Essay on "Wal-Mart Is One of the Leading Retail"

Essay 4 pages (1785 words) Sources: 1+

[EXCERPT] . . . .

Wal-Mart is one of the leading retail market chains in the U.S. Founded by Sam Walton, the very first Wal-Mart discount store opened in 1962 in Rogers, Ark. The company was incorporated on Oct 31, 1969, and was listed in the New York stock exchange in 1972. By 1983, the company opened Sam's Club, the membership only retail warehouse, and by 1988 the first Wal-Mart Supercenter, a complete grocery and general merchandise center was opened. Wal-Mart's international presence began with its opening of the Sam's club in Mexico City in 1991. [WalMart] The company has since achieved a phenomenal growth. Currently, Wal-Mart has 8,650 retail stores across 15 countries. With more than 2 million employees, Wal-Mart is clearly a giant retailer in the world. At $400 billion, Wal-Mart's annual revenue exceeds the GDP of Norway, indicating the massive scale of operations of this retailer chain. [Suzanne Kapner, (2009)] This massive growth of Wal-Mart into a retail superchain was not without its problems. Wal-Mart has been accused for its poor labor policies and environmental compliance issues. A brief overview of the company, its marketing and policy stands would provide better insight into the growth and development of this largest retail marketing chain in the world.

Wal-Mart (The largest retain Chain)

Serving over 100 million American customers every week, Wal-Mart is the largest retain chain and the largest private employer in the U.S. [Michael Barbaro, (2006)]. 'Saving people money to help them live better' was the goal of the founder Sam Walton and even today Wal-Mart strives to stick to this motto by providing quality products at very affordable prices. From groceries to electronics, from Apparels to Jewelry, Pharmaceuticals to pet care products, Wal-Mart stores cater to an entire array of shopping needs. Wal-Mart has an extensive distribution network with around 40 regional distribution centers. Each of these distribution centers supply merchandise to between 75 and 100 Wal-Mart stores within a 250-mile radius. Wal-Mart's DotCom Distribution Centers cater exclusively to the company's online sales. [Wal-Mart] Over the recent years Wal-Mart implemented several strategic initiatives to improve its customer base.

Wal-Mart (Targeted Marketing)

One of the significant strategic drives has been the 'store of the community concept'. In Dearborn in 2008, for example, Wal-Mart opened the latest store with a distinct Arabian flavor to it in view of the increased Arabian population in that region. More than half a million Arab-Americans live in Dearborn. The shelves are packed with mango juice from Egypt, Wine leaves from Turkey and Lebanese extra virgin olive oil. The store also has a separate section for Halal meats, displaying only meat from animals slaughtered according to prescribed Islamic rules. This store offers some 550 items specifically targeting Middle Eastern shoppers. This community-based approach is one of the key features of Wal-Mart's targeted marketing strategies. Also in stores across Chicago and Atlanta, where there is high proportion of African-Americans, the Wal-Mart stores stock up products aimed at African-Americans. Targeted marketing has evolved as key strategy at Wal-Mart over the recent years. [Keith Naughton, 2008]

Wal-Mart -- Upscale Trend

High end products offer more profit margin compared to the highly competitive and low margin groceries and staples segment. With its 2006 campaign "Look Beyond the Basics," Wal-Mart tried to break into new grounds. From its time-tested philosophy of 'Low Prices, Always', the retailer giant tried to venture into the upscale market. The company introduced the urban women's clothing line, Metro 7, in more than 1500 stores across the country. The strategy was to attract new upscale customers to Wal-Mart. However, this grand expansion strategy was a failure. As Lee Scott, the former chief executive of Wal-Mart said, the company "moved too far too fast." [Michael Barbaro, (2007)], The focus has since shifted back to making existing customers buy more products than to try and win new customers.

Wal-Mart (International Growth)

Wal-Mart has achieved huge strides in its International Ventures. In 2009, Wal-Mart International Inc. achieved $100 billion in sales for the first time. Wal-Mart's success in Mexico, Puerto Rico, Brazil and China illustrate the success of its market-by- market strategy for the overseas venture. For example, in China and India Wal-Mart is following the 'Direct Farm Practice' whereby farmers directly send the produce to the store. By 2007 more than 350,000 Chinese farmers were involved in the program. These direct farm practices will eliminate as much as 30% of produce loss along the supply chain in China and India. [Lisa Baertlein, (2010)] However, Wal-Mart also failed in some international operations. South Korea is a case in point. With a net loss of $9.9 billion won in 2006, the company, which had entered the South Korean market in 1998, accepted its failure to achieve the desired scale of expansion in the country. It sold out all of its 16 store outlets to local retailer Shinsegae for $882 million. [Choe Sang- Hun, (2006)]

Wal-Mart (The Future)

The last few years have been good for Wal-Mart. Wal-Mart profited during the 2008 recession as more and more up scale shoppers started to shop at Wal-Mart to save money. The fact that Wal-Mart improved it's profit margin in 2009, while most other retailers were struggling under the economic downturn, is a testimony to its reputation as the low cost retailer. On Feb 1st 2009, Mike Duke, became the fifth CEO of the company. Scott Lee, the predecessor, went through a period of intense complaints against Wal-Mart's operational policies and the treatment of it's employees. He was the first CEO to envision the saturation of growth in America and to focus on international expansion. These new strategies reaped success, as Wal-Mart became one of the very few retailers to report success while most others like Target Stores Inc. incurred decline in sales and drop in profit margins. As Charles O'Shea, senior executive with Moody's, the global investment analyst, says, "They have the trifecta -- Sam's Club, Supercenters and discount stores -- operating well in the U.S. right now." [Katherine Bowers, (2008)] However, the management has to address some pressing issues concerning its labor policies. As Tracy Stefl, representing Wal-Mart Watch, states, "Wal-Mart seems rightly sincere in their efforts to be the best company they can be. So to completely dismiss the notion of raising wages for its workers constitutes a failure of their goals," [MSNBC, 2005]

Is Wal-Mart Good for America

One question that is intensely debated is 'Is Wal-Mart good for America?' The primary reasons for such a question is the accusations from competing supermarket chains, loss of American jobs due to manufacturers shifting their production centers to low cost countries such as China and the degree of influence that Wal-Mart exerts on its suppliers. It is true that other supermarkets are forced to reduce their profit margins in order not to loose out to Wal-Mart. Wal-Mart has achieved economies of scale in its inventory management by effectively using technologies such as wireless bar-coding and electronic data interchange. Studies indicate that the price for food items at Wal-Mart are 8% to 27% lower than to other supermarkets making Wal-Mart a consumer haven. [Jerry Hausman, (2005)]

Economists also note that Wal-Mart has an indirect price effect as most of the supermarkets are forced to lower their food prices in order to compete with Wal-Mart and the American consumer stands to be the ultimate beneficiary. As MIT economist professor Jerry Hausman says, "The indirect price effect is 5% even if you never go into a Wal-Mart," [Sarah H. Wright, (2006)] Also, the cost savings for the customers translate into more spending on other goods and this in turn implies increased production and profits for the manufacturers of these goods. Economists also concur that decreased prices of food commodities offered by Wal-Mart contributes to inflation control by atleast 15% [NCPA, (2004)] Not to forget, Wal-Mart foundation is one of the largest cash contributors in the U.S. with $288.1 million donated for charities in 2009 alone. [Noelle Barton Defazio, (2010)] There is also the flip side of the issue. Globalization, open market principle and the shifting of production to low cost countries leads to some job loses in America. Overall, however, there is no question of doubt that Wal-Mart is good for America.

Conclusion

Wal-Mart continues its growth as the largest retailer in the world. Started with the motto of 'Saving people money to help them live better' Wal-Mart still continues to fulfill the commitment. The success of Wal-Mart during the economic recession when other retailers were struggling indicates the support that Wal-Mart enjoys from the customers and justifies Wal-Mart's philosophy of 'Low prices, Always '. The company's 'store of the community concept' and targeted marketing strategy have proved very successful in optimizing sales. Wal-Mart's policy of maintaining low costs and gaining profits by high volume sales is ultimately beneficial to the American consumers. Wal-Mart is definitely one of the best and efficient companies in America that has contributed to controlling inflation in America. Wal-Mart is good for Americans from a consumerist viewpoint. However, there is also a flip… READ MORE

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