Background Historical competitive advantages and its sustainability Whether its business concepts work in HK & China Recommendation

to Wal*Mart to sustain its growth

Wal*Mart
First established as a self-service discounting store in 1962 by Sam Walton

Formats:
Wal*Mart Warehouse Supercenter Hypermarket Close-out store

Wal*Mart
Major competitors: Kmart Target

Phenomenal success:

At the end of 1993: No.1 of the top 50 Discount Department store - Market value: 57.5 billion - Sales per square foot: $300 (the industry average is $210)

Everyday-low-prices

Commit to customer service

Maintaining technological superiority Building loyalty among associates and suppliers

Business strategies
Product Place Price Promotion

Product:
Food

Stationery Automative

Home hardlines

Wal*Mart

Sporting goods

Household chemicals & consumables

Health & beauty aids

Paint & hardware

Product Place Price Promotion

Place:
Small towns Rural areas

- pattern of expansion: -pushing from the inside out

Product Place Price Promotion

Price:
Always low prices-Always

- Between 1992-1993: - 2.2% below Kmart - 3.7% below Target

Product Place Price Promotion

Promotion:
Everyday-low-prices

- few promotion: - advertising expense: 1.5% of sales (while 2.1% for direct competitors)

Why Wal*Mart could succeed?

High Responsiveness and Flexibility

1.

Changing Customer Demand Flexible shelf space allocation Private label lines 2. Changing prices Always low prices, always 3. Technological Change Heavy investment in information technology Innovative Strategy
Discount stores -> Supercenters

Wal*Marts Strategy
Low Cost Industry-wide Differentiation Differentiation

Cost Leadership

Single segment

Focus

Key Source of Wal*Marts Competitive Advantages

Successful Vendor Relationship Efficient Communication Network

LOW PRICE
Value Employees Most Customer-Oriented Efficient Operation Management

Direct Factors to Low Price

Lower Land Rent Few Promotion
Sustainable?

Successful Vendor Relationship

No-nonsense negotiator Efficient Purchasing

Partnership with suppliers eg P&G-Sharing information electronically Vendor-managed inventory systems eg Wrangler & GE

Efficient communication

Lower Cost

Minimize inventory cost Sustainable?

Efficient Communication Network

There are no superstars at Wal-Mart Combined informal Entertainment with business Sharing the numbers Sustainable?
Better Communication
Higher Productivity

Lower Cost

Value Employees Most

Yes We Can Sam suggestion program Store within a store Shrinkage incentive plan Profit Sharing Scheme
Motivation

High Productivity

Lower Cost

Management Training Program

Sustainable?

Efficient Operation Management

Distribution Network -Hub-and-spoken distribution network -Owned warehouses -Cross-docking
Higher Productivity Lower Cost

Operating system -Uniform Product Codes (UPC) -Satellite system Sustainable?

Customer -Oriented
No. 1 Boss the customer
People Greeter Satisfaction Guaranteed policy Sustainable?

Loyalty

The Applicability of Business Concepts

Business strategy
Work / not In HK Work /not In China

low price
successful vendor relationship efficient communication network value employees most efficient operation management customer oriented

Low Price
in Hong Kong
Land rent

Promotion

in China
Land rent
Promotion

Successful Vendor Relationship

in Hong Kong
2 dominant supermarkets

in China
compete with established competitors

Efficient Communication Network

In Hong Kong

In China
flat organization information sharing

Value Employees Most

In Hong Kong In China

payment system
programming

Motivation + incentive

Efficient Operation Management

In Hong Kong
In China operation system shrinkage distribution network In Hong Kong In China

Customer Orientation
In Hong Kong
In China provide subsidiary services customer = the boss

The Applicability of Business Concepts?

In Hong Kong

In China

1. Maintain and reinforce Wal-Marts core competitive advantages. 2. Growth Strategies: Technology: Join forces with a well-known Interactive Service Provider(e.g.AOL) to bridge the physical and virtual world.

Advantages:
(1) Global Promotion (2) Cost saving

(3) Customers Serving i) By setting up searching engine ii) By providing personal online services iii) Could listen to consumers opinions promptly (4) Facilitation on operation management

Culture: - Change core values in different countries. E.g. Hong Kong

Formats: - Increase the number of supercenters

Conclusion:
1. Catch up the trend of e-commerce 2. Reinforce Wal*Marts core competitive advantages. 3. Adopt changes when necessary

THE END
Thank You!