Strategy of Walmart

An analysis

Submitted By: Akhil kumar Debashree Mahapatra Harshal Kumar Ishita Singh Rahul Singh Sr Rajkumar Vipul Singh Vivek Khanna

1. Operational Effectiveness & Strategy

2. Strategy rests on Unique Activities 3. Strategic Concept: Trade offs 4. Implementation by Wal-Mart 5. Rediscovering Strategy

Cost to company is a function of many activities required to Create, Produce, Sell, and Deliver the products or services OE: Performing similar activities better than rivals performing them In the 1980s Japanese challenged western companies because of the superior Operational Effectiveness i.e. Low cost & Superior Quality Some of the management tools to increase productivity, quality, and speed are TQM, Benchmarking, Outsourcing, Partnerships, Value Engineering, Six Sigma, Lean Manufacturing etc. Sales force effectiveness with the advent of laptops, mobile communications, internet, and software

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Competitors quickly imitate new technologies, and other techniques Competitive Convergence- More Benchmarking, more similar OE

L1 Low cost & High Volume, Everyday Low Pricing (EDLP) Information Systems & Inventory management systems are the best Excellent Distribution capabilities lead to cost savings from low inventory levels Partnerships with vendors and suppliers makes it difficult for the rival companies to find suppliers Customer satisfaction as low product prices and wide range of products Understanding customer purchase behavior by Advanced data mining Sustainable because distribution network cannot be matched in the short-term

Wal-Mart used in-store terminals to wire merchandise requests to a central computer. Wal-Mart took no more than a fifth of its volume from any vendor. Only 20% of the inbound merchandise was shipped directly from the vendors to the stores. The rest passed through Wal-Marts two step hub-and-spoke distribution network and this ensured better utilization of capacities.

Each distribution centre served up to 175 stores within a 150 to 300 mile radius. Reduced the cost of inbound logistics Wal-Mart stores gross area was available for selling space as its distribution network reduced back-room storage requirements. The Wal-Mart system included a larger number of SKUs than most other chains (over 70,000). The HR policies Of Wal-Mart were distinctly different. We care about our people The administrative style was very austere. It differed from competitors in its very heavy emphasis on communication within the company.

A competitor can reposition itself to match the market leader Straddling: A market challenger can seek to match the benefits of a successful position while maintaining original one Tradeoffs: Strategic position unsustainable without tradeoffs More of one things necessitates less of other Tradeoffs protect market leaders from straddlers and repositioners creating a need for choice Arise due to inconsistencies in image or reputation Also due to products themselves reflecting inflexibilities in people ,machinery or systems Strategy is making tradeoffs in competing and choosing what not to do

Wal-Mart has built competencies that cant be copied by its competitors Not imitable due to trade offs It has first mover advantage in isolated areas where it charges high margins Best practices in Management- High involvement and Frugal office and living style Human resource practices, purchasing and distribution competencies cant be replicated by its competitors Wal-Mart gains sustainable advantage due to trade offs

 Need of implementation: initial strategies decay with time growth trap(desire to grow, like, extending product lines) sound strategies undermined by misguided view of competition organizational failures Approach: Deepen the strategic position rather than broadening leverage existing strategic system, offer features/services that rivals would find costly to match on a stand-alone basis Find out core of uniqueness :- product/services that are more distinctive and profitable, effective activities in value chain, satisfied customers and profitable channels & purchase occasions

Current state (1985)- not such the need, net income increasing, return on growth and sales returns higher than competitors Competitors either had no promotions/advertising or too much of it, Walmart ran those moderately (13 promotions a year) Stuck to the philosophy of everyday low prices & we sell for less (non-central pricing system unlike other competitors) Deepened their position through diversification (Sams wholesale clubs) Sams mix differed from that in discount stores, also merchandise buying was independent Remained primary source of merchandise in most of rural communities/markets it previously served (strategy retention)