Module 2 Memo Mervyn_bm19b020

Comparison between Workman Co. LTD and Wal-mart

Commonalities:
 Expected quality and prices:
 For Workman, customers are mainly repeat customers; the basic layout of each franchising
store is the same; the prices are also set so that no matter which outlet customers are using,
they can be sure to have the same expectation of the price and quality of products offered
without having to look at price tags. Similarly, for Wal-mart, under the slogan of “Every day,
low price”, all the outlets, by guaranteeing equally low prices and good products, together offer
a stable quality and expectation for customers.
 Low price, cost leadership:
 Workman has managed to control its cost of goods sold at roughly 63% while offering low and
competitive prices to customers and thus ensure profitability. For example, one best-selling
product of Workman, light sneakers, only costs 900 JPY. Similarly, Wal-mart also managed to
control its COGS through strong bargaining power against vendors. Also, it managed to have
an operating expense much lower than the industry level but cutting down costs as much as
possible, thus achieving good profits.
 Use of technology and sharing of information
 For Workman, there is a vendor inventory management system, which shares shipping data,
POS data with vendors so that they can anticipate demands and inventories according to the
data. Similarly, Wal-mart applied lots of then advanced technologies, like the so-called “retail
link” system to share information with all suppliers to guarantee prompt responses to changes
in demand and inventory.
 Economies of scale:
 Workman has up to 855 outlets, whereas the second player in the industry only has a couple
dozen, which means that Workman can take advantage of economies of scale to drive down its
COGS and operating expenses and increase its exposure to customers and sales volume to
achieve better profitability. Similarly, Wal-mart has been a big beneficiary of economies of
scale. Along with the increasing number of outlets it opened, it managed to drive down the
costs of logistics, rents, and other operating expenses.

Differences:
 Supplier relationship and bargaining power
 Through the use of information sharing system, Workman allows suppliers to buy the volume
that they believe is appropriate to achieve good relationship with suppliers. However,
Walmart has an overwhelmingly strong power against suppliers and thus bring down the
COGS. Suppliers sometimes even need to sacrifice profits to maintain cooperation with Wal-
mart.
 Franchise vs. Direct-sale
 Workman allows franchising and has a staggering almost 100% franchise renewal rate,
whereas Wal-mart is a direct-sale corporation without franchising.