Walmart is the leading international retail hypermarket in the world based in America. The company was started in 1962 by Sam Walton with an aim to provide the convenience to buy the products under one roof at the most affordable prices. There are different factors that have contributed to the success of Walmart and the growth-oriented culture and focus of the company are one of those significant factors. To understand the role of the growth-oriented focus of the company towards its success, the Ansoff matrix is provided for Walmart.
Market Penetration
According to Stankevičiūtė et al. (2012), the company has adopted the strategy of cost leadership and offering the lowest possible prices to its customers. This strategy of offering the lowest possible prices to create the highest values for the customers is developed to penetrate in the market. The company did not focus on niche markets such as offering premium products and charging premium prices. But the company has a focus towards penetration into different markets which is the reason for keeping the prices low. The focus of the company was not on increasing the percentage of profit but the company has kept itself focused on the increment in the share of the market. Along with low prices, the company regularly gives different offers to attract more customers and penetrate further into the market.
Market Development
Bonanno & Goetz (2012) mentioned that market penetration is possible to an extent and there is a block after the penetration to a particular level. Once the market penetration retail is fulfilled, the companies are either contented with the position or move to the development of new markets. The development of a new market is a strategy through which the company increases the scope of its potential market. Walmart focused on the development of new markets as it already knew the limitations of market penetration. After a certain point, the penetrated market goes towards the cut-throat competition which is harmful to the company. As a result, the company did not only focus on developing more local market but the company grew rapidly all over the globe. The company entered the developing and developed countries in order to expand their business. The density of the population is one of the major criteria for a country to enter by Walmart.
Product Development
According to Nash (2019), Walmart spent 12 billion USD in 2018 for the research and development department which is the third-highest in the world after Amazon and Alphabet Inc. The massive spending on the R & D is made to adapt different technologies, equipment, skills, and services so that the new and innovative products can be developed continuously. Walmart has been focused on adapting the improvement in the product line. The focus of the company towards product development can be judged by the number of items the company offers. In 2017, Walmart has 16,859,211 items on its list for the sale which shows the continuous up-gradation, inclusion, and development of the product line of the company. The product development is Walmart is not limited only to the inclusion of the product but the company also conducts massive advertising campaigns for the purpose of making the new products successful. Walmart has spent 2.9 billion USD in 2017 for the promotion of its current and new products making the product development and market penetration strategies successful through the full support of marketing and advertisement (Statista, 2020).
Diversification
Walmart has a strong financial base and this has led to diversification by the company into different businesses and industries. The acquisition of Vudu Inc. by Walmart is an example of its unrelated diversification growth strategy. Vudu Inc. is a video streaming company and it is completely different from the retail supermarket. The decision of this unrelated diversification by Walmart is made by assessing the potential of the video streaming market at the global level (Stone, 2010). Walmart Financial is another example of Walmart’s unrelated diversification as the financial services are completely a different business category as compared to retail superstores. The company entered this industry keeping in view the reliance of companies on the financial institutions.
References
Bonanno, A., & Goetz, S. J. (2012). WalMart and local economic development: A survey. Economic Development Quarterly, 26(4), 285-297.
Nash, K. (2019). Amazon, Alphabet and Walmart Were Top IT Spenders in 2018. The Wall Street Journal. Available at: https://www.wsj.com/articles/amazon-alphabet-and-walmart-were-top-it-spenders-in-2018-11547754757
Stankevičiūtė, E., Grunda, R., & Bartkus, E. V. (2012). Pursuing a cost leadership strategy and business sustainability objectives: Walmart case study. Economics and Management, 17(3), 1200-1206.
Statista. (2020). Wal-Mart Stores, Inc advertising cost worldwide in the fiscal years 2014 to 2019. Available at: https://www.statista.com/statistics/622029/walmart-ad-spend/
Stone, B. (2010). Walmart Buying Vudu Movie Service. The New York Times.