Wednesday, September 27, 2006

The degree to which GM is out of touch is breathtaking. Is Wal-Mart next?

GM's management is intelligent, well educated, and dedicated. However, it operates in an insular world in which they have lost touch with the consumer. The fact is that GM is dead, but like a rotten tree, it looks solid on the outside. It even sprouts green leaves. They are likely to continue to circle the wagons and cut themselves off even more from outsiders. Bringing in an outsider may not be enough when the outsider has spent 37 years at one company - a company which does not deal with consumers at all.

In a similar fashion Wal-Mart is running in circles. The strengths which made it successful - the ability to bring low prices and wide variety to customers in C and D counties, rural ones, and its incredibly strong supply chain from retail stores back to its suppliers, have reached the point of diminishing returns. It has no skills in cultural sensitivity, so it has failed in Germany, Korea, is struggling in China (vs. Carrefour) and the UK (vs. Tesco). It is having difficulty dealing with market entry into the urban East and West Coast. its new committment to Organic Food and designer clothes may leave its existing customer behind, without winning customers from Target and Whole Foods. Its move from one store format to four is too little, too late. It is hiring 200 new marketing people, most of whom do not understand retail and will under-estimate the difficulty. Right now, they are optmistic, but there will be a culture clash, and the inevitable short-fall will be seized upon by old-timers to push out the newcomers. Just as once, people thought that A&P, and then Sears, were invincible, yet lost their market positions, so will Wal-Mart, which is now where Gm was 10-15 years ago, as it brought in many consumer marketers, and started acquiring luxury brands.

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