Wal-Mart Stores, Inc.: Company Analysis

Executive Summary

Wal-Mart Inc. has been in existence since 1962. The retail store chain has significantly expanded in the global market segments in Europe and America. Its powerful retail brand with “Everyday low price” slogan depicts its successful money-for-value pricing policy and strategy (Zook, &Graham 2006, p.15). However, it is noted that the global retailer has limited number of stores and more significantly, has not managed to venture into the African market. Egypt, as one of the fasted growing African markets and the most populous Arab nation is offering a better opportunity for Wal-Mart to extend its operations in the global arena. Currently, Egyptian market has been relatively liberalized; Wal-Mart will use its strong and vibrant physical environment, proper service provision process supported by technology, and timely product placement, its people management as a process of service marketing to penetrate the Egyptian market.

In order to effectively generate much interest among the consumers, we will apply the 4Ps (Product, Place (distribution), Price and promotion) marketing mix theory. The changing lifestyle and clustered distribution of people will be the basis in which products will be designed. Both Arabic and English language will be used in order to localize the product knowledge. Local vendors will be used, as this will be the only way to satisfy the government regulation of foreign traders. In the pricing strategy, Wal-Mart will stick to its low price strategy to continue with the dominance of the market. This will also help the company develop strong competitive strategy. Lastly, promotion will form major part of the marketing strategy. This will involve: push and pull promotional strategies, advertising on both print and electronic media, personal selling, and sales promotion.

Introduction

Wal-Mart Stores, Inc. is a United States’ public corporation that operates a series of supermarket stores globally. Founded in 1962 by Sam Walton, Wal-Mart is the largest full-line discount in the world in terms of sales and revenue. It is also billed as the single largest employer in the United States. Its initial rapid expansion initiatives were concentrated in the outskirts of small towns and buying out small businesses around these regions (Zook, &Graham 2006, p.17). Recently, however, the company has diverted its growth initiatives in big cities around the world. Wal-Mart has its operations in North and South American regions, Europe, Asia, representing one of the largest companies in terms of global presence. However, Wal-Mart has managed to only successfully penetrate a limited number of market segments in these regions namely UK, Mexico, Japan, Indian, Argentina, Puerto Rico and Canada. The retailer has not managed to penetrate African market segment. Recently, many retailers have increased their activities in African countries, considered to be growing in terms of consumer number and purchasing power due to increased disposable income. Egypt is a country that many companies have considered to enter in the recent past due to its high potentiality in terms buyers’ increased disposable income and changes in the business environment of the country.

The company has a powerful retail brand, with “Everyday low price” slogan depicting its value for money marketing policy (Zook, &Graham, 2006, p.15). Its core competency relies in its ability to apply various form of information technology to support its internal operations. Their weakness lies in its size. The company expansive units of operations may present a possible weakness that small traders can capitalize on. It means they may fail to concentrate on specific products and services, hence inability to cut a niche for particular services. Focused competitors may therefore concentrate on particular areas of specialization and outdo them. This has been seen in some insurance services as will be elaborated later in the plan.

Wal-Mart’s strategic Goals and Mission

Wal-Mart’s mission is “saving people money so they can live better” (Thompson & Strickland, 1995). Wal-Mart goals were crafted by its founders led by Sam Walton. The goals were to increase customer satisfaction in every business venture the company pursued, i.e. “increasing customer value and service; partnership with its associates; and lastly community involvement” (Thompson & Strickland, 1995).

Retail Product and Services

Much of the supermarkets stores’ success is attributed to its merchandising foresight, good pricing strategies supported by cost-conscious production, efficient marketing communication, good logistics in terms of distribution system (Zook, &Graham, 2006, p.17). Its well established online retail section that mainly concentrates in toys and electronics has also given the company an edge over other chain stores. In fact, Wal-Mart has combined a full line of groceries and general merchandise, combined with wide range of services such as pharmaceutical services, dry cleaning services, and studios, hair-dressing, insurance services among other various services.

SWOT Analysis of Wal-Mart

Strength

Wal-Mart has presented one of the most powerful retail brands in the global businesses, and most frequently reputed for low price as well variety of goods and services, all merged into one store. Steady growth and expansion has seen Wal-Mart acquire several retailers such as its acquisition of ASDA.

One of its major core competencies is the ability to apply IT in its retail activities. It is known that Wal-Mart has successfully used information technology to support its increasingly complex logistical activities in the global arena. For example, they have applied IT to monitor how individual products perform in their international stores all over the world. The other key component of Wal-Mart’s success is its strong human resource strategy. Wal-Mart believe that people form one of the most important resources hence their constant people investment through training and development.

Weaknesses

It is noted that Wal-Mart’s sheer big size may present one of its number one weaknesses. Controlling the huge business expansion as well as maintaining coherent management practices may not be easy for the retailer. This may leave other retailers taking advantage of these loopholes.

The other aspect is its diversification in product and service provision. Since the retailer deal in a variety of retail products ranging from clothing to household goods such as grocery, it may possess the advantage of flexibility that other small retailers dealing in single products have. Lastly, although Wal-Mart is global, it has very limited access in many nations. In other words, the retailer has only managed to concentrate in very major cities around the world.

Opportunities

There is opportunity for Wal-Mart to form merger or alliances with other retailers in their international retail expansion strategies. For example, emerging markets particularly in Asia and Africa have presented many companies with opportunities to expand their business initiatives in the global markets. The retailer’s little number of stores in limited cities in America and Europe present an opportunity to expand in other emerging markets in Asia and Africa. Of more importance is the emerging African market such as Egypt, which has presented considerable opportunity due to expanded favorable business environment. The retailer also has opportunity to increase in small unit retail stores to in these emerging markets, considering the people’s consumption habits.

Threats

The fact Wal-Mart is the number one retailer means that all other retailers will target it in terms of competition, hence the need to be more strategic. The other aspect of threat comes from the globalization strategies, which means the retailer has to face political and cultural problems of many market segments.

There are also the reduced production costs of consumer goods. Many retailers are also able to produce these goods and services with little difficulty hence increased price competition.

Retail Market Strategy and Operation Management

The prospect of retail business in Egypt is positive according to the forecast. In the recent years, the country’s economy has improved significantly, despite the global economic go-slow. This is attributed to the stable political environment that saw the appointment of liberal cabinet in 2004. It is projected that economic growth will continue in the upward scale as the pro-investment cabinet has repeatedly emphasized the government’s commitment to market economy in the recent years. With approximate population of 79 million people, and a projected annual population growth rate of 2%, Egypt offers a good market for Wal-Mart products (Daniels, Radebaugh & Sullivan, 2007).

Egypt is located in North of Africa, where it borders Mediterranean Sea. As at 2009, Egypt’s desert land with hot and dry summers and moderate winter has a population of 79 million people. Arabic is the official language in Egypt, with English and French languages mostly spoken by elite class with higher levels of education. In Egypt, the literacy level is relatively high as it is stated that 56% of the 15 years and above can read and write (Daniels, Radebaugh & Sullivan, 2007).

Wal-Mart has shown success in American and European markets because. With the fast paced lifestyle that is gaining root in the global society, sometimes people do not get enough time to look for the consumer products from different. It is therefore logical to presume that Wal-Mart, with its ability to operate in large variety of consumer products will do well in the Egyptian market. The retail business in Egypt has been thriving in the recent past. The country is highly populous with great potential increased consumption due to increased disposable income. At present, there is limited number of retail stores in the country. This is unlike in the United States and Europe which have big competitors like Germany’s Metro AG and Tesco. Additionally, as mentioned earlier, the country has a large population. This means that there is a big diversity in the lifestyles.

Cultural Analysis

Brief History

Egypt has a rich history, stemming back to thousands of years back. Vast literature comprises a critical cultural element for the whole world. Egyptian scholars were the first to venture into the literature of publishing in the Arab world, and their books as well as films are all over the world for academic and aesthetic value in museums and academic institutions. It is stated that Egypt has survived with a unified state and government for over 5000 years, with evidence showing the country has even existed for even longer period of time than anyone can imagine. Egypt is referred to as ‘Misr’ in Arabic, which means civilization (Daniels, Radebaugh & Sullivan, 2007). This word is the source of pride as the country’s people and scholars believe that the Egypt was that source of early civilization. This is backed by archeological revelations, which illustrate that primitive people resided along River Nile even before the Pharaoh rule came to existence. Formal agricultural activities began in 6000 B.C (Daniels, Radebaugh & Sullivan, 2007).

Come 3100 B.C., Egypt was under the rule of Mena, who initiated the Pharaonic dynasty that exist to date. The pyramids were established during one of the dynasties, the fourth, and they prove the powers that Pharaohs had relation to state matters as well as religion. The great pyramid forms one of the Seven Wonders of the World, which is the reason the country is popular with tourists from all over the world (Daniels, Radebaugh & Sullivan, 2007). This kind of dynasty still controls the state and religion to date, albeit loosely.

Geography and population

Egypt covers a land of about 1,001,450 square km, with major cities being Cairo and Alexandria. Cairo is the capital city, with a population of about 16 million. The land is predominantly desert in nature, except along the Nile and delta region. It has a climate of dry spells in most of the months of the year, with hot summer and an average winter, which proves ideal for tourists.

Egypt is the second most populous country in Africa, after Nigeria. Among the Arab nations, Egypt has the highest number of people, with approximately 79 million. The majority of these people reside in Cairo, Alexandria, along the Suez Canal, Delta region. This presents better opportunity for Wal-Mart to penetrate the urban areas with their retail stores. Moreover, the region represents one of the most densely populated regions of the world, with an average of 1,550 people per square km. This is an interesting phenomenon considering the fact that the country’s average occupation is 180 persons per square km.

Demography and linguistics

The most common language spoken is Arabic, which forms the official language. Additionally, the educated group is able to use both English and French. The communities, which are distributed in a clustered format a long the oases as well as historic towns and transport routes, are increasingly moving to towns, which are already overpopulated. The relatively homogenous population experiences annual growth of 1.7%, with ethnic groups comprising of Egyptians, Nubian, and Arabs.

Environmental Analysis

The Egyptian Constitution gives a provision for a strong and powerful executive with concentrated center of power. This means that all the powers to appoint any member of cabinet are vested wholly in the President, who is elected by the voters for a term of six years. It therefore follows that while the legislative arm of the government has 454 members, 444 are elected and 10 are presidential appointees. The constitution also has a provision for 50% of the assembly members for the disadvantaged in the country. This assembly runs for a period of five years, with president unable to dissolve it before the end of its term.

Although the opposition has their rights in making their political opinions public, with their representative all over the country, much power are still within the central government, which is headed by the president who is a member of National Democratic Party. The president’s party is dominating the political scene, including many of the institutions. There is considerable political restriction as well as limited freedom of expression for NGOs and human right groups. The organizational and professional groups are not allowed to engage in political activities, including human rights campaign activities. However, the recent developments are changing the political environment, especially since the amendment of the constitution in 2005 that allowed other candidates to challenge the incumbent president Mubarak for the first time in history. But in 2005, President Mubarak initiated several amendments in the constitution that banned all the political parties which are based on religious group, racial or with any ethnic association.

The business community in Egypt began to see the benefit of free economic system in 2004 when the parliament passed a motion to set of a new reform movement for liberalize business sector. This was triggered by the changes in the international trade that saw the stalled economic system of the country as not getting stack as compared to other countries. In the past 5 years, the government, through its cabinet economic team has defined a new way of doing business through simplification of the business process and reduction of taxes and tariffs. There has also been improvement in the government business deals transparency, particularly as concerns annual national budget, revival of the formerly stalled public institutions, and more importantly, the implementation of economic legislation meant to spearhead the private sector development to cope with the global changes in business environment. However, business experts observe that despite all these developments, the economic transformation is still restricted by government insistence in controlling some sectors of economy such as food and beverage, housing, and energy sector. Some also see a bloated public sector as the one that interferes with speedy changes due to huge expenditure in salary and wages to the civil servants. Furthermore, most of the major industrial sectors are still under the control of the public sector management.

The Growth Domestic Product (GDP) as at September 2008 stood at $452.5 billion, with an estimated growth of 4.7% in 2009. At the same time GDP per capita $5,500 in the same year, while inflation stood at 13% with only 14% of the population living below the poverty line (Travis, 2007). The Growth Domestic Product (GDP) as at September 2008 stood at $452.5 billion, with an estimated growth of 4.7% in 2009. At the same time GDP per capita $5,500 in the same year, while inflation stood at 13% with only 14% of the population living below the poverty line. Being the largest and the most populous Arab country, it has presented a critical and an important market segment in the region, and the success of Wal-Mart will be critical to entry into other Arab nations (Travis, 2007). The country is located at the heart of Middle East, with sprouting economy that has regenerated into a somewhat diversified in nature as opposed to the past.

Being a major producer and exporter of oil and natural gas, the country has embraced the need to strengthen their infrastructure to increase their accessibility for business development, particularly foreign investment. This is why at present, the government is spearheading an institutional framework to guide and boost public-private partnerships. The projects developed are mostly inclined towards building and maintenance of learning institutions, health centers, and waste water management stations.

Due to the world economic slump down, a significant slowdown of the economy was projected. This was according to IMF report, which indicated that Egyptian economy was likely to fall at a rate of 5% between 2009 and 2010 (Travis, 2007). The inflation was projected to be between 8 and 11% over the same period (Travis, 2007). However, the good news is that the financial sector has been spared the wrath of international financial crisis, a factor that has been linked to the improvement in the supervision of banking sector, limited lending practices, and central bank regulations and cautionary benefits (Travis, 2007).

The judicial system of the country is constructed in the basis of European, mainly French system of legal dispensation, both in methodology and conceptual aspects. Under the current government, there is a considerable independence in the judicial system, with court procedures and principle of court process gaining respect from both the government and private sector society. However, areas such as marriage laws together with family issues are all under the institution of religion, guided by the Sharia law. Egypt is a prominent member of NETO, which guides its international trade agreements. Egypt is also a member of World Trade Organization (WTO).

With increased literacy and adoption of technology by the people, many firms are increasing their online business, especially for consumer goods. This is supported and heightened by the increasingly busy citizens who would prefer faster purchase system like internet, to physical purchase of goods and services. This phenomenon is likely to boost our business initiatives, which would also emphasize online purchase and door-to-door delivery.

The competitors Wal-Mart is likely to face are US Wheat Associates, Abou Zeid for Trading, Dido, El Emani, El Matboly, ABA, and many others. Many of these retailers have concentrated in highly populous urban regions that still possess better business opportunities for expansion.

Marketing Retail Mix

It is a common knowledge that the principle of marketing is to know how to put the product in the right place targeting the customers or the intended buyers at the right time and at a price that is considered fair, or right (Travis, 2007). This description may sound simple, since all that is required is creating a product that is needed by a particular group of people, put it right for sale at a particular pace that is regularly frequented by these people, and finally give it a right price to allow them purchase. Ideally, there are a lot of facts in this aspect of marketing. But one thing that is needed is making a move to find out what these customers want in terms of product quality and quantity, placement and pricing. This therefore means that all the elements must be observed keenly and any failure on one may lead to total failure. In the process, we will apply the 4Ps (Product, Place (distribution), Price and promotion) marketing mix theory. This is because this tool will help us identify what we need to put in place through the definition o market mix.

Product

Considering the fast urban life that is taking root in Egypt (nearly all the 79 million people live in Cairo and Alexandria), it is prudent to understand the consequence of this lifestyle, not only today but in future. This is likely to develop a gap and the need to satisfy the needs of the increasingly busy population. Given the increasing popularity of one-stop shopping habit, it would be the right time for Wal-Mart to enter this market.

The dominant language in Egypt is Arabic, which is also the official language. Additionally, the educated lot is able to speak and write English and French. Wal-Mart’s merchandises sold in America and Europe are labeled in English. This means that we will adopt Arabic language in the labeling for the local consumers read and interpret what they consume. This therefore means that we will have to observe keenly the need for language interpretation. Basically, both English and Arabic language would be used to cater for all the demographic population, including the tourists. It is critical to note that other than language and labeling, the products content and services will remain the same as this is the philosophy of Wal-Mart, an equal quantity and quality in all countries.

Place (Distribution)

The majority urban populations purchase their products from retailers and wholesalers. Vendors would be used to get some retail products for the stores. As observed, Egyptian government restrict a lot the right to distribute in the country, especially for foreign companies which do not use the local businesses to venture into the market. It therefore follows that any attempt to overlook the local distributors and business partners would make it difficult for us to penetrate this highly regulated market.

We will also use online placement of products, with the intention of home delivery of our products. This is critical especially for large institutional consumers such as hotels, schools, governmental and non-governmental organizations, etc. It is noted that online marketing is increasing in the country. Many consumers now prefer online purchase of products than never before, hence increasing the need to venture into technological investment such that such kinds of customers’ needs are catered for. In fact, internet would be useful in marketing process as many people increasingly get attracted to the social sites like facebook and myspace, giving companies a lease of life in marketing and advertisement.

Price

The pricing would be based on the local value of the currency, though there would be little variance to the prices in the parent country, US. Though the government regulates a lot the prices of the products in this sector, the prices would be calculated on the basis of cost of production and distribution.

Bulk purchase customers would be offered discounts to encourage them to purchase more. This is intended to lock the existing customers, who would visibly define the nature of our business considering their low cost of distribution and direct delivery without use of middle men. In business, profit maximization and reduction of risks are the basics. Consequently, reducing costs of distribution through direct delivery to the bulk consumers like institutions would ensure prices are kept affordable to them. This is likely to prove critical especially where a new entrant or entrants comes into the market. Therefore the prices will be set such that the cost of production is covered in the marketing to avoid running at a loss.

Promotion

This would form the most important aspect of marketing Wal-Mart. Marketing mix gives promotion a perspective of marketing communication (Kotler & Lee, 2009). So the basis here is to communicate the products information to the Egyptian market. The actual goal in this case would be to generate positive response from customers, thus the potential of creating long term loyal customers. The marketing communication approach would therefore entail the following:

• Promotional strategy (push, pull, etc.)
• Advertising
• Personal selling & sales force
• Sales promotions

Promotion strategy: Push and Pull strategy

One of the major reasons for this promotional strategy is to create a strong consumer demand for Wal-Mart products. In this way a push strategy will be very favorable. As vitamin water brand, the sales force will be ready to apply the ‘push’ strategy to get wholesalers and large retailers to penetrate the market. At the same time, direct contact with the consumer will be very critical as they will have the chance to interact with marketing team to generate more enthusiasm in the idea of wanting to know more, thus the possibility of creating a euphoria needed in the sales and marketing of Wal-Mart. This is in line with Theodor Adorno’s mass culture and ‘pseudo-individualization’, cited in Welty (1981). According to Adorno, pseudo-individualization or what is known as market differentiation by modern marketers is what drives the sales of products in the market; something that is successfully achieved by individual involvement of the producer or manufacturers (Welty, 1981). It must be noted that Wal-Mart is a producer, hence the ability to design products according to the taste of the market segment.

Advertising

In this case event promotional activities will form the bigger part of the process. Wal-Mart will collaborate with charitable organizations. This will be done through distribution of fliers, advertisements on specific magazines and newspapers, word of mouth, and placing ads on the specific entertainment and social sites.

Internet marketing would prove useful in our effort to increase our market penetration. The internet will basically provide an easy and cheap way of accessing the market, especially through the use of social networking sites. Again, considering the concentration of Egyptian population in urban areas, direct marketing would be provide an edge in an attempt to increase the accessibility of the target market. This is because the reaching out to a clustered group of people would be easier, given the population distribution pattern. Basically, other channels like radio and TV will be used, especially in the initial introduction phase of the product to ensure a better understanding of the products. According to Mohan (2009), new product needs a lot of public exposure to create.

Personal selling & sales force

According to Kotler & Lee (2009), personal selling through the use of the available sales force is one of the best ways of getting the attention of the customer and fostering a long term relationship with the producer. Isn’t this what Wal-Mart needs to sell its merchandises? They further outline six main activities of a sales force: (1) prospecting- attempts to find new customers; communicating with the established and potential customers; Selling- the close contact with the customer enables answering of the questions and closing of the sales at the same time; servicing- providing the necessary support and services during sales; and information gathering-acquiring the necessary information about the market to help reorganize the process of marketing planning in future (Kotler & Lee, 2009). In addition, it is possible to monitor the demographic orientation of the buyers at Wal-Mart to help restructure appropriately the marketing strategies in the future.

Sales promotions

Possible techniques for sales promotion are numerous. However, for this kind of marketing, we will apply premium promotion of Buy-One-Get-One- Free (Daniels, Radebaugh & Sullivan, 2007) a strategy that Wal-Mart has applied in the United States and Europe, and which has proved successful in Egypt in the past for Wal-Mart’s competitors.

Cause-related and fair-trade

It is a common phenomenon to find that some charitable organizations may be interesting in organizing events. In this case, our sales team will be on the look out to find collaborators for the purpose of marketing Wal-Mart. Even though it’s early to speculate that this will happen, we have put it into consideration to ensure that we link up with any charitable organization with such a plan to enhance Wal-Mart brand’s publicity. It’s a common knowledge that celebrities and charities go hand in hand all over the globe.

Summary and Conclusion

There is a huge potential for the success of Wal-Mart in the Egyptian market. This is possible as long as all the business aspects are taken care of in the entry process and marketing of the product. However, it is observable that despite the economic transformation in the recent years, the public sector still controls a huge chunk of the economy, and regulating much of the products, particularly food and beverage industry. The government also does not recognize foreign firms which do not collaborate with local firms in offering their products and services. This call for one important approach: collaboration and partnership with the local merchandisers to ensure adequate market penetration.

Egyptian population distribution is mostly clustered and concentrated in urban centers. Again many people are currently moving to urban centers, hence rural areas that are mainly occupied by farmers, are left with scarce population everyday. On another note, the population literacy is increasing exponentially, and the increase in sedentary lifestyle is presenting a scenario where one-stop shopping is gaining popularity. These changes mean that for a successful bid into the Egyptian market, Wal-Mart will have to concentrate its marketing activities in the major cities. The use of Arabic as the official language in Egypt will mean that the labeling strategy must be changed or translated into Arabic in order to ‘domesticate’ Wal-Mart as a one-stop shop for the locals.

To increase Wal-Mart success, a well crafted product placement would be paramount, coupled with adequate marketing and promotion. Stores will be arranged in the traditional format of Wal-Mart with spacious arrangements to allow for easy search of products. Price should be set in line with the local currency value, and heavy promotional activities through online advertisement and marketing, personal selling and sales promotions should be adopted to increase product awareness.

Reference List

1. Daniels, J., Radebaugh, L., & Sullivan, D. (2007). International Business: environment and operations, 11th edition. Prentice Hall.
2. Kotler, P. & Lee N. (2009). Up and Out of Poverty: The Social Marketing Solution. Wharton School Publishing.
3. Mohan, J. (2009). International Business. Oxford. Oxford University Press.
4. Thompson, A., & Strickland, J. (1995). Strategic management concepts and cases (8^th ed.). Chicago: Irwin.
5. Travis, T. (2007). Doing Business Anywhere: The Essential Guide to Going Global. Hoboken: John Wiley & Sons.
6. Welty, G. (1981). The Materialist Science of Culture and the Critique of Ideology. Quarterly Journal of Ideology, Vol.3, Issue 12, pp.238-249.
7. Zook, M., &Graham, M. (2006). “Wal-Mart Nation: Mapping the Reach of a Retail Colossus”. in Brunn, Stanley D.. Wal-Mart World: The World’s Biggest Corporation in the Global Economy. Routledge. pp. 15–25.