Industry and Organization Analysis on Retail Industry Walmart
Retail is the process, of selling of the goods and services to the consumers through multiple channels of distribution, it is the process, to gain the profit and supply chain is involved in this process, to satisfy the customer wants and needs. The study is consisting of the analysis of business, of retail industry, that how grocery retail chain, do the series of the improvement to progress and to earn profit in the future. Retail Industry is dependent on the product development, diversification, organic growth, franchising, acquisition and investment, if want to grow in global competitive market.
Wal-Mart Stores, Inc. is multinational retail cooperation; it runs the large number of discount warehouses and superstores. It was founded by the Sam Walton in 1962; its head quarter is in Bentonville, Arkansas. Wal-Mart has 11,527 stores in 27 countries; its direct competitors are Target, Kmart, Safeway, Home Depot etc. Wal-Mart and other retail store, meet everyday requirements to meet the daily needs of the consumers, the diversity in the socio-economic background is the challenge for retail industry, as they are require to meet the demand of the heterogeneous customer group, they have planned strategies accordingly. Strategic management is based on, analyzing the alternatives routes for the growth of the company, for the competitive advantage and long-term effectiveness, strategic planning plays an important role, there are different marketing strategies which analyze that how to build customers relationship, how to measure quality and how the prices should be fixed. In the study, there is the broad overview about, how important information is and how to develop and implement an effective retail strategy.
Global Marketing Strategy:
The term “strategy” is frequently used in the retail sector; retail management is take place through making retail strategies. A retail strategy in globalization, is identify as the retail target market, retailers plans, that how to satisfy the target market needs and how retailers plans to build sustainable competitive advantage.
In target market the retail store industry, target its customer from different sectors and focus on its resources. A retail format is described as a retail mix and the nature of operations, in the format there is focus on the pricing, policy, promotion, advertising etc. There are also focused on the approaches of location, design of the store and customer-based services that should be given. A sustainable competitive advantage, could be achieved in this way for a long time, example, Steve Shore and Barry Prevor, opened their first store in 1985, near Philadelphia’s University of Pennsylvania, The chain sold, sportswear of university logo at low prices, its 200 stores have expanded now, they are offering humorous t-shirts, and basic clothing for children, men, women. It is the retail store in which, prices are low but quality is high. Steve and Barry’s business model was to keep prices low, by not to do advertising. They relied on publicity to run the company, manufactures allowed the buyers to buy the products at low prices, this is the reason large retailers frequently placed their orders and the company become successful throughout analyzing competitive marketing strategy. You can also buy essay on EssayWritingService for easiness.
Global retail strategies are the approaches to built the sustainable competitive advantage, attracting the customers through prices and products is essential, to maintain and manage the customer loyalty, human resource management, distribution and information system, customer services, relationship with vendors, unique merchandising and location, are the aspects of the sources of competitive advantages (Stolt, 2010).
Analysis of the Industry:
The retailing concept, is the management process, in which retailer have to focus on the needs of the target market, if the retailers identify and satisfy the need effectively than its competitors then it will be successful; successful retailers satisfy the target segment better than the competitors does. Similarly, a retail market is a group of people, who have the identical needs; the retailers have to focus on the consumer from different segment, example, to notice their lifestyles, demographics, buying behaviors, geographic location etc, is important.
Trends and competitions can affect the retail industry, the retail have to stay focused on, emerging trends in the people, emerging technology and to figure out the customer wants. Small retailers can use social media to know about the emerging trend, latest styles of clothing, accessories, foot wares and food-items, should be appealing to the consumers, if industry want to make loyal customers.
Competitors are important; if company wants to determine direct competitors then it has to look at the bigger picture, for example, for a regional discount store, it is difficult to compete with the Wal-Mart stores opening every month. There should be focus on the prices, services or quality, the competitors are offering. Overall performances should be evaluated example, personal growth, the retail profits, growth in domestic product (GDP), performance of economy, inflation etc. These macro factors can affect retail industry. Inventory evaluation like its turnover rate should be compared directly to the competitors (Rafiq, 2014).
Porters five forces analysis, could also be helpful to focus on the overall trends, from threat of new entrants, one can notice the majority of emerging retail stores, can establish the favorable supply contracts which can give chain store, a competitive advantages. Power of suppliers and buyers, are also identified, example, in retail industry suppliers and buyers have very little power. Availability of substitutes, capable one to deal in a wide range, of products and services, for the absolute advantages, there should be uniqueness in the products. Through competitive rivalry, retailers have to face high competition in the market, because rivals can take advantages at one point, by offering special services or discounts to the customers.
The retail industry can assess its market feasibility for economic uses and development, market potential targets, design, project and site planning, development of finance institutions and improvement in existing business, through knowing the needs of the target market and analysis of the macro factors. Qualitative and quantitative methods could also be followed to know about the, demand side analysis and supply side analysis. The special conditions and opportunities of the market could also be known by analyzing the demand and supply. Demand side is based on the population rate, income, demographic groups etc. Supply side analysis is based on the, location, quality, market area, national and regional trends, comparable stores etc.
Retailers have the great competitive advantages, they can engage in the market penetration opportunities if they want to be successful, expansion opportunities, can build the retailers reputation in the market, if they are experienced and skillful, they can attract the loyal customers. Retailers must peruse diversification opportunities to exploit the competitive advantage (Jia, 2006).
The unique capabilities that provide sustainable competitive advantages could be, Management Capability, retailers should understand the depth of management, management commitments to firm and top management should have experience and capabilities. Merchandising Capabilities, retailers must have the knowledge about the skills of buyers; they have to maintain the relationship with vendors and support advertising and promotion capabilities. To manage Financial Resources retailer must knowledgeable about, cash flow, ability to deal with debt or equity, financing etc. To get competitive advantages, Store Management Capabilities are also needed, management capabilities, commitment and quality of sales associates to firm. Operations like cost structures, management information system, loss prevention system, inventory control system, distribution capabilities should also be properly managed. Moreover, location of the store and customers loyalty plays an important role in gaining competitive advantages.
Direction of the Industry:
Assessment is needed to know about the direction of the industry, retail store industry or stores are based on their brand images, successful global retailers have the strong brand image or they are specialty stores. Unique merchandise such as Star Bucks and McDonalds are offer deep assortment and low prices, to appeal different consumers from different cultures. Wal-Mart has given discounts on food this is the reason they are also successful. Retailers need to category specialists; if they want to succeed globally, they should operate all function efficiently. Retailers need to use technology and need to mange inventories; they should also control the global logistics system (Gov, 2013).
Global culture and adaptability is must to direct the retail sector, one have to think globally, culture and infrastructures of the country is important to focus, structure of regional committees, should be practice regularly. Retailers should have the awareness about the strategies that should be implemented of best global practices are needed in the specific culture or area, if they want to know the direction of their business. Example, before Starbucks in China, coffee was not to drink; however, Starbucks understand their culture and promote its coffee, now there are two dozen of Starbucks in Beijing and Shanghai. The direction of the Starbucks industry is going in a positive way as they are earning large market share in Coffee industry every year.
Evaluating financial resources help retailers to sought out the directions of the industry and represent better global opportunities, long-term commitment and planning’s, generate the short-term profit like Wal-Mart and Costco face difficulties to in achieving success, in new global market, however, their strong financial position, helped them to keep investing in project and they become successful.
Innovations and Consumer Benefits:
To do innovations and build the sustainable competitive advantages, by offering the new and excellent services consistently, for any retail industry is important. Perfect services from the sales persons is essential to maintain the long-term customers relationships, through coaching and training of the employees, great services could be given.
Innovations could be done in the products to maintain the good customer’s services, example, Whole Foods, is selling organic products, to satisfy the health conscious people. They are still innovating new techniques for the consumer’s benefits. Innovations take place if retailers identify the strategic opportunities, do self-analysis, know about their mission, and do research and development, conduct the situation audit, know about the competitors, environmental factors, evaluate their financial resources, performances etc.
Blue Ocean Concept:
Blue ocean concept is the alternative strategic approach, blue ocean strategies can lead the retail industry towards success and development, through focusing on the blue ocean concept, retail industry or firm can focus on value innovation, it provides the theoretical frame work, which highlights the market condition and how the firm should be operate (Smith, 2010).
In retail industry, demand is created rather than fought over; there are opportunities of growth and profitability in blue oceans strategies. Companies grab the customers for the grater share, of limited demand; they make the competition irrelevant and pursuit the strategy of differentiation. Blue Ocean is a set of strategic move, the company or industry can do appropriate analysis, through become aware of set of managerial actions and decisions, which are involved in creating market business. Brand equity could be last for years if industry follows strategic management of Blue Ocean, because it is very powerful.
Walmart Retail Industry Analysis
Wal-Mart analysis could be done through knowing it, Macro, Micro, Internal and External (SWOT) environment, the industry want to get competitive advantages and want to earn profitability, for this the Wal-Mart have to stay focused on its environment. For the analysis of the Macro environment, PESTLE analysis could be done.
In political and legal environment, there are rules and regulation by the government, which Wal-Mart always follows, this is the reason Wal-Mart is successful, there are the laws for the customer’s protection, misleading discount prices, truth in advertising etc. The social environment is also favorable, as Wal-Mart continuous to contact with its customers and launched fashionable products for its customers. In environmental they are focused about the consumer life styles, desires, willingness etc, but issue like conservation, deforestation, use of pesticides and marine pollution could be occur.
For the analysis of the microenvironment, they use porter’s five forces, example, they have faced the threats of substitutes, in bunch of small and big retail stores, but they have variety of the product so they have overcome by threats. New entrants also threaten them, as Amazon is leading in online business. Competitive rivalry within the industry is also high, Wal-Mart have so many competitors in the whole world, they have less bargaining power of buyers and supplier because, they have many customers and suppliers around the world.
For the analysis of the external and internal environment, SWOT analysis should be done, their strengths are they have effective management of supply chain, they are competitive in information system, they have wide range of products etc. Their weaknesses are, Wal-Mart does not follow differentiation strategies, negative publicity, high turnover rate of employees etc. Opportunities are they have good chance of international operations, enter into baking industry and put effort in social welfare, through this they can be more strong and successful in competitive market. Threats are increasing rate of competitors, international barriers and market saturation etc.
Global Business Model:
Wal-Mart is the world largest company; earned revenues of $485 billons, in 2015. Wal-Mart has 2.2 million of employees, which make it biggest employer in the world. It has the innovative business model because of it retail environment, involving the consumer preferences, great experience to customers and lead on price (Vij, 2015).
The retail industry is the second largest industry, in U.S. The industry is responsible for the 12% employment; the majority of the retail revenues are produces by chains, the biggest one of them is Wal-Mart; Wal-Mart is creating fast moving and ultra competitive global retailing environment. Wal-Mart is selling the products that sustain the customer as well as the environment; they are efficient in retail marketing, and have good will and good reputation around the world. Wal-Mart is committed to implement the environmental measures, and give quality products overall the world. It is the huge retailing stores, it help the customers and communities in saving money, eat healthy food and live better (Marcilla, 2014).
Innovation and Strategies:
Wal-Mart strategies are based on the differentiations and innovations; they have multiple accesses to strategies, they are highly dependent on their channel partner. They have strategy that is “user friendly”; their customers can do shopping online by placing orders through mobile phones and online sources, customers enjoy services from anywhere, Wal-Mart have acquired the several tech companies to develop its technology platform. “Provide all services under one roof”; Wal-Mart is giving various services, like technology, clothing, food, care clinics, wellness products etc all under one roof, comparatively at less prices, this is the reason they have competitive advantage and they have number of customers. “Deliver a great experience” and “Be competitive on assortment” are he strategies using by Wal-Mart, they have large number of product range and variety across digital and physical channels. Wal-Mart delivers great experience to its worker and customers, there are training and growth for the employees and they are focus on retaining of employees through giving them promotion, rewards and incentives.
Wal-Mart target its customer through pricing and promotional strategies, they have make the mind on people that they are selling products at less price or they are cost-effective, Wal-Mart promotional strategy is “lowest price always”, which attracts the customer, they spend about 2.1% of their budget in advertising every year. They are focused on the product strategies and distribution strategies also, because company has its own brands, under which products are sold, they have both traditional and online stores, from where customers can get 24/7 services and satisfaction.
Wal-Mart have to do improvement in its performance, if want to company to grow continuously, for future, Wal-Mart has to do the international business practices, such as green field investment, franchising, joint venture with local partners etc. Wal-Mart properly protects its technology advancement, because when they entered the German market the competitors copied their IT, protections should be needed. Wal-Mart should improve its proposal so it can grow, in future, there will be more focus from the retailers to improve the stores, so there is need of effective planning. The company should stop the negative action in the communities, so they reputation could be improved. They should expand their business in internationally for the more profitability.
Wal-Mart need to focus on the points where they are lacking, effective strategic planning is needed in the case of employees management, as the employees turnover rate is high, to retain and train the employees is very important. Wal-Mart should focus on the needs and demands of its employees to reduce the turnover rate. Wal-Mart should avail the opportunities it has, there should be more focus on the online shopping for the resistance of the customers, they need to more humble to the human beings, as through this they get power of customer change. Customers have some issues this is the reason they do not buy from the Wal-Mart, issues should be resolve by taking feedbacks; feedbacks should be taken from the employees and customers to improve the services. Luxury goods are more in demand, mostly, people do not care about the prices they just want the good products, range if luxury goods and other goods should be increases, to capture target market. Differentiation strategies should be used if they want competitive advantages in the market, differentiation will help them in making good will in the market, and customers will trust Wal-Mart. They need to strengthen the points they are best at, through this they will more success and can save their cost; they should reduce the cost in shipping and inventory.
- Gov. (2013). A STRATEGY FOR FUTURE. 1-47.
- Jia, P. (2006). Entry and Competition in the Retail and Service Industries. 1-111.
- Marcilla, L. B. (2014). Buisness Analysis of Wal-Mart. 1-67.
- Rafiq, M. (2014). Principles of Retailing. Palgrave Macmillan.
- Smith, B. (2010, March 10). What Is The Retail Blue Ocean Sales Strategy? Retrieved April 7, 2016, from https://retailleverage.com/2010/03/10/alternative-channel-sales/
- Stolt, R. (2010). Analysis of WH Smith’s Retailing Strategy. GRIN Verlag.
- Vij, R. (2015, Nov 6). How Walmart Makes Money? Understanding Walmart Business Model. Retrieved April 7, 2016, from https://revenuesandprofits.com/how-walmart-makes-money-understanding-walmart-business-model/