Strategic Marketing Audit of Wal-Mart Stores Inc

This paper presents a strategic marketing audit of Wal-Mart Stores Inc., the world’s largest retailing corporation. The audit report is divided into three main parts; the first part is an overview of the retail industry, the second section is a detailed analysis of the company’s microenvironment, and the last part is an analysis of the company’s macro-environment. In the analysis, appropriate theoretical frameworks and academic models from literature have been utilized to provide a critical underpinning of key concepts. The study reveals that Wal-Mart has developed immense competencies that have made it a prominent market leader. However, competition is an important issue in the retail industry.

Marketing Audit: Case Study of Wal-Mart
Introduction
Wal-Mart is an American retail corporation operating chains of grocery stores, warehouses, hypermarkets and departmental stores. The company was founded in the 1960s in the United States (US) but has grown over the years to become the largest retailer and employer in the world (Bonacich and Khaleelah, 2006). Currently, Wal-Mart operates in 27 countries and is actively exploring opportunities to expand its business to new markets. At the beginning of 2016, Wal-Mart operated more than 11,500 stores under 60 different brands. Most of these stores are concentrated in the North American market. The company’s mission objective is to help its customers to save money. It endeavors to achieve this mission objective by offering high-quality products at reduced prices.

The sections that follow provide a detailed audit of Wal-Mart.
Overview of the Global Retail Industry
The global retail industry comprises of businesses and establishments engaged in selling commodities and merchandise used for household or personal consumption. These products include technological products, apparels, furniture, beverages, food, pharmaceuticals, home improvement and others. For many years, the retail industry has remained highly fragmented and vulnerable to various macroeconomic factors (Hicks, Keil, and Spector, 2012, 314). Western Europe and North America have traditionally led the retail industry as evidenced by the fact that some of the leading global retailers are based in the two regions. Currently, the Asia-Pacific region dominates the global retail industry regarding consumption volumes. The region has some of the fastest growing economies in the world. Therefore, its markets are very attractive for more investment in retail businesses.
In general, the retail industry is upward growth oriented, notwithstanding random fluctuations due to external pressures. Rising gross domestic product in many countries, rapid population growth, increasing disposable incomes, and technological advances are some of the factors driving consumption in the retail industry (Bonacich and Khaleelah, 2006, 78-81). Conversely, economic recession, unemployment, and inflation are some of the challenges affecting the sector negatively. The industry is estimated to have achieved US$ 20 trillion in sales revenue in 2015 and is expected to continue growing in the next ten years (Bonacich and Khaleelah, 2006, 78-81). The industry employs millions of people and accounts for a third of the world’s GDP.
Micro-Environment Analysis
Micro-environment refers to the forces and factors within an organization, which affects the ability of a company to conducts its operations. The most common model for doing macro-environment analysis is SWOT analysis, which identifies the strengths, weaknesses, threats and opportunities associated with an organization’s internal environment. The following is the SWOT analysis of Wal-Mart:
Strengths
Wal-Mart’s greatest strength is that it is the largest and most diversified retailer in the world, with unparalleled market power and scale of operations. The Corporation is the largest private employer in the world. In all the markets where it operates, Wal-Mart is a major competitor and retains enough influence to dictate industry trends. Being the largest retailer means that Wal-Mart enjoys immense economies of scale, efficiency in the use of resources and high bargaining power over suppliers (Bergdahl, 2004, 84). Another strength is that Wal-Mart is an established international brand. The company operates more than 11500 stores in 30 countries across the globe. As a means to satisfy the needs of these stores, Wal-Mart purchases in bulk and is thus able to negotiate trade discounts from its suppliers. These discounts are passed onto consumers regarding reduced prices. As a result, the company is poised to make massive sales and high profits. Lastly, Wal-Mart enjoys significant efficiencies in supply chain management. The company operates its supply chain system and is inclined to reduce costs of dealing with intermediaries.
Weaknesses
Despite being the greatest and most successful retailer, Wal-Mart faces some weaknesses that may jeopardize its business operations. First, the company sells products across diverse sectors such as stationery, household goods, electronics, grocery, and apparels. Due to this diversity, Wal-Mart lacks the flexibility of some of its competitors that have focused only on specific product categories (Bonacich and Khaleelah, 2006, 78). Secondly, Wal-Mart lacks the ability to overcome competitive forces from leading rival retailers such as Targets and Kmart. Currently, Targets is the second largest retailer after Wal-Mart. The company is pursuing an aggressive global expansion strategy, which will lead to more market share at the expense of Wal-Mart. Besides, small retailers such as Dollar General have been able to establish their niche markets and are competing successfully against Wal-Mart (Gereffi and Michelle, 2009). Third, Wal-Mart faces reputation crisis due to its labor practices. In the past, Wal-Mart has been accused of engaging in questionable labor practices such as hiring illegal immigrants and under-aged workers. The company has likewise been accused of denying its employees opportunities to join trade unions. These accusations make Wal-Mart to be seen as an irresponsible employer.

Opportunities
There are opportunities for Wal-Mart to expand into more countries and form strategic partnerships to strengthen its competitive advantages. The retail industries in emerging markets such as in India, South Africa, and China are very attractive for foreign investors (Krafft and Mantrala, 2006, 22). Wal-Mart can venture into these markets through strategic acquisitions, joint ventures or by establishing its stores. Perhaps, India has the most attractive retail market for Wal-Mart. The retail industry in India is very young, and many gaps are yet to be filled. There are also opportunities for Wal-Mart to venture into other industries such as the sale of pharmaceutical products and fast foods (Krafft and Mantrala, 2006, 22). Since Wal-Mart is already an established brand, diversifying into these industries will not be a major problem. Lastly, advances in technology and growing acceptance of digital business models presents opportunities for Wal-Mart to expand its capacity in electronic retailing. Currently, e-commerce accounts for a small share of Wal-Mart’s sales revenue. By expanding its capabilities in this area, the company will reduce the need for more physical stores and expand thus broadening its revenue base.
Threats
Being the largest retailer means that Wal-Mart is the target of competition from all industry players in the markets where it operates. To overcome competitive forces, Wal-Mart has to review its product offerings, marketing strategies constantly. Wal-Mart is also faced with the threat of political instability and economic recession due to the global nature of its businesses. For example, during the 2007-2010 global financial crisis, Wal-Mart’s sales revenue declined significantly.

Macro-Environment Analysis
Macro-environment refers to the combination of uncontrollable and external factors that influence an organization’s decision making and affect its implementation of strategies and ultimately the financial performance (Gomez-Mejia, Balkin and Cardy 2008, 24). There is a broad range of tools and models that can be used to conduct macroeconomic analyses of any business organization. The most common and effect model is PEST analysis.
PEST Analysis of the Retail Industry
This tool is used to identify Political, Economic, Social and Technological factors making up an organization’s macro-environment. The following section provides PEST analysis for Wal-Mart. It is important to note that macroeconomic factors differ from one country (market) to another. For this reason, the PEST analysis below is based on the US market.
Political Factors
Wal-Mart’s business operations and mission objectives are inevitably affected by government decisions and developments in the political circles. Because of its massive size and large workforce, Wal-Mart plays a major role in the US politics. The company has been observed to influence political processes, for example by making contributions to politicians and political parties (Chandran, 2009, 56-57). In fact, Wal-Mart is ranked among the top 100 political donors in the US. These contributions have been used to influence labor and corporate tax legislations. In a way, Chandran (2009) confirms that Wal-Mart has cultivated strong political connections that have helped it to maintain its leadership position in the US market. However, the company has been subjected to negative political processes such as lawsuits.

Economic Factors
Different economic factors in the US market and the global retail market affect Wal-Mart’s revenues and profits. These factors include fluctuations in currency exchange rates, interest rates, and taxation policies. In the recent years, the global economic crisis was the most important economic factor to have affected Wal-Mart. The crisis caused a sharp decline in the company’s revenue and ability to expand. The cost of labor is another major economic factor affecting Wal-Mart. Wal-Mart has for a long time been criticized for paying employees low wages and for subjecting them to poor working conditions. Amid these growing accusations, Wal-Mart has had to increase its minimum wages with the impact of reduced net profits.
Social Factors
Wal-Mart’s operations should be in accordance with the social and cultural expectations of the local communities in the markets it operates. Major social factors that affect the company include demographic characteristics, emphasis on healthy and product safety and careers. In recent years, there have been increasing trends towards healthy lifestyles (Chandran, 2009, 84). It has forced Wal-Mart to reduce the volume of non-healthy foodstuffs especially sugary beverages and other foods rich in carbohydrates. Another social trend is that Wal-Mart is perceived to be the best place for shopping. Therefore, Wal-Mart must review its product offerings to give customers the best experience.
Technological Factors
Technology has a great impact on the operations of the retail industry. As a need to maintain its industry leadership and competitiveness, there is a need for Wal-Mart to invest in research and development, technological incentives and automation. Modern technologies are particularly indispensable in marketing.
Porter Five Forces Analysis
Porters five forces analysis is a framework for understanding the competitive forces shaping an industry. With regards to the global retail industry, the five forces are:
Threat of Substitute Products – High
Across the world, competition in the retail industry is very high. There are thousands of companies offering similar products and services like those provided by Wal-Mart. Kmart, Costco, Targets, Dell Direct, Amazon, and eBay are some of the largest retailers offering substitute products. Some of these retailers have stepped up their competitive capabilities by specializing in certain products. According to Kotler, Armstrong, Lloyd and Piercy (2013, 52), retailers specializing in a narrow product category have distinct advantages over their rivals. The availability of substitute products means that Wal-Mart must continually rethink its business strategies to lock in existing customers and attract new ones.
Threat of New Entrants – Moderate
Although the retail industry (especially in the developed countries) is saturated, there are potentials for new market entrants. Advances in information technology have opened up possibilities for new businesses meaning that it is possible for new companies to enter the market and change the competitive landscape. It is especially the case with the e-commerce sector. Similarly, there is a trend towards reduction in the number of independent retail businesses (Fishman, 2006, 36). Currently, a large percentage of supermarkets and departmental stores are operating as chain stores. The centralized purchases and vertical structure of chain stores make them an attractive investment opportunity for potential market entrants.

Threat of Competitive Rivalry Among Existing Industry Players – High
Due to Wal-Mart’s continued expansion around the world, it is facing increased competition from various industry players (Hicks, Keil and Spector, 2012). Currently, almost three-quarters of Wal-Mart’s sales are obtained from the US market. Therefore, the most significant competitors are the ones operating in the United States. These include Targets, Kroger, Walgreen, The Home Depot and CVS Caremark are the largest direct competitors in the domestic market (Bonacich and Jake, 2006, 65). Wal-Mart also has to deal with indirect competitors like convenience stores, which sell a limited variety of groceries, candies, food, magazines and other products. Typically, convenience stores are located in high-traffic areas and have become very popular among retail consumers.
Bargaining Power of Customers – High
Due to the availability of substitute products, the bargaining power of customers is very high. Individuals, customers have no bargaining power of retailers, but in their millions, they can influence industry trends. Customers expect convenience, quality, and cost-effectiveness as important aspects of customer service (Gereffi and Michelle, 2009, 572). To adapt to customers’ expectations, Wal-Mart is pursuing the twin strategies of cost leadership and product quality. Information technology has made it easier for customers to get information that they can use to make decisions.
Bargaining Power of Suppliers – Moderate
The bargaining power of suppliers is low to moderate because Wal-Mart purchases its products in vast quantities. Most providers depend on Wal-Mart for their survival, and therefore, they cannot assert any influence over Wal-Mart. For some suppliers, Wal-Mart is their only customer meaning that they have to deliver high-quality products to maintain the good relationship.
Conclusion
Wal-Mart enjoys tremendous competitive advantages in the retail industry because of its innovative business strategies and prudential financial controls. There are opportunities for Wal-Mart to expand its activities, especially into emerging markets. Despite being the leader in the global retail industry, its external and internal environments present challenges that it must overcome to maintain its position. Increasing competition is the greatest challenge that Wal-Mart faces. In addition, new business models and economic downturns are major issues affecting Wal-Mart’s business strategies. The company can overcome these problems by adopting a more innovative business strategy.

References
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