Is this strategy sustainable? (Could Wal-Mart’s competitors/new entrants easily imitate this strategy?) a. Using the three Order “Fit” model to explain your answer 1. First Order Fit--Consistency: activity (function)-the overall strategy--value adding activities (1) Wal-Mart’s promotional strategy of “everyday-low-prices” meant offering customers brand name merchandise for less than department and specialty store prices. (2) Discount Retailing: fixtures were distinctly luxurious, in-store selling was limited, and ancillary services, such as delivery and credit, were scarce. (3) Management style-“management by walking and flying around”. Wal-Mart partnership with its associates meant sharing the numbers-Walton ran the business as an open book and maintained an open-door policy. Wal-Mart aimed to excel by empowering associates, maintaining technological superiority, and building loyalty among associates, customers, and suppliers. (3) National brand strategy, and the majority of its sales consisted of nationally advertised branded products. (4) The company leased about 70% of Wal-Mart stores and owned the rest. In 1993, Wal-Mart’s rental expense was 3% of discount store sales, compared to an average 3.3% for direct competitors. 2. Second order fit—when activities are reinforcing each other Walton’s plan for growing Wal-Mart:
(1) Locating stores in isolated rural areas and small towns, usually with populations of 5000 to 25000. “Our key strategy was to put good-sized stores into little one-horse towns which everybody else was ignoring.” (2) The pattern of expansion. “We are always pushing from the inside our. We never jump and then backfill.” (3) Wal-Mart’s advertising expense was 1.5% of discount store sales, compared to 2.1% for direct competitors. (4) Wal-Mart offered a “satisfaction guaranteed” policy, which meant that merchandise could be returned to any Wal-Mart store with no question asked. (5) Store managers priced products to meet...
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