Daniel Millsap MBA School Research

Hypothetical WAL-MART STRATEIGIC MARKETING PLAN FOR 2009-2010

EXECUTIVE SUMMARY

In an effort to solidify Wal-Mart's position in the market, a strategic marketing study had been requested by the head of Sales and marketing. As sales in existing stores slowed, an attempt had been made to increase revenues at existing stores by product diversification in order to attract more affluent and brand-conscious consumers. According to the finance department, however, it seems that analyst estimations will not be met, thus threatening WM's ability to offer value to its shareholders. In addition, a change in the external environment in the form of a down-turn in the economy had made it necessary to construct an appropriate and well-thought-out strategy for the years 2009-2010. Based upon departmental research, it has been found that WM's core consumer base shops for basic goods such as food based on low prices. Wal-Mart has always based its core mission on the attempt to improve consumer lifestyle by offering the lowest prices so that consumers can use the money elsewhere. Wal-Mart's situation is that its previous growth has been based upon the construction of new stores. There comes a time, however, when the marginal utility of adding new stores is no longer useful. There are several strategic alternatives but, based on the following research report, it has been recommended that Wal-Mart use a market-development strategy in attempt to attract new customers to its present product selection with a focus on its “power” product categories (food, entertainment, apparel, home goods, pharmacy.) A 25% increase in advertising expenditures is recommended in order to expand product awareness. Specifically, television commercials are to be used as the primary medium of delivery as the advertisements are stimulating and reach a large audience. In addition to brand awareness, television advertising can be used as a means of improving Wal-Mart's public image.

INTRODUCTION

The purpose of this report is to critically analyze Wal-Mart's current situation and to plan a future strategy which will be most likely to give it a competitive advantage. Profits are a function between the relationship of revenues and cost. (profit=revenues-cost) The higher the profit, the more value the company can give to its shareholders, which is the primary function of the company. In order to increase revenues, consumer needs must be understood so that a company can make a product which will satisfy those needs. Having a product which does this is not enough, however. Consumers must be aware of the product. High revenues alone do not ensure profits. Companies must be able to create and deliver products in a way which minimizes costs to the company. Ultimately, the company able to offer the most valuable product at the lowest cost to the company will have the greatest profits. In order to achieve these two goals, a company must strategically plan its future actions. Within this report, Wal-Mart 's current situation will be analyzed and a strategic marketing program will be created for the 2009-2010 year.

STRATEGIC BUSINESS GOALS AND OBJECTIVES

MISSION

Wal Mart's goal is to;save people money so they can live better.(Wal-Mart, purpose, 2008) Sam Walton stated: If we work together, we'll lower the cost of living for everyone...we'll give the world an opportunity to see what it's like to save and have a better life. Knowing that price is important to its customers, Wal Mart offers the highest quality products at the lowest prices. By saving money on necessary products, people will have more money to spend on other things.

BELIEFS AND VALUES

Wal-Mart is guided by three basic beliefs and values (Wal-Mart, 3 values, 2008) The first is respect for the individual. Respecting the diversity, employees are encouraged to express their thoughts and ideas as long as they are treated with respect. The second is service to customers. Customers keep Wal-Mart in business and thus they should be treated well. Wal-Mart strives to excel in customer service by training employees to politely engage any customer within ten feet. The third value is striving for excellence. Wal-Mart can be proud of its accomplishments but never satisfied.

CRITICAL ANALYSIS

Environmental Analysis

The credit crisis has caused a change in the state of the economy. Consumers have less disposable income to spend on non-critical items and the situation could get worse if there is a recession. Even with 10-30% price cuts, Wal-Mart has found that shoppers still spend mostly on cheaper grocery and pharmacy items. Reasons include higher energy costs, higher food cost, slow job growth and declines in the credit and housing markets. (3) Wal-Mart has the opportunity to strengthen its image as being the low-cost supplier through the use of its economies of scale. The threat is that changing its wage and health care structure, in response to criticism, will increase costs which must then be passed on to the consumer. As new store growth in the US slows, Wal-Mart's management has suggested that much of the company's future growth would come from its international operations. (Gogoi, 2007) The opportunity for expansion is good but the threat comes from the unknown and changing political and social environments in other countries. In terms of social and cultural environment, firms are expected to offer men and women equal wages for equal work, wages which will allow a decent standard of living for its employees, and decent health care. Wal-Mart's size and availability of cash allows it to run television ads in its favor in order to take its arguments straight to the public in an ongoing battle over its reputation with unions and other critics. Wal-Mart must be careful to back up its ads with concrete efforts as critics reply : no matter how bad their public reputation is, they still believe that a tired ad campaign can fool the American public into believing it is OK to exploit millions of working families. (2)

Industry Analysis

Wal-Mart operates within the Discount/Varietystores industry. Its major competitors include Target Corporation with annual sales of $63 billion, a market cap of $43.9 billion and CostCo Wholesale Corporation with annual sales of $68 billion and a market cap of $30.76 billion. (Yahoo 2008) The threat of new entrants is low as the cost of entry is high. Substitute products can be found but not at such low prices due to economy of scale. Suppliers have little bargaining power as they desire to have a large customer like WM. Buyers have a large impact on the industry as they demand that suppliers offer products at the lowest price possible.

Organizational Analysis

Wal-Mart's objectives are to increase shareholder value by increasing profits through the increase of revenues and decrease of costs. Its organizational strengths consist of its economy of scale and dedication to mission and its weakness consists of public criticism concerning some of its business practices. Profits keep rising but not as fast as Wall Street expects. This, in part, could be caused by the fact that Wal-Mart has yet to attract more affluent shoppers. It has beat analysts' profit expectations with an increase of net income of 9.8% to $3.94 billion and its sales increased 10.9% to 98.09 billion, but this was lower than the $99.95 billion forecast by analysts. (Gogoi,2007)

Marketing Strategy Analysis

Retail experts say nearly half of American families shop at Wal-Mart at least once a week. (1)A competitive advantage is established if the customer comes to associate WM with superior products and service. Research should be conducted to see which products should be introduced and which should be withdrawn. In the recent past, WM began to offer higher end goods in an attempt to attract different customers but found that most of their customers come only for cheap groceries and steer clear of the other merchandise. (1) WM also offers price cuts ranging between 10 and 30 percent just before important events like the SuperBowl football championship game in 2008 in an attempt to increase sales. (3) Wal-Mart has also decided to broaden its approach by offering certain products online. For example, its Canopy home furnishings brand (4)

STRATEGIC ALTERNATIVES

As Wal-Mart has found the hard way, customers primarily shop at its stores in order to utilize the low prices as opposed to higher-end goods. Considering the current environmental state of the economy, it is recommended that Wal-Mart pursue a market development strategy in order to attract new customers to its already popular products.

STRATEGIC MARKETING PROGRAM OBJECTIVES, MARKET TARGETING AND POSITIONOING

Marketing Objectives

To retain competitive advantage in terms of offering products at the lowest price while increasing research expenditures on prospective customers and future products by 25%.

Target Markets

It is recommended that Wal-Mart not segment to one particular market segment but rather to the following three: Brand aspirational - low-income individuals obsessed with having well known brands, price sensitive affluents -wealthier but still enjoy finding a good deal, and value-priced shoppers -low income holders with no other choice but to buy from the lowest price provider.

MARKETING PROGRAM

PRODUCT

Wal-Mart's “power” product categories consist of food, entertainment, apparel, home goods, and pharmaceuticals. Considering the state of the economy,it is recommended that Wal-Mart maintain its current product focus. In order to increase value, WM should focus on intangible aspects of product such as superior customer service.Wal-Mart can ensure low prices through its economy of scale. Being such a large company gives it more power over suppliers since it forms such a large percentage of supplier-business. WM can further increase revenues by enlarging the width of its product mix as opposed to depth. Packaging of products should not take great precedence yet should look neat. Remember that increasing profits means decreasing costs.

PROMOTION

Part of selling products is creating awareness. WM should increase awareness through advertising more often and through a variety of effective mediums. WM should increase its advertising during times in which customers are likely to be planning their shopping. Sales promotions should be used during special events where customers will be shopping anyway. For example, before Thanksgiving WM can offer a special on Turkeys, knowing that customers who shop for a Turkey are likely to buy mashed potatoes as well. Though expensive, television advertising appeals to the senses and is able to reach a mass audience.

DISTRIBUTION

In order to decrease costs, WM should focus on the direct channel method of distribution. By cutting out intermediaries, WM will decrease its total distribution cost and thus be able to offer the lowest prices while making the largest profit. This arrangement also gives WM the highest degree of control as it decreases the power of buyers.

PRICE

Price should be set low enough so that customers purchase goods from WM instead of, say, Target; however, price should be set just under this amount to ensue healthy profits. For non-perishable goods, price should not be set so low as to give consumers the impression that the product is of poor quality. This, in part, is why it is also important to carry brands which customers perceive as being of high quality. WM should also take advantage of every-day low pricing strategies in order to cut back on advertising costs.Customers should come to associate WM as always offering the lowest prices as opposed to a high/low provider. This method also cuts down on inventory management costs, as inventory levels are more easily predicted. In reaction to competition, of course, WM should be ready to change its prices as needed.

REFERENCE LIST

Barbaro, Michael. "It's Not Only about Price at Wal-Mart." New York Times. March 2, 2007.Retrieved on April 3, 2007 from https://www.nytimes.com/2007/03/02/business/02walmart.html?ex=1330491600&en=5a72ddc69030ce62&ei=5088&partner=rssnyt&emc=rss
Dolan, P. (2008, Feb,25). Wal-Mart partners with hospitals to rapidly expand in-store clinics. AMNews.Retrieved April 16 from https://www.ama-assn.org/amednews/2008/02/25/bil10225.htm
Gogoi, P. (2007, Feb 22). Wal-Mart goes abroad for growth. BusinessWeek. Retrieved, April 16, 2008,from https://www.msnbc.msn.com/id/17262613/
Wal-Mart. (2008). Our Purpose. Retrieved April 30, 2008, from https://walmartstores.com/AboutUs/8123.aspx
Wal-Mart. (2008). 3 Basic Beliefs and Values. Retrived April 30, 2008, from https://walmartstores.com/AboutUs/321.aspx
Yahoo. (2008). Yahoo industry center. Discount and variety stores. Retrieved April 30, 2008, from https://biz.yahoo.com/ic/732.html
(1) Associated press. (2006). Wal-Mart turns attention to upscale shoppers. Retrieved, April 16, 2008,from https://www.msnbc.msn.com/id/11957536/
(2)Associated Press. (2007). Wal-Mart to air ads countering attacks. Retrieved, April 16, 2008, from https://www.msnbc.msn.com/id/16514307/
(3)Author not stated (2008). Of Wal-Mart price cuts, struggling retailers and weak 2008 retail sales forecast.Archived at https://industryweek.blogspot.com/2008/01/wal-mart-2008-retail-sales-forecast.html
(4) PR Newswire (2008, March 4). Press Release Canopy Home Furnishings Available Now at Wal-Mart. Retrieved,April 16, 2008, from https://www.forbes.com/prnewswire/feeds/prnewswire/2008/03/04/prnewswire200803041454PR_NEWS_USPR_____LATU108.html