Executive summary
Wal-Mart Inc. has been in existence since 1962. The retail store chain has significantly expanded in the global market segments in Europe, America, and Asia. Its powerful retail brand with “Everyday low price” slogan depicts its successful money-for-value pricing policy and strategy (Zook, &Graham 2006, p.15). Even though Wal-Mart has managed to develop a strong and vibrant physical environment, e-commerce branch of business that entail proper service provision process supported by technology, and timely product placement, its people management as a process of service marketing is a problem and creates unnecessary negative publicity and jeopardizing its overall growth, hence destroying its image. They need to develop proper e-commerce management strategies, more so on its online product differentiation, online market segmentation, intranet services and good website to facilitate employee’s management.
Introduction
Wal-Mart Stores, Inc. is a United States’ public corporation that operates a series of supermarket stores globally. Founded in 1962 by Sam Walton, Wal-Mart is the largest full-line discount in the world in terms of sales and revenue. Initially, it was purely brick and mortar chain of stores, but the retail store has grown to a multimillion dollar investment that no other company has matched. It is billed as the single largest employer in the United States. Its initial rapid expansion initiatives were concentrated in the outskirts of small towns and buying out small businesses around these regions (Zook, &Graham 2006, p.17). Recently, however, the company has diverted its growth initiatives to e-commerce. This is to solve the problem of limited penetration of global market and facilitate the supplier-retailer business initiative.
The company has a powerful retail brand, with “Everyday low price” slogan depicting its value for money marketing policy (Zook, &Graham 2006, p.15). Its core competency relies on its ability to apply various forms of information technology to support its internal operations. However, the shear big size of Wal-Mart has challenged its product specialization and concentration on a specific niche market. It means they may fail to concentrate on specific products and services, hence inability to cut a niche for the particular services. Focused competitors may therefore concentrate on particular areas of specialization and outdo them.
Retail Product and Services
Much of the supermarkets stores’ success is attributed to its merchandising foresight, good pricing strategies supported by cost-conscious production, efficient marketing communication, good logistics in terms of distribution system (Zook, &Graham 2006, p.17). Its well established online retail section that mainly concentrates in toys and electronics has also given the company an edge over other chain stores. In fact, Wal-Mart has combined a full line of groceries and general merchandise, combined with wide range of services such as pharmaceutical services, dry cleaning services, and studios, hair-dressing, insurance services among other various services.
Website and Online Services
Wal-Mart has a powerful website that supports its online retail services. The company has managed to adopt a website visitor analysis programs that they use to track and analyze online customer behavior. This program is supported by the software eLuminate marketing tool. It helps identify what customers need most in the store shelves. The analysis of the website visitor is also an important process that helps marketing department access information about the visitors and at the same time help in the facilitation of online customer service (Grant & Neupert 2003).
According to Gap Model, Wal-Mart may be considered to have listened and known what its customers needs through its online services. The simple use of technology is to increase efficiency in customer service. It eases the way customers purchase their products. However, the most critical part of it is for the company to understand the complex customer demand before they can know what service to improve.
Internet Marketing Alliance
Towards the end of last decade, many marketing alliances emerged between major retailers as internet companies increased in number. Wal-Mart stores, the world’s largest retailer partnered with American Online, signaling their intention to bring their services to closer to people.
The two companies agreed to develop a low-cost Web service for consumers who had not got access and at the same time help each other promote their services. It subsequently followed that Wal-Mart customers were supplied with software that allowed them to set up the service through AOL’s CompuServe service (DePamphilis 2007). The aim of Wal-Mart was to funnel as many customers as possible to its newly designed website. The target services were in pharmacy, photo center services, and travel services.
Wal-Mart’s Business Strategy
Wal-Mart adopted high technology which has been rising over the years, consequently leading to success on several of its activities. Basically, most of its products are advertised over the internet, thus increasing accessibility by its clients (Pahl & Ritchter, 2009). Wal-Mart’s superior online marketing strategy complements its mission statement and has seen its product being well positioned in the market. The company’s reputable brand name is a source of competitive advantage as it lures customer traffic on its website. Wal-Mart’s low cost strategy offers are also an effective marketing tool being implemented through it e-commerce structure. Likewise, pricing appears to be the key element of Wal-Mart’s marketing mix as seen by its high turnover growth. Although Wal-Mart benefits from marketing synergy through its joint venture co-branding, it could end up with a reputation of disloyalty as was revealed after the breakdown of the partnership.
Wal-Mart’s E-Commerce Operational Strategies
Established as a separate independent company in 2000, Wal-Mart.com was operating in a joint venture between Wal-Mart and Accel Partners. In 2001, the company acquired all the minority shares in Wal-Mart.com so as to allow it establish the tight integration of its e-commerce and physical business. This kind of integration was as costly to the company as it was not within company’s initial business plan and strategies.
Wal-Mart has reconfigured its value chain through horizontal and vertical integration. For instance, online direct purchase of products from manufacturers has become an instant success in their cost of production reduction initiatives. The company has also established core competency in its patented software technology. This assists them in the provision of efficient link between the company’s value creating activities as well as boosts business efficiency by increasing speed of transactions as well as fulfillment of services with little error. Some of the main transactions include order processing, outbound transportation, and customer services. They form an integral part of the long-term growth strategy.
One of the major strength of Wal-Mart is its intense customer focus, with low price production and pricing being their main approach to success. There are mainly two types of e-commerce; business-to-business (B2B) and business-to-consumer (B2C). According to Carolyn (2010), Wal-Mart major strategy is the cost leadership strategy, which basically focuses on customer satisfaction. In this aspect, products are sold at an average price so as to attract a big mass market, thus leading to higher profit gains.
However, Wal-Mart’s e-commerce strategy has mainly been focused on Business-to-Business (B2B) e-commerce. B2B e-commerce is that which supports transaction between business across private networks, the internet, and the Web. This is in contrast to its customer focus policy that has been dominating its strategies since it was founded. Wal-Mart’s emphasis on B2B e-commerce could be attributed to the belief that this strategy is more valuable, as it help them save money and offers competitive advantage. B2B has proved essential in areas such as purchase of raw materials for production of products, tools, and machine parts, office equipments, and transportation and shipping services.
Just like many companies that use business to business e-commerce, Wal-Mart offers its services through EDI networks. The EDI transaction takes place over the internet. Following this trend, Wal-Mart requested its over ten thousand suppliers to implement Internet-based EDI, significantly dropping the previous private network. EDI makes it easier for Wal-Mart to place products orders directly to suppliers’ information systems with no human intervention, thus reducing the cost of transaction. In certain instances, orders can be automatically placed by software that recognizes when inventory becomes low. This process expressly saves buyers as well as sellers time and money during transaction.
Wal-Mart also uses its online business to differentiate its products. This differentiation strategy helps the company develop usage for a set of incorporated actions that are intended to improve the delivery of goods and services. Although this strategy targets customers, who are expected to recognize that these goods and services are different and unique, it has not penetrated much of the customers’ views because of large number of products under Wal-Mart brand. But so far this strategy has ensured increased production of its products as well as profitability. Its products are considered unique, law priced, giving them a competitive advantage both locally and internationally.
Strategies and Processes to Correct the Deficiencies
As stated earlier, one of the Wal-Mart’s corporate strategies is to increase its global presence through effective customer focus. The company may have not implemented other strategies such as customer relations in a proper way. Several lawsuits and protests have come up in the recent past, which relates to the company’s failure to adapt to the good employee relations (Francis, 2003). How can human resource fit in the company e-commerce strategies? The company needs to adopt a web technology that would not only speed external processes of business transactions but also lead to increased internal process management. For example, well integrative web design will include a fully functional intranet, which allows employees access to a variety of human resource information, e-mail, and applications from desk-tops. This would help reduce its paper work and cut process time (Carr 2000, p.208). More importantly, employees are able to present their complaints to the senior management, discuss issues online and strike a mutual agreement on various issues related to work and progress.
In another perspective, Wal-Mart can act on its mismatching business strategies. Notable, the company has all along directed its business strategies towards its customers, through price management. However, the online business focuses more on business to business e-commerce, thus failure to reflect its long term goal of business customer-based strategy. Moreover, the differentiation strategy has not worked effectively for the company’s e-commerce, driving the strategic approach a little off the route. In principle, differentiation strategy involves launching of products and services in a differentiated manner so as to reduce price sensitivity of such commodities. Wal-Mart failed to differentiate its products according to the nature of its customer range, thus jeopardizing its growth potential. In fact, the company assumed that much of its online client base was homogenous in nature; something that has never been true in the true aspects of diverse marketing environment. It is thus important for the company to develop more differentiation strategy through more partnerships as in the case of its physical stores cases. Again, the need to explore more of the business to customer e-commerce strategy is necessary in the alignment of the overall business goal of customer satisfaction.
Wal-Mart’s online shopping strategy may prove difficult to integrate considering the fact that most of the purchases done by customers are from its offline stores. It is therefore logical to assume that an integration strategy may need more offline customers to pick up its business. For example, it is estimated that offline accounts for 99% of all the business transactions, hence the need to focus more on offline customers to facilitate its global growth strategies (Lamb, Hair & MacDaniel, 2008, p.146). Additionally, the global growth will need more strategic market segmentation. That is, each region should be aligned through offline design, as characterized by the customers being served per market segment.
Conclusion
Wal-Mart has a well advanced offline marketing services. The company has effectively expanded their product services provisions. They have also diversified their products and services ranges through physically well designed services and excellent brand development, appropriate product placement, competitive pricing strategy, and fastened process of service retail through technology.
On its online side of business, the retailer has also ventured in its e-commerce, through establishment of more integrated B2B strategies. However, this form of e-business approach has not matched its overall corporate strategy, which emphasize on the people aspect of their expanded market mix for services. First, they have failed to differentiate its products to fit the demands of its varied online customer base (Sang-Hun, 2006). Secondly, their market segmentation is only enhanced in the offline business, failing to pick up in the online version of its business. Thirdly, the online business strategies have not observed the need to integrate employees’ needs in the e-commerce operations. It thus follows that workers have no opportunity to present their issues through intranet.
In order to increase Wal-Mart’s e-commerce accessibility, it is important that the company adopt a strategic approach to online trade by having an intranet services to increase employees’ interactions and ability to present their views in an easy way.
Recommendations
- Wal-Mart’s priority should be on how to keep its loyal customers in both online and offline line of businesses intact and build satisfied employees. It therefore means that well-being of the workers through adequate and favorable communication channel should be made part and parcel of marketing service goal for the online business.
- It is known that e-commerce do have extended lifeline to businesses selling products and services (Milne 2007, p.35). The company can develop more incentives in help its online customers visit their website more and make online purchase part of the service delivery process. These incentives will raise service productivity and subsequently be reflected in the customer.
- Wal-Mart needs to acknowledge the roles played by online market segmentation just like it has done in the offline business. People from different geographical locations and cultural backgrounds have separate tastes and preferences, thus the need to recognize this in the online marketing design. The double effect is that it will eventually build the company’s public relations both globally and internationally; and finally
- It is acknowledged that e-commerce holds important future in the continuous improvement of the company’s global sales. It is estimated that online sales is likely to grow by a rate of 17% (Milne 2007, p.36). In this aspect, it is important the company creates a more customer-friendly website. Such a website would emphasize the retailer’s customer focus business strategy by enhancing online operations globally. For customers, they will be in a position to save time, lower opportunity costs and generally increase an easier way to get into contact with the services they need. For the retailer, it would be one way of extending its global presence, a feat that has not perfectly worked in its offline business. The reason is that they are able to save fixed costs and broaden the customer base globally, therefore giving the company a lease of life in the international scene.
Proper implementation of these strategies will boost Wal-Mart’s goal of further global presence extension. The company will not only expand faster into the global market, but will be in a position to defend its global leadership in retail business. This will help Wal-Mart achieve its global business presence by maintaining low price and high quality reputation.
Reference List
Carolyn B. (2010) “Organizational Theory”. Web.
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DePamphilis, D. (2007) Mergers, Acquisitions, and other Restructuring Activities. New York, Academic Press.
Francis, H. (2003) HRM and the Beginning of Organizational Change. Journal of Organizational Change Management, Vol. 16 No. 3, pp. 309-327.
Grant, R., & Neupert, K. (2003) Case in Contemporary Strategy Analysis. Chicago, Harvard University Press.
Lamb, C., Hair, J. & MacDaniel, C. (2008) Essentials of Marketing. Chicago, Cengage Publishers.
Milne, P. (2007) Motivation, Incentives and Organizational Culture. Journal of Knowledge Management, Vol. 11 No. 6, pp. 28-38.
Pahl, N. & Ritchter, A., 2009, SWOT Analysis – Idea, Methodology and a Practical Approach Akademische Schriftenreih. New York: GRIN.
Sang-Hun, C. (2006) “Wal-Mart Selling Stores and Leaving South Korea.” New York Times, 2006.
Zook, M., &Graham, M. (2006). “Wal-Mart Nation: Mapping the Reach of a Retail Colossus”. in Brunn, Stanley D.. Wal-Mart World: The World’s Biggest Corporation in the Global Economy. Routledge. pp. 15–25.