Strategic Marketing Management of the ASDA-Wal-Mart - Case Study Example

Strategic Marketing Management of Wal-Mart Stores Inc. Introduction 2 Literature Review 3 Executive Summary 9 Analysis 10 Product Range 10 Demographic Coverage 11 Marketing channels used by the organisation 11 Electronic marketing 11 Vertical Marketing 12 Market Segments Served 12 Role of Branding 13 Product Quality 14 Conclusions 16 Bibliography 22 Introduction ASDA has been the leading British retailer. After the takeover of ASDA by Wal-Mart, the ASDA-Wal-Mart supercenters have been ruling the British retail industry. A leading American department store, Wal-Mart Stores Inc. presently stands as the world's leading retailer in terms of revenue. The organisation possesses a large customer base in U.S., which constitutes nearly one-third of the population. The company operates all over the world through 7800 Wal-Mart stores and Sam's Club warehouses. Being the largest retailer in the world, Wal-Mart is responsible for the introduction of a series of job opportunities globally. As a result, it's British subsidiary ASDA, which already was proficient in the Britain, has made a successful business in U.K. Presently, the ASDA-Wal-Mart supercenters stand at the second level in the supermarket chain of U.K. It covers a huge market share of 17% in the U.K. After the takeover by Wal-Mart in 1999, the retail company has flourished by leaps and bounds. In 2004, ASDA operated a large number of stores in Scotland and employed a number of employees. The total number of store operated by ASDA in 2004 was 259 and the employee strength was 122000 (ASDA/WAL-MART: A Corporate Profile, 2004). The key to ASDA-Wal-Mart's colossal success is its strategic marketing management policies. The company has implemented some highly calculated and effective marketing strategies. It has always made an effort to render the best product to the customers in terms of quality and price. Simultaneously, it has imparted a feeling of associate partners to all its employees. The marketing strategy analysis of ASDA-Wal-Mart can be studied as an excellent example, which will show the effectiveness of the strategic marketing management on the business. Literature Review Strategic marketing is a complex management technique for the identification of proper marketing opportunities. It aims to offer better values to the most profitable areas of the business without harming customer interests. The core marketing concepts are concerned with customer needs, customer-client relationship and supply of quality products at affordable prices. This includes a sophisticated market research that rests on customer feedback. A company is directed to build a competitive-edge for long-term activities with the application of various management techniques. The objective of strategic marketing management concerns with a wide array of activities. It involves an aggressive approach to capture the market share rapidly. While performing such kind of marketing management activity, a company needs to focus on the product diversity, the various geographical regions in which it is operating, the role of branding, the marketing channels it is using and the product quality it is offering. All such areas of marketing are required to improve for strategic marketing management. A giant retailer like Wal-Mart will need to re-focus all these issues to find the drawbacks and improve its service by correcting them (Strategic Marketing Management, 2009). The domain of strategic marketing management is vast and it includes internal as well as external analysis of the company. This report focuses only on the external analysis of the company. There are various models that have been put forward to express the external analysis of a company. Porter's five forces model is the most popular among them. The task of strategic analysis involves a high level of expertise and experience. The analysts must possess both the qualities to conduct a strategic analysis with ease. When an analyst uses Porter's five forces model, the planning process consists of a chain of steps. The prime steps included in the strategic planning process are Analysis, Planning, Implementation and Control. The analysis begins with defining the business, which is followed by devising the vision. The final part of the analysis includes assessment of the external and internal environment of the business. The planning process follows the analysis which finally leads to the financial budgeting of the business. The planning is followed by implementing the strategies and controlling them. Michael Porter's competitive forces model is so far the most commonly used framework to assess a company's potential for profit making in an industry. In the above mentioned Porter's five forces diagram, the five forces mentioned in the rectangular boxes have a definite impact on the profit potential of a company. The five forces collectively affect the company in a particular industry. Entry Barriers The barriers to entry form an important component in determining the entry of a new company in the industry. There are several barriers that limit a company's entry in the market. The major component in the entry barriers is the economies of scale. The existing firms enjoy the scale economies gained from experience and knowledge which hampers the entre of the new company. The next barrier is brand loyalty and the image of the existing firms. The new companies also confront the risk of premium at the time of entry. Rivalry among existing firms In an industry the rivalry among the existing companies plays a crucial role for the determination of profit potential of a firm. The competition in this case is observed in the form of product offerings and price offerings. The factors like industry growth, number of competitors in the market, fixed costs of production, diversity among the competitors and lack of differentiation attribute to the aggressive competition. Substitute Consumers can always avail of substitute products in any industry. Every firm has a substitute which performs in the same way but the technology employed is different. All that matters in this case is a shift in the technology in order to compete with the substitutes. Buyers The buyers within a market possess the power to bargain and can force the sellers to pull down the price. There are various factors that determine the power of bargaining of the buyers. The chief among them is the volume of purchase, the fraction of income the buyer is spending on the product and the buyer's profitability. Suppliers Like the buyers, the suppliers also possess the power of bargaining over the buyers. The suppliers can come up with the threat of raising prices or reducing the quality of products. Such a situation can occur when there is a concentrated supplier group. All these five forces, explained above, act within an industry jointly. Each of the factors can be divided into smaller fragments which again exert force on the buyers and suppliers and make the model more complex. The collective actions of the forces determine whether or not a company can survive in the market and what will be its degree of profit is it survives (Arons H.D. and Waalewijn P., n.d.; Parks D.M., 1999). Another model that is also popular in the strategic marketing management analysis is Value Chain Model proposed by Porter. The objective of Value Chain Model is to render a high value to the customers which will eventually lead to a higher profit margin. The model shows the supply activities and primary activities diagrammatically. The activity areas are as described below. The primary activities include five components namely, Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales and Service. Inbound Logistics include the receiving of raw materials, storing them in warehouses and finally their distribution to the manufacturers. Business operations involve the processes required to make the finished goods out of the raw materials. Outbound logistics include the distribution of the finished products and their warehousing. Marketing and Sales activities involve the identification of consumer needs and supplying them with suitable products. Finally, the service focuses on the customer support, after the products and services are rendered to them. These primary activities are constantly supported by a number of factors for the fulfillment of the company's goal. The infrastructure of the firm is very essential to support the primary activities. It forms the backbone that provides the essential tools to fulfill the primary activities. Human resource management follows the infrastructure which constitutes the employees. In human resource management, the company offers training and support to its employees to cater to the needs of the customers in a better way. After human resource development, the technological development of the company is very essential. The technological development of a company provides it with the competitive edge to overpower the competitors. Through research and development a company can gain sophisticated technology to offer better products at lower prices (Prof. Duane T III, n.d.). The value chain activities are not isolated activities but are highly interdependent. Linkages are observed between various factors within the primary activities and also within the primary and support activities. A proper linkage offers the successful value chain to fulfill the goals of the company (Porter's Value Chain: An Analytical Framework for Intermediation, n.d.). Executive Summary The report in the analysis explains the various areas of strategic marketing management. The company selected to show the importance of the strategic marketing management is ASDA-Wal-Mart. The report states the several changes ASDA-Wal-Mart has undergone in order to exhaust the business opportunities in the retail industry. The report describes the various actions taken by the company while performing a refined market research. Every marketing policy has been supported with relevant data to show the organisational benefits accrued by implementing the strategies. The report starts with an analysis of ASDA-Wal-Mart and is followed with a few recommendations. The recommendations aim at making the company more able in capturing greater market share. Finally, the report ends with a conclusion that explains how the marketing strategies have proved to be successful for ASDA-Wal-Mart. Analysis The main area of focus in the analysis is the external analysis of ASDA-Wal-Mart. The organisation pays sufficient attention to enhance customer satisfaction. From the very day of initiation, the company offered a wide range of products to its customers at a relatively lower price than its competitors. The plethora of products, ranging from garments to groceries and optical services to hardware, was further upgraded through customer feedbacks gathered at regular intervals. The product range by ASDA-Wal-Mart coupled with lower price has given it a significant competitive edge to grab a larger market share in U.K. Presently, ASDA-Wal-Mart is making an attempt to homogenise its product range across all its stores in U.K. Product Range The broad product range has posed a potential threat to all the retailers in the market. Some of the budding retailers have also found the cost of entering into the business substantially hefty. Moreover, along with the retail industry that is facing high competition because of Wal-Mart's wide range of products the various other kinds of businesses like car repair products, optical goods and services may also become vulnerable (Renkow M., 2005). Demographic Coverage The demographic coverage of ASDA-Wal-Mart is notably vast. U.S. offers the most potential market for Wal-Mart which has a total of 3814 stores. This means that on an average there are 13 stores for a group of one million U.S. citizens. The distribution of stores across UK is also outstanding. The business expansion in U.K. by Wal-Mart through its subsidiary ASDA has been rapidly increasing since 1999. The main competitor of Wal-Mart in UK market is Tesco and Sainsbury. After the takeover of ASDA by Wal-Mart, the business has expanded swiftly surpassing Sainsbury. Presently ASDA- Wal-Mart in U.K. operates around 300 stores and is attempting to increase it. Despite all these attempts Tesco captures the greatest market share in U.K. (Raupp M., Baker S. and Sicilian J., n.d.). Marketing channels used by the organisation Marketing channels play a crucial role to enhance the efficiency and effectiveness of a company. In fact it bridges the gap between the producers and consumers. There are various types of marketing channel structure adopted by a company to gain competitiveness (Types of Marketing Channels, No Date). Electronic marketing With the growing popularity of the internet, electronic marketing channel has been adopted by Wal-Mart aggressively. It has always offered the real value of money to its customers. Following this objective it has also attempted to offer its huge product range on the internet. Through the internet marketing the mega-retailer will help the customers save more. They will enjoy the comfort of home and the fun of shopping together. But when the land based retailing is concerned, Wal-Mart has also shown its excellence at ease. The U.K. market has shown an immense affinity to Wal-Mart's online marketing techniques. The online grocery aisle of ASDA is vastly popular among its customers (Wal-Mart Annual Report, 2008). Vertical Marketing Vertical marketing is also a vital marketing channel that helps in connecting the producers, intermediaries and consumers in a single chain. The vertical marketing system adopted by Wal-Mart is known as 'administered VMS'. According to the administered VMS, Wal-Mart stays as a singular member holding the power to co-ordinate the activities of the rest of the members. It coordinates the sales with the help of different channels throughout the globe (Marketing Distribution & Channels Issues, n.d.; McCorriston S., Sexton R. J. and Sheldon I.M., April 2004). Market Segments Served The ever growing product range of Wal-Mart has made shopping lucrative for people of all income groups. Ranging from luxury good to low-priced products, the products at Wal-Mart grabs the interest of all the individuals. Multi market study has revealed that out of 5 U.S adults (age 18 years and above) 4 shop from Wal-Mart. This confirms the fact that customers of all income groups are attracted by this mega-retailer (Wal-Mart Stores Inc., May 2009). Outside USA, Wal-Mart has also excelled in U.K. by becoming a leader in the most low-priced market, especially in the grocery market (Graff T.O., n.d.). The retailer is focusing on five categories of shoppers; baby-boomers, rural, high-income, Latinos and Americans. This innovative and active approach has been adopted to reach at all the market segments with its great variety of products. Some of the products introduced for the high-income groups are wine section including 1200 different choices. These 1200 different selections include 700 premium brands. The Wal-Mart officials have made it clear that introducing the premium luxury brands will not at all harm the core customer of the store who prefers low-price coupled with high quality. Recently Wal-Mart has endorsed an agreement with ACNeilson which will assist Wal-Mart to offer merchandise variety in all its stores. This will help the retailer to approach any kind of customers in all the stores (Dixon N., August 2006). Role of Branding It is an important task to promote a company's brand name in the minds of the consumers. In this regard, the advertising techniques play a vital role. The various advertising strategies adopted by a company changes from time to time to alter deeply promote its brand name (Waber, Rebecca L, n.d.). The acquisition of ASDA by Wal-Mart proved to be successful for certain crucial reasons. Before the takeover, ASDA, a British retailer, followed similar promotional and pricing strategies that Wal-Mart followed. Naturally Wal-Mart did not make any huge change in its promotional strategies and branding for the U.K. market. ASDA already exercised a huge and successful branding campaign in the retail market of U.K. which added on to the success of ASDA-Wal-Mart (Liang D., 2003). Wal-Mart has also been noticed to introduce a new advertising tag line that reads "Save money. Live Better". This tag line offers a striking change in the minds of the customers, especially to the middle-class people. Product Quality The competitive prices of Wal-Mart's products always reflect the fact that best quality products are being offered at the minimum possible price. This demonstrates the need to keep an eye on the quality of the products. The company has always paid sincere attention to its quality (Pattaon S., August 2008). The company conducts annual meeting with the suppliers to ensure that superior quality of products are being served in all the outlets. The company has been observed to offer lucrative incentives to the SDS (soaps, detergents and surfactants) in order to improve the quality. The incentive offered in this sector was mainly value-added per worker which improved the productivity and quality rapidly (Javorcik B., Keller W. and Tybout J., July 2006). Conclusions The strategic marketing management policies adopted by Wal-Mart have given a striking benefit for the organisation. The product diversity is notably wide for the competitor and passes on potential threat for the new entrants in the retail industry. The retail industry enjoys the benefit of accessing multi markets. Hence Wal-Mart's marketing techniques has carried on the competition for other markets as well. The demographic coverage of ASDA-Wal-Mart is growing in U.K. after the acquisition. However, there are certain drawbacks in this regard which is causing its competitor TESCO to retain its top position in the U.K. market. The low price and higher quality offered by the company is a crucial element for gaining success in the U.K. markets. But there is also a need to increase the spread of premium quality products simultaneously. The company has shown a brilliant effort in enhancing the product quality. It has given incentives in the SDS industry. This effort has been remarkable as this industry attracts a large number of consumers. Hence a quality improvement in this regard will be highly profitable for the company. The advertising techniques of the company have also been brilliant focusing on the middle-class consumer group who constitute the highest customer base (ADVERTISING; Wal-Mart Fires Marketing Star and Ad Agency She Chose, May 2009). References: Arons H.D. and Waalewijn P. (No Date). A Knowledge Base Representing Porter's Five Forces Model. Retrieved May 2, 2009, from http://pserc.ee.iastate.edu/DA/readings/eur-few-cs-99-02.pdf. ASDA/WAL-MART: A Corporate Profile (2004). Corporate Watch. 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