Abdulgafar Sanni

September 7, 2010

MKT3410

Assignment #1

1. The evidence that Wal-Mart might be a channel leader can be seen by all of the criteria and requirements that they impose on their suppliers. They expect for the best of products to be sold in their stores at low costs so they make sure that each and every supplier can provide these products. Because Wal-Mart has several requirements on its suppliers that allow for good products at low prices, they are able to keep up with the constantly changing environments that are uncontrollable within the marketing channel such as the economic, competitive, sociocultural, technological and legal environments. With the ever-changing economic environment, Wal-Mart has come through as a powerhouse in the industry. Wal-Mart allows for consumers to obtain the products that they need and want at low costs, which in the current recession is an important aspect because people are trying to find any way possible to save money. The competition environment creates the constant need to be on top of the ever-changing needs of consumers. Wal-Mart keeps its consumers by constantly dropping their prices lower than their competitions. The technological environment has caused Wal-Mart to create a shopping experience through the Internet. Now consumers can purchase all of the products that they need online, making shopping easier on consumers. Also the Internet allows for Wal-Mart to interact faster and more efficiently with suppliers. Wal-Mart also caters to the changing sociocultural aspects in each of the countries that they are present in. Legal environments allow for Wal-Mart to make sure that that every single supplier is aware of the agreements and that each agreement is upheld. All of the requirements that suppliers must meet and the understanding of all the changing environments allow for Wal-Mart to be a channel leader.

2. The types of channel power that Wal-Mart uses in dealing with its suppliers are reward, coercive, and referent powers. The rewards power that is used by Wal-Mart can be seen through the mass market that the supplier will be dealing with if they are approved to supply to Wal-Mart. By conforming to Wal-Mart’s requirements, the suppliers are given a mass market of consumers to supply their product to with the hopes of becoming a household name, which in turn can provide both Wal-Mart and the suppliers with financial gain. While I know that the coercive power is considered to be the complete opposite of the rewards power, I believe they both apply to Wal-Mart. The coercive power of Wal-Mart is that if the suppliers chose not to follow their requirements their could be major financial losses as well as legal issues at hand because the first requirement for a supplier with Wal-Mart is that they all must sign a binding legal agreement. If a supplier breaks any part of this contract they are held legally accountable and will either be fined or taken to court, depending on the action that was broken. The third and final power of Wal-Mart is the referent power, which is that the suppliers and Wal-Mart’s intentions are closely aligned. Wal-Mart wants the best and safest product

available to provide to its consumers. If the supplier can provide the best and safest product then they will be chosen for distribution in Wal-Mart stores, as with the quality assurance tests that must be performed on the products before distribution. Both the suppliers and Wal-Mart are invested at this point and want the product to pass the quality assurance test so that the product can be distributed.

3. There are several criteria that Wal-Mart uses in selecting suppliers to begin the initial proposal. According to walmartstores.com, the supplier must register and obtain a “Supplier Evaluation Report” with Dun and Bradstreet before beginning the online questionnaire process. Then they must submit the online product questionnaire, which asks for one image of item or product, the UCC membership number, and federal tax id among all of the other information needed. You must also be able to supply a copy of your product liability certificate of insurance. Also if you are a minority/women-owned business, you must provide a copy of the current minority or women-owned certification. All costs that are incurred while preparing your initial proposal packet for Wal-Mart are the responsibility of the supplier, Wal-Mart will not reimburse. You must also be able to provide all financial documents that will be assessed by Dun and Bradstreet to evaluate the supplier’s financial standing and the risk that might be taken by a company choosing to distribute their product. Once all of these aspects have been met and approved the supplier is given a user id and password that allows them access to Retail Link© where they must complete an initial vendor agreement. Once approved they receive a vendor number. After all of these steps there is still no guarantee that the supplier’s product will be distributed in stores. According to walmartstores.com, the authorized buyer at the home office makes buying decision for all programs.”

4. It is required for Wal-Mart suppliers to be technology competent in managing the flow of products to Wal-Mart. According to the walmartstores.com website, all suppliers need to be have a Retail Link© account and be able to use and comprehend Electronic Data Interchange (EDI), which will allow for Wal-Mart and the product suppliers to interact and exchange important information instantly. According to walmartstores.com, being technology competent with the use of EDI’s allows for Wal-Mart to “improve customer service, lower expenses, and increase productivity by real-time delivery of EDI documents”. The EDI allows for more effective distributing results with more accurate and timely production schedules, order processing and inventory carrying costs. The capability of being able to communicate in real-time with suppliers allows for Wal-Mart to keep in constant contact with them. The Internet and computer inventory management allows for Wal-Mart and suppliers to share unlimited amounts of information quickly and replenish inventory without having to manually write the order form to purchase more product.

5. There are many requirements that Wal-Mart has for suppliers after they have completed the initial proposal and been approved. First, all suppliers must sign a legally binging agreement with Wal-Mart. An attorney should review this contract so that the supplier completely understands all of the stipulations. These stipulations may include “allowances, new store discounts, merchandise warranties, defective/return merchandise allowances, warehouse allowances, soft goods allowances, late shipment penalties and markdown dollars or discounts”. Suppliers must also obtain a Retail Link© account and

be technology efficient with Electronic Data Interchange (EDI). Being able to communicate with Wal-Mart through EDI’s is essential because it allows for real time communication, lowers expenses and increases productivity and accuracy. The suppliers must also adapt to Wal-Mart’s lead-time requirements, have timely shipping and have industry knowledge and integrity. Suppliers need to be prepared to undergo quality assurance tests as well. These tests are set up with a third party lab and must be done far enough in advance of shipment to make sure that the product is safe for consumers. Suppliers are not allowed to give gifts or gratuities to any Wal-Mart associate. All suppliers must keep in contact with the Corporate Traffic Department to make sure that efficient transportation is arranged from suppliers to distribution centers. Wal-Mart also favors suppliers that have a commitment to the basic principles of human rights and use equal opportunity practices. Suppliers must also be ready to meet the regulation differences among the several countries that Wal-Mart serves. The Office of Regulatory Compliance or ORC makes sure that each supplier complies with each country that Wal-Mart is located in. Suppliers must use security source tagging to help with anti-theft and each of these anti-theft labels must be certified by an authorized Source Tagging Lab prior to being put on the merchandise.

6. Selling to Wal-Mart does seem worth the effort, even though there are a ton of requirements that the supplier has to meet. Wal-Mart is a powerhouse in the industry; it is the “one stop shop” that makes life easier on the everyday American. Americans today want to be able to go to a store and get all of the things that they need. The convenience of having all of the departments in one store is a huge attraction to customers. As a “one stop shop”, Wal-Mart offers its customers food, clothing and jewelry, electronics, outdoor living, movies, furniture and home goods. While this is not a complete list of the departments in Wal-Mart, it shows the diversity that the store offers to its customers all while keeping their prices reasonable so that people of all economic standings can afford to shop within the store. While the requirements and standards that must be met to become a supplier at Wal-Mart can be tough, it is worth it because they have such a large and wide range of clientele. Also it may not be long until stores like Wal-Mart completely take over the demand for specialty stores such as Best Buy for electronics and become the only place to obtain such items or goods.