Marketing Audit of Wal-Mart China

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Marketing Audit of Wal-Mart China………………………………………………………………….. 2

  1. Introduction and executive summary…………………………………………………………… 2
  2. Analysis……………………………………………………………………………………………………. 2

2.1           Analysis of business………………………………………………………………………. 2

2.2           External environments…………………………………………………………………… 3

2.3           Internal firm environments……………………………………………………………… 4

2.4           Customer analysis…………………………………………………………………………. 4

2.5           Competitor analysis……………………………………………………………………….. 5

2.6           TOWS analysis……………………………………………………………………………… 5

2.6.1     Strengths and Opportunities (SO) strategy…………………………………. 6

2.6.2     Strengths and Threats (ST) strategy…………………………………………… 7

2.6.3     Weaknesses and Opportunities (WO) strategy……………………………. 7

2.6.4     Weaknesses and Threats (WT) strategy……………………………………… 7

  1. Conclusion……………………………………………………………………………………………….. 8

List of Reference…………………………………………………………………………………………….. 9

 

List of table

 

Table 1 TOWS/SWOT analysis of Wal-Mart China……………………………………….. 3

Marketing Audit of Wal-Mart China

 

1.        Introduction and executive summary

 

Wal-Mart Stores, Inc. was established by American retail legend Mr. Sam Walton in Arkansas in 1962. For the past half of century the firm has served customers and is currently the world’s largest private employer and retailer, occupying the top position of the Fortune 500 list for a number of years. As early as 1996, the world’s largest player in the retail industry entered the China market with a joint venture contract (wal-martchina.com 2012). The Wal-Mart model, with the features of “high-tech, low-skill” and large-scale production of mass-market goods business strategies, was not really successful in China which could be seen from the slow growth of the company’s business in China since its entrance in this vivid market. This study would concentrate on performing a marketing audit to provide examination of the reasons behind the slow business growth of Wal-Mart in China. And also in the last section, the study would provide some advices to the company to maintain its business growth while sustaining its business competiveness in China.

 

2.        Analysis

 

2.1    Analysis of business

 

The shops and shopping centers are very visible and familiar parts of the urban built environment, and the business scale of the retail development has closed relationship with the degree of development of the economy and industries (Guy 1994, p. 196). The continual rapid economic booming has also lead to the similar fast expansion of the market of retail sector. For instance, according to the data, retail sales increased 16.3% in 2011 Q1, while GDP expanded 9.7%. Retail sales are expected to double in the next three years (thomaswhite.com 2012). Beside the rapid economic growth trend, another key reason behind the rapid and faster growth of the retail industry is quick urbanization happening in most part of China as shops and shopping centers are the very visible and familiar parts of the urban built environment.

 

2.2    External environments

 

PEST analysis can be used to help detect trends in the external environment that will ultimately help find the way into the competitive environment (Henry 2008, p. 51). Here below we have a PEST analysis based on the factual data.

Political factorsEconomical factors
Social welfare is under improvement rapidly in the recent years;

Overall political stability;

Regional conflicts with other adjacent countries;

Increasingly accepted market economic status;

Fast economic growth in term of GDP, GNP and so on, e.g. GDP growth in China will be about 8.2 percent in 2012 (worldbank.org 2012);

A popular destination of FDI;

As a result of China’s one child policy, the conventional wisdom asserts that China will grow old before it gets rich (chicagobooth.edu 2012).

Social and cultural factorsTechnological factors
Chinese people are highly long term orientation and group orientation;

China’s urban population surpassed that of rural areas for the first time in the country’s history after three decades of economic development encouraged farmers to seek better living standards in towns and cities (bloomberg.com 2012).

The lopsided male-female ratio in China caused by sex-selection abortions is worsening, pushed up to 120 men for every 100 women according to a government newspaper (euthanasia.com 2011).

The latest 5 year plan calls for government investment, of up to $1.5 trillion to develop alternative energy, biotechnology, information technology, advanced equipment manufacturing, alternative fuel autos and other energy saving, environmental technologies (economicpopulist.org 2012).

Table 1 The PEST analysis in China

 

2.3    Internal firm environments

 

An organization’s internal environment is composed of the elements within the organization, including current employees, management, and especially corporate culture, which defines employee behavior (cliffsnotes.com 2009). An organization’s mission statement describes what the organization stands for and why it exists. Wal-Mart Stores, Inc. has always been a values-based, ethically led company. The values guiding our decisions and leadership are the 3 basic beliefs established by our founder, Sam Walton, in 1962:

 

  1. Respect for the Individual
  2. Service to the Customer
  3. Strive for Excellence (csrglobe.com 2009)

 

As a result, we can still see the reason behind the high respect of the employees in the Wal-Mart China, as it is embedded into the company culture to do so.

 

2.4    Customer analysis

 

Professor Geert Hofstede conducted one of the most comprehensive studies of how values in the workplace are influenced by culture by proposing a National Cultural Dimensions. In this model, with a score of 20 in the dimension of individualism China is a highly collectivist culture where people act in the interests of the group and not necessarily of themselves. In contrast, the LTO (long term orientation) dimension is the highest in Chinal (geert-hofstede.com 2011). There could be several implications to the players in the retail industry in China like Wal-Mart China. First of all, customers in China would consider their buying decisions by taking into consideration of their group family needs, i.e. family, company and friends; secondly, Chinese consumers would have less impulsive purchasing behaviors due to the focus on the long term orientation, they tend to buy after serious consideration or calculation; thirdly, also because of the high long term orientation level, it is expected that durable consumer products that provide good after sale service would be preferred by the Chinese consumers.

 

2.5    Competitor analysis

 

According to the China Chain Store and Franchise Association, the number of stores of the 100 largest retailers in China increased 18.9% in 2009. The 100 largest retail chains also sold 11% of all consumer goods in China, and experienced a 13.5% year-over-year growth in 2009. In addition, over 25 of the largest retailers in the world are at present doing business in China (Farfan 2010). And obviously, China has become a popular destination of the global leading retailers for them to maintain the business growth. French retail giant Carrefour, although second to US firm Wal-Mart in global sales, has gained the upper hand in China’s retail market in terms of number of stores as early as 2003 (peopledaily.com.cn 2003). With the strong challenges from the major international and domestic competitors, the company of Wal-Mart has to get to know more about the competitors’ decision and strategic business by providing better offers to the customers.

 

2.6    TOWS analysis

 

A TOWS analysis is a useful analytical tool to evaluate the organization’s strengths and weaknesses by simply creating a chart where the internal pieces (Strengths and Weaknesses) intersect with the external aspects (Opportunities and Threats) (mujtabaashfaq.com 2011).

StrengthsWeaknesses
Heath financial performance;

Strong company capital;

Experience in management;

Wide brand acceptance in the Chinese market;

Good employer image;

Market share is relatively small;

Competition from the local and international industrial players;

Price war popular in the retail industry;

 

OpportunitiesThreats
Rapid urbanization trend;

China’s changing to a more western style society and economy;

The growth of the middle and high income group;

Possible economic crisis;

Different customer behaviors compared to that in the western societies;

Increasingly popular online shops;

Non-grocery retailing outperformed grocery retailing in 2011, in terms of both value sales and overall growth. The further penetration of non-grocery retailing into the rural market and urban communities underpinned its outstanding performance in last year (euromonitor.com 2012).

Table 2 TOWS/SWOT analysis of Wal-Mart China

 

 

2.6.1            Strengths and Opportunities (SO) strategy

 

To take advantage of the above mentioned opportunities and internal strengths of the company, the company could approach an ambitious expansion of its business scale by establishing supermarket outlets in the large and also medium sized cities because of the fast urbanization development. And with a good brand as employer, the company could use this to source the China talents and attracting talents with better quality and caliber would certainly contribute to the enhanced business success and competitiveness building. In addition, the storing of good talents would help the company to fight against labor shortage the future.

 

2.6.2            Strengths and Threats (ST) strategy

 

Because of the hyper competition caused by the non-grocery retailing, retailers like Wal-Mart has to adopt better after sale service than those non-grocery retailer in order to prepare their competitiveness as a better choice among the customers. And also the company could also consider opening its online business on the internet to the Chinese customers.

 

2.6.3            Weaknesses and Opportunities (WO) strategy

 

Faced by competition as well as price war popular in the retail industry, Wal-Mart China could have several key strategies to such difficulties. First of all, continual promotion of the products under the Wal-Mart brand would be able to assist the company to maintain unique competitiveness over the other players because such brand is also unique; secondly, again better service before and after sale would help company to avoid direct price war which would certainly reduce the profitability of selling any products.

 

2.6.4            Weaknesses and Threats (WT) strategy

 

With the said weaknesses and threats, the company should be prepared for any crisis situation or at least there should be such a plan to handle the crisis situation such as sudden economic crisis.

 

3.        Conclusion

 

With the analysis above, there are several conclusions and remarks to which extra attention is invited. First of all, the above facts are based on the publication resource and no first hand data is offered, this would certainly limit the usefulness of our findings. Or in another word, more studies and surveys based on the Chinese retail market should be prepared; secondly, the differentiation strategy proposed does not mean that the price could be charge in premium as people visiting super markets still prefer to have low priced goods; thirdly, the company should invest heavily in the Chinese market with the fast urbanization process. In another word, the company has to take advantage of its capital ownership to build more outlets which increase the business scale in China in a short period. Last but not least, with the rapid change among the customer behaviors, the company should perform market auditing from time to time and to update the changes happening in the market or is about to happen.

List of Reference

 

bloomberg.com 2012. China’s Urban Population Exceeds Countryside For First Time. Accessed on 23 Aug 2012 [online] available: http://www.bloomberg.com/news/2012-01-17/china-urban-population-exceeds-rural.html

 

chicagobooth.edu 2012. China’s Labor Market Time Bomb. Accessed on 23 Aug 2012 [online] available: http://www.chicagobooth.edu/alumni/events/showEvent.aspx?eventId=3698

 

cliffsnotes.com 2009. The Internal Environment. Accessed on 23 Aug 2012 [online] available: http://www.cliffsnotes.com/study_guide/The-Internal-Environment.topicArticleId-8944,articleId-8860.html

 

csrglobe.com 2009. Wal-Mart Stores, Inc. Accessed on 23 Aug 2012 [online] available: http://www.csrglobe.com/login/companies/wal_mart_stores.html

 

euromonitor.com 2012. Retailing in China. Accessed on 23 Aug 2012 [online] available: http://www.euromonitor.com/retailing-in-china/report

 

economicpopulist.org 2012. China’s Indigenous Innovation Policy Bigger Threat to the U.S.. Economy Than Offshore Outsourcing. Accessed on 23 Aug 2012 [online] available: http://www.economicpopulist.org/content/long-term-unemployment-crisis-our-time

 

euthanasia.com 2011. China Male-Female Ratio Worsening. Accessed on 23 Aug 2012 [online] available: http://www.euthanasia.com/china-ra.html

 

Farfan, B. 2010. 2010 World’s Largest Retailers – The Biggest and Best Chinese Retail Chains. Accessed on 23 Aug 2012 [online] available: http://retailindustry.about.com/od/famousretailers/a/china_2010_largest_retailers_world.htm

 

Guy, C. 1994, The Retail Development Process: Location, Property, and Planning. New York: Routledge. p. 196

 

geert-hofstede.com 2011. China. Accessed on 23 Aug 2012 [online] available: http://geert-hofstede.com/china.html

 

Henry, A. 2008, Understanding Strategic Management. New York: Oxford University Press. p. 51

 

thomaswhite.com 2012. BRIC Spotlight Retail Sector in China: The Next Big Thing? Accessed on 23 Aug 2012 [online] available: http://www.thomaswhite.com/explore-the-world/bric-spotlight/china-retail.aspx

 

mujtabaashfaq.com 2011. What is a TOWS Matrix? Accessed on 23 Aug 2012 [online] available: http://www.mujtabaashfaq.com/2011/09/26/what-is-a-tows-matrix/

 

peopledaily.com.cn 2003. Carrefour No. 1 in China in Terms of Number of Stores. Accessed on 23 Aug 2012 [online] available:  http://english.peopledaily.com.cn/200301/13/eng20030113_110000.shtml

 

wal-martchina.com 2012. Walmart China Factsheet. Accessed on 23 Aug 2012 [online] available: http://www.wal-martchina.com/english/walmart/index.htm

 

worldbank.org 2012. China Quarterly Update – April 2012. Accessed on 23 Aug 2012 [online] available: http://www.worldbank.org/en/news/2012/04/12/china-quarterly-update-april-2012