January 10th, 2018
Walmart’s Communication Strategy – Situational Analysis
Situational analysis involves the assessment of the current marketing-mix strategy of the company, internal environment (strengths and weaknesses of the entity) and the external environment (opportunities and threats; including competitiveness, customer analysis and other environmental factors – e.g. political, economic, socio-cultural and technological). The section below evaluates these factors in the case of Wal-Mart.
Marketing Mix Analysis
Of the four marketing-mix elements – price, product, place and promotion – Wal-Mart’s emphasis has historically been placed n pricing. The entity’s mission for instance captures the core importance of pricing in the entity’s strategy stating: “We save people money so they can live better” (Wal-Mart, 2011b). To achieve its competitive pricing strategy, Wal-Mart, for instance capitalizes on its purchasing power to apply pressure to its suppliers to lower their prices, thus allowing it to pass the benefits realized to customers by offering lower prices (Trefis Team, 2011). Promotion has also played a critical role in Wal-Mart’s marketing strategy as exemplified by high expenditure on advertising (Wal-Mart, 2011), discounts offered during the holiday seasons (e.g. Black Friday specials advertised various Newspapers), and Gift cards linked to a particular amount of purchases (ConsumerAffairs.com 2011).
The third element of marketing mix is the product. In respect to this element, Wal-Mart’s is disadvantaged by aspects such as quality complaints (ConsumerAffairs.com 2011; Catts, 2008), but its offering of a variety of products making it a “one-stop” shopping destination has been its saving factor. Product disadvantage of Wal-Mart are however heightened by its packaging sizes, which according to the entity’s executive vice president have favored competitors like dollar stores who sold smaller-sized packages that are attractive to customers who are on tight budgets (as cited in Clifford, 2011).
Place has also had mixed effects on the marketing strategy of Wal-Mart. Its store location in most metropolitan regions in the U.S (3,708 units and 596 Sam’s club joints by end of its 2010 financial year) has helped achieve high customer patronage thus high revenues from year-to-year (Wal-Mart, 2011, back cover page). The entity’s online presence (shipping supplies to customers) has helped Wal-Mart achieve further location advantages of penetrating markets that it was initially unable to access due to its physical location (Wal-Mart, 2011a). However, the declining convenience of shopping at Wal-Mart stores has led to some customers shifting their attention to small stores within their residential areas (ConsumerAffairs.com, 2011).
Wal-Mart main strength lies in its enormous size. Through its enormous size it has been able to achieve economies of scale by such ways as influencing its supply chain to acquire products at lower prices, and furthered its growth foreign markets, a factor that has shielded its declining sales in its U.S market (Clifford, 2010). Secondly, Wal-Mart’s strength lies in its variety that allows customers a wide range of brands to chose from. The decline in sales has for instance been attributed, in a Los Angeles Times article, partially to have resulted from the entity losing such a focus and removing some of the less expensive brands from its shelves.
Wal-Mart’s weaknesses mainly exist in its customer service and human resource practices. Through its poor customer service and unfavorable staff treatment (see for example CustomerAffairs.com, 2011; Seeking Alpha, 2008), the entity has slowly eroded the customer experience it was historically associated with. Complaints of lack of motivation for its workforce for instance about in various online forums (e.g. CustomerAffairs.com, 2011; Seeking Alpha, 2008) a factor that may limit the extent to which employees share the vision of the entity, hence their willingness to improve the entity’s service.
Wal-Mart’s customer base is the low and middle income households (“Wal-Mart’s profit rises,” 2011). This customer base is for instance evident by the entity’s focus on competitive pricing as its core principle (Wal-Mart, 2011a; 2011b) and its declining sales after losing such a focus as exemplified by removal of less profitable brands from its shelves in recent past (“Wal-Mart’s profit rises,” 2011). Although Wal-Mart customers, by being mainly individuals and households not organized into associations thus lacking significant bargaining power (Dagmar Recklies, 2001), may not influence prices at the retail giant, the targeting of its products towards lower income levels means that the entity must always strive to remain competitively priced as compared to its competitors. Accordingly, the entity could be forced to invest into smaller stores in residential areas or enter into agreements to counter the onslaught by dollar stores that offer merchandise at lower prices and convenient sizes for such customers (Clifford, 2011; “Wal-Mart’s profit rises,” 2011).
Wal-Mart’s main competitors include Target, Costco and Best Buy (Clifford, 2011; Trefis Team, 2011). Due to it’s the variety that it offers, Wal-Mart however faces competition from other entities such as Home Depot (home improvement retailer) and Macy’s (Apparel retailer) whose product-offerings are mainly focused on a single industry (Clifford, 2011). Due to its numerous size and its largely successful foreign expansion, Wal-Mart’s dominance over its competitors has been so significant that it sales have traditionally been 50% higher than the cumulative sales of its seven closest competitors (Trefis Team, 2011). Wal-Mart however faces new competitor forces with the increasing incidence of dollar stores and drugstores capable of providing smaller-size packages thus lower prices suited to Wal-Mart’s target customers (Clifford, 2011). Resulting from these competitor forces, Wal-Mart needs to evaluate entering into agreements such as contracting with such stores to curtail their impact on its business (Dagmar Recklies, 2001).
Wal-Mart’s external environment is also influenced such other factors as political, economic, socio-cultural and technological aspects. Political factors affecting Wal-Mart include allegations of its attempts to shield legislation that eases unionization of employees (“Mixing politics and Wal-Mart,” 2008), and free trade-enhancing legislations that make cheap imports easily accessible. Economic factors such as recessions also affect Wal-Mart’s business since these modify customer’s purchasing power (“Wal-Mart’s profit rises,” 2011; Wal-Mart, 2011a). Other factors affecting Wal-Mart include its environmental impacts and technology such as the Internet and social media that allow customers engage in more word-of-mouth promotion/ demotion.
Wal-Mart’s opportunity lies in highlighting the unique features it offers to his customers and enhancing customer experience and perception of its stores. Unique features would include the variety it offers its customers to choose from at competitive prices. Customer experience would need improving customer service at its stores. To change the perception of the entity, Wal-Mart needs to engage its customers through different market communication channels. Currently, even the entity’s mission “We save people money so they can live better” seems to communicate to a third party rather than making a promise to the customer. Go to part 3 here.