Wal-Mart In Japan Argumentative
- Pages: 17
- Word count: 4116
- Category: Walmart
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Wal-Mart is the world’s largest retailer and its headquarters is at Bentonville, Arkansas, USA.It was founded by Sam Walton in 1962 and listed in the New York Stock Exchange in1972.It is the largest grocery retailer in USA taking almost 20-21% of retail grocery and consumables business. It is also the highest private employer in USA and Mexico. It is operating throughout USA and other countries like Japan, UK and Mexico. Further it has wholly owned operations in Brazil, Canada, Argentina, UK and Puerto Rico.Due to high competition and continuous losses it closed down its operations in Germany and South Korea some time in 2006. Due to its specific business policies it has been criticized by labor unions, religious organizations, women’s rights groups etc.
Buyers in the same market seek products for broadly the same function. But different buyers have different evaluative criteria about what constitutes the right choice for performing the function. As a consequence different offerings will attract different buyers.
Buyers within a segment are more homogeneous in their market wants when compared to those who are in the market at large but differences will always remain in wants among those within a segment notwithstanding this similarity. A marketer can always achieve additional homogeneity by subdividing the original set of segments further until, theoretically speaking, we have segments to which only one buyer belongs.
At the most detailed level, every buyer is a market in himself for every buyer’s ‘want’ is probably distinct in some way. On the basis of similarities and differences, such unique wants can be grouped into sub-classes. What it means is that wants within a sub-class are more related to each other than wants between sub-classes.
For Walmart to target the following markets of African Americans, the Affluent, Empty Nesters, Hispanics, Suburbanites and Rural Residents, it needs to consider the results of the below analysis and renegotiated its strategy. For entry into Japan it has to consider a few characteristics.
Demographic Basis: People in the market can be divided on the basis of demographic variables such as age, sex, family size, income, occupation, education, location, religion, race and nationality. Demographic variables are the most popular bases for distinguishing customer groups.
Demographic variables can be combined to form social classes. Social class is defined in terms of a number of demographic variables varying from a single indicator like occupation to the use of a combination of factors like occupation, source of income, type of home or residential area. Social class has a strong influence on the person’s preferences in regard to clothing, home furnishings, leisure activities, reading habits, and so on.
Family life cycle: Another basis for segmentation that draws on demographic factors is family life cycle, where each stage in the cycle is a combination of age, marital status and age of children. A household with a young family tends to have different wants from an older married couple whose family is grown up.
Psychographic basis: One can also segment the market on the basis of life style or mode of living. This helps to understand what those who are in the market do. Some of the products where life style approach has been used for segmenting the market are women’s clothing, cigarettes, cosmetics, alcoholic beverages and furniture. Another basis is need- based segment, with companies making direct appeal to the loyal user. Companies selling in a brand-loyal market have a hard time gaining more market share. Similarly, companies that enter a need based market have a hard time getting in.
Environmental Analysis: Strategic analysis is concerned with the structuring of the relationship between a business and its environment. Disciplined approach is emphasized. resulting in functional improvement in quality and processes. The environment in which business operates has a greater influence on their successes or failures. Political ideology and political stability strongly influence the pace and direction of the economic growth. It contributes to the economic environment which is conducive to Walmart to grow in the situation Nevertheless, the deteorating standards in politics, increasing corruption and the criminal nexus are creating hurdles for business in certain areas. It is important to understand the forces of external environment the way they influence this linkage. The external environment in the Walmart Group is dynamic and changing holds both opportunities and threats for the organizations. The factors in the environment affect the attractiveness or risk levels of various investments of the organizations or the investors The macro environment in which Walmart operates broadly consists of the economic environment political and legal environment and the socio cultural aspects.
The competitive environment is the situation when the organization faces within its specific area of operation. In a given industry different organizations have different intermediate basis of understanding its relative position with respect to other organizations in the industry. Entry of a firm in and operating in a market is seen as a threat to the established firms in that market. The competitive position of the established firms is affected because the entrants may add new production capacity and it may affect their market their market shares. The technological temper and its progress has been the key driver behind the major changes witnessed in the internal environment of Walmart making it increasingly complex.
CUSTOMER AND MARKET ANALYSIS
Customers with a stronger bargaining power relative to their suppliers may force supply prices down or demand better quality for the same price and may demand more favorable terms of business. For instance, there will always he a difference in the bargaining power between an individuals buying different construction material like cement, steel or brick and a real estate builder buying them for the number of properties he may have been building over so many years. Customer’s buying behaviors vary with respect to their sensitivity to prices. Depending on how important the item is for the customer’s usage and proportion he may be spending on the item concerned, buyers’ sensitivity to price varies. Any customer with high price sensitivity gains advantage in its bargaining power.
In order to take full advantage of its assets the organization needs to develop skills, as experience suggests that with similar assets two different firms may add value of different amount for them selves. This difference can only be explained by the differences these organizations carry their capabilities in utilizing these assets. For example, in a sector like management education, in a typical segment you will find institutions more or less with similar resources and infrastructure, however, the quality of their output in terms of new professionals for business may be starkly different for different institutions. This is greatly reflected in the type of organizations that pick them up for employment and the kind of job responsibilities they are offered. This difference in output can be explained on account of the skills which these institutions carry with themselves. This position has been found true in case of many companies Organizations need a set of threshold resources to perform in any market and there is a continuous need to improve such resources to stay in business. This becomes inevitable because of the competitors and sometimes the new entrants..
Critical success factors for a firm may also be determined by its relative position with respect to its competitors. In some instances, industry is dominated by a few large players and their actions lead to determining the critical success factors for the industry which smaller players have to ensure for their success. For example, for the pathological laboratory centers earlier the CSF was authentic, hygienic and scientific testing facilities until few big players added service features like door to door sample collection or home delivery of reports. Very soon approachability and ease became the additional CSFs for the players.
A SWOT analysis summarizes the key issues from the external environment and the internal capabilities of an organization those which become critical for strategy development. The aim through this is to identify the extent to which the strengths and weaknesses are relevant to and capable of dealing with changes in the business environment. It also reflects whether there are opportunities to exploit further the competencies of the organization.
A comprehensive internal analysis of an organization’s strengths and weaknesses must however utilize all three types of comparison standards. For instance, an organization can study industry norms to assess where it stands in terms of number of complaints generated regarding defects during guarantee period of a product. Then it could benchmark the organization that is best at controlling the defects. Based on the benchmarking results it could implement major new programmes and track improvements in these programmes over time using, historical comparisons.
FORMULATING STRATEGIC ALTERNATIVES
A firm following strategy maintains its current business and product portfolios; maintains the existing level of effort; and is satisfied with incremental growth. It focuses on fine-tuning its business operations and improving functional efficiencies through better deployment of resources. In other words, a firm is said to follow consolidation strategy if it decides to serve the same markets with the same products; continues to pursue the same objectives with a strategic thrust on incremental improvement of functional performances; and concentrates its resources in a narrow product-market sphere for developing a meaningful competitive advantage.
Adopting a strategy does not mean that a firm lacks concern for business growth. It only means that their growth targets are modest and that they wish to maintain a status quo. Since products, markets and functions remain unchanged, strategy is basically a defensive strategy. A stability strategy is ideal in stable business environments where an organization can devote its efforts to improving its efficiency while not being threatened with external change. In some cases, organizations are constrained by regulations or the expectations of key stakeholders and hence they have no option except to follow stability strategy.
Generally large firms with a sizeable portfolio of businesses do not usually depend on the stability strategy as a main route, though they may use it under certain special circumstances. They normally use it in combination with the other generic strategies, adopting stability for some businesses while pursuing expansion for the others. However, small firms find this a very useful approach since they can reduce their risk and defend their positions by adopting this strategy.
.The firms operating in this highly competitive environment are always on the move to become successful. To strive in this competitive environment the firms should have an edge over the competitors. To develop competitive advantage, the firms should produce good quality products at minimum costs etc. This means that the firms should provide high quality at low cost so that the customer gets the best value for the product he/she is buying. Therefore, it becomes necessary for the firms to have a strategic edge towards its competitors. One such competitive strategy is overall cost leadership, which aims at producing and delivering the product or service at a low cost relative to its competitors at the same time maintaining the quality. The cost cutting alternatives are : aggressive construction of efficient scale facilities; vigorous pursuit of cost reduction from experience; tight cost and overhead control; avoidance of marginal customer accounts; cost minimization.
To sustain the cost leadership throughout, the firm must he clear about its accomplishment through different elements of the value chain. . Hence, the stability strategy is perceived as a non-growth strategy. As a matter of fact, stability strategy does provide room for growth, though to a limited extent, in the existing product-market area to achieve current business objectives.
STRATEGIC MARKETING PROGRAMM
Strategic analysis is basically concerned with the structuring of the relationship between a business and its environment. The environment in which business operates has a greater influence on their successes or failures. There is a strong linkage between the changing environment, the strategic response of the business to such changes and the performance. It is therefore important to understand the forces of external environment the way they influence this linkage. The external environment which is dynamic and changing holds both opportunities and threats for the organizations.. At the same time the changes in the environment affect the attractiveness or risk levels of various investments of the organizations or the investors. A market segment consists of buyers who seek same aspects of a product. And the concept of a market as a set and a segment as a subset is the basis on which the process of segmentation is carried out.
But the relationship of a segment to a market is also one of means to goals. Accomplishing goals can be varied, different segments of a market may demand radically different substitutes ,.The function distinguish a market is a means to some higher-level function that can be served by a variety,. there can be mobility of buyers among the several markets which may result in instability in any individual market. Choice is exercised by people within the context of what is available, the buyers are not necessarily satisfied with what they buy meaning thereby that a possibility always remains of designing an attributes mix better suited to the segment.
Buyers within a segment are more homogeneous in their market wants when compared to those who are in the market at large, but differences will always remain in wants among those within a segment notwithstanding this similarity A marketer can always achieve additional homogeneity by subdividing the original set of segments further until we have segments to which only one buyer belongs. Segments will be distinguishable on the basis of such differences, in other words one will be able to distinguish one segment from another on the basis of what segment members have in common in respect of what they seek from a product.
MARKETING PROGRAMME –4Ps FOR JAPAN
All the elements of marketing mix are arrived upon and implemented in the broad framework of a marketing programme.. Therefore, to appreciate the relationship between the marketing planning process and the elements of the marketing mix, the various components of a marketing plan. are: description of the current marketing situation, i.e., ‘where we are’ or situation analysis, identification of problems and opportunities in the situation, definition of objectives of the marketing plan, i.e., ‘where we want to be’, designing the marketing strategy, developing the marketing programme, and estimating the necessary appropriations, i.e.. budgeting, forecasting sales and estimating cost and profit contribution.
Marketing planning, like any other planning process, is an intricate process and has to he done on a continuing basis. In other words, what is needed is constant monitoring, redefinition, adaptation, and re-evaluation of objectives and strategy, its implementation and control in an effort to obtain maximum payoff from ever-changing market situation.
There are other factors as well, besides the ones listed above which a marketer has to
consider. The promotion mix is the particular combination of advertising, personal selling and sales promotion that is used in communicating with consumers. Generally, advertising is employed to reach large groups of consumers at a low price per contact. It is widely used by firms selling consumer durables as well as by selling consumption items like toiletries to serve a mass market. Personal selling has a higher cost per contact, but is an intense form of communication — consumers usually find it more difficult to ignore or refute the arguments of a sales person than the persuasive appeals of an advertisement, the other two are not capable of attaining, but is generally supplementary to them. Sales persons demonstrating the use of particular items in stores can considerably enhance the effect of advertising upon consumers.
Like other elements of the marketing mix, promotion should be aimed at the target audience rather than at consumers at large. if target consumers are in upper-income groups.. If target consumers tend to be highly educated, promotion messages should be more sophisticated than when target consumers have low levels of education. Failure to consider the unique characteristics of the target consumer can result in ineffective promotional efforts
A large part of the process of environmental analysis seeks to explore the unknown dimensions of the future which emphasizes on what would happen in the near future. The factors which the environment comprises of Walmart’s environment In Japan are
- Factors which influence environment directly including suppliers, customers and competitors
- Factors which influences the firm directly including social technological, legal and economic factors.
For doing the environmental analysis, there can be the strategic advantage profile which provides for analysis of internal environment, and the organization capability profile as well. For analyzing the external environment, environmental threat and opportunity profile has been be adopted which was given scant regard in case pf Walmart. An organization has to continuously grow in term of its core business and develop core competencies.
The analysis provides for elimination of alternatives which are inconsistent with the organizations objectives. Due to the element of uncertainty, environmental analysis provides for certain anticipated changes in the Walmart’s network which equipped itself to meet the unanticipated changes and face the ever increasing competition.
Walmart was able to identify the strengths of new technology and emphasize on them while Walmart continued to bank upon exiting resources to make profits. At the same time, it identified its weaknesses and exited the instant cameras business. Organizational threats and opportunities, strengths and weaknesses helped in identifying the relevant environmental factors for detailed analysis of the management.
Strategic alternatives results into large number of alternatives through which an organization relates itself to the environment. Fig 1 summarises the success model of performance adopted.
On the study of environmental analysis, Walmart chose four grand basic strategic alternatives to garner the market share:
- Expansion: This is adopted when environment demands increase in pace of activity. Company broadens its customer groups, customer functions and the technology. This kind of a strategy had a substantial impact on internal functioning of the organization.
- Modernization: Digital technology was used as the strategic tool to increase production
and reduce costs in long run. Through modernization, the company aimed to gain
competitive and strategic strength.
- Integration: The company started producing new products and services of its own
by investing in R&D centres across the U.S. Through forward integration it gained ownership
over distribution and retailers, thus moving towards customers while Walmart remained focused on key functional areas.
- Diversification: Diversification through the horizontal route involved change in business definition in terms of customer functions, customer groups or alternative technology. It was done to minimize the risk by spreading over several businesses (printers, printer cartridges, handy cams, industrial and professional cameras) to capitalize organization strength and minimize weaknesses, to minimize threats, to avoid current instability in profit & sales and to facilitate higher utilization of resources. It sold the health group business to Onex Healthcare Holdings, for $2.55 billion in 2007. Diversification strategies applied to the spreading of market risks: adding products to the existing lines of business and is viewed as analogous to an investor to “spread the risks.” The figure below explains the logic of the competitive advantage.
Fig: 2 Molecular Modelling Of Long Term Approach
Rational for Diversification
Enhanced Market Power- Increased Not always market share does not necessarily translate to higher profits – greater value for owners unless the merger substantially reduces the inter-firm rivalry in the industry. The below balloon diagram analyses how Walmart missed the opportunity bus by just focussing on developed markets and concentrating niche markets
Fig: 3 Anticipated Financial Opportunities of Walmart in JAPAN
Profit Stability: New business reduced the variations in corporate profits by expanding the company’s lines of business. This occurred as the core business was dependent on sales that were seasonal or cyclical. Diversification strategy was followed to avoid instability in sales and profits.
Improve Financial Performance: To exploit diversification opportunities because of liquid resources far in excess of the total expansion needs or the intention of tiding over its financial problems.
Growth: Diversification is basically a way to grow. Unlike organic growth, which is slow, an acquisition or merger (inorganic) can deliver the results rather quickly since resources, skills, other factors essential for faster growth are immediately available. Fig. 4 takes into account the risk accounts of Walmart involving modernization and adaptation of technology at suitable time
Counter Competitive Threats: Such a strategic move is to counter the competitive threats by reducing the intensity of competition. Organizations are driven at times towards external diversification through merger by competitive pressures.
Access to Latest Technology: Organizations have diversified their operations geographically to exploit opportunities in different regions and countries and also to take advantage of the incentives being offered by the various governments to attract investment
Joint Ventures: In joint ventures, two or more companies form a temporary partnership (consortium). Companies opt for joint venture for synergistic advantages to share risk, to diversify and expand, to bring distinctive competences, to manage political and cultural difficulty, to take technological advantage and to explore unexplored market.
Strategic Alliance: When two or more companies unite to pursue a set agreed upon goals but remain independent it is known as strategic alliance. The firms share the benefits of the alliance and control the performance of assigned tasks. The pooling of resources, investment and risks occur for mutual gain. In 2005 Walmart and Motorola, Inc. entered into a marketing alliance in the field of mobile imaging for a period of 10 years with a provision of gaining royalty.
Every enterprise seeks growth as its long-term goal to avoid annihilation in a relentless and ruthless competitive environment. Growth in JAPAN offers ample opportunities to everyone in the organization and is crucial for the survival of the enterprise. This is possible only when fundamental conditions of expansion have been met. Growth strategies are designed to allow enterprises to maintain their competitive position in rapidly growing national and international markets. Hence to successfully compete, survive and flourish, an enterprise has to pursue an expansion programme. For Walmart, Expansion strategy in JAPAN is an important strategic option in the upcoming markets, which enterprises follow to fulfill their long-term growth objectives. They pursue it to gain significant growth as opposed to incremental growth envisaged in stability strategy.
Growth strategy is adopted to accelerate the rate of growth of sales, profits and market share faster by entering new markets, acquiring new resources, developing new technologies and creating new managerial capabilities. Marketing research helps in discovering what types of distribution channels and retail outlets are most profitable for the product. On the basis of comparative information for different channels and different types of outlets the store can choose the combination most suitable for their product. Marketing Research is a tool for decision-making and marketing decisions involve variables which are often external to the firm, dynamic in nature, uncontrollable by the firm and interact with each other in a complex manner. The marketing team is always on the lookout for ways and means to reduce this risk. One way that the risk can be reduced is through the use of MR which by providing information reduces uncertainty and converts the unknown risk factor into a known calculated risk.
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