Walmart 2007 Research Proposal

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Wal-Mart Case Study

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Wal-Mart faces a daunting series of challenges beginning with the need to refine and strengthen its core marketing strategies in the U.S., resolve Human Resources compliance violations, and learn from failures to expand globally and be successful in China and India. In addition to these challenges, Wal-Mart faces competitors who are growing in strength and marketing expertise both in the U.S. And globally, and must also confront an emerging global recession. All of these challenges are made all the more urgent by the slowing revenue growth and expansion of Wal-Mart both in the U.S. And globally. With the board of directors being given the commitment of 7.5% growth globally and 7% U.S. market growth after the company had achieved 10% growth in preceding years, the need for capitalizing on the company's core strengths is turning into a strategic priority. While the Low price Every Day (LPED) value proposition has been changed to Save Money, Live Better, Wal-Mart faces the daunting challenge of becoming relevant in high growth economies of China and India where the company's core messaging does not resonate at the level it does in the U.S. Compounding this is the fact that the customer base Wal-Mart relies on in the U.S. is having their incomes squeezed by an oncoming recession and the company must first find how to increase same-store sales if the goal of 7% growth is to be attained. The intent of this analysis is to provide recommendations of how to refine their marketing strategies, Human Resources (HR), increase the potential for success from global expansion efforts, while competing profitably and alleviating the effects of a recession that threaten the company's marketing strategies.

Challenges

Research Proposal on Walmart 2007 Assignment

The five strategic challenges that Wal-Mart faces are first getting their U.S. marketing strategy better aligned with their core market segments; second, development more effective governance and compliance of their Human Resources (HR) functions; third, develop more effective international growth strategies based on lessons learned from failures in Germany and Korea; fourth, develop a more effective competitive strategy against Target and other big-box retailers; and fifth, develop contingency strategies for managing the company through the beginning of a global recession. Each of these challenges are now analyzed for the purpose of developing alternatives and recommendations.

Re-Aligning the marketing strategy for Greater Relevancy

It is not enough to merely re-design the store layouts or add faux flooring within the Wal-Marts, or add in designer clothing lines in an attempt to increase same-store sales. This has unfortunately been the strategy Wal-Mart has relied on in conjunction with its LPED value proposition (Frazier, 38). As Wal-Mart has been very successful in the past with bland, low-price store interiors there is a resistance to change in terms of changing the store layouts, augmenting merchandising or significantly upgrading the shopping experience (Blanchard, Comm, Mathaisel, 169, 170). Increasing same-store sales cannot be "bought" through all these externalities and investments in store layouts. They do contribute to a more pleasant shopping experience, yet Wal-Mart's most loyal shoppers come back to the store because the prices help them to make ends meet, as many have incomes at or below the per capita income of the United States (Wal-Mart Annual Reports).

The traditional logic of retailing therefore does not completely apply to Wal-Mart. The ambience of shopping is secondary to the price savings and the trust its most loyal customer segments have in the quality and availability of products. What gives Wal-Mart such a competitive advantage on pricing, availability and the quickness of rolling out new stores is their supply chain management (SCM) practices and strategies, considered one of the best worldwide (Mottner, Smith, 535). Wal-Mart has pioneered the development of Collaborative, Planning, Forecasting and Replenishment (CPFR) a critically important. The essence of this supply chain framework and series of strategies is to share forecasting processes across suppliers and retailers to alleviate out-of-stock conditions during periods of high demand (Doiron, 53, 54). Wal-mart uses CPFR for toys during the holiday season to make sure they do not run out, and they also use them for electronics products that are positioned squarely against Target, including plasma flat-screen TVs.

In evaluating how CPFR plays a critical role in their marketing strategies, it is important to keep in mind that their core customer base, often called the Price Value Shopper in their annual reports and SEC documents (Wal-Mart Annual Reports) relies on Wal-Mart as a primary means of keeping their family budgets in balance. If Wal-Mart does not continually exceed or at least meet the Price Value Shopper's expectations over time, same-store sales from this most valuable segment will decrease as will same-store sales. The continual addition of services, initially appearing to be unrelated, are all aimed at increasing same-store sales to the Price Value Shopper while increasing sales into the other segments Wal-Mart is attempting to penetrate with new selling strategies.

Wal-mart is known for their ability to quickly analyze supply chain performance in the context of per-store performance through the use of advanced analytics (Todd, 35). This inherent strength of the company of being able to manage the retail industries' most complex and diverse supply chain in conjunction with managing to continually add new stores in several countries at the same time needs to be continually improved upon to make both same-store sales and new market penetration strategies successful.

From an analysis of their annual reports and SEC filings (Wal-Mart Annual Reports) the current structure of the Wal-Mart customer base can be ascertained. Figure 1 provides an analysis of the seven key segments that Wal-Mart has been able to ascertain as the most potentially profitable based on their market research, both through demographic and psychographic studies (Wal-Mart Annual Reports).

Figure 1: Wal-Mart Segmentation Strategy

Source: (based on analysis Wal-Mart Annual Reports & SEC filings)

As can be seen in the figures shown for each segment Wal-Mart needs to increase same-store sales from all segments if they are to attain their 7% growth in the U.S. Of all segments that Wal-Mart sells into the largest are the Brand Aspirationals that comprise 29% of their total installed base (Wal-Mart Annual Reports). What has been determined from the research about the Brand Aspirationals is their paradoxical nature, and the bigger problems they cause Wal-Mart when taken into account from a same-store sales strategy. Brand Aspirationals are heavily committed to Wal-Mart from a behavioral standpoint as they seek to gain the pricing advantages the chains' supply chain can provide on name-brand merchandise. Yet they are often not willing to even pay the reduced prices at Wal-Mart for name-brand apparel. Instead the Brand Aspirationals label shop and only buy only when there are sales at Wal-Mart. This is a trap that Wal-Mart has fallen into when it comes to merchandising and store refurbishment, as this segment, the largest they have at 29%, has a household income of less than $40,000 per year on average. Same-store sales strategies into this segment often stall out because this segment only waits for quarter-end and seasonal sales to purchase name-brand apparel. Further complicating same-store sales into this segment is the fact that the majority of this segment are in urban areas, outside the rural and suburban areas Wal-Mart has its greatest retail strength in the U.S. within. In addition this segment is younger than their mainstream Price Value Shopper who has a median age of 34 and often is often a working mother (63%) who relies on Wal-Mart to make ends meet and the budget in their households to balance. IN attempting to go up-market to the Brand Aspirationals through the re-vamping of their stores, Wal-Mart runs the risk of alienating the most loyal customer base they have. From a strategic branding standpoint, the company also runs the risk of going against its rural strength as a one-stop shop at a reasonable price for products and services to keep a household running. The remaining segments are eclectic in their use of retailing outlets to purchase products and skew towards being more brand than retail outlet loyal. An analysis of these segments based on the insights shared by Wal-Mart over their filings with the Securities and Exchange Commission over the five years of the study timeframe (2002 -- 2007) illustrates how these seven customer segments align relative to loyalty to Wal-Mart. Figure 2, Customer Segment Loyalty Analysis illustrates the percentage of the Wal-Mart customer base and the relative levels of loyalty each segment has to Wal-Mart. At 11% the Price-Sensitive Affluents are a third group Wal-Mart is addressing with their merchandising strategies.

Figure 2: Customer Segment Loyalty Analysis

Source: (based on analysis Wal-Mart Annual Reports & SEC filings)

The Price Value Shopper, Brand Aspirationals and Price-Sensitive Affluents are the three most critical segments to enabling greater same-store sales. Yet the strategies Wal-Mart is taking appeal only to Brand Aspirationals and run the risk of alienating the predominately rural-based Price Value Shopper. The Price-Sensitive Affluents are not as influenced by improvements to the shopping experience as they are to Wal-Mart… [END OF PREVIEW] . . . READ MORE

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