Nature of Wal-Mart Industry - Essay Example

Wal-Mart Industry Analysis Affiliation Nature of the Industry Wal-Mart is retail market, which is the largest private company in the US and among the largest multinationals in the world. Competitors operating in the retail industry threaten the company and its analysis is important. The other retail industries competing with Wal-Mart include the K-Mart, Costco, Kroger, and Safeway. Competition is on pricing, store size, product mix, store location, and image to shoppers. The main strategy for Wal-Mart is low-cost leadership to attract many customers for the wide selection of merchandise in its stores (McGee & Festervand, 2015). According to Fortune Global 500 in 2014, Wal-Mart was the biggest company by revenue and the largest employer in the private sector worldwide. The number of employees stood at 2.2 million making it is the most valuable company in the world. The operations of Wal-Mart are in three divisions namely Sams Club, Wal-Mart US, and Wal-Mart International with nine retail formats. The formats are supercenters, general merchandise, food and drugs, stores, bodegas, membership warehouse Clubs, cash and carry stores, apparel stores, restaurants, and soft discount stores. The Wal-Mart US is the largest with sales amounting to $258 billion operating discount stores, Neighborhood Markets, and Supercenters. Some of the Wal-Mart stores are located in Argentina, Canada, Brazil, and the UK. The company also involves global eCommerce, which is involved in online sales in the US with headquarters in San Francisco. Competition Analysis The main competitors of Wal-Mart in North America include departmental stores such as Kmart, Target, Meijer, and Publix, which sell similar products. One of the main competitor is Target (TGT) in the retail market. Wal-Mart competes directly with Target (TGT) a discount retailer, which offers its goods and services at low prices. Just like Wal-Mart, TGT provides a wide range of products especially staple consumer goods such as household goods, clothing, food, and groceries. TGT also offers discount to its customers to attract them, which is also a common method in Wal-Mart. Wal-Mart sells products at lower prices to attract low-income consumers while TGT targets goes for affluent customers with their high quality merchandise. Both Target and Wal-Mart try to keep their profit margins high through cost reduction measures. Other competitors include Giant Tiger and the Real Canadian Superstore competing for the retail market. Wal-Mart also competes with Mexicos retail stores such as Soriana and Commercial Mexicana. The Sams Club also experiences competition from Costco and the BJs Wholesale Club Chain, but the customers are many. The grocery market faces competition from major supermarkets in the US and Canada especially the WinCo Foods and other smaller retailers. Wal-Mart sold all its outlets in Southern Korea, which were later rebranded as E-mart Stores by Shinsegae. In other parts of the world such as China, Wal-Mart is struggling to enter the market, as it has to comply with some standards. Wal-Mart and Technology Wal-Mart embraces technology in its innovative ways to attract consumers to cut down the costs of operation. The technology assists in tracking inventory and restocking shelves, which ensured low cost, which was reflected the consumers. Wal-Mart makes the use of computer-based technology in which the product bar code is swiped at the checkout isle. This ensures that information is sent to the Wal-Mart data warehouse instantly. In case the product needs to be replenished, the data warehouse can detect and places the order directly to the vendor or other distribution centers. This technology reduces the amount of merchandise to be stored in the storeroom or many boxes in the store, which minimizes costs (McGee & Festervand, 2015). All supply chains of Wal-Mart are linked via computer network making the processes simpler. The company also practices E-business to replace the physical business processes with electronic types hence can sell at any time of the day regardless of the physical distance. The company employs computer technology to facilitate electronic data Interchange in which computer-to-computer exchange of the business documents is possible. The electronic surveillance cameras and screens help in monitoring the stores without the necessity of moving to each section. The technology is also used to aid recycling for various materials such as cans, plastics, paper products and others. The other technology used in Wal-Mart is the Flow-Time Analysis Point of Sale Data in which the system can stock the shelves and captures data in the warehouses and previous day tracks using Real-time for invoice management. Another technology in use is the real-time point-of-sales (POS) data transmission, which help in the management of sales. Technology is important in any industry and companies are trying to utilize it as much as possible. Technology helps in saving time and costs, as it is fast, efficient, and replaces human labor. Instead of employing several people to manage items on the selves, computer technology helps to solve the problem (McGee & Festervand, 2015). Impact of Economic factors to Wal-Mart Economic factors affect the performance of Wal-Mart both locally and internationally. For instance in the US, high interest rate affects the demand for the products by consumers. If the interest rates are higher, the demand decreases and when interest rates are lower the demand increases. The other factor is inflation, which affect the general prices of consumer products making them more expensive. Consumers end up buying less, which reduces sales. High unemployment makes some things less affordable to consumers who are unemployed leading to low sales. Changes in laws such as high taxation also affect the ability of consumers to buy Wal-Mart products. High fuel changes and energy costs increase transportation costs, which are added to the products making them too expensive for some people decreasing the overall sales (McGee & Festervand, 2015). Some laws may increase the operating costs of Wal-Mart, which in turn result to the high cost of the products sold to customers. In other countries, economic factors may include devaluation of currency and other development may affect the consumers’ purchasing power, which reduces the Wal-Mart’s sales. In some countries, the incomes are lower than in the United States, which makes it impossible for consumers to buy leading to low sales. Such conditions affect the companys gross margins, the cost of sales, markdowns, and inventory turnover. The international segment is the one greatly affected by economic factors especially whether such levies such as taxes are high. Other factors included the cost of housing as consumers spend most of their earnings paying rent and little on shopping. In addition, the cost of renting premises for the company operations may be too high affecting the profits. The economic challenges are a major drawback to War-Mart and its performance depends on the economy and its level of development. Recession is another factor, which affect consumer buying, and in many cases, it results in very low sales. For instance, the US great recession of 2008 affected the company sales very much. When people are earning less much of the income goes to housing, education, and medical care. The little that remains is shared among many activities including shopping. In countries with developed economy such as the UK, sales are high which help to balance the deficit created in the low performing outlets (McGee & Festervand, 2015). Foreign exchange rate fluctuations affect the international markets and this affects the Wal-Mart sales. Low pricing help in recovering some of the losses since low-income earners can buy small packages and contribute to the profit margins. Wal-Mart has improved its products to cater for the nutritional value of foods such as reducing the amount of sugar and salt. The company also reduced or eliminated the amount of fat in many food categories and encouraged its suppliers to consider the nutritional needs for their products. Other developments include Wal-Mart to Go in which it delivers goods to the customers who purchase online. One of the outlets is in San Jose California, and it aims to make the project national to serve many people. The company also has an interest in some African countries such as Kenya in which it aimed at acquiring a majority stake in Naivas Chain Stores to diversify the markets (McGee & Festervand, 2015). The other challenges it faces in the industry include striking workers demanding for higher salaries, law suits especially one by comedian Tracy Morgan, and a drop in stock by 1 percent in October 215. Reference McGee, J. E., & Festervand, T. A. (2015). When Wal-Mart comes to town: A look at Davids response to the arrival of retailings Goliath. Journal of Small Business Strategy, 7(3), 15-28. Read More