By exploiting core competencies firms can develop value creating strategies which are superior to their competitors. Wal-Mart are experts at using there core competencies to become superior to their competitors. There are three resources which allow a company to create a core competency. Tangible resources consist of assets that can be seen, financial resources (borrowing capacity), physical resources, organizational structure and technology. Wal-Mart is a huge and very powerful company and therefore uses its ability of lending to become a core competency. Intangible resources are characterized by human resources, resource for innovation, and reputation. This category is where Wal-Mart excels against all its competitors. Knowledge, training and corporate culture possessed by employees may be one of the most significant sources of core competencies and competitive advantages throughout the business world. This is due to being very hard to copy or substitute for. Brand equity consists of brand name and maintaining brand equity. Wal-Mart are masters at using this resource as an advantage over their competitor are
Wal-Marts emphasis is on its image of everyday low prices and high quality goods when marketing. Wal-Mart uses many different channels when marketing itself. It uses television, radio, monthly circulars, weekly newspapers and many more channels. Each one of these channels can be used in an unique way to emphasize Wal-Mart’s position of selling quality products at low prices. Radio usually grabs the audience’s attention by promoting products which are experiencing high demand. Both of these channels are made stronger by the use of newspapers adverts and monthly circulars. In these marketing channels deeply discounted items are highlighted to the potential competitors and these items help lure the customers into the stores. The idea of having “quality for less” is a good marketing plan because it gets people into the store. It also offers a competitive advantage over the competitors because they can not financially match Wal-Mart prices. This is due to Wal-Mart having better use of financial resources, technology and physical resources.
By censoring some products Wal-Mart are trying to market themselves as a company with good values. They use this to attract families. Unfortunately this plan has negative and positive effects. A negative effect is the effect of preventing or manipulating artistic freedom. Due to Wal-Marts restrictions many singers have changed their work. This can be seen as bad for society when one firm dictates what sort of art is released. It could also hurt Wal-Mart financially if it alienates people who do not believe in censorship or if public opinion towards censorship changes. On the positive side their censorship strategies help strengthens their market position of being there for the family and community.
A major strength of Wal-Mart is its service-scapes or in store atmosphere. When you walk into any Wal-Mart you are met by happy and helpful staff. This helps strengthen the firms brand image of being a nice and community based firm. All Wal-Mart stores have a lot of nightlights which allow sunlight to enter the store. Many of Wal-Mart’s competitors like K-mart and Target do not use this idea which lowers the cost of lighting and more importantly makes people happier and more trusting in your products. Target and K-mart, who are Wal-Mart’s competitors, do not have a happy, community feeling in their stores. A clever marketing idea which Wal-Mart uses to emphasize its commitment to a position of friendly service is the yellow smiling face which rolls back the prices. In this small idea Wal-Mart’s core competencies are highlighted, lower prices with friendly service. None of its competitors have been able to copy this competitive advantage and this shows why Wal-Mart are far superior with sales.
Another marketing strategy Wal-Mart uses is involving each store in the local community. By sponsoring local teams and showing pictures of them it helps manipulate the customers into believing the Wal-Mart cares about the community and gives as well as takes. This is a major competitive advantage Wal-Mart has over its competitors. “Buy American” is another advertisement which Wal-Mart uses to make people feel better or happier about shopping at Wal-Mart. Its competitors do not give their products any “character” where as Wal-Mart sell their products as a package. If you buy fishing tackle from Wal-Mart you will also be creating jobs for Americans. If you buy from its competitors all you are buying is fishing tackle. This manipulation of the customers through process is extremely beneficiary to Wal-Mart and allows them to secure their market dominance.
Wal-Mart has roughly 4,000 stores in the United States, including stores in all fifty states. In 2004 Wal-Mart also hope to open over one new store everyday. These stores differ in size, sales volume and service different communities. Wal-Mart also has stores throughout the world and these stores also differ dramatically. Although each store may service different customers, each store uses the same image of providing quality for less. This image is often portrayed through the same channels at every store and this means that wherever a Wal-Mart store is it will be successful. The secondary image of providing a friendly and enjoyable experience is also consistent throughout the world. This image is harder to get throughout the world because of the level of training in the various countries. In Great Britain Wal-Mart purchased Asda. Unfortunately their management strength and employee development program was not as good or the same as Wal-Marts. This makes it difficult for Wal-Mart to enforce their competitive advantage on to them. Asda was also known for cheaper products, both price and quality, which means that there brand image, is totally different to Wal-Mart’s. I believe that buying Asda was a bad idea and location for Wal-Mart.
Wal-Mart competes in the retail business. This market has recently started to include a growing market segment called e-tailing. Internet e-tailing offers many opportunities and problems to many companies, and Wal-Mart is no different. Issues such as cost of delivery, merchandise returns, and data security are concerns which must be addressed before creating a website. If any of these aspects are missed a company’s name and brand image could get permanently damaged. Wal-Mart moved into the e-tailing in 1996 with Wal-Mart on-line but it re-launched its site, with an easier site, Wal-Mart.com in 2000. Wal-Mart tries to create an in store feeling to its website. Unfortunately they have found it hard to replicate their in store atmosphere. On their website there are a lot of offers of less expensive prices, just like a store, but there is no feeling of community on the websites. This aspect is nearly impossible to get on a website as there is no actual location for the website. Apart from this flaw in the website I believe all the crucial aspects have met. This, along with wal-marts great brand name will allow the website to flourish. Target whom is one of Wal-Mart’s competitors has a very similar website. Everything is easily found and Data and security can be addressed with ease. The only difference I found was that Wal-Mart’s page was showing more prices than Targets. This emphasizes Wal-Mart’s marketing technique. K-Mart has a similar website to Target and Wal-Mart. Once again it easy to use and security is sound and concerns can be voiced and answered easily. Like Target and unlike Wal-Mart there is little mention of price. This shows me Target and K-Mart are trying to compete less on cost leadership and more on differentiation.
Wal-Mart has many strengths and weaknesses. In these couple of paragraphs the most important will be discussed.
Reputation as a global company is a major strength for Wal-Mart. It could be considered as one of the world’s largest companies and in fact it does count itself as the second biggest. Domestically it operates about 4000 stores and hopes to open one everyday in 2004. Internationally it has 1300 stores and this number is set to grow dramatically. This global strength is an obvious strength because gives them a great brand name and also allows them to loan money at lower rate. Strong management and a good employee development program is another company strength. Its management has been strong and keeps the company moving in the right direction. In its training programs high potential individuals are identified and developed into strong managers. This idea of hiring within and looking after its employees allows the firm to show good employee loyalty and friendly service.
Excellent logistics system is another very important strength. It is unparalleled and continues to deliver outstanding results. This brings them a very effective global sourcing advantage which provides a competitive advantage over its competitors because it gain cost advantages by sourcing from the cheapest location. An aggressive growth strategy is the last strength which is highlighted. “In 2003, the company spent around $11 billion on capital projects, adding 48 million square feet of retail space”(huiohuio). This growth was 9% bigger than in 2002 and as the growth of SuperCenters increases Wal-Mart will get stronger and gain more market dominance.
Insufficient European exposure is a major weakness of Wal-Mart. For such a massive company it holds a very small international position. Its only relatively strong point in Europe is the UK and even there they are known as Asda and are not the dominant firm. In Western Europe Wal-Mart have no presence and are therefore losing huge market shares to its competitors. Poor Saturday sales have started in the past 2 years. It has been blamed on “capacity issues and deflation in certain products”(ll). This means that SuperCenters are too popular and are being put closer together. Other reasons for this weakness have been stated as an air of complacency or a loss of presentation and marketing in the stores. As a most firms grow they encounter problems with staying in the right direction. Wal-Mart must address this problem to continue to grow.
Price deflation has been poorly by Wal-Mart and other retailers. “aiming to obtain sales increases, companies have bought more merchandise units of products that are experiencing price deflation, without allowing for the inelasticity of demand for most basic products” (lll). Basically this has reduced in markdowns which have resulted in reduced sales and gross margins.
The Internal factor Evaluation (IFE) matrix is used to summarize and evaluate the major strengths and weaknesses in the functional area of business. It also provides a basis for identifying and evaluating relationships between these areas. A weight is assigned to each factor with 0.0 being unimportant and 1.0 being all important. A rating is then assigned with 1 being minor weakness and 4 being a strength. Both of these are then multiplied together to get a weighted score. The closer the overall weighted score is to 4 the stronger the firm is. The average is 2.5.