1. To what extent is Wal-Mart’s performance attributable to industry attractiveness and to what extent to competitive advantage?
Wal-Mart is a company which operates in the service sector, more specifically in the “Discount, Variety Stores/Retail” industry. The company’s superior performance is demonstrated through the fact that it was America’s largest company (in terms of revenue) in 2002, and the reputation of the company is reflected in the opinion of “Fortune” who have identified Wal-Mart as one of the world’s most admired companies. In 2004 Wal-Mart had been hiring 1.4 million employees – making it the largest corporation in the world. Wal-Mart’s share prices have also been stable at time of stock market volatility. There are several reasons behind Wal-Mart’s breathtaking results, most of them coming from the fact that Wal-Mart had been able to combine industry attractiveness with its competitive advantages. Wal-Mart managed to implement correct strategies to utilize its resources to the maximum and thus be able to create superior value for its customers. The competitive advantages of Wal-Mart are demonstrated through: -
Their customized superior Distribution model
Diversity of retail stores (from 24/7 Supercentres with a great emphasis on customer service to Sam’s Clubs warehouses which were targeting small businesses and offered minimal customer service) -
Unique approach to retailing and a unique corporate culture – minimizing costs and maximizing customer satisfaction is what Wal-Mart’s philosophy is all about -
Their capacity for continuous improvement and innovation
Most productive work force (175,000$/employee in sales on a yearly level) The industry Wal-Mart is a part of (Discount Retail industry) is a fast-paced, turbulent, highly competitive environment and there is no guarantee of continued success. The industry had been developing and growing and so had Wal-Mart with it (by that complying with the four building blocks rule and having innovation, efficiency, quality and responsiveness to customers as the pillars of Wal-Mart’s competitive advantage). 2. In which of Wal-Mart’s principal functions and activities (namely: purchasing, distribution and warehousing, in-store operations, marketing, IT, HRM, and organization and management systems/style) do WM’s main competitive advantages lie? Identify the distinctive resources and capabilities in each of these functions/activities.
Purchasing and Vendor Relationships
Wal-Mart’s cost cutting philosophy started at the supply/purchasing part of the value chain. Suppliers have described negotiating with Wal-Mart as a tough experience, because Wal-Mart imposed on its suppliers’ requirements that went a lot deeper than just low price and got involved suppliers’ employment policies. Other than that, Wal-Mart didn’t accept to negotiate with intermediaries and was reluctant becoming dependant on any single supplier. This is demonstrated through the fact that any single supplier could account for a maximum of 2,5% of the total purchases. (Biggest was P&G with 2%). Wal-Mart developed a “Retail Link” supply chain management system based on EDI (electronic data interchange) which enables them to forecast and plan shipping of products as needed, and enhances their “Just-in-time” philosophy. As a result of this the customers are offered a tuned product mix, and the inventory costs are lower. Warehousing and Distribution
Wal-Mart’s shipping system is utilizing the trucks to the maximum – trucks also pick up shipments on their return trips, and more than half of the stores also accept night deliveries. Wal-Mart’s highly automated distribution centers are running 24/7 allowing continuous distribution of products to stores. This paired with the “cross-docking” system where in-bound trucks are unloaded and reloaded on out-bound trucks, skipping the inventory made Wal-Mart’s distribution centers highly efficient. In-store Operations
The management of in-store...
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