For the millenials and the middle class, Walmart is an important shopping destination. While its primary source of competitive advantage is the least pricing strategy, to strengthen it, the brand has used better store models, larger product assortment and additional customer convenience. With a stronger competitive advantage, the brand has been able to penetrate the market deeper. Its distribution system is one among the largest in the world and serves a large number of stores, clubs and also caters to the customers directly.
Its transportation system has a fleet of 6, tractors, 61, trailers and more than 7, drivers. Walmart has also kept six disaster distribution centers that are placed strategically across US and are stocked well that in case a natural disaster happens, help can be sent without any delay to the communities.
The shipping centers employ more than people each who upload and unload more than trailers every day. Each of them is 1 million square feet in size or larger. They are built to cover a circle of more than miles radius and supports 90 to stores. Walmart, It owns a private fleet of trucks and employs a team of skilled truck drivers. Its fleet is one of the largest and the safest.
These drivers drive million miles every year to deliver to the stores and clubs. With its large team of drivers, Walmart constantly works to ensure that they move merchandise in a responsible and sustainable manner. The focus is again on efficiency and on reducing empty miles.
So, Walmart advises its drivers to follow the most efficient routes. This way, it achieves three things — minimum wastage of time by driving minimum empty miles, low fuel consumption and maximum merchandise delivery with least environmental impact. From to , Walmart achieved In this way, the leading retail brand has been able to maximize its efficiency using such optimization techniques.
Walmart has also focused on the use of technology for better results from its business. Its supply chain system is considered to be the most advanced and efficient in terms of technology. It was a pioneer in terms of using barcodes and RFID for a better inventory management system.
Inventory management is a crucial part of managing a great retail system. If you know how much of what is needed when, you can manage a large retail system efficiently.
Walmart has also managed a more effective and efficient supply chain system by having a direct relationship with the manufacturers. In this way by eliminating suppliers and handing them over the responsibility to manage inventory in its warehouses, the brand could manage smoother inventory flow with less irregularities and better availability of products on the shelves.
This has also led to higher cost effectiveness and better savings which can be transferred to the customers in the form of lower prices of products. A shared database between the company and its suppliers helps manage better supply of inventory. All the required information from PoS Point of Sale data to warehouse inventory and the retail sales data is stored in the shared database from where it is relayed to all the participants in the entire system.
This easy sharing of data is enabled by the private satellite system Walmart owns. Lower Operational Costs Walmart had managed low operational and overhead costs. However, owing to high pressure from various sources in the recent times, it made several improvements to make its image in the market and among its customers better. It has improved its employee wages and their working conditions.
Earlier they were subjected to very high pressure work conditions and paid lower salaries. The situation has grown a lot better after Walmart made changes to its HR strategy. However, based on its financial strength, Walmart can pay its employee higher wages and still retain a larger part of its profits.
Its financial clout also helps it bargain for very low prices from its suppliers. These profits are then passed to the customers in the form of lower prices. Thus, size and scale have helped Walmart achieve an important competitive advantage. International Presence: Around the world, Walmart sells high quality goods and fresh and nutritious food at low prices and thus saves its customers precious money. Prices can be an important differentiator and cost leadership is the biggest source of competitive advantage for Walmart.
Now, it is growing at a large scale and has expanded to the foreign markets. Its international wing operates 6, retail stores in 27 countries and under 67 banners. From Japan to Chile, its operations are spread far and wide and more than , of its associates serve more than million customers a week.
The brand is also investing in social and environmental initiatives in each of the markets its serves. It targets families and entrepreneurs. The products and services it offers include high-quality bulk groceries, consumables, general merchandise, specialty services, including travel, auto buying, pharmacy, optical, hearing aid centers, tire and battery centers and a portfolio of business operations support services. Main focus of its products and services are the small business owners and it serves around , of them every day.
A large part of its target audience are the microenterprises that have less than seven employees. Technological Innovation for better customer service Walmart has also advanced boldly into e-commerce. It has a global e-commerce segment with its base in Silicon valley, California that leads all the online and mobile innovation for Walmart. The innovation center of Walmart has some brightest minds that are working to provide the customers a seamless experience whether they are shopping online, mobile or in stores.
Along with data and social insights, these data scientists are working to deliver a more personalised experience to its customers. In this way, it has transformed the shopping experience for its customers.
Its main website receives more than million unique visitors every month and this number has kept growing every year. Customers have unique needs and Walmart is using a variety of services to fulfil these unique needs. Its size and scale helps it serve its customers more effectively and cutting edge technology has helped it bring customer service to the next great level.
In this way, using price leadership and technological innovation, the brand has created a great retail system that is more effective and efficient than the competitors. Growing presence around the world: The number of Walmart stores internationally has grown fast. In , the retail giant had total 11, stores of which 6, were located outside US and 5, were located in United States.
Apart from it, United Kingdom had , Canada and Brazil stores operational in Walmart is also increasing its presence in China where it had stores operational in The Asian economy is growing at a very fast rate which makes China and India important markets for Walmart. It is buying a controlling stake of roughly 77 percent in Indian Ecommerce brand Flipkart to make its entry into the Indian markets.
The brand is paying around 16 Billion US dollars for this purchase. Without this deal the legal barriers in India would not have allowed Walmart to enter the market.
Conclusion: There are several reasons that Walmart has proved good for America. This makes it very hard for small businesses, such as "momand-pop" enterprises, to survive. They, therefore, fight to keep Wal-Mart from entering their locales. Numerous studies conducted in different states both support and criticize Wal-Mart Verdisco, Nevertheless, Wal-Mart did drive local merchants out of business when it opened up stores in the same neighbourhood. As a result, more and more rural communities are waging war against Wal-Mart's entrance into their market.
Besides protesting and signing petitions to attempt to stop Wal-Mart's entry into their community, the opposition's efforts can even be found on The Internet. The increasing opposition indicates that the road ahead for Wal-Mart may not be as smooth as Wal-Mart's annual report would entail. This requires Wal-Mart to rethink its expansion strategy since it would not be profitable to operate in an unfriendly community. Walton predicted that the four biggest sources of growth potential would be the following: 1.
Expanding into states where it had no stores; 2. Wal-Mart Super-centres represent leveraging on customer loyalty and procurement muscle in order to create a new domestic growth vehicle for the company.
With few locations left in the U. Before the Super-center, Walton experimented with a massive "Hyper-mart", encompassing more than , square feet in size. The idea failed. Customers complained that the produce was not fresh or wellpresented and that it was difficult to find things in a store so big that inventory clerks had to wear roller skates. One of Walton's philosophies was that travelling on the road to success required failing at times.
As a result of the unsuccessful experiment, Walton launched a revised concept: the Supercenter, a combination discount and grocery store that was smaller than the Hyper-mart. The Super-center was intended to give Wal-Mart improved drawing power in its existing markets by providing a one-stop shopping destination. Super-centres would have the full array of general merchandise found in traditional Wal-Mart stores, as well as a full-scale supermarket, delicatessen, fresh bakery, and other specialty shops like hair salons, portrait studios, dry cleaners, and optical wear departments.
Walton's prediction was right on target. The Super-center division more than doubled in size during , then doubled again in Super-centers, once thought of as risky because of slim profit margins on the food side, will most likely make Wal-Mart the nation's largest grocery retailer within the next five to seven years Longo, The WalMart International Division was officially formed in to manage the company's international growth. By the year , analysts expect Wal-Mart to be a huge international retailer, with numerous locations in South America, Europe, and Asia.
The ever-changing market presents continuing challenges to retailers. First and foremost, retailers must recognize the strong implications of a "buyers' market" Lewison, Customers are being offered a wide choice of shopping experiences, but no one operation can capture them all. Therefore, it is incumbent upon management to define their target market and direct their energies toward solving that specific market's problems.
Technology, demographics, consumer attitudes, and the advent of a global economy are all conspiring to rewrite the rules for success. Success in the next decade will depend upon the level of understanding retailers have about the new values, expectations, and needs of the customer.
If Wal-Mart continues its customer-driven culture, it should remain a retail industry leader well into the next century. Retail Industry Strategic decisions are ones that are aimed at differentiating an organization from its competitors in a way that is sustainable in the future. Porter, Porter strongly advocates that decisions in business can be classified as strategic if they involve some innovation and difference that results in sustainable advantage.
According to Patrick Hayden et al the retailing industry adopted the style of discounting on its merchandise after the Second World War. It is learnt that discount retailing was not the strategy at the time Kmart, Target and Wal-Mart first started operating their business. Frank states that when Sam Walton was franchising for Ben Franklin's variety store, invented an idea of passing on the savings to his customers and earning his profits through volume.
Prior to Wal-Mart's entry into the market, Sidney and Hebert from Harrison founded Two Guys discount store in the year which dealt in hardware, automotive parts and later on groceries. Two Guys was the forerunner as compared to today's retailers like Super Target, Wal-Mart which succumbed to the economic recession.
Another discount store set up by Eugene as E. Porter states that combination of operational effectiveness and strategy is essential for superior performance which is the primary goal of any organization. He also says that a company can perform its rivals only if it can operate in different ways which are not in practice.
Much emphasis had been laid on strategic positioning like variety based positioning, needs based positioning and access based positioning. However, Target has been functioning successfully, courtesy Wal-Mart, but other two failed in their operations and filed bankruptcy. Michael Bergdahl, Porters five forces model explains what strategic decisions should be made and on what basis.
The model explains the basic strategies to be considered while starting a business like bargaining power of suppliers. While franchising of Franklin he always looked for cheaper deals and thought of passing his savings to the customers and earning through the margin on volume of bulk purchases. Through the way of discount stores, shoppers were given the cheapest price as compared to any other store.
In regard to threats of new entrants, Wal-Mart has been constantly in the news for acquisition of other small retail shops in view of its expansion. But nevertheless it has stiff competition from likes of Super Target, Tesco, etc. Mike reports that Wal-Mart as of had 1,, employees growing at The above data explains that strategy of Wal-Mart is extraordinary which manages and operates over retail facilities globally.
The key components of Wal-Mart The Value Chain , which offers cheap prices than its competitors includes firm infrastructure like frugal culture, no regional offices and pleasant environment to work.
Managements take lots of visits and it is learnt there are no rehearsals before any meeting which is usually scheduled on every Saturday. In any organization, human resource is the key to development and Wal-Mart efficiently manages its sources. Wal-Mart terms its employees as associates. Manager compensation is linked to the profit of store operated by him, within promotions, compensation offered to associates depending on company's profits and also offered some incentives on their performances.
The workforce at Wal-Mart is not unionized as the company takes all the measures of their benefits and provides them training on related issues. Technology plays a vital role in development of the organization and Wal-Mart is well equipped with technological innovations like POS, store performance tracking, real time market research, satellite system and UPC.
Wal-Mart procurement measures like hard-nosed negotiations, partnerships with some vendors, centralized buying, planning packets, etc.
The other factors that increase the margin of profit for Wal-Mart are inbound logistics with frequent replenishment, automated DCs cross docking, pick to flight, EDI, hub and spoke system. Wal-Mart strategy of operation is innovative with big stores in small towns with monopoly in the market at low rental costs, local prices, concentric expansion, merchandising in brand name, private labels, little space for inventory, store within store, etc.
In relation to marketing and sales, merchandising is tailored from locals, spent less on advertising and the prices are fixed low and 11 it depends on the store manager to fix the latitude of pricing.
All the above factors combined together form the key components of Wal-Mart which not only increase the margin of profits through bulk sales but also boost the confidence of the customers with services like point of sale information system and everyday low prices.
Wal-Mart Strategy Wal-Mart dominates the American retailing industry due to number of factors like its business model which is still a mystery and its effectiveness in not letting the rivals let know about the weaknesses. Wal-Mart made strategic attempts in the its formulation to dominate the retail market where it has its presence, growth by expansion in the US and Internationally, create widespread name recognition and customer satisfaction in relation to brand name Wal-Mart and branching into new sectors of retailing.
It is learnt that Wal-Mart strives on three generic strategies consisting of Focus Strategy, the Differentiation Strategy and overall cost leadership. Managers strive hard to make their organizations unique, distinctive and identify key success factors that will drive the customers to buy their products.
Thus, firm specific resources and capabilities are crucial in explaining the firm's performance. The Resource Based View RBV explains competitive heterogeneity based on the premise that close competitors differ in their resources and capabilities in important and durable ways. The company's capability can be found through its functionality, reliable performance, like Wal-Mart superior logistics.
Helfat, Wal-Mart has firm infrastructure, well equipped in human resource with management professionals and technologically too. Any organizations thrive hard to be successful for which it needs to have better resources and superior capabilities.
Wal-Mart has strong RBV with economically and financially very strong enough to stand still in the time of crisis. Pereira states that dominating the retail market is its key strategy. Wal-Mart operates on low price strategy which is operated as every day low prices EDLP which builds trust among the customers.
Brunn, The strategy lies in purchasing the goods at lower prices and selling the goods to customer at much lower prices, cutting the price as far as possible and increasing the profit by increasing the number of sales.
This ferociously increases the competition in the market and Wal-Mart competes with all its competitors till it is dominant it the market. Wal-Mart is expanding seriously and rapidly which is also its strategic goal.
Wal-Mart employs over 1. Wal-Mart far flung network of retail outlets has ensured 12 that Wal-Mart interacts with and has impact on virtually every locality within US. It is learnt that three countries with no Wal-Mart stores became part of corporation's international presence wherein the domestic retail chains were taken over by Wal-Mart including Woolco stores in Canada, 21 Wertkauf stores in Germany and ASDA units in United Kingdom.
The takeover strategy by Wal-Mart keeps the company at forefront when entering into the new market and the number of competitors is also minimized. The strategies have helped the Wal-Mart to rein in number one position in international countries making it the largest retailer in the world.
It is seen that Wal-Mart has significantly the Porters five force model wherein through proper strategic planning and strategic implementation has led to removal of barrier entry, rivalry from competitors and pricing norms.
In regard to substitutes, Wal-Mart in order to achieve its aim of customer satisfaction has selling goods under its own legal brand. Wal-Mart's big box phenomenon has changed the retailing industry in the United States which is often considered as discount stores and makes profit through high volume of purchases and low markup on profits.
Parnell, Wal-Mart with its low cost and ever expanding strategy has made a dramatic impact since when Sam Walton first started his business. With this strategy, Wal-Mart has now over stores and outlets in US and other countries through acquisition and mergers. Sustainability in Discount Retailing Wal-Mart According to Porter, operational effectiveness and efficiency are the key elements of success in any organization.
A company can outperform its rivals or competitors in the market only with superior management and efficient control creating a difference from the others which eventually attracts customers. Porter defines operational effectiveness as performance of similar activities as its rivals but better than them. In a study, it is stated the Wal-Mart is expert in manipulating perceptions. It is termed that low price is not the strategy of Wal-Mart but the advertisement manipulates the consumer perceptions by making them think that its prices are lower than its competitors' price using price spin'.
Wal-Mart makes the consumer addicted coming to its stores by convincing them the prices are lower than in the other stores by selling itself cheaper by advertising that we have lower prices than anyone else' and placing a opening price point'.
The opening price point' is the lowest price in the store which is kept at high visibility which makes consumer believes that the products in this store are really cheaper. Race Cowgill, The SWOT analysis of Wal-Mart reveals that it is most powerful retail brand, reputation for money, value, commitment, and provides wide range of products. It is growing at a brisk pace 13 with expanding its horizon to other parts of world through acquisition and merger.
Wal-Mart has good opportunities in markets of Europe and China and focuses on acquiring the market through acquisition of smaller stores and merger with leaders in the specific markets. Wal-Mart is always under threat to sustain its top position in market nationally and internationally. Global leader in the industry leaves the organization vulnerable to many socioeconomic and political problems of the country. Sustainability at the top place is the most important job that makes its managers strives hard to frame the policies and strategy to compete with its rivals in the market.
Slack, Imitation, Substitution and Hold-up are some of the threats to any organization in retail industry. GreenBiz, Imitation increase profits by increasing the supply. But imitation puts reputation, relationship at stake. James, Such tactics will create mixed response among the consumers while degrading the reputation of the leader in market. Substitution reduces the demand for what a firm uniquely provides by shifting the demand elsewhere due to changes in technology.
The threats of substitution can be subtle and unexpected like minimizing expenses through videoconferencing instead of air flights to long distance meetings with its managers of other stores, etc. Therefore, substation is an especially effective way of attacking dominant rivals in the market. Substitution offers mixed responses after identifying and understanding the threats.
The organization should fight the threat and merging with them, switching to different options of substitution to be in the market. Hold-up diverts the value to customers, suppliers or complementors who have some bargaining leverage which results in tough negotiations, contractual agreements and vertical integration. Wal-Mart is having great network with almost over stores and Sam's Club locations in 16 markets worldwide.
It employs more than 2 million associates and serves more than million customers every year. Wal-Mart is ever expanding its boundaries by way of acquisition and mergers. Thus Wal-Mart with such a vast network of stores and alliances in the forms of ASDA, Target and many other stores is well protected enough to sustain its top position in the retail industry. New approach to retail signals strong future for point of purchase displays.
Paperboard Packaging, pp. Lewison, M. New York: Macmillan. Longo, D. New generation of exec's leads Wal-Mart into the next century. Discount Store News, pp. Us against the Wal. Saporito, B. And the winner is still. Fortune, pp.
Each of them is 1 million square feet in size or larger. SAM Advanced Management. Barker, M. Hold-up diverts the value to customers, suppliers or complementors who have some bargaining leverage which results in tough negotiations, contractual agreements and vertical integration. Wal-Mart has become a capability competitor. Organization and management styles The management of Walmart has been based upon the values and principles of the founder.
University of Houston, Bauer College of Business. From to , Walmart achieved In a study, it is stated the Wal-Mart is expert in manipulating perceptions. In addition the logistics involves the suppliers and workforce of employees, far reaching distribution centers, transportation offices, more than
When questioned about Wal-Mart's secrets of success, Walton has been quoted as saying, "It has to do with our desire to exceed our customers' expectations every hour of every day" WalMartAnnualReport,,p. For that, it is aggressively investing in customer experience. The brand has led the U. With this strategy, Wal-Mart has now over stores and outlets in US and other countries through acquisition and mergers. The third part critically discusses the validity of the Walmarts business model.
Out of its more than stores, are there in the U. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. Firstly, Walmart eliminates local competition creating a monopoly effect.