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Wal-Mart Competitive Advantage With its 3, 200 stores throughout the United States and more than 200 $ billion of annual sales Wall-Mart takes permanent position atop The Fortune 500. The success of Wall-Mart is first of in the customer oriented marketing policy and excellent services provided. According to Jan Mauldin, formerly director of marketing and community programs for Wal-Mart, While profit is the goal, service is the process (Prism Business Media Inc. , 2006). No one can deny that the main feature of Wall-Mart is its unprecedented popularity among costumers which says about the real consumer orientation of the company.
Its utmost popularity is not make-up to hide the heavy corporate face but the real policy of the Wall-Mart top management. The core of the Wall-Mart success is in its retailing and marketing concepts which have been worked out to meet the needs and demands of the customers. Jan Mauldin identifies four of them. The main of them is the concept of the discount store. This concept was the basis of creation of Wall-Mart and remains the main engine of the Wall-Mart marketing policy. The second concept is a complex approach, the variety of products on sale in Wall-Mart.
It indicates the customer orientation of Wall-Mart. the Wal-Mart super center that combines a discount store with groceries and perishables in a total inventory of almost 100, 000 items (Prism Business Media Inc. , 2006). The huge variety of products attracts the customers because they are able to purchase everything they need at one place thus saving their time and money. The newest of the four concepts is the Wal-Mart neighborhood market that provides the services of a traditional grocery store in a building format that is small by Wal-Mart standards. The fourth retail concept is the Sam's Wholesale Club, which is basically a membership warehouse store that carries a constantly changing inventory of about 4, 000 items (Prism Business Media Inc. , 2006). The logistics of the Wall-Mart operations which has been developed perfectly is one of the main advantages of the Wall-Mart stores.
From mid- 70 s the company began using the computer networks to maintain inventory control on an item-by-item basis for all goods in its distribution centers and on a department classification basis for each store. (M. Edgar Barrett, 1999). The management of Wall-Mart succeeded to create the advanced information system using the newest achievements in computer network technologies. The introduction of the latest technologies was targeted to meet the demands of the costumer and provide the better services. The technology of Electronic Data Interchange introduced in 1977 provided excellent distribution services. It connected the Wall-Mart stores with the home office.
Own satellite information system was the largest private satellite network in the world (Kerver, Tom, 1988). The satellite network resolved a number of problems. First of all it connected the head office and the store with the suppliers thus improving the logistics. Secondly it has automated the process of the payment authorization (plastic cards). The improved logistics reduced the advertising expenses considerably. The Wall-Mart stores gained the reputation of the stores where the customer may buy anything he or she needs.
One of the most important achievements of the communication technologies is that the entire system succeeded in putting inventory control in the hands of suppliers, who were responsible for replenishing inventory as it was sold in each of the stores. In return, Wal-Mart gave better payment terms than the rest of the retailing industry. On average, Wal-Mart paid its suppliers within 29 days compared with 45 days at Kmart (Harvard Business Review, May-June 1993). Thus Wall-Mart won the suppliers by more attractive terms of cooperation.
The success of Wall-Mart could be defined by both customer and partner oriented marketing policies. On one hand it looked like paradox because the costumers and the partners have opposite interests regarding the price policy. The customers are interested in buying at a cheaper price while the suppliers are interested to sell at a higher price. The Wall-Mart management is hard to work with the suppliers, but the volumes of purchasing and the terms of payment make Wall-Mart to be extremely attractive for the suppliers. The diversification of the suppliers is one of the keys to the Wall-Mart success. In order to maintain its buying power, Wal-Mart worked with numerous suppliers, keeping buying functions separate for the discount stores and Sams Clubs.
As a result of having numerous relationships, no one supplier provided Wal-Mart with more than 3. 6 percent of its merchandise in fiscal 1990. (M. Edgar Barrett, 1999). Such diversification of the suppliers is very difficult to observe but this enables Wall-Mart to provide more attractive customer oriented pricing policy in combination with the perfect logistics and complex approach to a total number of item sold which is in its turn an unbreakable advantage of the Wall-Mart marketing policy. The core of the Wall-Mart strategy is reducing the cost of operations. Thus on one hand Wall-Mart invests huge amounts into logistics and new information technologies and on the other hand the reduction of cost is the main priority of the managements of Wall-Mart. The perfect ratio of technological investment and reduction of total cost of the services provided is the key success of Wall-Mart.
It is a culture based on profit derived, not from the pricing end, but from the cost end of every transaction, Mauldin said. The plan, always, has been to drive costs out of the system in the stores, from the manufacturers' profit margins, and from merchandise brokers and other middlemen, all in the service of driving down prices at the retail level (Prism Business Media Inc. , 2006). The marketing strategy of Wall-Mart is targeted to reduce the total cost of the operations. Wal-Marts marketing strategy relied primarily on word-of-mouth advertising. Generally, advertising spending was limited to one advertisement circular per month per store and limited television advertising.
According to an estimate by Advertising Age magazine, Wal-Mart spent only 0. 5 percent of every sales dollar on advertising, compared to 2. 5 percent for Kmart and 3. 5 percent for Sears Roebuck and Company. The savings further helped the company to reduce prices on its merchandise. Wal-Marts national marketing efforts had focused principally on image advertising. In the late 1980 s, Wal-Mart initiated a national campaign emphasizing its everyday low prices strategy. Customer response to the idea of consistently low prices proved favorable, and created a great deal of good will for Wal-Mart relative to its competitors.
Industry analysts indicated that this phenomenon was due to customers suspicions about pricing practices at retail outlets in general (M. Edgar Barrett, 1999). The main idea of the advertising policy was successfully accepted by the costumers. The high quality of the goods is the natural demand of the market, the innovative technologies are only the tools of sales but the price policy is the aspect that attracts the customers most of all.
The pricing policy is the essence of the Wall-Mart relations with the suppliers. For example, Wal-Mart buyers approached Rose Hill Company, an Okolana, Mississippi, manufacturer, to develop a table that would be competitive with one that Wal-Mart was importing from Taiwan. Rose Hill agreed to manufacture a similar table. As a result, Wal-Mart was able to buy a table that cost four dollars less per unit than the import. In return, Rose Hill was guaranteed a certain order level. (Barrier, Michael, 1988) Thus as it is seen Wall-Mart got one more advantage, a reputation of the company which promoted the US jobs.
Promoted by the company as a means of creating manufacturing jobs in the United States, the program was viewed by critics as a marketing ploy designed to take advantage of a wave of pro-American sentiment that swept the United States at the time. (Barrier, Michael, 1988). Such approach could be either criticized or not but no one can deny the fact that Wall-Mart really creates the jobs in the United States. Though it is not absolutely market category it adds certain positive features to the Wall-Mart corporate reputation. No doubt the main success of Wall-Mart is the care of the customer. According to Jan Mauldin, formerly director of marketing and community programs for Wal-Mart, unless the situation is completely unreasonable, a customer must never be allowed to leave a Wal-Mart store unsatisfied, Mauldin said. Taking care of customers is possible, because the company has an unwritten deal with its associates.
Sam Walton believed that if he was good to people and fair with them and demanding of them, they would eventually decide that he was on their side, she said. The focus of that deal is that cost-cutting can co-exist with a moral center, which operates on the principle that Wal-Mart can be the cheapest place to shop and the best place to work at the same time. (Prism Business Media Inc. , 2006). The reduction of the cost of the operations is transferred into reduced prices for the customers. That is, into category that is crucial for the sales and customer attraction. The price is the most important factor for the mass stores of the companies similar to Wall-Mart. Average customer does not care of technological innovations, logistics and other things.
He is coming to the store to buy products of the normal quality at a lower price and saving his time. If we take the quality of the products as more or less permanent category (product of lower quality can not be sold at all), other two factors, time and price meet the expectations of the customer at the Wall-Mart stores completely. The huge variety of products on sale at the Wall-Mart stores gives customers the chances to buy everything they need at one place thus saving their time. The employee loyalty is one more advantage of Wall-Mart. The employees of the company are offered profit sharing. HR policy involving the employees into the interest sharing steadily brings positive results.
Wal-Mart also instituted several policies and programs for its associates: incentive bonuses, a discount stock purchase plan, promotion from within, pay raises based on performance not seniority, and an open-door policy (Tuck Schools of Business at Dartmouth, 2002). Bibliography Corporate culture provides Wal-Mart competitive advantage, Prism Business Media Inc. , 2006, available at web retrieved 6. 11. 2006 M. Edgar Barrett, J. Kenneth and Jeannette Seward Chair, Wal-Mart Stores, Inc. (A), available at web retrieved 6. 11. 2006 Kerver, Tom, Fast Start At Wal-Mart, Satellite Communications, January 1988, p. 16. Expansion and Leadership, Harvard Business Review, May-June 1993, p. 83. Barrier, Michael, Waltons Mountain, Nations Business, April 1988, p. 19.
Wal-Mart Stores, Inc. Tuck Schools of Business at Dartmouth, available at web retrieved 6. 11. 2006
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Research essay sample on Wal Mart Competitive Advantage
