Wal-Mart Incorporation’s Low-Price Attraction

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Executive summary

The research proposal relates to Wal-Mart Incorporation. The objective of the proposal is to evaluate the strategies that Wal-Mart can incorporate in an effort to deliver quality products to the customers and at the same time maintain its low price strategy. A literature review is conducted to evaluate the importance of the supply chain in a firm. The review gives an analysis of the ways through which Wal-Mart Incorporation can improve its supply chain. This is achieved through consideration of various strategies, which include procurement and distribution, inventory management, logistic management, and total quality management. Procurement and distribution management will enable the firm to attain both cost efficiency and deliver value to the customers through managing the entire supply chain. Effectiveness in procuring its supplies will enable the firm to set its prices at a relatively low level. On the other hand, total quality management will enable the firm to improve and sustain the quality of its products.

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In conducting the research, the procedure that will be utilized in collecting the data is analyzed. This is achieved by considering various methods of data collection, which include the use of interviews and questionnaires. The methods to be used in analyzing the market data are outlined. Finally, a summary of the market findings and conclusion are illustrated.

Introduction

Wal-Mart Incorporation operates a chain of discount stores in the US and other countries across the world. The firm has been successful over the years. It has been in operation, making it to be the largest corporation in the world. Wal-Mart’s success is associated with its adoption of a low pricing strategy. The low pricing strategy has been attained due to the firm’s size, which has contributed towards the firm attaining high economies of scale in its operation. In addition, the size of the firm has enabled it to incorporate product diversity in its operation. As a result, the firm has been effective in meeting the customers’ needs more effectively by acting as a one-stop-shop. The firm’s low pricing strategy has had a significant influence in the entire market to both the consumers and retailers. However, the firm’s low pricing strategy has been greatly criticized as being predatory. This results from the fact other large and small firms within the industry cannot be able to compete with the firm. Most of the critics argue that Wal-Mart has adopted the low pricing strategy in an effort to attain monopoly power within the industry.

According to Wood (2006, para. 7), firms adopt a low pricing strategy in an effort to cope with competition and to attract customers. In its operation, Wal-Mart has been committed to its low pricing philosophy. Over the past few years, Wal-Mart has not been effective in attracting and retaining customers. For example, despite the firms’ management team incorporating a low pricing strategy, Wal-Mart has not been successful in attracting customers. According to Thompson (2009, para. 6), Wal-Mart’s sales revenue during the 2009 holiday season increased by only 1.7%, which is relatively low despite the firm offering a discount of up to 70% on different products. In addition, there have been increased reports in the media concerning a high level of inefficiency in the operations of the firm. For example, surveys conducted by the media houses reveal that customers are concerned about other factors in the process of making a purchase decision other than only price. One of these factors relates to the quality of the products and customer experience.

This paper entails a research proposal relating to the operations of Wal-Mart Incorporation.

Aim

The objective of the proposal is to determine the actions that Wal-Mart’s management team should take to ensure effectiveness in its low pricing (spent-less) strategy. In addition, the proposal is also aimed at determining how Wal-Mart can improve its supply chain in an effort to attain cost efficiency and total quality management.

Scope and assumptions

The research proposal is organized into five parts. The first part is a literature review which gives an analysis of the ways through which Wal-Mart Incorporation can improve on its supply chain. Some of the avenues which have been considered include procurement and distribution, inventory management, logistic management, and total quality management. The second part gives a detail of the procedure that will be utilized in collecting the data. Some of the considerations include the use of interviews and questionnaires. On the other hand, the third part details the data analysis procedure, while the fourth part gives a summary of the market findings. Finally, a conclusion is illustrated. However, the research proposal does not give the cost that will be incurred in conducting the research.

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In conducting the research, it is assumed that the respondents identified are conversant with the current operations of Wal-Mart Incorporation. In addition, it is also assumed that the respondents are conversant with what the supply chain consists of.

Literature review

Over the past decades, there has been an increment in the degree of complexity within the retail market. As a result, management teams of firms in this industry are considering re-evaluating their core operating strategies. In addition, there has been a shift in consumer purchasing patterns resulting from the consumers demanding diverse products and attaining a high level of customer experience. Myer and Schwager (2007, p.1) assert that customer experience is comprehensive since it entails all the company’s offerings. These may relate to the quality of customer care, product features, packaging, advertising, reliability, and ease of use. Alternatively, Myer and Schwager (2007, p.2) define customer experience to include both indirect and direct links between the firm and the customers. Direct linkage mainly occurs in the process of the consumers making their purchases and utilizing the product or service. On the other hand, indirect contact occurs in unplanned circumstances such as during advertisement, criticism, reviews, and news report relating to the firm. A firm’s success resulting from customer experience is enhanced by the ability of the firm to deal with quality brands. This is due to the fact that the strength of the brand enhances customer experience even before the consumer purchases the product.

Growth in technology has also played a significant role in changing consumer demands. For example, innovation of the internet has resulted in information explosion culminating in the consumers demanding high customer experience (IBM, n.d, p.4). For a firm to firm to succeed within the retail industry that is characterized by intense competition, it is paramount for the management team to incorporate the concept of customer-centric. According to Thompson (2009, para. 6), the concept of customer-centric in business entails the firm ensuring that the customers attain high-quality services and experience. Changes in the market have limited the effectiveness with which product and price acted as differentiators. As a result, the consumers are more concerned with the experience that they attain in their purchasing patterns. Thompson (2009, para.8) asserts that despite the fact that Wal-Mart has succeeded to be effective in implementing its low price strategy compared to other small stores, the firm has failed in offering services to its customers. Maria (1999, para.9) asserts that customers are forced to beg Wal-Mart employees in order to obtain decent service. Inefficiency in service delivery within the firm has played a significant role in the firm’s low pricing strategy being ineffective in attracting and retaining the customer. Findings of research conducted by Thompson revealed that customer loyalty is driven by a number of factors (2009, para. 9). For instance, 40% of customer loyalty results from the product purchased, while 40% results from experience attained upon consuming the product. The cost of the product or service only contributes 20% towards the development of customer loyalty.

Improving supply chain management

Despite the fact that Wal-Mart’s low pricing strategy has not culminated in an improvement in the firm’s success by attracting and retaining customers, there is a high probability of the firm dealing with this situation. One of the avenues through which the firm can enhance the attainment of its low pricing objective and at the same time deliver quality services to the customers is by improving its supply chain management. In addition, supply chain management can also contribute towards the firm attaining cost efficiency in its operation. Cost efficiency refers to the concept in which a firm conducts its operations with minimal expense, no time wastage, and little effort. Supply chain management refers to the process through which a firm manages all the activities involved within its supply chain (ICFAI, 2003, p. 4). The core objective of supply chain management is to maximize the value received by the customers, which translates into the firm attain and sustaining a high competitive advantage. Integration of supply chain management in an organization represents a firm’s conscious effort to attain effectiveness and efficiency in its supply chain. According to Lambert and Cooper (2000, p.6), supply chain management entails a number of activities which include sourcing, product development, and logistics. In addition, supply chain management entails a number of firms that are linked together in their operation. For this to be attained, there has to be a well-established flow of information between the business partners which enables the firms to coordinate their operations.

There are a number of ways through which Wal-Mart can utilize supply chain management to low cost and deliver high value to the customers. These avenues are outlined below.

Procurement and distribution

Wal-Mart’s management team should consider integrating efficiency in its procurement process. As a result, the firm will be able to meet market requirements more sufficiently. Over the past few years, there have been increased customer complaints about the lack of some commodities from the firm (Maria, 1999, para. 7). The resultant effect is that the firm’s public image has been deteriorating.

The firm’s management team should formulate a strategy aimed at minimizing its purchasing cost. Through effective procurement, the firm will be able to set the price of its products at a relatively fair value compared to the competitors. For the firm to attain this objective, the management should procure its products from the manufacturers. As a result, the firm will bypass other intermediaries involved in the supply chain. According to ICFAI (2003, p. 4), if there are many intermediaries within the supply chain, the cost of procurement is increased. This translates into an increment in the price paid by the final consumer. In addition, the procurement of the various products that the firm deals with should be done in large volumes. This will make the firm benefit by obtaining large quantity discounts. The benefits will trickle down to the final consumer. This means that the firm’s management team should ensure that its procurement process benefits the customers.

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In addition, the firm can attain cost efficiency by engaging itself in an intense negotiation with its suppliers. To attain this, the firm’s procurement department should conduct a comprehensive analysis of its suppliers before making a decision to obtain its supplies from the supplier. This will contribute towards the firm gaining knowledge on the suppliers’ cost structure. By making the procurement process to be transparent, the manufacturers will be pressured to cut their costs. The resultant effect of understanding the vendor is the development of a long-term relationship.

In an effort to develop customer loyalty, Wal-Mart should ensure that all its stores located in different countries are well stocked. In addition, the firm’s stock should be replenished on time. This means that the firm should devise mechanisms on how to reduce its lead time relative to its competitors. The cost of replenishing the stores should also be minimized. The effectiveness in stocking all the firm’s distributional centers will enable the consumers to obtain a variety of products under one roof. As a result, the customers’ shopping experience will be enhanced.

For there to be efficiency in serving the customers, all the firm’s employees should be aware of the products that the firms deal with. This means that service delivery to the customers will be improved through effective response to the consumers’ product inquiries. Superior customer service delivery can also be attained by ensuring that all the firm’s employees access information regarding the firm’s inventory levels.

The firm can also ensure efficiency in serving the customers by integrating the current technologies, such as the use of handheld bar codes. This will enable the employees to locate where the products are located within the store easily.

Inventory management

The firm’s management team should be committed to reducing unproductive inventory from the firm. This can be attained by allowing each store to manage its own stocks and ensuring timely price reduction. Through effective inventory management, it will be possible for the firm to reduce its operation cost by minimizing the amount of unnecessary inventory held within the firm. However, the firm’s management team should be careful not to reduce the amount of stock available within the firm beyond a level that will compromise its service or performance. It is also important for the firm to network with the suppliers through the current Information Technology capabilities. For example, it is paramount for the firm to adopt the current automatic re-ordering system. The system will enable the firm to identify the stocks which are running low and replenish them in time.

Logistic management

Wal-Mart can also attain cost-efficiency in its supply chain by incorporating logistic management. ICFAI (2003, p.2) asserts that logistic management is beneficial in the operation of a firm since the firm becomes efficient in attaining place and time utility. The management team should be concerned about installing an efficient transportation system. The transportation system should ensure that all the firm’s distributional stores are replenished in time. To attain this, the firm’s management team should ensure that it has a sufficient number of tracks to deliver goods to the stores. In addition, all its drivers should be committed to delivering value to the customers. In the course of delivering the products to the customers, the quality of the products should be maintained. The distributional fleet should be well-coordinated so that minimal time is involved in supplying the goods.

Total Quality Management

The management team should also be concerned about improving its supply chain by incorporating the concept of Total Quality Management (TQM). According to Murray (2010, para.1), TQM refers to the approach that a firm uses in an effort to improve the quality of the products and services it deals with. As a result, the firm is able to meet the customers’ expectations. Wal-Mart can improve its supply chain by integrating functions related to improving the quality of its products and services within the entire firm. In the process of incorporating TQM, the firm’s management team should ensure that all the firm’s employees are involved. TQM can result in an improvement of the firm’s supply chain by considering a number of elements. Some of these include quality control, quality improvement, quality assurance, and quality maintenance. Murray (2010, para.4) asserts that high costs are involved in the process of implementing TQM in an organization. However, the cost incurred cannot be compared with the benefits received from the TQM. For the entire supply chain to be improved, the firm’s management team should ensure that the product’s requirements are adhered to. The firm can attain this by the setting specification for the products finished products it receives from the suppliers. In addition, the firm’s procurement department should conduct a vendor evaluation so as to assess the suppliers before approving them to be the firm’s suppliers. Comprehensive quality assurance can be attained by creating, implementing, and maintaining a quality system. Quality audits should be conducted from time to time to ensure that the firm’s quality system is operating efficiently. The firm should also conduct quality improvement by incorporating the concept of value addition. Value addition will result in an enhancement of the customers’ shopping experience.

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Data collection

According to Flick (2009, p.131), data collection entails the process through which the researcher prepares and collects data from the field in order to ensure that the study provides information that benefits the intended parties. In the process of collecting the data from the market, the random sampling method will be used in selecting the sample from the market. This will ensure that bias is eliminated in the process of obtaining market feedback. This is due to the fact that all the respondents will have the same probability of being selected. The respondents to be selected for the study include the firm’s customers, employees, and those at the management level. The sample size selected will consist of 12 respondents. This will include five customers, three managers, and four employees. Market data will specifically be collected from California State.

The primary method of data collection will be used in obtaining market feedback. This will result in an increment in the validity of the data collected.

Face-to-face interviews will be utilized in obtaining market feedback from the firm’s employees and customers. In addition, self-administered questionnaires will be used in collecting market information from both the managers and the customers. Emails will be used in distributing the questionnaires to the employees and the managers. Before administering the questionnaires, the questions will be reviewed so as to eliminate any form of ambiguity and improve on the clarity. The respondents will be informed of the research prior to its execution to ensure that consent is obtained.

Data analysis

The market data collected will be analyzed so as to benefit the firm’s management team in the process of making relevant decisions. Considering that questionnaires used in collecting the data are exploratory in nature, the nature of data collected will be qualitative in nature. In order to ensure that there is the ease in the process of analyzing the data, data coding will be integrated. This will entail condensing the data collected into smaller and analyzable units. Data coding will enable the data collected to be transformed into another format that can be analyzed by incorporating various statistical tools such as the computer. Through data coding, it will be possible to incorporate various statistical data analysis tools such as the Statistical Package for Social Sciences (SPSS) and Microsoft Excel. Longnecker (2008, p. 56) asserts that data reduction results in the data becoming sharper, focused and enables the researcher to discard some of the data which is not relevant. In addition, data coding makes the process of displaying the data more effective by reducing the volume of the data collected from the field.

To ensure effectiveness in utilizing the SPSS statistical analysis tool, the various codes developed will be developed into a matrix by considering the various matrixes. This will be attained by incorporating the Likert scale used in collecting the data. The use of the Likert scale will aid in arranging the data in the form of columns and rows.

Summary of the results

Findings of the market research revealed that Wal-Mart had not been effectively integrated the concept of Total Quality Management in its operation. Three of the managers and employees interviewed revealed that the firm has not been consistent in ensuring that the high quality of the products is adhered to within the firm’s entire supply chain. On the other hand, all the managers interviewed revealed that the firm has witnessed a reduction in its revenue levels despite a significant reduction in the price of all the products that the firm deals with. In addition, 3 of the employees revealed that a large number of employees are not conversant with the location of a large number of the products that the firm deals with. As a result, the employees are not able to respond to the customers’ questions during purchasing. In addition, 4 of the employees interviewed revealed that it takes up to 3 days for the firm to replenish some of the stocks. This makes the customers lack some of the products from the store from time to time.

On the other hand, 4 of the customers interviewed revealed that they don’t receive quality services from the firm’s employees despite the fact that the firm has a low pricing strategy. As a result, the customers received a low level of customer experience, thus de-motivating them from making repeat purchases from the store.

Conclusion

For a firm to succeed in an environment characterized by increased competition, it is paramount for the management team to ensure that the firm delivers quality to the customers. This will enable the firm to develop a positive public image culminating in its long-term survival. One of the ways through which the firm can attain this is by ensuring effectiveness in its supply chain. Despite its low pricing strategy, Wal-Mart has not managed to attract a large number of customers. This has resulted from ineffectiveness within its supply chain. Over the years, there has been a shift in consumer behavior. This is evident from the fact that consumers are not only being concerned with the price of products but also customer experience. A high level of customer experience can result from high-quality products, ease of obtaining the products from the store, and effective quality.

Wal-Mart Incorporation can improve on its supply chain so as to achieve cost efficiency and total quality management. By attaining these goals, the firm will be able to survive in the long run as a going concern entity. Cost efficiency within the firm’s supply chain can be achieved by improving its procurement and distribution process. The procurement process should contribute towards an enhancement of the firm’s pricing strategy. This can be attained by procuring its supplies directly from the suppliers so as to obtain large quantity discounts. As a result, it will be possible for the benefits to trickle down to the customers. Efficiency in product distribution will contribute towards the firm improving the customer shopping experience. This can be attained by ensuring that the firm’s stores in different locations are well stocked.

Supply chain improvement can also be conducted through the integration of effective total quality management. This will ensure that the quality of the products is maintained until it reaches the final consumer. Total quality management can be achieved through the conduction of quality control, quality assurance, and quality improvement. This will enable the consumer to obtain a high utility by consuming the products.

The supply chain can also result in cost efficiency through the incorporation of logistic management. This will make it possible for the firm to supply the products to the final consumers more cost-effectively. As a result, the consumers will be able to attain time and place utility in their consumption patterns. Cost efficiency can also be attained in the firm’s supply chain through inventory management. The firm’s management team will be able to eliminate unproductive inventory from the firm.

Reference

Flick, U. (2009). An introduction to qualitative research. Newbury Park, CA: Sage Publication.

ICFAI. (2003). Wal-Mart supply chain management practices. Nagarjuna Hill, India: Centre for Management Research. Web.

IBM. (n.d). The customer centric store. New York: IBM Business Consulting Services. 2010. Web.

Lambert, D.M. & Cooper, M. (2000). Issues in supply chain management. New York: Elsevier Incorporation. Web.

Longnecker, M. (2008). An introduction to statistical methods and data analysis. New York: Cengage Learning.

Maria, T.G. (1999). Go inside: Wal-Mart or Wal-Bad. Web.

Murray, M. (2010). Total quality management. About.com. Web.

Myer, C. & Schwager, A. (2007). Understanding customer experience. New York: Harvard Business Review. Web.

Thompson, B. (2009). Are low prices customer centric? Wal-Mart says yes. California: Customer Think Incorporation. Web.

Wood, C. (2006). Economic boon or bad for business. Owensboro: Public Life Foundation. Web.

Appendix: Questionnaire

  1. Has Wal-Mart incorporated Total Quality Management in is supply chain?
  2. Do customers obtain quality services by shopping at Wal-Mart despite its low pricing?
  3. How can you rate the level of customer experience obtained from Wal-Mart?
  4. Has Wal-Mart been effective in supplying quality products to the customers?
  5. Does Wal-Mart employees serve the customers with enthusiasm?

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