Wal-Mart Supply Chain

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Background of Mal-Mart
Based in Bentonville, Arkansas and founded by the legendary Sam Walton in 1962, Wal-Mart is the world’s largest retailer with more than 10,000 stores worldwide. Wal-Mart remains a family-owned business, as the company is controlled by the Walton family, who own a 48 percent stake in Wal-Mart. The company has a total of 2.2 million employees worldwide. Wal-Mart is best known for its discount stores, grocery stores and warehouse stores. It offers products such as apparel, small appliances, housewares, electronics, hardware and a variety of drinks and food. Wal-Mart stores are located in low-rent, suburban areas, close to major highways. Its distribution centers are usually located within a day’s driving distance from its stores in order to better serve its stores. According to Wal-Mart annual report, the number of stores has increased from 7262 units in 2008 to 10,130 units in 2012. Its net sales have increased from $373,821 million in 2008 to $443,854 million in 2012. Wal-Mart competitive position

Wal-Mart strong competitors are: Target, Kmart, Costco and Safeway. Wal-Mart’s competitive position can be analyzed by Porter’s five forces. The Porter’s five forces are: the threat of new entrants, the threat of substitute, the bargaining power of suppliers, the bargaining power of buyers and rivalry among existed competitors. The threat of new entrants is low:

The entry barriers are high because Wal-Mart has a large scale of operation, an outstanding distribution system and loads of stores, which require huge capital. Also Wal-Mart brand name is very strong and price is very low, which threaten the potential competitors. The threat of substitute is moderate:

The Wal-Mart makes a great effort to make sure that they are better meeting customer needs. However, the customer switching cost is really low so that customers can easily switch to other stores. On-line purchase can be a substitute means for shopping. The bargaining power of suppliers is really low:

Globally, Wal-Mart was thought to have around 90,000 suppliers. The Wal-Mart has so much of the market shares and requires for high volume of products so it is in better position to negotiate with its suppliers. When negotiating with its suppliers, Wal-Mart insisted on a single invoice price and did not pay for co-operative advertising, discounting or distribution. Also, most of its products are commodities, it can easily find other suppliers if it is not satisfied. The bargaining power of buyers is moderate:

There are lots of customers which are price-sensitive and required for low price; Wal-Mart can satisfy them. Also the individual buyer has little to no pressure on Wal-Mart. However, the trend of buyers’ power is increasing because the ease of switching between different retailer store and the habit of online shopping. Rivalry among existing competitors is high:

The retail store industry market has grown very slow and been matured. There are a few large competitors which mainly compete on price since the products are commodities. To sum up, the Porter’s five forces showed that the industry is not attractive for new entrants however the situation for Wal-Mart is good because it can lower its cost and has lots of market share and customers base. So the Wal-Mart’s competitive position is strong overall. Business Strategy Analysis

As the world’s largest retailers with more than 6,500 stores worldwide, Wal-Mart has followed low-cost business strategy since 1962. Based on the theory of generic business strategies, the low-cost business strategy requires very valuable value chain, and a low cost base as well as a way of sustainably cutting costs below those of competitors. Wal-Mart’s focus is on selling products at lower price to get higher sales at a lower-profit margin, and its value proposition is based on offering everyday low price. Wal-Mart’s purchasing power is its core competency which is not easy to imitate and substitute. For...
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