Walmart Inc. Takes on Amazon.

com Case Study Solution

Walmart’s biggest strength over its competitors and suppliers are economies of scale, efficient and
effective use of resources, implementation of best practices and huge operating margins. These
strengths are used to avoid threats of low prices and high quality from its competitors while less
experimental risk used to penetrate market and grab more market share than its competitors. As
compared to Walmart, Amazon’s biggest strength over its competitors are largest inventory
selection and high number of third party sellers that help to maintain low cost structure in Amazon
for the purpose of getting competitive advantage over its competitors by providing low prices high
quality product to attract more customers (Jurevicius, 2019).

VRIO analysis of Walmart’s indicates its core competencies such as market power over suppliers and
competitors, success of new practices, less risk associates with new experiments, effective resource
management and economies of scales. VRIO framework for Amazon indicates its core competencies
such as low cost structure, unique selection process, use of third party in selling process and
synergies from local competitors and suppliers. (David Collis, 2018).

Currently, Walmart is pursuing business strategy. Business strategy used to reach company’s specific
business objectives by making high level plans. Walmart use business strategy for growth purpose
and to get strong competitive position in industry. Walmart’s main focus is on cost leadership
strategies that help it to make high quality lower priced products in order to get competitive
advantage over competitors. As compared to Walmart’s business strategy, Amazon is
pursuing corporate strategy. Corporate strategy used to boost up revenues ultimately company’s
overall profitability. In corporate strategy, Amazon’s more focus is towards diversification strategies.
Amazon Incorporation has been shifting its trend from click and mortar position to brick and mortar
one (Boitnott, 2017).

Walmart Incorporation’s main problem is slowly and gradually taking over of offline retail consumer
market by Amazon Incorporation. By using strategy factor from 7 s factors, Walmart can overcome
this threat. For this purpose, Walmart should focus on its inventory management that will reduce
the shortage and excess of inventory at any given time in a year. To manage its inventory, Walmart’s
should implement lean operations and Just in Time (JIT) inventory management tool with
collaboration of its suppliers and subsequent retailers.

Currently, the biggest issue being faced by Amazon is the immediate delivery of goods to its
customers because customers do not want to wait for single day to get delivery of their ordered
goods. For this purpose, implementation of crowd sourcing strategy is best to overcome this
faltering issue in future.

Question for Class Discussion:

1. How can Walmart effectively manage and implement strategies to grab its previous position
in industry?

2. What should be the core focus of Amazon Incorporation related to its diversification
strategies?
Exhibit 1: Financial Ratios

  Walmart Inc. Amazon Inc. Industry Average

Net Sales Growth 3% 30.80% 2.20%

Profit Margins 1.99% 1.71%

Return on Equity 12.70% 10.95%

Return on Assets 6.90% 2.31%

Average House hold Income           42.20 40.2

Average Age of Customers    56,000.00 62900

Exhibit 2: Comparative Cost Analysis
Amazon $ % Walmart $ %

Revenue 120 100 Revenue 120 100

COGS 69.6 COGS 68.2

Marketing 3.9 Marketing 0.5

SG&A 1.8 SG&A 2.3

IT 3.5 IT 1

Fulfilment 9.5 Logistics 2.5

Shipping (3rd Party) 2.7 Store 2

Shipping (In-house) 6 Labor 12.9

Operating Income 3 Operating Income 10.6