Unit 3 Part II, Assignment 3, Part 1, Wal Mart SWOT

Posted on July 26, 2010. Filed under: Advertising, Communications, Digital Communication, Magazines, Mass Media, Newspapers, Print Media, Public Relations, Radio, Television, Web | Tags: Advertising, Advertising Campaign, Communications, Mass Communications, SWOT, Wal Mart SWOT |

UNit 3 Part II Princ. of Advertising

NOTE** this is a crisis response campaign. Soon we will be doing a new product campaign.
Part 2 is due Tuesday, July 27 at 5 p.m.

A product definition of Walmart would be we run discount stores.

A market-oriented definition of Walmart would be we deliver low prices, every day.

Before one can do a SWOT analysis of Walmart’s current situation, one must first know who are the current  customers or buyers of Walmart products.

SWOT analysis: how to create a useful one

Walmart like most companies has several types of customers or buyers of the products they sell at their stores.

Walmart divides the market into a number of groups with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes.

Market segmentation and targeting requires the identification of the market segments, selecting one or more of them, and developing products that are tailored to their needs.

There are at least three distinct groups of customers who shop at Walmart:

(1) Customers wanting to buy manufacture’s brands or national brands at  lower prices than they usually find at other retail stores.

(2) Customers wanting to buy manufacturer’s brands or national brands at lower price as well as the Walmart’s private store brand products at even lower prices provided these products have the perceived quality of the national brand.

(3) Customers wanting the lowest priced products and usually purchase and use the Walmart private store  brand products instead of the manufacturer’s national brand.

All three market segments are impacted by the current economic recession with over 30 million Americans seeking full-time employment.

Many customers who are unemployed can no longer afford purchasing the manufacturer’s national brands and are  turning instead  to the Walmart private store brand, Great Value, a national brand equivalent or NBE ,to save money.

WalMart switching to cheap generic items due to economy? Great Value brand

Wal-Mart CMO Defends Private-Label Expansion

The Food Industry, Part 1: Markets and Money

The Food Industry, Part 2: “Then, Now, and Tomorrow”

Those customers who are still employed or employed only part-time are also cutting back on the purchase of manufacturer national brands and trying and switching to the Walmart private store brands as seen above.

Given the economy is currently in a recession and unemployment levels will remain high for the next two years or longer,  the market segments that purchase the Walmart private store brand products will be the focus of the Walmart SWOT analysis and advertising campaign.

The SWOT analysis below focuses primarily on Walmart’s  grocery store and  Great Value private  store brand and does not cover Sam’s Club, discount stores and the non-grocery products and services.

Walmart SWOT Analysis

Strengths

World’s number one retailer in terms of sales revenues with over $400 billion in sales revenue in 2009.

An established and trusted retail brand with a reputation for lower price or value, convenience and a wide range of products in one retail store.

Largest private employer and grocery store retailer in the United States.

Recognized core competencies in information technology in support of its logistics and procurement systems.

Grocery items account for about 49% of Walmart sales revenues.

More than 8400 stores including about 800 discount stores, 3,100 combination discount and grocery stores (Wal-Mart Supercenters in the US and ASDA in the UK), and 595 Sam’s Club warehouses.

Reputation for low prices on manufacturer national brand products and Walmart private label brand products.

Over 40% of its sales are from private label brands through contracts with manufacturers.

Offers a wide variety of products in its stores.

World’s largest private brand, Great Value, with over 5,000 items.

Economies of scale in distribution because they can supply a wide range of products to the same customer base.

 Walmart International is the fast-growing part of Walmart’s overall operations, with 4,112 stores and more than 680,000 associates in 14 countries outside the continental U.S.

The International division with 25% of sales is growing at a fast pace;  it’s the #1 retailer in Canada and Mexico and it has operations in Asia (where it owns a 95% stake in Japanese retailer SEIYU), Europe, and South America.

People are a key resource and asset and Walmart invests time and money training and developing them.

Over 2.1 million employees worldwide and 1.4 million in the United States., the majority of which are full time employees.

One of the largest employers in United States and Canada, and the largest in Mexico.

Walmart Superstores offer twenty-four hour shopping.

Walmart Sam’s Club enable customers to purchase products in bulk at discount low prices

High customer satisfaction.

Family controlled company with Sam Walton heirs owning  about 45% of the company.

Weaknesses

A global company with a presence in only fourteen countries worldwide.

Low market share outside of the United States.

Does not specialize in many product sectors and may not have the needed expertise in managing some of these product sectors as do their more focused competitors.

 Big size stores may not work well in emerging markets, where customers may prefer small stores located in their communities compared to larger stores that may require travelling long distances outside of their communities.

Opportunities

Walmart currently operates in only 14 countries; and it has great opportunities to expand into other countries as well as grow within the countries they are currently operating in.

Form strategic alliances with other giant retailers in China, Europe and India.

The recession in the United States and the remainder of the world including those in which Walmart operates provides an opportunity for Walmart to switch their customers from manufacturer national brands to their own Walmart private and attract customer who normally do not shop at Walmart.

Acquire other discount retail and grocery stores in other markets for fast entry into other markets abroad.

Acquire manufactures of Walmart’s private store brand products.

Switch customers to higher profit margin Walmart private label brand, Great Value, from lower profit margin manufacturer national brands due to the recession. 

Settle sex descrimination law suits that have merit to avoid unnecessary, costly and prolonged litigation, negative publicity and impact on customer and employee base.

Continue and expand successful growth strategy of large supercenters.

Threats

Faces competition from local, regional, national and international business firms.

Top competitors are Carrefour SA, Costco Wholesale Corporation, Kroger, and Target Corporation.

Intense price competition from falling manufacturing costs in lower cost regions due to outsourcing.

Target of  lawsuits from litigants who perceive Walmart as a deep pocket financially.

Small companies can compete successfully by distributing specialty products or providing superior customer service

Many competing companies are outsourcing which leads to greater competition on price.

Many small towns do not want Walmarts to establish a store in their community because many small businesses cannot compete on price and subsequently close down once a Walmart store is openned.

Subject to political and foreign exchange currency risks in countries when operating abroad. 

Background Information

In grocery sales, Wal-Mart sacks competition

“…While much of retail has experienced sharply declining sales for more than a year, food – especially if perceived as a good value – still brings customers through the door.

“It’s all about foot traffic, and foot traffic is just not happening unless you have the food to draw people in,” said Patricia Edwards, a retail analyst and founder of Storehouse Partners LLC in Seattle.

Wal-Mart gets more than half the grocery dollars spent in Arkansas, Oklahoma and Mississippi and is the top grocer in the other states that border Arkansas, according to Shelby Publishing Co. Inc. of Gainesville, Ga., which tracks the supermarket business.

Globally, Wal-Mart had $401.2 billion in sales for its fiscal year that ended Jan. 31, and grocery items accounted for 49 percent of that figure, according to the company’s annual report.  …”

http://wakeupwalmart.com/news/article.html?article=2212

Private label plays off low-key, low-price approach – Wal-Mart, Target marketing strategies

“…Traversing a Wal-Mart store looking for proprietary brands isn’t as straightforward as it might seem. Unlike other discounters and supermarket chains this retailer doesn’t plaster the store name on house brands or make a big deal out of the product line as a point of differentiation. Rather, it simply and unobtrusively offers inexpensive product to its value-conscious customers.

Wal-Mart has long operated its merchandising programs in such a manner. It doesn’t advertise product in the traditional sense. Where other retailers spend hundreds of millions of dollars running Sunday circulars and using co-op advertising money from manufacturers to run product-heavy ads, Wal-Mart uses its every-day-low-pricing (EDLP) strategy to cut out that enormous expense and keep prices on both private-label and national brands as low as possible.

So it stands to reason that it would adopt a similarly low-profile approach to marketing its house brands. All proprietary product is positioned within its respective category based on price.

“Wal-Mart’s strategy is to reinforce their price leadership,” said Sid Doolittle of the consulting firm McMillan/Doolittle. “That’s their main theme; they’ve stuck with it for a long time, and it works. …”

http://findarticles.com/p/articles/mi_m0FNP/is_11_40/ai_75452808/

Private Label Trends

“…Private label describes products manufactured for sale under a specific retailer‘s brand. They are often designed to compete against branded products, offering customers a cheaper alternative to national brands. Though the public generally used to see them as low-cost imitations of branded products, private labels have overcome this reputation and achieved significant growth in recent years. The most commonly known private label goods are the “store brands” sold by food retailers, though this is just one example of many. Department stores, electronics stores, and office supply retailers all offer private label products or services.

Private labels offer several benefits to both retailers and customers, driving the segment’s rising popularity. For retailers, margins on private label goods are an average of 10% higher than those on similar branded products. Customers benefit from private labels’ lower prices, which are often significantly less than those of national brands. This combination, while beneficial to retailers and consumers, can put substantial pressure on the manufacturers of branded goods, who have to compete against their own customers (the retailers) for market share. …”

“…Private label goods are generally much cheaper to produce than branded goods, due to the lack of advertising and marketing expenses. As such, retailers are able to purchase private label goods for much less than they would have to pay for comparable branded products. The cost difference is usually large enough that retailers can offer customers lower prices while still making higher profit margins themselves. Lower prices can be enticing to customers and increase a company’s competitiveness. Small chains have a particular incentive to offer private label goods; they are often unable to match larger retailers’ prices for branded goods, but private label can allow them to price more competitively. …”

http://www.wikinvest.com/concept/Private_Label_Trends

“…Wal-Mart Stores, Inc. (formerly branded as Wal-Mart, branded as Walmart since 2008) (NYSE: WMT) is an American public corporation that runs a chain of large discount department stores and a chain of membership required warehouse stores. In 2010 it was the world’s largest public corporation by revenue, according to the Forbes Global 2000 for that year.^[6] The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. Wal-Mart, headquartered in Bentonville, Arkansas,^[7] is the largest majority private employer^[8] and the largest grocery retailer in the United States. In 2009, it generated 51% of its US$258 billion sales in the U.S. from grocery business.^[9] It also owns and operates the Sam’s Club retail warehouses in North America.

Wal-Mart operates under its own name in the United States, including the 50 states and Puerto Rico. Wal-Mart operates in Mexico as Walmex, in the United Kingdom as Asda (“Asda Wal-Mart” in some branches), in Japan as Seiyu, and in India as Best Price. It has wholly-owned operations in Argentina, Brazil, and Canada. Wal-Mart’s investments outside North America have had mixed results: its operations in the United Kingdom, South America and China are highly successful, while it was forced to pull out of Germany and South Korea when ventures there were unsuccessful. …”

“…In March 2006, Walmart sought to appeal to a more affluent demographic. The company launched a new Supercenter concept in Plano, Texas, intended to compete against stores seen as more upscale and appealing, such as Target.^[35][36] The new store has wood floors, wider aisles, a sushi bar, a coffee/sandwich shop with free Wi-Fi Internet access, and more expensive beers, wines, electronics, and other goods. The exterior has a hunter green background behind the Wal-Mart letters, similar to Wal-Mart Neighborhood Markets, instead of the blue previously used at its supercenters.

On September 12, 2007, Walmart introduced new advertising with the slogan, “Save Money Live Better,” replacing the “Always Low Prices, Always” slogan, which it had used for the previous 19 years. Global Insight, which conducted the research that supported the ads, found that Walmart’s price level reduction resulted in savings for consumers of $287 billion in 2006, which equated to $957 per person or $2,500 per household (up 7.3% from the 2004 savings estimate of $2,329).^[37]

On June 30, 2008, Walmart unveiled a new company logo, featuring the non-hyphenated name “Walmart” followed by a stylized spark, as it is referred to on store advertisements. The new logo received mixed reviews from some design critics, who question whether the new logo is as bold as competitors such as the Target bullseye or as instantly recognizable as the former company logo, which was used for 18 years.^[38] The new logo made its debut on the company’s walmart.com website on July 1, 2008. The new logo will eventually replace store logos at the company’s US locations throughout the year^{[clarification needed which year]}.^[39] Wal-Mart Canada started to adopt the logo for its stores in early 2009.

On March 20, 2009, Wal-Mart announced that it is paying a combined $933.6 million in bonuses to every full and part time hourly worker of the company. An additional $788.8 million in profit sharing, 401(k) contributions, and hundreds of millions of dollars in merchandise discounts and contributions to the employees’ stock purchase plan is also included in this plan. While the economy at large was in an ongoing recession, the largest retailer in the U.S. reported solid financial figures for the most recent fiscal year (ending January 31, 2009), with $401.2 billion in net sales, a gain of 7.2% from the prior year. Income from continuing operations increased 3% to $13.3 billion, and earnings per share rose 6% to $3.35.^[40] …”

http://en.wikipedia.org/wiki/Wal-Mart

List of Walmart Brands

“…Great Value

Great Value was launched in 1993 and forms the second tier, or national brand equivalent (“NBE”), of Walmart’s grocery branding strategy.

Products offered at Walmart through the Great Value brand are claimed to be as good as national brand offerings, but are typically sold at a lower price because of minimal marketing and advertising expense. In fact, in early 2009, Walmart had over 5,200 testers who failed to prove that the new Great Value revamp was better than the national brand. As a house or generic brand, the Great Value line does not consist of goods produced by Walmart, but is a labeling system for items manufactured and packaged by a number of agricultural and food corporations, such as ConAgra, which, in addition to releasing products under its own brands and for Walmart, also manufactures and brands foodstuffs for a variety of other chain stores.

As Walmart’s most extensively developed retail brand, covering hundreds of household consumable items, the Great Value line includes sliced bread, frozen vegetables, frozen dinners, canned foods, light bulbs, trash bags, and many other traditional grocery store products. The wide range of items marketed under the Great Value banner makes it Walmart’s top-selling retail brand.

The Great Value brand can also be seen in Canada, Mexico, Argentina and Brazil and some Trust Mart stores in Xi’an, Shaanxi Province, China through a partnership with Walmart.

By mid-summer 2009, Walmart had redesigned the Great Value labels to be predominantly white. The new redesign also includes over 80 new items including thin crust pizza, fat free caramel swirl ice cream, strawberry yogurt, organic cage-free eggs, double stuffed sandwich cookies, and teriyaki beef jerky. Walmart changed the formulas for 750 items including: breakfast cereal, cookies, yogurt, laundry detergent, and paper towels. The new brand was tested by over 2,700 people.^[1] Other retailers are following suit with their private label packaging as well.^{[citation needed]}

http://en.wikipedia.org/wiki/List_of_Wal-Mart_brands

Wal-Mart says Castro-Wright leaving his current post

“…Walmart U.S. has lost some higher-income shoppers gained during the recession and is facing stronger competition from rivals including Target Corp. … and Dollar General Corp. …”

“…The chain has been remodeling stores to make it easier and more pleasant to shop. It’s also cut prices on thousands of items and is bringing back some products to its U.S. store shelves after a move to narrow product assortment alienated shoppers who couldn’t find what they wanted — something Castro-Wright described as “self-inflicted pain” earlier this month at the Wal-Mart annual meeting. …”

http://www.marketwatch.com/story/wal-marts-promoting-from-within-for-key-us-post-2010-06-29 

Wal-Mart plans to widen price gap, eyes more acquisitions

“…Wal-Mart has cut prices on thousands of products — its so-called rollbacks or price cuts for 90 days — in its U.S. namesake stores, and has made similar moves in its overseas chains, such as the U.K.’s Asda, as the retailing behemoth vied with rivals from Target Corp. /quotes/comstock/13*!tgt/quotes/nls/tgt (TGT 52.68, +0.79, +1.52%) to Family Dollar Stores Inc. /quotes/comstock/13*!fdo/quotes/nls/fdo (FDO 39.51, +0.04, +0.10%) that also have been sharpening their price message, analysts said. Target’s sales have outpaced that of Wal-Mart.

“In some cases we’ve lost some of the promotional price intensity,” said the company’s U.S. Wal-Mart unit’s chief, Eduardo Castro-Wright. “Competitors in certain segments of the trade have become very price oriented. We’ve responded.”

http://www.marketwatch.com/story/wal-mart-to-widen-price-gap-eyes-mobile-potential-2010-06-04

Sex Discrimination Lawsuit Against Wal-Mart Allowed to be a Class Action

“…The world’s largest retailer, Wal-Mart, is squarely in the crosshairs of a sex discrimination class action lawsuit that may have far reaching implications on sex-based bias in the workplace. On April 26, 2010, a federal appeals court in San Francisco ruled that the lawsuit against the retail giant may proceed as a class action. Originally filed in 2001 by six female employees, the suit alleges that Wal-Mart systematically discriminated against female employees by denying promotions, paying women less than men and giving women smaller raises.

Prior Sex Discrimination Suits

Wal-Mart has settled scores of sex-discrimination lawsuits in recent years. It recently settled a lawsuit filed by the Equal Employment Opportunity Commission (EEOC) where the Commission alleged that Wal-Mart denied jobs to female applicants at its London, Kentucky distribution center from 1998 to 2005. However, in the present case, Dukes v. Wal-Mart Stores, Inc., the Plaintiffs sought to certify a much larger class of potential plaintiffs: women who may have worked at any Wal-Mart store in the United States after December 26, 1998. This prospective class would include hourly and salaried workers in 3,400 locations who may have been subject to Wal-Mart’s allegedly discriminatory policies regarding equal pay and promotions …”

http://www.24-7pressrelease.com/press-release/sex-discrimination-lawsuit-against-walmart-allowed-to-be-a-class-action-157766.php

Walmart Corporate

http://walmartstores.com/7663.aspx

Official Walmart Site

http://www.walmart.com/

 SWOT Analysis

SWOT Analysis: How to perform one for your organization

Video Lesson SWOT Analysis

Rob Frankel on Wal-Mart’s Sinking Brand

Walmart SWOT

http://www.marketingteacher.com/swot/walmart-swot.html