Posts by John Dudovskiy
BMW business strategy can be characterized as product differentiation with a particular focus on design and digitization. Electromobility represents the latest direction for BMW Group product differentiation and the company introduced its fully electric BMW i3 in 2013. This has been followed by plug-in hybrid vehicle BMW i8 in 2014. Moreover, BMW business strategy focuses on individual mobility in the premium segment – combined with attractive mobility services.[1] The company stays loyal to Strategy Number One which strives to align high levels of profitability in short-term perspective with increasing the levels of long-term value of the company in times of change. Four strategic areas for BMW have been specified as “Growth”, “Shaping the Future”, “Profitability” and “Access to technology and customers” BMW Group competitive advantage is based on the following points: 1. Representation of status and achievement. BMW belongs to premium car categories, and accordingly, possession of a BMW model car can be interpreted as a sign of achievement and social status in a society. 2. Effective design and features integrated to each model of the brand. These common design and effective features include, but not limited to the two-section, rounded radiator grille, attractive aesthetics, sophisticated style, and Hofmeister kink, i.e. the counter curve in the window-outline at the base of the rear roof pillar. 3. Competitive post-sales service. BMW received positive acclaim for superior after-the-sales customer service and this fact is greatly valued by customers. Research and development (R&D) plays an integral role in sustainability of BMW competitive advantage and this fact is duly recognized by the senior management. In 2015, R&D investments were increased by EUR 136 million to more than EUR 4.2 billion[2]. It has to be noted that BMW competitive advantage is challenging to sustain in the long-term perspective because sustainability of competitive advantage depends on the…
Bayerische Motoren Werke Aktiengesellschaft (BMW AG) is the parent company of the BMW Group, a global automobile manufacturer and seller based in Munich Germany. Originally founded as Bayerische Flugzeugwerke AG (BFW) in 1916 the company has emerged as one of the leading brands in the global market of luxury cars. BMW Group owns famous BMW, MINI and Rolls-Royce Motor Car Limited brands. In 2015 the company sold its products to more than 2.2 million people in more than 150 countries, an increase of 6.1 per cent compared to the previous year. BMW Group generated more than 93 billion EUR revenues in 2015, a significant increase of 14.6 per cent compared to the previous year. BMW net profit in 2015 increased by 10 per cent to around 6.4 billion EUR. The company employs 122,244 people globally and it has a hierarchical organizational structure. BMW Group operations are divided into four business segments: automotive, motorcycles, financial services and other entities. The company has 30 manufacturing sites in 14 countries and robotic technology plays an instrumental role in BMW manufacturing process. BMW Group pursues product differentiation business strategy and differentiates its vehicles on the basis of design, performance and advanced features and functionalities. Moreover, high level of integration of information technology and internet, as well as, electromobility represent solid grounds of BMW Group competitive advantage. At the same time, BMW Group has certain weaknesses that include a lack of portfolio diversification with only three brands, a high level of vulnerability to economic crises due to the premium pricing strategy and the lack of strategic partnerships with other businesses within and outside of automobile industry. BMW Group Report contains the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis and McKinsey 7S Model…
Corporate Social Responsibility (CSR) is a critically important aspect of the business for any company of a large size, including Walmart. Walmart CSR strategy rely on the following three principles[1]: Creating economic opportunity for our employees, suppliers and people who work in retail and retail supply chains beyond Walmart Enhancing the sustainability of operations and product supply chains for people and the planet Building strong communities where the retailer operates Walmart’s aims to achieve the following 3 aspirational goals formulated in 2005 by Lee Scott, who was Walmart CEO at the time: Supply the company with 100 per cent renewable energy Create zero waste Sell products that sustain people and the environment The company releases Global Responsibility Report annually and it includes the details of Walmart CSR programs and initiatives engaged by the company. The table below illustrates highlights from the latest report for 2015: Categories of CSR activities Walmart Performance Supporting local communities In UK, Asda donated more than 10,000 grants as part of the Chosen By You, Given By Us program in 2014More than USD 100 million awarded in state and neighbourhood grants by Walmart and Walmart foundation in the US Walmart employees in the US volunteered over 1.5 million hours in their local communities in 2015 USD 14 million was donated by Walmart to the causes in “dollar-for-doer” grants Educating and empowering workers Results if a survey involving more than 2 million employees worldwide indicate that 4 or 5 are proud to work at WamartIn February 2015, the company announced a USD1 billion investment in U.S. hourly associates to provide higher wages, more training and increased opportunities to build a career with Walmart.[2] More than USD 100 million grants will be funded by Walmart foundation to accelerate mobility of retail workers from entry- to middleskills jobs, Labor and human…
Walmart McKinsey 7S framework illustrates the ways in which seven elements of businesses can be aligned to increase effectiveness. According to the framework strategy, structure and systems represent hard elements, whereas shared values, skills, style and staff are soft elements. McKinsey 7S framework stresses the presence of strong links between elements in a way that a change in one element causes changes in others. As it is illustrated in Figure 10 below, shared values are positioned at the core of Walmart McKinsey 7S framework, since shared values guide employee behavior with implications in their performance. Hard Elements Strategy. Walmart pursues cost leadership business strategy according to its brand promise of ‘everyday low prices’. The company has been able to sustain this strategy thanks to the economies of scale, exercise of its vast bargaining power to secure low prices from suppliers and paying employees low wages. Three important pillars in Walmart business strategy can be specified as – assortment, price and access. Due to its aggressive pursuit of cost leadership strategy, Walmart has attracted criticism for paying its employees low wages with a consequent negative impact on the quality of customer services. CEO Doug McMillion had to address this issue via introducing certain changes in Walmart business strategy. Specifically, in February 2015, the company announced a USD1 billion investment in U.S. hourly associates to provide higher wages, more training and increased opportunities to build a career with Walmart.[1] Structure. Traditionally, Walmart organizational structure has been highly hierarchical due to the massive size and scope its business that comprises more than 11,000 stores in 27 countries and serves nearly 260 million customers each week under 72 banners.[2] However, new CEO Doug McMillion introduced initiatives to delayer the organizational structure. Specifically, in 2015 Walmart announced that “it will eliminate a layer of management…
Value chain analysis is an analytical framework that assists in identifying business activities that can create value and competitive advantage to the business. The figure below illustrates the essence of value chain analysis. Walmart Value chain analysis Primary Activities Inbound logistics It has been estimated that more than 50 per cent of Walmart products in the US come from overseas suppliers[1] and about 75 percent of walmart.com sales come from non-store inventory [2]. Generally, Walmart inbound logistic practices are based on the following three principles: Using the minimum amount of links in the supply chain. Starting from 1980s, Walmart began to ruthlessly eliminate traders in its supply chain opting to work with manufacturers directly. Such a strategic decision proved to have a positive impact on the bottom line after a few years. Specifically, “in 1989, Wal-Mart was named Retailer of the Decade, with distribution costs estimated at a mere 1.7% of its cost of sales – far superior to competitors like Kmart (3.5%) and Sears (5%)”[3]. The efficiency of Walmart supply chain practices has further improved since in a consistent manner. Forming strategic partnerships with vendors. Walmart imposes strict conditions on various aspects of the business when negotiating with potential suppliers. The company also attempts to purchase for the lowest prices applying its huge bargaining power in order to be able to maintain cost leadership competitive advantage. However, once a potential vendor is contracted as a supplier, Walmart offers a strategic partnership for long-term perspective and engages in high volume purchases, although for lower prices. Using cross docking as an inventory tactic. Cross docking implies “the direct transfer of products from inbound or outbound truck trailers without extra storage, by unloading items from an incoming semi-trailer truck or railroad car and loading these materials directly into outbound trucks, trailers, or…
Porter’s Five Forces analytical framework developed by Michael Porter (1979)[1] represents five individual forces that shape the overall extent of competition in the industry. Walmart Porter’s Five Forces are represented in Figure 1 below: Figure 1. Walmart Porter’s Five Forces Rivalry among existing firms is intense. Walmart is engaged in cut throat competition with many other grocery retail chains and supermarkets such as Costco Wholesale Corporation, Dollar General Corporation, Dollar Tree, Inc., Kohl’s Corporation, Macy’s Inc, Sears Holdings Corporation, Target Corporation and others. At the same time, as it is illustrated in Figure 2 below, the pattern of changes of grocery industry concentration for more than two decades has been in favor of major market players such as Walmart, Kroger, Costco and Safeway. Market share of these large companies have been consistently increasing compared to grocery stores of smaller sizes partially due to the cost advantage gained via economies of scale. Figure 2. Changes in industry concentration in the US grocery market[2] Threat of substitute products or services. Walmart sells thousands of products belonging to the following categories: groceries entertainment health and wellness – including pharmacy hardlines – including stationery, auto spares, and accessories hardware apparel home furnishings household appliances It can be argued that the threat of substitute products is irrelevant for Walmart due to the abundant range of products sold by the retailer. In other words, Walmart sells a wide range of products, as well as, substitutes to this products, therefore, the impact of this particular threat to Walmart can be stated to be irrelevant. Bargaining power of Walmart suppliers is insubstantial. Due to the size and the scope of its business, Walmart secures the lowest prices from its suppliers to sustain its cost leadership competitive advantage. Walmart paid its suppliers USD 13.5 billion in total in 2015 alone.[3] Along with…
Walmart marketing budget equaled to USD2.4 billion for both fiscal 2015 and fiscal 2014 and USD2.3 billion for the fiscal year of 2013[1]. These funds are invested in Walmart marketing communication mix that include print and media advertisements, viral marketing, sales promotions, events and experiences, public relations and direct marketing components of the marketing communication mix. Advertising Traditionally, print and media advertising has represented the core of Walmart marketing strategy for many years. However, in 2015, Walmart Vice President Wanda Young announced planned shift of the main focus from the print advertising to the mobile marketing campaigns.[2] Such a change in Walmart marketing strategy is expected to target young people in general and Millenials in particular. Viral marketing is another direction that is being extensively utilized by Walmart with varying levels of success. For example, Walmart marketing video ‘Work is a Beautiful Thing: Meet Patrick’ released in 2014 has attracted more than 1.2 million views in just six days with thousands of positive comments and with evident positive implications on the brand image.[3] Nevertheless, Walmart still uses print and media advertising to a considerable extent and the company places advertisements on newspapers, magazines and TV channels popular with the target customer segment. Sales Promotion Sales promotion is used by Walmart in an extensive manner. The retailer launches seasonal sales promotions in a regular manner along with sales promotions in before and during public holidays and other memorable days. Particularly, Black Friday is a massive sales promotion day for Walmart each year eagerly anticipated by millions of customers. Walmart maintains Daily Savings Center section in its official website where online and offline sales promotion offers are announced. Sales promotion also has been adapted as an effective tool to increase the sales of Sam’s Club segment of the business. Specifically, the emphasis of…
Walmart segmentation, targeting and positioning is the core focus of Walmart strategic marketing. Segmentation refers to dividing population into groups according to certain characteristics, whereas targeting is associated with choosing specific groups identified as a result of segmentation to sell products. Positioning refers to the selection of the marketing mix the most suitable for the target customer segment. Walmart uses mono-segment type of positioning and accordingly, Walmart marketing management appeals to single customer segment who place greater value on the price attribute of products compared to other attributes. The following table illustrates Walmart segmentation, targeting and positioning: Type of segmentation Segmentation criteria Walmart target segment Geographic Region Domestic and international Density Urban and rural areas Demographic Age Individuals of all age categories Gender Males and Females Life-cycle stage Bachelor Stage young, single people not living at home Newly Married Couples young, no children Full Nest I youngest child under six Full Nest II youngest child six or over Full Nest III older married couples with dependent children Empty Nest I older married couples, no children living with them Empty Nest II older married couples, retired, no children living at home Solitary Survivor I in labor force Solitary Survivor II retired Income Individuals and households with low incomes and middle class Occupation Students, manual workers, floor level employees and middle level managers in public and private sectors Behavioral Degree of loyalty ‘Hard core loyals’, i.e. individuals who always purchase the product / brand in question. ‘Switchers’, i.e.individuals who do not specifically seek out a particular brand, but rather purchase the brand available to them at time of need, or that which was on sale Benefits sought Cost advantage Personality Reserved and cost-conscious individuals User status non-users, potential users, first-time users, regular users, or ex-users of a product Psychographic Social class Lower class, working and middle class Lifestyle Resigned,…
Walmart 7Ps of marketing comprises elements of the marketing mix that consists of product, place, price, promotion, process, people and physical evidence. Product. Walmart sells a wide range of products belonging to the following categories: groceries entertainment health and wellness – including pharmacy hardlines – including stationery, auto spares, and accessories hardware apparel home furnishings household appliances Despite the low prices, Walmart attempts to position its products as quality and this message is integrated into company’s marketing strategy. For example, in China Walmart utilizes “Worry Free Fresh” program to provide a money-back guarantee if its produce and meats don’t meetcustomer expectations. Wallmart.com offers about 8 million items in the US[1] and it is duly considered to be one of the largest online stores in the world. Place. With more than 11,000 stores, websites and mobile apps, customers can access Walmart via multiple channels.[2]During the fiscal year of 2016, Walmart is planned to expand by approximately 15 to 16 million total net retail square feet, representing between 240 and 270 units[3]. Walmart stores are operated in the following four formats: Walmart discount stores Walmart express stores Walmart super centers Walmart neighborhood markets Walmart has launched its dedicated e-commerce websites in 11 countries and the proportion of online sales compared to the traditional offline sales has been consistently increasing for the past 10 years. Price. Walmart has based its competitive advantage on cost leadership. Accordingly, the retailer aims to offer the lowest price possible according to its motto ‘everyday low prices’. Walmart Price Match Policy formulated on its website states the following: “We’re committed to providing low prices every day, on everything. So if you find a lower price from an online retailer on an identical, in-stock product, or the item purchased from Walmart.com is now listed at a lower price, tell us and…
PESTEL is a strategic analytical tool and the acronym stands for political, economic, social, technological, environmental and legal factors. Walmart PESTEL analysis involves the analysis of potential impact of these factors on the bottom line and long-term growth prospects. Political Factors Because of its massive size and significance for the US economy, Walmart has been observed to interfere with politics a number of times. The primary reasons for Walmart’s political interferences via lobbying and other means have been an attempt to gain positive political impact on the business. In 2013 Walmart has been caught convincing employees to make political contributions to republicans to support pro-business conservatives like Cruz and Boehner[1]. Walmart has been ranked among the top 100 political donors overall for the period since 1989[2]. As it is illustrated in Figure 5 below, Walmart political spending has vastly increased during the past one and half decade and these funds have been used to influence corporate tax and labour legislations to a certain extent.[3] Changes in Walmart’s political spending[4] Apart from campaign contributions and lobbying activities, Walmart has attempted to interfere directly in certain political debates a number of times. In one notable case, Walmart voiced its opposition to religious freedom law in its home state of Arkansas in 2015. Arguing that religious freedom laws would open the door to discrimination against gay and lesbian customers, Walmart emerged victorious and Republican Gov. Asa Hutchinson refused to sign the legislation.[5] Additionally, Walmart is impacted by a wide range of political factors such as political stability in places where the company operates, market lobbying protectionism policies in international markets, the freedom of press, extent of corruption and others. Economic Factors Walmart revenues and profits are impacted by a range of external economic factors either, directly or indirectly. For example, currency exchange rate…