Analysis of Wal-mart’s Business Strategy and How the Company Manages to Keep the Top Position in the Market

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Wal-Mart Store Inc. is currently ranked as number 1 one the Fortune 500 list for the 6th year in a row. Walmart which is based in Bentonville, Arkansas was founded in 1962 by Sam Walton owns a series of grocery stores, Club store, hypermarkets and discount stores. As the world’s largest company with over 2.3 million employees, Walmart generates over $500 billion according to the Fortune 500 list. Walmart Inc. operates all over the world including the United States, Mexico, India, Japan, Argentina, Canada, Chile, Brazil, Central America and The United Kingdom with 11,718 stores and clubs. The U.S operations are responsible for 63% of their overall sales.

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One of Wal-Mart most successful strategies is complete market domination. When the company was first established, founder Sam Walton created this philosophy and the company still follows it. Walmart considers themselves to be at discount retailer. This is because their products are sold as low as they can possibly go. By selling at the “lowest price.” Walton outlines that the essence of successful discount retailing to cut the price on an item as much as possible, lowering the markup, and earn profit on the increased volume of sales. (Wal-Mart pricing philosophy document, Because of this, Wal-Mart is ranked the world’s number one retailer.

Another strategy that appears to be working very well for Wal-Mart is its expansion. Wal-Mart has successfully expanded both in the United States and overseas. Recently, the expansion strategy has allowed Wal-Mart to gain entry by taking over the retailer market. Once Wal-Mart has purchased the store, it is then converted into a Wal-Mart. This is a strategic move because it allows the company to build brand familiarity with Multiple store fronts within a small radius.

Third aspects of Wal-Marts strategy is to have its name recognized worldwide in a positive manner. They aim for overall customer satisfaction and partner with other companies that have a positive Brand. For example, some Walmart stores and have a subway or McDonald’s inside of the store.

Wal-Mart’s Competitors, Industry & Competitive Strategy

Wal-Mart and its everyday low prices make it is difficult for competition to keep up with them and their practices but that doesn’t keep them from trying. Every move that Wal-Mart makes is done so intentionally in an effort to keep their prices low and competitive. Currently, Wal-Mart has plenty of competitors offering the same products and services. Wal-Mart’s top competitor is Amazon. Amazon is known for its two-day shipping with Prime membership and its great customer service and quality products. There are currently 342,000 people employed by Amazon. They also focus on convenience for the customer. To compete with Amazon, Wal-Mart introduced its same day delivery for certain markets. Customers in Wal-Mart’s test markets can choose from as many as 5,000 items, ranging from TVs, toys and sporting goods, and get them the same day for a flat rate of $10. Instead of using distribution centers, orders will be shipped out of Wal-Mart stores and will be delivered by UPS. (Mao, 2012) Walgreens is another competitor of Wal-Mart, Walgreens offers prescribed and non-prescribed drugs. They also focus on offering the largest number of generics possible. They also sell, household products, make-up, fresh foods etc. Wal-Mart combats this by offering over 300 generic medicines for $4, similar to those Walgreens offers. Target is also considered to be a competitor of Wal-Mart’s. They work with similar distributors and offer similar products.13% of Wal-Mart’s revenue comes from Target. Publix and Kroger are also considered to be competitors. The company’s competitive strategy is to dominate every sector where it does business. It measures success in terms of sails and dominance over competitors. Its strategy is to sell goods at low process, outsell competitors, and to expand. Generally, Wal-Mart does everything it can to win over competitors.

To compete with other companies in their industry, Walmart believes in building more locations and making them bigger to be able to appeal to the needs of each and every customer. The idea is to make each location a one stop shop that houses everything that a customer may need. This offers convenience for the customer. Walmart believes in being hospitable to words is customers. They also believe in servicing the customers, respecting the customers and providing an excellent interaction each time. This is usually done by having door greeters at each entrance to welcome and bid goodbyes. The 10-foot rule is also commonly used to make customers feel at home. This rule simply states that an employee must smile or greet a customer that is within 10 feet of them.

Wal-Mart’s Vendors

“One of the critical issues with Wal-Mart and the companies servicing it is the flawed everyday low-price strategy,” said one vendor who asked to remain anonymous. “There are too many people pricing at or below cost, and this puts pressure on the manufacturer to price products below cost or below list.”(Wilensky, 1994) Wal-Mart currently has over 60,000 suppliers or vendors in order to offer the best prices and the widest variety of products for its customers. They tend to have great success managing their inventory system and it is mainly because of its vendor managed inventory system. This system allows vendors to access Wal- Mart’s data base and see real time updates on its inventory. They can then provide the needed items to keep the store full and keep a constant replenishment. They utilize this technology to help then keep their prices low and the availability and options for a customer. With Vendor managed inventory, it takes the stress off of one person to keep up with which products need to be restocked. Wal-Mart goes through numerous steps to choose the vendor or vendors that will be responsible for the vendor managed inventory. They must be reliable, and trustworthy in order for them to be given this large job or opportunity. Collaboration and Communication are two factors that make this system a success. The use of certain technology also assists the vendors with a smooth running of the system. Predictions can be made based on trend, season and history in order to fulfill the growing demands of the customer and the company on a whole.

Wal-Mart’s Customer Base

Studies by consulting firm Kantar Retail have shown that the typical Wal-Mart customer is a white woman in her early fifty’s that earns between $53,000 – $55,000 annually. Target on the other hand, has a customer base about 5 years younger that makes approximately $12,000-$15,000 more. Since Wal-Marts prices tend to appeal more to the low and middle class, they have a large customer base. It earlier times, Wal-Mart tried to revamp the stores by offering a higher end luxury product with a higher price. The result of that was a decrease in sales and a loss of customers. They ideal target customer for Wal-Mart is the single person/ bachelor living on their own, customers who are recently married with no children, empty nesters and large families with small children. This demographic seeks the prices that’s and the quality that Wal-Mart offers, Wal-Mart also seems to target brand switchers. These are people who are not loyal to a specific brand but are attracted to product for other reasons such as cost, ingredients, flavors etc.

Walmart’s Communities

For well over 40 years, Wal-Mart has been focused on giving back to the communities in which their employees live and where they do business. Not only do they donate money, but they believe in going out and volunteering time while getting their hands dirty. Employees are encouraged to volunteer their time when it is needed to help give back on behalf of Wal- Mart. They offer grants to Non- profit organizations, churches, schools, recreation centers etc. Wal-Mart also contributes a lot of money toward disaster preparedness, relief and resiliency. Last year alone, Wal-Mart gave over $1.5 Million to the community to help with rebuilding after natural disasters, disaster preparedness training and courses and safe havens during disasters and crisis’. Wal-Mart also believes in secondary education, so they offer scholarships and back to school assistance for eligible employees and their dependents. In the last year alone, Wal-Marts giving exceeded $1 billion dollars.

SWOT Analysis

The SWOT analysis for Wal- Mart gives incite as to how the number 1 company on the Fortune 500 list uses both its strengths and weaknesses to attain success. On a weekly bases, Wal-Mart’s all over the world services over 270 million customers. Wal-Mart plays on its strength of being the largest retailer with a strong international presence. It is well known that Wal-Mart offers a wide variety of items at a low cost which helps to develop its e- commerce. The company could stand to improve in the eye of the public. There have been several legal proceedings that have reflected negatively on the company. This has caused a decline in sales and the customer base. Continued involvement could ruin their reputation and tarnish the brand. Online sales have been and is quickly becoming a great avenue for increased sales and profits. Establishing new online avenues could help the Wal-Mart reach new and more customers which in return will grow the customer base and possibly build brand loyalty. Also, if Wal-Mart continues to expand internationally, that is another avenue for new customers, partnerships and revenue. There are several islands in the Caribbean that have not been penetrated with chain grocery supermarkets such as Wal-Mart. Introducing the stores to different parts of the world can be a bold move that can keep Wal-Mart stores ahead of the competition. There are several risk factors that the company faces, competition being one of them. Wal-Mart is the best at what they do, but there are so many companies that are quickly catching up and attempting to offer the same services and products with more convenience and at a better price. Continuing to be a trendsetter will help Wal-Mart stay ahead of its competition. Also, continuing to find vendors that offer the best pricing on the market will help keep the competitive edge.

Wal-Mart, Its Shareholders and The Board of Directors

There are many people that work behind the scenes and hold stake in the company to ensure that Walmart remains successful and that they make Moves that will be beneficial to the growth of the company. Shareholders are those who have Financial stake in the operations of the company and non-market shareholders and do not have any type of political or economic stake.

Shareholders are usually interested in the success of the Walmart. They own a certain number of shares and generally want to see a return on their investment. In most cases they want to see the Walmart stock rise and growth of their dividends. In 2018, Walmart was able to return $14.4 billion cash to its shareholders in the form of dividends and purchasing of shares. After Sam Walton died, the business was left in the hands of his wife and four children who are now only operates over half of the company. Jim Walton who is the youngest son of the late Sam Walton owns 10.5 million shares. Alice Walton, the daughter of the late Sam Walton owns 6.7 million shares. S. Robson Walton who is the oldest living son of the late Sam Walton owns 3.34 million shares. Mark Lore who is the current president and CEO of the Wal-Mart U.S e-commerce holds 3.3 million shares and Walton Enterprises, which is the family business that is responsible for managing the company fortune holds the remaining 1.4 billion shares. The strategic split of the shares by Sam Walton was to avoid having to woot massive amounts of money for estate taxes. The split happened before the stock appreciated in order to save the family as much money as possible on taxes so that that money could be passed along to future generations. Walmart has a team of 11 board of directors. They are responsible for ensuring that the company always operates with integrity and keeps them accountable for any decisions that have been made or any action in general.

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