Group - 2

RESOURCES
COMPETITIVE PORTER’S FIVE PORTER’S
PORTER’S AND
INTRODUCTION SWOT ANALYSIS ADVANTAGES FORCES GENERIC
VALUE CHAIN CAPABILITIES
ANALYSIS ANALYSIS STRATEGY
ANALYSIS
 Introduction
 Wal-Mart store is the second largest discount retailers and largest company (fortune ranked 2003) .
 Wal-Mart HQ in Bentonville (US)
 Sam Walton , the founder of Wal-Mart and open the first Wal-Mart in Rogers,Arkansas,1962
 Products:-
 Discount stores
 Super center
 Neighborhood markets.
 Largest private employer in the world.
 No. of stores (2003)
 Discount stores( 1568)
 Supercenters(1258)
 Neighborhood markets(49)
 SAM’s Clubs(525)
 International(1288)
DISCOUNT STORES ,SUPERCENTER MARKET AND NEIGHBORHOOD MARKET
 Discount stores:- discount department stores.
 Supercenter market:- a full line grocery store and specialty departments.
 Neighborhood market:-shop for daily necessary goods.

MAJOR PLAYERS
 Wal-Mart
 K-mart
 Target
 Case Synopsis

Wal-Mart has four parts to their corporate strategy-

- Dominance in the retail market
- Expansion in the U.S and international markets
- Creation of positive brand & Company recognition
- Branch out into new sectors of Retail
 Wal-Mart’s Supply Chain Management

They started the practice of digitally sharing sales data with

major suppliers, allowing the company to supply the product at
shortest delivery times.

Pricing strategy
Bulk purchasing allows Wal-Mart to negotiate large discounts
with suppliers, achieve economies of scale.
 Inventory Management
Warehouse are automatically replenished to optimal levels
through continuous cooperation with suppliers.

Labor Relations
Low salary Payer

Trade union membership is discouraged

Why Wal-Mart So Successful ?
 Low prices ,low expense
 Cut out the middle man and worked directly with manufactures.
 Supply chain management.
 Partnerships with suppliers.
 Locations(small town and rural areas)
 Variety of retail layout.
 Leader in a general IT- Driven transformation of retailing.
 The private satellite network.
 SWOT
STRENGTH WEAKNESS OPPORTUNITY THREAT

Cost Advantages. Ignore store decoration New location and store type Competitors Innovations

Low Prices High employee turnover Overseas Market Intense Price Competition

Customer Oriented Online Sales

Strong Supply Chain

Q. What is the basis for Wal-Mart’s Cost
advantage?
 Wal-Mart has essentially had a low-cost, high volume strategy.

High Volume
Cost control •At the end of Fiscal year 2003
world mart operated 4,688
•Cut out the middle man stores.
• Inventory Turnover •Each center serves 150 stores
• High store volume within a 150 mile radius
•Management techniques •43 Distribution centers
internationally.
•Exclusion of unions •84 distribution centers in
United States.
Porter’s Value Chain
 Support Activities

Firm Infrastructure: Human Resource Management:

•High store volume •Lower wages than competitors
•No regional HQ •Less people employed/store
•IT support systems for managerial •Higher sales volume / employee
decisions. •“Associates”
 Support Activities

Technology Development: Procurement:

•Benchmark of competitors successful •High bargaining power with suppliers
measure •Long period for Account Payables
•IT
Electronic Data Interchange (EDI) to
communicate with the supplier.
 Primary Activities

Inbound Logistics
Outbound Logistics
•Disintermediation
•Wal-Mart Distribution Centers
•High bargain power
•Distribution costs 2-3% compared with 4-5%
Operations of competitors
•They uniquely operate each store •Inventory Turns (7.6 compared with 6.1 –5.4
from competitors)
•Better in-store execution than competitors
Services
Marketing & Sales
•People Greeter
•Unbeatable prices
Q. Has Wal-Mart been able to sustain its
competitive advantage and superior
performance over the years covered in
the case?
Yes, We think that Wal-Mart has been able to sustain its competitive advantage and superior performance.
And we divide it into five distinct competitive advantage-
-Distribution capabilities
-Partnership relationship with suppliers
-Advanced data-mining
-Workforce culture
-EDLP

• Distribution capabilities:
Efficient distribution; e.g. cross-docking, predominance of Walmart’s own distribution centers, and “inside-
out” location strategy.
- Cost savings from lower inventory levels ;Cost-savings can translate into lower prices and more customer
satisfaction

• Partnership relationship with suppliers: Wal-Mart integrates suppliers via IT and treats them well in terms
of pricing; they are more partners than “value takers” .
- Improves supply chain and lowers distribution costs
•Advanced data-mining: Active collection and usage of customer purchase behavior info
-Useful data for suppliers
- Improves customer satisfaction through more accurate forecasting of demand
- Lower costs through reduced inventory and shrinkage
- Improved matching of supply and demand creates superior sales/ sq ft

•Workforce culture: Customer-oriented workforce motivated through generous monetary participation and
belief in Wal-Mart culture.
- Good customer service is not compromised by self-service and low cost structure, thereby improving
customer loyalty
- Stores can respond more quickly/ flexibly to changing demand
- Continuous improvement mindset

• EDLP: Maintenance of “every day low prices.

-Improves customer satisfaction through low prices
-Matches volume-driven strategy
- Drives down costs through less advertising
- Steady prices improve stability of supply chain
Q. How can Wal-Mart continue to
sustain its superior performance ?
Porter’s Five Forces Analysis
 Industry Rivalry: Bargaining Power Bargaining Power Threat of New Threat of
High of Suppliers: Low of Buyers: Low Entrants: Low Substitutes: High
• The switching • There were a • Most of the • High capital • There was a lot of
cost was very low. number of buyers were investment competition
• Very high fixed suppliers Wal- individual • Distribution among quality
cost. Mart had. customer, they channel was very and price.
• Exit Barriers were • Wal-Mart didn’t have hard to build • Substitutes
very high. purchased huge negotiation • There was no performed the
quantities of power again such product similar function
products from its a large company differentiation
suppliers. • Customers
always made
small purchases
• Very large
customer base
Porter’s Generic Strategy
COST LEADERSHIP
• Allows to achieve a large scale and an efficient supply
chain.
• Has its own low-cost brands, like Great Value.
• A unique cost structure that allows Walmart to
establish the lowest price and achieve competitive
advantage.
• Present in many different industries and market with
efficient distribution channel. (Economies of Scale)
• Very different strategy to imitate by offering a broad
quantity of products at low price as cost incurred to
quite low.
Resources and Capabilities Analysis
 S2 - Use this 2/2
Matrix to show
S1 - Assess the the key strengths
main resources and weakness of
and capabilities the company.
that affect the
company and its
industry.
 Conclusion
 As a result of Wal-Mart's ever growing size and variety of services they offer, their public affairs department is going to

become more and more important.

 Wal-Mart need to address the public relation issues they are experiencing now as well they can expect in the future.

 Wal-Mart would greatly benefit in taking the lead and increasing the wages for their associates, enhancing the benefits

and providing better healthcare for them as well.

 In order for Wal-Mart to stay at the top of their game and follow the company strategy and achieve their key policy

goals, they need to deal better with their stakeholders and make sure they guard their reputation well.