Target Market
Wal-Mart's target market is approached by means of low prices. It maximizes its margins by taking advantage of huge volumes in sales. An overview of this strategy makes it seem that they target the poor and middle-classes in society. These are the two largest groups in any society and are found in every state and country. Most times they are enticed more by the price of a product rather than its quality. Their volume of consumption is also higher than that of the upper class.
Criteria
Wal-Mart uses two methods of segmentation; one is by geographical positioning whereby if the nature of a place does hardly require a commodity, it will not stock the product. The other way is by age whereby stocks are kept depending on the age composition and preferences of the population. In selecting its market, Wal-Mart goes through five steps, the first is deciding on whether to use concentrated, differentiated or undifferentiated strategy for targeting (Ferrell, & Hartline, 2014). The second involves dividing the population in terms of geographical, demographic and behavioral features. Next, they profile the market segments according to general behavior. After this, they evaluate the market segments with regards to estimates of costs and sales (Pride, & Ferrell, 2006). Finally, a decision is made once this criterion has been used on whether it is necessary to segment the market with regard to the evidence found.
Relevance to Wal-mart
Wal-Mart is the biggest chain-retailer in the world, targeting the middle and lower classes seem to be a far more viable option compared to only targeting the upper-class if high sales margins are the target. Selling to more people will cover the costs incurred due to lower prices by cancelling out with economies of scale in other areas (Ferrell, & Hartline, 2014). Another applicable aspect of their segmentation criteria is segmentation according to geographical position. One cannot expect to make huge profit margins when selling raincoats on Nevada so it would be unwise to have a large stock of them in that state. General behavior is also a good way that Wal-mart uses to evaluate the market since if the consumption by the people in a place is majorly on essentials, and then a large stock of luxury commodities will result in a loss.
Importance of Identifying the Target Market to Wal-mart
Identifying a target market helps Wal-Mart to avoid potential losses and even determine prospective profits. It helps the chain-retailer to decide on which product and what quantity of it is the most ideal to have in stock. Once they identify it, they can easily identify trends in the market and develop their products to keep pace with these trends. Identifying the target market also helps to add a personal touch to the products as Wal-Mart now can have it modified to meet the general specifications of particular segments. Identifying it also helps Wal-mart decide on whether to segment it or keep it undifferentiated if the general behavior is the same in a given state.
SWOT Analysis
Strengths
Wal-mart draws its strength from a number of factors. The first source if sits strength lies in its ability to comprehensively collect data on the existing demographic composition, which is relied upon in determining the market segments. This company has a clear strategy in place to segment the market based on geographical and behavioral characteristics. Its strength is drawn from the fact that it hires professional analysts to evaluate the segments and potential in the market. This company has been outstanding in the market, thus enjoys these many years of establishment giving it a footing in the industry. Finally, the company enjoys the economies of scale from handling a large operation, thus positioning to a positive competitive advantage over its rivals.
Weaknesses (W)
Despite the strengths above, Wal-Mart faces a series of challenges. The first weakness is attributed to complexity in central management of an entity with so many branches and two million employees. Besides, this company is exposed to perceived losses, especially, when it is established in an area with unresponsive market. On the international scene, the company faces a tough hurdle due to the differences in international laws making inter-continental operations complicated; finally, Wal-Mart is exposed to different legal suits against it by external aggressors.
Opportunities (O)
The existence of growing middle class increases potential sales volumes for Wal-mart. This is because the size of potential customers to who they can sell their product gets bigger and may therefore increase their margins (Gundrum, 2013). Prospects of projected growth in the retail industry increase the odds of Wal-mart hitting their target sales volume which is good news for their business. General appeal in all the markets it has attempted to enter with the exception of Germany and South Korea is a sign of good things. It shows the probability of Wal-mart making it in a new market is high. Diversity in products and interests of the market is a good thing since it ends up spreading out risks for Wal-mart further encouraging investment.
Threats
Wal-Mart is subjected to various threats. The first threat attributes to strong competition from new firms trying to penetrate the market. Besides, this size of internet selling platform is a threate that is likely to overshadow physical stores is a big problem for Wal-mart. Finally, ever changing international labor laws make it difficult to run a uniform operation.
References
Ferrell, O. C., & Hartline, M. D. (2014).Marketing strategy: Text and cases. Mason, OH: South-Western/Cengage Learning.
Gundrum, N. (2013). Marketing strategy of the foreign hypermarket wal -mart in china. Place of publication not identified: Grin VerlagOhg.
Pride, W. M., & Ferrell, O. C. (2006).Marketing: Concepts and strategies. Boston: Houghton Mifflin Co.
