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Walmartsm 110617053208 Phpapp01 PDF
Walmartsm 110617053208 Phpapp01 PDF
WALMART CASE
Authors:
G. Gimondo
N. McConville
A. O’Dell
S. Smith
O. Vadillo
M. van de Rijt
Table of Contents
• Introduction
• Recommendations
Walmart
• World’s largest company
• Discount store and Superstore model
• Net income of $8 billion and sales of $245
billion in 2003
• Shareholder’s expect growth
– Domestic
– International
INDUSTRY AND FIRM ANALYSIS
To what extent is WM’s performance attributable to industry attractiveness
and to what extent to competitive advantage?
Sources of Superior Profitability
INDUSTRY
ATTRACTIVENESS
Which CORPORATE
RATE OF PROFIT businesses STRATEGY
ABOVE THE should we be
COMPETITIVE LEVEL in?
How do we
make money? BUSINESS
COMPETITIVE STRATEGY
ADVANTAGE
How should we
compete?
5
Factors Which Underpin Industry
Attractiveness
• Strong barriers from new entrants 3
• High differentiation 2
• Growth rate and growth potential 3
• low price sensitivity 1
• High value added 2
• High level of resource utilisation 3
• Attractive level of profitability now and in the future 3
ComputerCommercial services
software and services 12.8
attractiveness
Household and personal products 14.7
Pharmaceuticals
Computer software and services 15
15.2
Pharmaceuticals 18.4
0 5 10 15 20
7
Factor Which Underpin The Judgment
on Competitive Advantage
• Market share -1
• Quality of product/service offer -3
• Customer loyalty -2
• Innovation ability -2
• Control of inputs and distribution -1
• Quality of assets -1
• Technology -1
• Labour Productivity -1
Overall Score: -1.5 / 6
• Services
• People Greeter
Distribution Network
• Economies of Scale
• Hub and spoke model
– 84 distribution centers in
United States
– Each center serves 150
stores within a 150 mile
radius
• Cut out the middle man
• Inventory Turnover
• High store volume
Distribution Network Sustainability
• Sustainable due to size and relationship with
suppliers
• Some aspects can be replicated by
competitors
– Hub and spoke model
– Buying directly from the manufacturer
• However difficult to replicate due to necessary
capital and size
Information Systems
• Electronic Data Interchange (EDI)
• “Retail Link”
– Operating efficiencies
• Ex: partnership with Procter and Gamble
– Inventory turnover
– Unique merchandise in stores
• Local adaptation
Information Systems Sustainability
• Partly sustainable
• The technological system itself can be
replicated/purchased
• Capabilities difficult to replicate
– Partnerships
– Superior supply chain management
– How information
Cost Control
• Bargaining power with suppliers
– Disintermediation lower cost lower prices
– Longer accounts payable periods
• International Trade
– China
• Fewer employees lower labor costs
– Management techniques
– Exclusion of unions
Cost Control Sustainability
• Sustainable
• Bargaining power is difficult to replicate
– Influence
– Disintermediation
• Ability to keep indirect costs low
– Culture of frugality
• Difficult to imitate
– Labor costs
• Exclusion of unions
Resource & Capabilities Analysis
1st Step: Assessment of the main resources and
capabilities that affect the company and its
industry
R1 Financial Strength 9 10
R2 IS Infrastructure 8 9
R3 Distribution Infrastructure 10 9
R4 Human Capital 8 4
R5 Store Locations 8 7
C1 Bargaining Power s/ Suppliers 10 9
C2 Inventory Management 7 8
C3 Employee Relations 4 6
C4 Marketing 5 5
C5 Cost Controls 10 10
C6 Management Expertise 7 9
C7 Distribution Processes 8 7
C8 Social Responsibility 2 4
C9 International Adaptation 3 8
10
3 5
1
Relative Strength of the R&C
6
Capabilities 7 2 1
Resources
2 5
Key Strengths
Superfluous Strengths
4
3 4
8 9
10
Importance
RECOMMENDATIONS FOR THE
FUTURE
Future of Walmart
• How can Wal-Mart sustain its recent
performance and defend against other
threats?
• Globalisation
– Market expansion
– Challenges
• Failure
• Cultural insensitivity
• Competitive Threats
– Intense price competition
– Potential competition or too big to fail?
• Social Issues
– Sustainability 360
– Corporate image
• Negativity associated with
Walmart regarding HRM issues
Conclusion
• Industry and Firm Analysis
• Competitive Advantages