The Marketing Environment: Wal-Mart Corporation
The Marketing Environment: Wal-Mart Corporation
Wal-Mart is one of the world's greatest assets to most people. It provides consumer's a place they can go to virtually get anything they need from, car repairs, to groceries, prescription's, even the latest toys and electronics. With all that said, this paper relates to the different forces in business that affects business: competitive, economic, political + legal + regulatory, technological, cultural + social, demographic, and natural forces. Although there are technically seven we are going to focus on competitive, political, technological, and natural forces.
Wal-Mart is the world's largest retailer and second largest corporation. It is the largest private employer in the United States and Mexico. Wal-Mart is the largest grocery retailer in the United States, with an estimated 20% of the retail grocery and consumables business, and the largest toy seller in the United States, with an estimated 45% of the retail toy business, having surpassed Toys"R" Us in the late 1990s. Wal-Mart has 1,929 stores which as of 2005 sales figures totaled about $155,477,000,000 in sales. Wal-Marts revenue as of 2006 was an estimated $315,654 billion USD, net income $11.231billion USD, and employs more than 1.8 million employees.1
Wal -Marts' major competitors are the Kroger co. #2 in annual sales, Albertsons' Inc. #3, Safeway,Inc. #4, and Costco Wholesale Group #5. Now even though Wal- Mart is leading the way in total sales the #2 and #3 businesses lead in way with total # of stores. The Kroger Co. has 3,302 with Albertsons at 2,476 stores nationwide. Wal-Marts total sales for that year alone was beating its 2nd place competition alone by more than 80 billion dollars. Wal-Marts major competitors in low-end general merchandise department would include Sears Holding Corporation', the slowly diminishing K-Mart chain, and Target whose trying different approaches including building Super Target stores to compete with Super Wal-Marts. With Wal-Mart moving into the grocery business it has put a strain on grocery retailers also including: H-E-B, Kroger, Albertson's, Publix, Giant Eagle, SafeWay, Winn Dixie, Food Lion and Save-A-Lot just to name a few. However with a small number of low-cost product store like Family Dollar and Dollar General, they have proven a match for Wal-Mart successfully competing with them head-to-head for consumer sales. However, like the case in pure competition Wal-Mart has countered those low-cost product stores with a subsection in it store known as "Pennies n-Cents. 2
Political, Legal, and Regulatory Forces
Wal-Mart has come under fire as of late over issues regarding local communities arguing over Wal-Marts planning new store locations. The communities argue that they are concerned about traffic problems, environment problems, public safety, absentee landlordism, poor public relations, low wages and benefits, and predatory pricing (aggressive pricing). However, there are some people in those communities that defend Wal-Mart. They claim consumer choice and claimed economic benefits. With the pace of Wal-Mart building more and more stores every year you might be the one eventually making a decision to be for or against this act.
Many claim arguments towards the opinion that Wal-Mart uses cheap, foreign labor to provide its customers with lower prices. According to the AFL-CIO, "Wal-Mart is the single largest importer of foreign-produced goods in the United States", Wal-Marts biggest trading partners is China which coincidently constitutes about 10% of the total U.S trade deficit with China. In 2004 60% of products sold at Wal-Mart were imported to the U.S from other countries.
Health Care and employee benefits are so big it's even gotten the attention of State Legislators. A judge in Maryland overturned a law in Maryland that required Wal-Mart to provide more health-care coverage for its employees. In 2006 Maryland originally passed a bill requiring all corporations with more than 10,000 employees in the state to spend at least 8% of their payroll on employee benefits, or pay into a state fund for the uninsured. Wal-Mart, which had 170,000 employees in the state of Maryland, was the only company not to follow through with the requirement before the bill passed. That's what lead way to the overturning of the bill on July 7, 2006. District Judge Frederick Motz of the federal supreme court ruled, the law would "hurt Wal-Mart by imposing the administrative burden of tracking benefits in Maryland differently than in other States2. " On April 17th, the company publicly announced changes to its benefits programs plan, which would allow employees to be eligible for health-care benefits a year after being employed, compared to two years previously. Plus, part-timers would be able to add their children to their coverage.3 In August 2006; Wal-Mart made the choice to give out a pay increase of 6% for all new hires at 1,200 US Wal-Mart and Sam's Club locations, but at the same time place a pay cap on veteran workers. Wal-Mart takes claim to the fact that measures are necessary to stay competitive, critic claim the salary caps are primarily an effort to push higher-paid, veteran workers out of the company.2
If Wal-Mart was going to stay in competition it needs to take care of its associates better than what they've done in the past. Associates makes a company run Wal-Mart needs to keep that in mind.
Wal-Mart will continue to use the age of technology to its advantage. Whether it's coming up with ways to get more accurate ordering numbers through it auto-replenish order system, or get more updated with the Chronos system for its employees. Wal-Mart will continue to find and edge, but not only to better it business through technology, but also to better itself to make more profits from consumers through technology. Wal-Mart has entered into a partnership with six major Hollywood studios to sell digital movies and television shows on its web site, www.walmart.com/videodownloads. The retail chain will partner up with some of the biggest
This paper shows different internal factors which are influencing the environmental scanning process. Out of a critical analysis of the classical theory (Aguilar, 1967) the author presents a holistic approach of understanding the environmental scanning process. Therefore the paper considers the areas of management, technique and methods, structure and culture regarding their influences on the way a company perceives on external environment changes as well as they respond on it. Finally the “symbiotic” relationship between external and internal forces as well as the influence of other functions among the marketing department is presented.
Keywords: marketing, environmental scanning, organisation culture, internal environment, Introduction:
Short product life cycles, a high competition pressure and a further development of technology are only some characteristics of today’s business markets. Competitive positioning needs further more a totally marketing orientation of the whole company. They have to focus their marketing environment (Mercer, 1998). The marketing environment includes all actors and drivers which influence the “business” of an organisation in a directly or indirectly way (Kotler & Keller, 2006; Palmer & Hartley, 1999). It contains the macro-, the micro- and the internal environment. Kotler & Keller (2006) separate the environment in the task environment and the broad environment. The task environment includes these forces and actors, which affect the firm’s activities immediately. Separated in an external and internal view, the microenvironment includes all external actors and forces (e.g. suppliers, competitors, distributors, target customers). The internal environment contains the organisation. This implies the organisations current and potential capabilities. Beyond the task environment is the broad environment (macro environment) which comprises all these forces. They have an indirect effect an organisation’s relationship to their markets. It is often broken down into the demographic-, economic-, physical-, technological-, political-legal- and social-cultural environment (Kotler & Keller, 2006; Palmer & Hartley, 1999).
Marketing orientated companies have to monitor their strategies and objectives along the needs and trends of their markets. The identification and management of environmental opportunities is essential regarding the way companies determine their objectives and devise their strategies (Costa & Teare, 2000). Environmental scanning can be used to identify these external trends and opportunities as well as to evaluate the internal assets and competencies (Drummond & Ensor, 2001; Fahey & Narayanan, 1986). Getting and understanding the data, the environmental scanning extracts are fundamental regarding the way a company make their decisions and develop their strategies to enjoy a competitive chance (Lenz & Engledow, 1986).
Aguilar (1967) defines the marketing environmental scanning process as the activity of acquiring information about the external environment. His research is often described as a pioneer effort. His classical model gave an important due on the developing of information systems in the management theory in the time. His theory is based on the contingency theory, a systematically approach of understanding an organisation as an open system which interacts with different external conditions of the environment. Lawrence & Lorch’s (1967, 1969 & 1970) research describes an organisation as a “passive reactor” of external forces, which dictated strategy and performance. Obviously, the assumptions of the classical theory lead the manager to create an organisation structure which is able to respond efficiently and effectively on all changing environmental demands and issues (Donaldson, 1982; Varadarajan, Clark & Pride, 1992; Lozada & Calatone, 1996; Harker, 2001). Their research shows the importance of environmental understanding in relation to the firm performance. The main weakness of the classical model is the mechanistic way of understanding. The classical theory acts on the assumption of an objective interpretation of data by a rational and technical process. The theory gives no answer on firm’s differences in the same line of business, which are influenced by similar external environment issues. Aguilar (1967) does not examine in a total or empirical way to what extent the external environment issues shape the organisation in processing. Today markets and their actors request a further more complex and interrelated under]standing of marketing. The holistic view “(...) is based on the development, design and implementation of marketing programs, processes and activities that recognize their breadth and interdependencies” (Kotler & Keller, 2006, p.17). This view goes beyond classical assumptions of environmental practice. An organisation and their individuals are shared by interests, belief and culture of their employees and managers. The environment is characterised by uncertainty. People involved in the environmental scanning process have to handle with a flood of information. The information level they work with is incomplete. In addition the classical model pays no attention to their conceptual and empirical research on human communication, a catalyst of the environmental scanning process. Communication is not objective. The communication process is determined by various factors, like cultural or structural impediments (more on these matters later). The classical theory shows a technical and rational knowledge by reducing the complex relationship between the organisation and the external environment to a one-way-relationship, but environmental practice is not objective and rational (Arrington & Sawaya, 1984). It is influenced by different internal and external issues (Fulk & Boyd, 1991; Kourteli, 2000).
Every organisation is shaped by and/or shapes the external macro and micro environment. One the one hand the environment is controllable. There are possibilities to get an influence on external forces, for example on politicians and their laws (e.g. cigarette companies did by spending charitable donation to parties) or by changing consumer’s behaviour with a new advertising strategy (e.g. Kellogg’s did by selling their cereals not only for breakfast, but also for lunch and dinner) (Dearlove & Glantz, 2000). But on the other hand there are also uncontrollable issues which influence the business (e.g. presently new laws and regulations in the US influence the gambling industry) (Blitz, 2006; Varadarajan et al., 1992). Looking only on external forces of environmental practices does not illuminate the fact that in reality companies interpret and respond differently on similar environmental issues (Gunningham, Kagan & Torton, 2003; Prakash, 2000). How could you otherwise understand why companies come up with many different responses on nearly the same external marketing environment? For example the “Centre for Insolvency and Recapitalisation University of Mannheim, Germany” figured out that 71% of company’s insolvency reasons are internal reasons (ZIS, 2006). The following part focuses on the different internal characteristics of an organisation, which could have an influence on the way it responds and perceives on the external environment.
Internal factors influencing the environmental practice
“An organization that assigns marketing responsibilities to a narrow group of people may in fact create tensions within the organization that make it less effective at responding to changing customer needs than one where marketing responsibilities in their widest sense are disseminated throughout the organization” (Palmer & Hartley, 1999, p.50).