Wal-Mart Stores is an American public corporation that runs a chain of large, discount department stores. It is the world's largest public corporation by revenue and is founded by Sam Walton in 1962. It is the largest private employer in the world and the fourth largest utility or commercial employer. Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, as well as the largest toy seller in the U.S.
It also owns and operates the North American Company, Sam's Club.Sam Walton, a leader with an innovative vision, started his own company and made it into the leader in discount retailing that it is today. Through his savvy, and sometimes unusual, business practices, he and his associates led the company forward for thirty years. Wal-Mart executives continue to rely on many of the traditional goals and philosophies that Sam’s legacy left behind, while simultaneously keeping one step ahead of the ever-changing technology and methods of today’s fast-paced business environment.The future also looks bright for Wal-Mart, especially if it is able to strike a comfortable balance between increasing its profits and recognizing its social and ethical responsibilities.
The Wal-Mart Philosophy — Wal-Mart is successful not only because it makes sound strategic management decisions, but also for its innovative implementation of those strategic decisions. Walton had a reputation for caring about his customers, his employees (or “associates” as he referred to them), and the community. In order to maintain its market position in the discount retail business, Wal-Mart executives continue to adhere to the management guidelines Sam developed. Walton was a man of simple tastes and took a keen interest in people.Wal Mart Stores, operates an expanding chain of discount retail stores in 49 of the 50 states of the United States.
The rapid growth strategy followed by the firm is a major factor in the continued growth in the demand for the company's products because the company's reputation for fair dealing and low prices precedes its entry into new markets. In this research we well go to answer few questions to deliver comprehensive details about wal-mart and his competitor Kmart as following:•Explain the Management Strategy. •SWOT Analysis of Wal-Mart and Kmart. •Explaining the Strengths and weaknesses of Wal-Mart and Kmart •Comparing the sales, net income, and stock market performance histories of Wal-Mart and Kmart •The reason that Wal-Mart’s performances go beyond that of Kmart’s in all areas.We well go through each point as mention step by step to understand both retail wal-mart and Kmart.
The key features of Wal-Mart’s approach to implementing the strategy put together by Sam Walton emphasizes building solid working relationships with both suppliers and employees, being aware and taking notice of the most intricate details in store layouts and merchandising techniques, capitalizing on every cost saving opportunity, and creating a high performance spirit. This strategic formula is used to provide customers access to quality goods, to make these goods available when and where customers want them, to develop a cost structure that enables competitive pricing, and to build and maintain a reputation for absolute trustworthiness.Wal-Mart stores operate according to their “Everyday Low Price” philosophy. Wal-Mart has emerged as the industry leader because it has been better at containing its costs which has allowed it to pass on the savings to its customers. Wal-Mart has become a capabilities competitor. It continues to improve upon its key business processes, managing them centrally and investing in them heavily for the long term payback.
Walton proved to be a visionary leader and was known for his ability to quickly learn from his competitors’ successes and failures.In fact, the founder of Kmart once claimed that Walton “not only copied our concepts, he strengthened them. Sam just took the ball and ran with it” (Thompson & Strickland, 1995, p. 859). Wal-Mart has invested heavily in its unique cross-docking inventory system.
Cross docking has enabled Wal-Mart to achieve economies of scale which reduces its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Wal-Mart has been led from the top but run from the bottom, a strategy developed by Sam Walton and carried on by a small group of senior executives led by CEO David Glass.
Wal-Mart Supercenters represent leveraging on customer loyalty and procurement muscle in order to create a new domestic growth vehicle for the company. With few locations left in the U.S. to put a new Sam’s Club or traditional Wal-Mart, the Supercenter division has emerged as the domestic vehicle for taking Wal-Mart to $100 billion in sales. Before the Supercenter, Walton experimented with a massive “Hypermart”, encompassing more than 230,000 square feet in size.
The idea failed. Customers complained that the produce was not fresh or well-presented and that it was difficult to find things in a store so big that inventory clerks had to wear roller skates. One of Walton’s philosophies was that traveling on the road to success required failing at times.As a result of the unsuccessful experiment, Walton launched a revised concept: the Supercenter, a combination discount and grocery store that was smaller than the Hypermart. The Supercenter was intended to give Wal-Mart improved drawing power in its existing markets by providing a one-stop shopping destination. Supercenters would have the full array of general merchandise found in traditional Wal-Mart stores, as well as a full-scale supermarket, delicatessen, fresh bakery, and other specialty shops like hair salons, portrait studios, dry cleaners, and optical wear departments.
Supercenters would measure 125,000 to 150,000 square feet, and target locations where sales per store of $30 to $50 million annually were feasible. Walton’s prediction was right on target. The Supercenter division more than doubled in size during 1993, then doubled again in 1994. Supercenters, once thought of as risky because of slim profit margins on the food side, will most likely make Wal-Mart the nation’s largest grocery retailer within the next five to seven years (Longo, 1994).
Wal - Mart Strengths •Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. •Wal-Mart has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA). •The company has a core competence involving its use of information technology to support its international logistics system.
For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.•A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.
Opportunities •To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. •The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India. •New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centers, to local and mall-based sites. •Opportunities exist for Wal-Mart to continue with its current strategy of large, super centers.
Weaknesses •Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. •Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors. •The company is global, but has has a presence in relatively few countries Worldwide.Threats •Being number one means that you are the target of competition, locally and globally. •Being a global retailer means that you are exposed to political problems in the countries that you operate in. •The cost of producing many consumer products tends to have fallen because of lower manufacturing costs.
Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat.Strengths •Brand Kmart is an existing well-known and trusted national brand in USA Kmart has private label and designer clothing that is well endorsed Infrastructure •Kmart has a large number of well-located, low-cost, leased stores in urban far away from competitors throughout the countryOpportunities •Change communications of actions, company strategies and financial must be transparent to win support for the changes and understanding. •Sort out logistics and technology problems•Change marketing/advertising strategy, promote private branding.
•Review product range, locations and customer’s needs and expectations. Weakness •Kmart was satisfied with targeting only low-income families and providing mediocre customer service. Customers were not only associating the Kmart brand with low prices, but also low quality service. •Poor customer service, Kmart had serious problems with advertised products being out of stock. Out-of-stock merchandise shows a weakness in Kmart's inventory control system. •Kmart must be able to continually reinvent the brand image in order to remain competitive in the retail.
•No top management hiring was done from outside, no open door for new experience, suggestions and recommendations. •Store locations, layout and Performance Stores conveniently located away from competitors like Wal-mart and Target therefore less to compete for customers face-to-face. There are 250 non-performing stores who have already been identified as being more cost effective to close than continue with running costs.Threats •Discount retailing is a mature industry, with many competitors, a few of which are large and cater for differentiated market segments with better profit margins.The Explanation of strength and weakness of both retailer The two retailing company have had stiff competition when it come to the aspects of the market share.
Both companies have strengths and weaknesses when it comes to the way they handle their businesses.Wal-Mart boasts of having a high competing advantage over Kmart. They have a good network in the rural regions as compared to the Kmart stores. In addition, their discounting stores have proved. The strategy of Wal-Mart investing into a countrywide computer system linking the cash registers to the headquarters enabled easy restocking of the goods that had been bought.
This gave Wal-Mart a big advantage as is had full stocks with high efficiency in their operations. In addition, the strength of Wal-Mart was evidenced when they invested a lot in the purchase of the transportation tracks and distribution centers in many regions.This made them easily access their customers. The incorporation of the discount stores and grocery by Wal-Mart also gave Wal-Mart a big advantage over its major competitor, Kmart.
Lastly, it is worth noting in the intension to expand their market share, Wal-Mart started building larger stores in the territories that were once under the control of Kmart.These larger stores were more organized and the customers were able to access the goods easily. This proved as a big strength against its major competitor Kmart. However, Wal-Mart has also had some weaknesses that had affected their business.
Initially, Wal-Mart had higher prices as compared to its major competitor, Kmart.This kept of the prospective customers from shopping in walmart.in addition, the stores of Wal-Mart were mainly concentrated in the small town sand had customers who were not reliable. This greatly reduced the overall sales of Wal-Mart as the main reliable customers were located in the developed urban regions. This gave Kmart some advantage over Wal-Mart.On the other hand, Kmart boosted of the following strengths; the pricing of their goods was cheaper as compared to the prices of Wal-Mart.
The lower prices led to the maintaining of their customers who were always pulled by the lower prices. Since the start of the two companies, Kmart had twice as many discount stores as compared to Wal-Mart. This made the goods being sold by Kmart easily accessible to most of the customers. The other major strength of Kmart was that it had carried out good advertising and had a large urban presence. The good advertisement made the products being sold by Kmartfamiliar to the customers. In addition, the big red logo, ‘K’ was very conspicuous and was easily identified by the customers.
The purchasing of other retailer stores by Kmart also led to its easy access to the customers. This led to the increase in its sales.On the other hand, Kmart also experienced some weaknesses that led to being overpowered by Wal-Mart when it comes to the annual sales and profits. It is recorded that the competition that Kmart got from Wal-Mart was very strong. This actually made Kmart to start considering getting into a different market niche.
The other major weakness that Kmart experienced was that their workers and staff lacked training and skills to plan and control inventory.This led to an increase in delays and even extending wrong pricings to customers when on the counter. It is also noted that Kmart had a problem with their cash registers whichwere not up to date where the system prices were at times different from the shelf prices. Lastly, it is noted that during sometimes, the stock of Kmart was always down where some goods were not available while those that are available, there was no variety that the customers could pick from.
It is these weaknesses that led to Kmart losing its market share to Wal-Mart. Currently; Wal-Mart is far much successful as compared to Kmart.
