THE MARKET ENVIRONMENT OF WAL-MART
TABLE OF CONTENTS
Title page ………………………………………………………………… 1
Table of Contents ………………………………………………………… 2
Introduction ………………………………………………………………… 3
Background of Wal-Mart …………………………………………………… 4
SLEPT and SWOT Analysis ……………………………………………… 6
Competitor Analysis ………………………………………………………… 8
Conclusions ………………………………………………………………… 9
Recommendations ………………………………………………………… 10
References ………………………………………………………………… 11
INTRODUCTION
There are many aspects of the market that must be taken into consideration in order to look into the possible effects of these market aspects in the possible success or failure of an organization. An illustration of this is the market environment. The contemplation on the behavior of the market environment is considered a maxim by firms. The business press is gorged with stories of firms that are successful because they are flexible in responding to the changes that buffet them. Marketing researchers coined the term “market orientation” to throw more light on the nexus between a firm and its environment, and their findings added empirical evidence to the truism mentioned above. However, much of the work on market orientation has examined this phenomenon in manufacturing contexts, and most studies seem to be to relate the magnitude of a firm’s market orientation to performance. It is possible that firms, facing the repeatedly incompatible demands from stakeholders, may emphasize one aspect of market orientation more than others.
This paper shall be discussing the market of environment of Wal-Mart by analyzing its background using its annual report and by examining of the external environment of the company using the PESTLE analysis. The study will also provide a competitor analysis in order to look into the threats posed by its closest contender in the industry. It will then be followed by a SWOT analysis of the Wal-Mart in order to uncover the strengths and weaknesses of the company. The researcher will consequently provide sound conclusion and pertinent recommendation based on the entire data presented in this study.
BACKGROUND OF WAL-MART
The company is among the largest in the United States operating more or less 1,568 discount stores, 1,258 supercenters, 525 SAM’s CLUBs and 49 neighborhood markets as of January 31, 2003. It identifies those segments based on management responsibility within the United States and geographically for all international units. The Company’s mass merchandising operations serve its customers primarily through the operation of three segments. Discount stores, Supercenters and Neighborhood Markets in the United States are among the Wal-Mart Stores segments. Moreover, a segment including the warehouse membership clubs in the United States is named the SAM’s CLUB.
The company’s net income acquired a 6.0% increase over the aggregate net income of the company in the preceding fiscal year. It earned a total of ,671 billion. Nevertheless, the net income did not grow in fiscal 2002 by the same percentage as our total net sales grew in fiscal 2002 largely as a result of the reduction in the overall gross margin and increased costs and expenses of the Company in fiscal 2002. In fiscal 2001, the company acquired a net income of ,295 billion, a 17.1% increase over the Company’s net income in 2000. This increase resulted primarily from the growth in the Company’s total net sales and a slight improvement in the Company’s overall gross margin. During July 2001, the company garnered the outstanding minority interest in Wal-Mart.com, Inc. from Accel Partners and a small group of other investors. A reorganization resulting from the acquisition resulted in a charge against the earnings of the Company during fiscal 2002 of slightly less than .01 per share. This shows that although Wal-Mart is such a large company, it does look into the stakeholders of the company.
SLEPT and SWOT ANALYSIS
SLEPT ANALYSIS Social Influences
Legal Influences
Economic Influences Political Influences
Technological Influences
The September 11 attacks have affected the American consumer’s attitude on going to public places. Lawsuits has become the basic defense of a shopper or an employee when they are subjected to a certain level of discomfort on stores The September 11 attacks has also affected the sales of the company When Pres. Bush was still the governor of Texas, he have authored several legislation in favor of large businesses Wal-Mart has tapped the internet by installing a website for home shopping.
There is a significant demand for retail merchandise in the United States.
Competitors are closely breathing down Walmart’s neck The Bush administration’s war on terrorism has affected the perception of the international market on American companies A considerable number of internet home shopping companies has been established itself long before Wal-Mart.
Wal-Mart is currently expanding its market by looking to other opportunities aside from the retail industry The congress has ensured the security of American companies by passing legislatures protecting them in order to provide more jobs for the American public.
The merchandise sold in Wal-Mart stores could be considered as basic commodities for the American public
SWOT ANALYSIS
STRENGTHS
WEAKNESSES
1. Wide knowledge of retail industry
2. Competent top management and rank & file for operation and maintenance
3. Existing customer base
4. Financial investment backing.
1. Low supervision on international market
2. Considerably late exploitation of the Internet.
OPPORTUNITIES
THREATS
1. Potential of Internet shopping
2. Expansion of target market
3. Healthy market environment
1. Economic restructuring
2. Intensified competition
3. Government regulation
COMPETITOR ANALYSIS
Although there are hundreds of companies in the retail industry, a close competitor of Wal-Mart throughout the years is Kmart. Kmart Corporation, which is a discount retailer and a general merchandise retailer, was integrated in May 1916. The Company functions in the general merchandise retailing industry by means of 1,829 Kmart discount stores with locations in all 50 states, Puerto Rico, the United States Virgin Islands and Guam, as of January 29, 2003, and through its e-commerce shopping site, www.kmart.com. On January 22, 2002, Kmart and 37 of its United States businesses profiled deliberate requests for restructuring underneath Chapter 11 of the federal bankruptcy laws, and, consequently, acquired an exit financing facility. On January 28, 2003, the court permitted the shutting down of 326 stores situated in 40 states, which figure was afterwards condensed to 316 stores, or roughly 17%, of the Company’s 1,829 stores. In May 2003, the Company transpired from Chapter 11 protection.
The Company’s general merchandise retail operations are positioned in 314 of the 331 metropolitan statistical areas (MSAs) in the United States. Kmart stores are commonly one-floor, detached units varying in mass from 40,000 to 194,000 square feet with a standard size of 98,000 square feet. In addition to its general merchandise retail operations, the Company operates 114 Kmart Supercenters. Its supercenters merge a full grocery, deli, bakery, video rental and uninterrupted accessibility. They also tender the general merchandise collection of a Kmart discount store.
CONCLUSIONS
The organization’s market environment context is thus made up of all the conditions and factors external to the organization that can positively or negatively affect the life, orientations, structures, development and, in a word, the future of your organization. The research on an organization’s market orientation would also be helpful in the study. Research on market orientation has centered on understanding the construct and examining its relationship to performance. Two important studies sought to define and operationalize market orientation. Based on an extensive review of the literature on sustainable competitive advantage and marketing strategy, Narver and Slater (1990) operationalized market orientation as consisting of three dimensions: customer orientation, competitor orientation, and inter-functional coordination. Using both a literature review and field interviews of managers, Kohli and Jaworski (1990) operationalized the market orientation construct as consisting of three basic components: intelligence generation, intelligence dissemination, and responsiveness. Intelligence generation extends beyond collecting information about customer needs and preferences to include information about the entire task environment confronting an organization. To be market-oriented, an organization has to communicate, disseminate, and often “sell” market intelligence to relevant departments and individuals in the organization. (Kumar, Subramanian, & Yauger, 1998). And finally, the market-oriented organization responds to or acts on the market intelligence gathered and disseminated.
Year after year, sales, profits, and shareholder returns from this massive group of discount stores increase, defying economic cycles and the woes that seem to beset other retailers from time to time. Some argue the reason is market power: Wal-Mart built its business by opening stores mainly in small communities where there was less competition. Once a Wal-Mart store opened in a small town there was no room for another similar retailer. Others point to its systems: electronic linkages with suppliers that keep the shelves well-stocked at minimal cost. Another explanation is highly motivated staff, inspired by the late Sam Walton’s habit of driving around in a pickup truck visiting stores, and supported by concepts like teamwork and delegation. Paying attention to customers is also mentioned: at Wal-Mart customers really do come first. And of course leadership, the most intangible but perhaps most potent factor in management cannot be ignored. Wal-Mart represents a combination of factors – a thousand infinitesimal actions and decisions – that together have led to its unusual success. A professional seeks to learn from these factors, recognizing that they were developed over more than 30 years and are underpinned by thoroughness in execution that is the antithesis of fads and quick fixes. Nor does a professional assume that the factors that worked in the past will continue to work in the future.
RECOMMENDATIONS
Wal-Mart has been in the top of the retail industry in the United States for a considerable number of years already. Based on the conclusion and analysis above, the researcher came up with the following recommendations:
The company should deeply consider the potential of the Internet to their business. Although they are generally focused on retail, the use of the Internet will allow them to expand its sales as a supplier of wholesale merchandise. Moreover, in order to be consistently at the top of the industry, they should start buying out their small competitors. This way, they could save a great deal of anxiety whenever there are possible threats to their company. Similarly, they should also start lobbying for statues and laws that would protect their rights as corporations in Congress whenever a well-written law is enacted. This way, they could monitor what proposed bills could be beneficial and what could keep a tight rein on the company.
Reference:
Kumar, K., Subramaniam, R., & Yauger, C. (1998). Examining the market Orientation Performance Relationship: A Context Specific Study, Journal of Management, 24(2):201-233.
Kohli, A.K., & Jaworski, B.J. (1990). Market orientation: The construct, research propositions, and managerial implications. Journal of Marketing, 54: 1-18.
Narver, J.C., & Slater, S.F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 54: 20-35.
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