the core focus of Walmart strategic marketing. Segmentation refers to dividing the population into groups according to certain characteristics, whereas targeting is associated with choosing specific groups identified as a result of segmentation to sell products. Positioning refers to the selection of the marketing mix the most suitable for the target customer segment. Walmart uses mono-segment type of positioning and accordingly, Walmart marketing management appeals to single customer segment who place greater value on the price attribute of products compared to other attributes.
It is important to specify that although Walmart attempts to target customers of all ages via its marketing communication messages, particular attention is paid to young consumers, dubbed as generation X due to the strategic importance of capturing the loyalty of young consumers for long-term perspectives. Along with the promise of cheap prices, Walmart attracts Millennials via effective integration of social media marketing into its marketing communications strategy. This strategy is proving to be effective so far. As illustrated in figure below, Millennials favor Walmart over its significant competitors including Target, Costco, Trader Joe’s, and Whole Foods in North America.
Walmart’s marketing mix alternates around the nature of the firm’s retail business. The company’s cost leadership basic strategy define the marketing mix. The general conduct of Walmart in the global retail market is associated with its marketing mix strategies. With its continuous leadership as the biggest retailer in the world, Walmart expects to use the similar marketing mix as it develops globally. The strategies are composed of the company’s current marketing mix which have already shown significant success. Therefore, it is accurate to continue using it as is. Though, Walmart can improve its current marketing mix, specifically in the place/distribution component.
Product. Walmart’s product is its retail service. Over-all its retail firms are servicing businesses. The company entices customers by providing convenient and effective service. For example, Walmart’s sales employees are trained to effectively assist shoppers in finding the goods they need. Suitability is achieved because the firm offers a wide array of goods in its stores. Most customers expect easy one-stop shopping at Walmart stores. The product component of the marketing mix affects Walmart by defining customer involvement. The company’s sales employees directly influence how customers feel when they enter the stores.
Prices and Pricing Strategy. Walmart uses an Everyday Low Price (EDLP) pricing strategy. In fact, “Everyday Low Price” announcements are frequently seen in Walmart stores. The objective of this pricing strategy is to entice large populations of customers. This strategy supports Walmart’s generic business strategy, which is cost leadership. The company has low costs and low prices. Nevertheless, the large sales volume allows Walmart to generate profits. Therefore, in the marketing mix, the pricing component is the main supplier to Walmart’s competitiveness.
Place (Distribution). Walmart uses the rigorous distribution strategy or rigorous distribution channel design. In this strategy, Walmart stores offer the same variety of goods, while the same worker roles and everyday jobs apply to each store. In addition, the company continues to open new stores to reach more clients. Hence, the place/distribution element of Walmart’s marketing mix helps attract customers by making shopping suitable in terms of location.
Promotion. Walmart’s promotional mix is composed of ads, sales promotions, personal selling, and public relations. The company promotes in newspapers and on websites. Walmart uses sales promotions in the form of special deals and discounts. Individual selling happens at Walmart stores, where sales personnel encourage customers to try new products or package deals. In terms of public relations, the company uses press releases to notify customers and stockholders about policies, programs and strategies. The firm also sporadically sponsors charity programs. Thus, the promotion component in Walmart’s marketing mix helps improve the company’s ability to attract customers to its stores and helps shape brand recall.