According to Fortune Global 500, Wal-Mart is the largest public corporation by revenue in the world. Wal-Mart’s international operations currently comprise 2980 stores in 14 countries outside the United-States. It operates in numerous countries like Mexico, UK, Argentina, Brazil, Puerto Rico, China, India, Germany, South Korea and so on. This fascinating company was founded by Sam Walton. Sam Walton was born in Kingfisher, Oklahoma.
Sam was an achiever since the childhood. In 8th grade, he became the youngest Eagle Scout in Missouri’s history. He opened the first Wal-Mart in Rogers, Arkansas in 1962. When he started working as a businessman, he developed skills of acquiring discount merchandising by buying wholesale goods for the lowest prices suppliers. This is the strategy Wal-Mart still uses to pass on savings to his customers, which drives up the sales volume. Higher volume allows Wal-Mart to negotiate even lower purchase prices with the wholesaler on further purchases.
The journey of becoming the world’s largest retailed was over in forty years. Walton’s vision came true due to the unique business model Wal-Mart has. Its business model consists of selling extensive variety of merchandise at “always low price.” Wal-Mart has about 1.8 million employees worldwide. The current CEO and president of Wal-Mart is H. Lee Scott. Under his leadership, Wal-Mart has sustained its position as the largest retailer in the world based on revenue, but its share price has fallen 22%. Wal-Mart operated in retail industry. It has a market cap of $ 232 billion.
“Walmart helps people around the world save money and live better — anytime and anywhere — in retail stores, online and through their mobile devices.”- This is Walmart’s goal. Under suspicious or unethical ways, they are the lowest price guaranteed in the market place. The company appeals the basic needs of consumers by selling basic household appliances, hygiene products, grocery items, and the like. Essentially, Wal-Mart’s products are the basic needs of individuals.
The company tries to satisfy their customers by providing quality goods at reasonable prices. Other products consist of apparel for men, women, and children, books on most subjects including politics and social sciences, history, electronics, and the like. Wal-Mart also distributes vendor gift cards such as Visa, MasterCard, Wal-Mart brand, restaurants, etc. Alternatively, Wal-Mart’s primary target markets include several layers as follows: Working Class Families: Low wage earners, skilled and unskilled laborers, renters, low education levels, multiple children, coupon clippers, hourly workers, convenience meals, fast food eaters, hand me downs, starchy food, quantity matters the most.
Bargain Hunters: Garage sale shoppers, coupon clippers, Entertainment books, young parents, savvy with researching prices, quantity and quality both matter, lower end retail, American made vehicles, first time home owners, low to middle education levels. Middle Class Families: Married, educated college and above, two working parents, multiple children, investments, quality over quantity, trendy, fashion conscious, foreign vehicles, professional careers, organic food, health conscious.
Single Parents: Budget minded, educated, young children, professional careers, convenience is key, quantity and quality both matter, fashion conscious, low to middle education levels. College Students: Quantity is important, seek low prices, brand conscious, trendy, gravitate toward promotions, influenced by celebrities, educated, and opinionated. Simply, Wal-Mart’s target market and positioning strategy work and makes sense.
The retailer dominates the industry through competitive pricing, a diverse customer base, global entities, and its supplier base. Thus effective strategies and tactics provide a path in Wal-Mart maintaining its top position in the industry. Remaining on top also means remaining flexible in a highly volatile, often changing, and competitive environment–areas Wal-Mart has conquered and overcome throughout time. In general merchandise retailing, Wal-Mart’s primary competitors are Target and Kmart. Retail superstores such as Circuit City and Bed, Bath, and Beyond, also provide retail competition.
A survey found that the majority of respondents favored Wal-Mart over stores like Target and Kmart. Respondents claimed Wal-Mart offered lower prices, better variety and selection, and good quality. The needs of consumers is an important economic feature in all competitive environments. What attributes (price, variety, quality, etc.) prompt buyers to choose one retailer over another is very important in the competitive landscape.
In the warehouse segment, Wal-Mart’s Sam’s Club competes harshly with Costco. Costco has fewer warehouses but greater sales and revenues. Costco customers also shop at Costco more frequently than Sam’s Club customers and,on average, spend more each visit as well. Costco’s dominance may be the result of better innovation. Costco offers luxury items and was the first to sell fresh meat and produce, and gasoline. This is important because innovation is a key factor in assessing competitors in an industry.
Last, Wal-Mart is also in direct competition with large supermarket retailers. Production capacity in the grocery industry is quite populated and Wal-Mart poses a serious threat to many supermarket retailers, both large and small. Kroger, Albertson’s, and Safeway are all finding it very difficult to compete with Wal-Mart’s low prices. Because the industry is so crowded, even the large supermarket retailers are seeking to differentiate themselves in order to stay afloat.
In reference to the Five Forces Model, being the largest retailer in the world, Wal-Mart’s position is strong overall. Rivalry among competitors is fairly weak. The market is crowded but Wal-Mart has the lowest costs, prices, profits, and market share. The threat of substitute products is also weak. Wal-Mart exerts a great deal of effort in making sure they are innovative and meeting customer demands. The bargaining power of suppliers is weak as well. For most producers, Wal-Mart would be their largest account. Obviously, they would do what Wal-Mart wanted them to do if they hoped to do business. Likewise, the bargaining power of buyers is also weak.
There is a very broad base of customers and a significant demand for low prices. Last, the threat of new entrants is weak. Wal-mart has a scale of operation that is so great, it would take years, maybe even decades, for a new company to be on the same level. Even prominent companies today would have an extremely difficult time matching the costs and prices Wal-Mart provides.