Contributing factors to Wal*Mart’s strategic competitive success;
Cost of Goods Sold
High sales volume is the main contributor to Wal*Mart’s strategic competitive success. Their sales figures are way above the weighted average of their direct competitors. This makes them the biggest player in their industry and gives them a huge bargaining chip with their suppliers. Some examples of these are their custom packaging and on-time and defect free delivery requirements. Also their improved relationship with some vendors turned into partnerships; where they were linked up with Procter & Gamble electronically for information sharing. As a result of their high sales volume they are able to invest more money on opening new stores and upgrading their information systems. They are also very quick to adopt new technologies; such as electronic scanning of UPC and installation of a satellite system to improve communications between stores.
Operating expenses of Wal*Mart are less than their competitors. They achieve this by going lean with their efficient stock control systems. Executives share hotel rooms and walk instead of taking taxis to cut down on business travel expenses. Also increase in sales per square foot helps drive down operating expenses. And their sales per square foot figures are way above their competitors. Their operating expenses are a small percentage of sales, which generates a high expense turnover for them. Operating income is the company’s earning power from ongoing operations. From the numbers we can see that Wal*Mart is more profitable than their competitors in business’s own operations. Because of the consistency of sales growth and steady operating income they are very efficient in creating an advantage over their competition.
Without profits there will be no return to the investor therefore no one will want to invest. So, having a gross...
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