The Strengths of the Walmart
The Walmart is the largest retail seller in the world. The Walmart Company has invaded all the North America and spread to the other countries all around the world. The Walmart has got its markets in the most suitable locations in many towns. Also considering that the Walmart buys goods in very large amounts, the Walmart provides the best pricing for the customers. Selling a large range of products attract many customers to the company. Also the company can create the best pricing strategy by implementing different prices for different products. In another word, the price changes in the Walmart markets cannot be easily realized by the customers; therefore, it is possible for the Walmart to change the prices easily to make its profits higher. The Walmart is also a workplace for many unqualified workers. Because many of its workers are unqualified, the workers respect the company. In another word, the Walmart can keep the workers for a low cost of labor. As seen in many national news, some workers make complains about the Walmart for not providing their legal rights. Thus, the ideology of Walmart depends on selling cheap products and the strategies of purchasing and human resources to make the goods cheaper.
The Weaknesses of the Walmart
The cost advantage of the Walmart is truly brutal for the other companies. The Walmart tries to kill the other local sellers and it is really successful at this. The Walmart tries to be a monopoly in the retail selling sector. However, the Walmart has weaknesses also.
The Walmart has large inventories. Actually it is one of the main strategies of the Walmart: buying large amounts of the products helps the company sell the products at lower prices. However, on the other side, the Walmart has to cover the expenses of the inventory management. The only cost for the high level of inventories is not the cost of storages. The products that the Walmart purchases are durable and nondurable. The durable products are relatively easier to store; however, the nondurable products like foods need more care relatively. The management of the inventories requires well-experienced human resources and other relevant costs.
Another important weakness that the Walmart has is the human resources management. The Walmart hires many of its workers as part time workers. Considering that they are mostly unqualified workers, working part time in the Walmart makes them more fragile in the labor market. The fragile workers might have problems to concentrate on their jobs. Therefore, we can observe the productivity of the workers in the Walmart is lower relatively. Actually, considering that the wages the Walmart pays to the workers is the minimum wage; thus, it would be unfair to expect a high level of productivity from the workers.
Also, in the Walmart stores, the price is more important than the quality. Besides this, the after sale services are so weak in the Walmart stores. Thus, the people who go to shopping to the Walmart stores expect low prices with a terribly designed after sale services.
Besides the weaknesses of the labor and the inventory management, the Walmart has two very essential weaknesses: the dislike the company faces because of being monopoly in the retail market industry and the local culture ignoring behavior of the Walmart. Many people dislike the Walmart because the Walmart has killed many local sellers. Even though some people might claim that the competition is good for the people; the Walmart is trying to have the monopoly power. As known from the microeconomics theory, the monopoly is not good for any agent in the economy. Another important factor that the Walmart ignores is the local cultures and their products. The entire Walmart stores sell the same products in every city. However, each city has a different culture and the customers would like to see the local products in the stores. Especially, considering that the places with a large rate of immigration, many of the people come from the other countries and they would like to see their countries’ products they are used to consume.
Finally, one of the most important weaknesses of the Walmart is the large size of the Walmart. The Walmart has at least one store in many cities with the different cultures. The Walmart has big advantages in selling the general products that every individual in the different cities consumes; however, the Walmart cannot fully comprehend the local cultures. Thus, it is truly difficult for the Walmart to control every store all around the U.S.A. and the other countries.
Competing with the Walmart Stores at Local Level
The big picture shows us that the Walmart is very strong in the local and in the international markets. There is a reality of a strong supply chain behind the strength of the Walmart. Therefore, the Walmart can follow a strategy of killing the other local markets by keeping the prices very low. Thus many local companies lose their market shares to the Walmart. From this point of view, the local stores should be able to create a specific strategy to cope with the Walmart’s competition power. In the following parts of the paper, I will try to develop a strategy on how a local seller can be successful against the Walmart at the local level. In this perspective, I will argue the strategies of pricing, quality, services provided, and inventory management.
Developing a Pricing Strategy against the Walmart Low Price Strategy
It is almost impossible that a local seller provides low prices to compete against the Walmart. Depending on this idea, it would not logical to follow the strategy of low pricing for the local sellers. Following the low-pricing strategy might end up with bankruptcy in a short time period. Thus, another way of pricing should be developed.
A local seller, instead of trying lower prices, should observe the prices for the products sold in the Walmart. The Walmart does not apply the low-pricing strategy for every product. Thus, while some of the products are cheap, the other products become relative more expensive in the Walmart stores. Thus, the local seller should be able to observe the prices in the Walmart and develop a mixed strategy for different products. Also, this strategy should be dynamic. In another word, a function of pricing for different products should be developed. In this way, when the Walmart increases a price, the same product should be cheaper in the local market as much as possible. Also, some bundles of the products can be developed. It might be easier to control the price of a bundle of the products.
Even a local company can develop a mix pricing strategy, but it will not help the local company survive against the Walmart. Therefore, a further step should be developed. The local company should increase its power against the Walmart. Let us assume that the local seller has some capital; however, it will not be enough for the company. The solution in this situation might be creating a local network among the sellers of the other products in the town. The sellers’ network can gather a higher level of financial resources. Considering that each company has specialized in producing a specific good, then the network can create a synergy to fight against the Walmart. But the Walmart will have always the advantage of selling high technology products and some other products that produced by the large companies in the international markets. Thus, the local markets will never be able to compete against the Walmart in these products.
Eventually, the local sellers should develop a network among them and they need to select some products to compete against the Walmart. In another word, they need to make a hidden agreement with the Walmart by forcing the Walmart to stop selling some specific products in the local market. For instance, Florida is the production place of the tomato. Therefore, the local producers by creating a network between the local traders and the local tomato producers can create a pricing strategy for the tomato based products. Eventually, the network can make the tomato products cheaper. The Walmart has to bring the tomato products from another state or the Walmart needs to make an agreement with the local tomato producers. Therefore, the local markets should be able to make the local tomato producers believe in that if they sell their products to the Walmart, in the future they might lose their business to the Walmart also because the Walmart aims at producing everything inside its supply chain. Its supply chain is a vertical supply chain. Thus, instead of buying things from the producers, the Walmart prefers invading all the productions.
Consequently, the local sellers should be able to create a network and create a mixed pricing strategy. In another word, a strong supply chain at the local level should be constructed to compete against the Walmart supply chain.
Managing Services to Compete against the Walmart
The Walmart has a great advantage because of the low-pricing strategy. However, the Walmart cannot easily understand the needs of the customers at the local level. The Walmart, actually, does not care the needs at the local level. The Walmart follows the strategy of killing the other sellers at the local level by using the pricing strategy mainly. However, this is an important weakness of the Walmart system. If a local power can understand the needs of the customers at the local level better than the Walmart does, then it might be possible for the local producers and sellers to compete against the Walmart.
The local sellers should draw the picture of a customer shopping at the Walmart. An individual enters the Walmart and faces a large shopping place. No one welcomes the customers at the Walmart. The customer tries to find the products he would like to purchase and he cannot get help from the workers because workers prefer staying away from the customers mostly. When a customer would like to get information on a specific product, it is truly hard for him to find someone to get the information. When the customer decides to but the product, no specific information of guarantee conditions or return policy is provided. Only the general rules are read to the customers. If the product has some specific return policy or guarantee conditions, they neither are nor provided to the customers. The Walmart also do not provide any ease at payments. Thus, the customers have to use the general ways of paying the bill such as using debit or credit card. No special way of payment is provided for the customers. Finally, the Walmart does not provide well-designed after-sale services.
The local sellers should take all these weaknesses of the Walmart system into consideration to develop new services for the customers. As size, the local sellers have comparatively smaller marketplaces. Thus, it is possible to help the customers better in the local sellers’ marketplaces. Welcoming the customers, informing the customers about the products, helping them find the products easily and creating some payment methods to make the life easier for the customers might be important to compete against the Walmart. Also, the local sellers through the network between them should be able to provide information about every seller in the network for the other products. Especially, mentioning the local products that the Walmart is disadvantaged will help the local sellers develop their power.
The most important service that a local seller or as the entire local sellers should produce is the after-sale service. The after-sale services are the weakest point in the Walmart system. Many of us have had this problem in the Walmart. If we need a service after-sale in the Walmart system, it is hard to find a responsible in the Walmart system. The local sellers can produce a good after-sale service including the returning the products, setting the products at home or fixing the products. The after-sale services can increase the trust in the local sellers. Especially, if the entire local sellers become a part of a network and the after-sale services are provided through the entire network, then it might provide some power for the local sellers against the Walmart.
Pricing and Quality
For the local sellers, developing a pricing strategy alone or developing some services alone will not provide enough power against the Walmart. Therefore, a local seller or the entire local sellers should be able to use the strategies of pricing, quality and services together.
A local seller should pick a product that it can provide a high level of quality that the Walmart cannot reach. As known the Walmart mostly sells fabrication products. For instance, let us assume that the local seller figure out that the quality of the local cheese kinds has a very high quality and the Walmart cannot produce these kinds of cheese. We might think that the Walmart can produce the same cheese; however, the ideology of the Walmart does not depend on producing high quality local products. Therefore, the Walmart probably will not produce this cheese.
The local seller should develop an advertisement strategy to inform the customers about the quality difference between the high quality products and the manufactured products at large sizes. For instance, a local cheese becomes healthier and more nutritious. If the customers can see the difference and believe in you, then you can get the customers. At the beginning, maybe, only some people with high level of income will buy your high quality product; however, following the right strategies, it is possible to attract varying customers at different income levels. For instance, developing an advertising strategy for the people with low income as follows might work: “Instead of buying a large amount from the low quality Walmart cheese, buy our high quality small cheese boxes. Being healthy does not mean eating a lot, it means eating healthily and eating high quality products”.
Consequently, the pricing strategy should be lowering the prices as much as possible; however, more importantly, the advertising should be used to make the customers believe in your high quality and be willing to buy your high quality products.
Inventory Management
Inventory management is very crucial for the Walmart stores. The Walmart has a large number of stores all around the world. Thus, logistics and storing are very difficult for the Walmart. However, logistics and inventory management might not be so important for a local seller because a local seller cannot compete with the Walmart by developing a very efficient logistics and inventory management.
Therefore, instead of spending effort to develop an efficient inventory management and logistics, a local seller should pick the best spot to make the largest sale. The Walmart has large stores; therefore, in many towns it is not easy to find a large place for the Walmart store in the centre of the town. Because of that, the Walmart picks some places a little away from the city center. To go to the Walmart store, many people need a car to travel. As known, in the U.S.A. and in the developed countries, the public transportation system works slower relatively. Consequently, the local seller should pick a place in the city center where people can access there by walking. That will create very important advantage for the local seller. Also, creating a network between the sellers in the center might help them be powerful against the Walmart.
Consequently, the local sellers should follow the strategy of picking the right places for them where they can reach the people more directly. Implementing the strategies mentioned in the following parts might work more efficiently in the right location for the local sellers.
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