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    Corporate Strategy Assignment

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    Mathew
    Wal-Mart Stores was incorporated in 1969 and grew rapidly through discount operations, expanding to 859 stores by 1985. Sam Walton had the insight to locate stores in small towns, gaining market dominance. Wal-Mart achieved competitive advantages through low-cost purchasing and efficient inventory management and distribution enabled by information technology. Its generic strategy involved price leadership through low prices, wide product selection, and geographic concentration of stores.

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    Corporate Strategy Assignment

    Uploaded by

    Mathew
    86 views12 pages
    Wal-Mart Stores was incorporated in 1969 and grew rapidly through discount operations, expanding to 859 stores by 1985. Sam Walton had the insight to locate stores in small towns, gaining market dominance. Wal-Mart achieved competitive advantages through low-cost purchasing and efficient inventory management and distribution enabled by information technology. Its generic strategy involved price leadership through low prices, wide product selection, and geographic concentration of stores.

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    Walmart Stores Case study

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    Wal-Mart Stores was incorporated in 1969 and grew rapidly through discount operations, expanding to 859 stores by 1985. Sam Walton had the insight to locate stores in small towns, gaining market dominance. Wal-Mart achieved competitive advantages through low-cost purchasing and efficient inventory management and distribution enabled by information technology. Its generic strategy involved price leadership through low prices, wide product selection, and geographic concentration of stores.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    86 views12 pages

    Corporate Strategy Assignment

    Uploaded by

    Mathew
    Wal-Mart Stores was incorporated in 1969 and grew rapidly through discount operations, expanding to 859 stores by 1985. Sam Walton had the insight to locate stores in small towns, gaining market dominance. Wal-Mart achieved competitive advantages through low-cost purchasing and efficient inventory management and distribution enabled by information technology. Its generic strategy involved price leadership through low prices, wide product selection, and geographic concentration of stores.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    Corporate Strategy

    Case Study:
    Wal-Mart Stores Discount Operations

    Company Background

    Discount stores emerged in US in mid 50s


    Wal-Mart stores was incorporated in 1969
    By 1970 Walton expanded his chain to 30 discount stores.
    In just 40 years Wal Mart stretched its roots to small towns
    with population less than 50,000 in Arkansas to become the
    largest retailer in the world
    After 1970 Wal-Mart's discount operations multiplied, by end
    1985 they had 859 discount stores
    Wal-Mart's strategy was primarily built on local focus and a
    compelling example of a company that has dominated both its
    original market and neighboring ones to wherever it expands.
    Sam Walton had the insight

    Stores
    Net Income

    1970
    30
    16 Million

    1985
    859
    328 Million

    Industry
    Attractiveness

    Threat of New Entrants: Medium


    Margins are Low
    Industry growth is slow.
    Entry & Exit barriers are high.
    Grocers could potentially enter into the retail side.

    Industry
    Attractiveness

    Bargaining Power of Buyers: Low


    Individual buyer has very little bargaining power
    Consumer advocate groups have complained about Wal-Marts
    pricing techniques.
    Consumer could shop at a competitor who offers at times
    comparable products at comparable prices, but the convenience is
    lost.
    Bargaining Power of Suppliers: Low
    Huge Volume business resulting in low bargaining power for
    suppliers.
    Wal-Mart could vertically integrate.
    Wal-Mart does deal with some large suppliers like Proctor & Gamble,
    Coca-Cola who have more bargaining power than small suppliers.

    Industry
    Attractiveness

    Substitute Products: Low


    Not many substitutes that offer
    convenience and low pricing.
    The customer has the choice of going to
    many specialty stores to get their desired
    products but are not going to find WalMarts low pricing.

    Competitive
    Advantage

    Cost efficiencies arising from purchases from


    vendors, low distribution costs, efficient inventory
    management due to Information Technology
    integration and effective communication network
    Location of Wal-Marts stores More than half
    of their stores were located in towns with
    populations between 5000 to 25000 and not
    served by any competitors, thus providing barrier
    to entry to other stores and commanding higher
    sales 10%-20% of total retail sales

    Competitive
    Advantage

    Low cost of purchases from vendors Wal-Mart used to bargain very hard
    with the vendors and thus purchase costs were low. Also Wal-Mart took no
    more than 1/5th of its volume from one vendor and no vendor accounted for
    more than 2.8% of the total purchases. This resulted in low bargaining
    power of vendors.
    Low Distribution costs and increased responsiveness 80% of the inbound
    merchandise was passed through the hub-and-spoke distribution
    network which utilized cross docking, catered to multiple stores
    requirements reducing delivery times and transportation costs. Wal-Marts
    cost of inbound logistics was 2% of sales which was half the industry
    average
    Wal-Mart Difference: The geographic concentration allows Wal-Mart to get
    lower distribution costs, lower supervisory costs, and lower advertising costs.

    Competitive
    Advantage

    Wal Mart had centralized purchasing. Used instore sales forecasts. Stores were closely
    packed together in a geographic area so
    distribution was more efficient. One truck
    could resupply two or three stores on a single
    trip. Trucking back hauls had 60% occupancy
    better than industry average

    Generic Strategy of Wal-Mart

    Locating the stores in such a way that it is easier for people to


    reach and where there is high population base. This was the
    strategy taken for growth in spite of the competition they faced
    in those areas.
    Had their own warehouse where they could buy goods in huge
    volume, store the merchandise and hence sell it for attractive
    prices
    Company was taken public when it seemed to increase the
    running cost
    Centralized purchasing system. They used in-store terminals to
    wire merchandise requests to a central computer. They never
    filled out-of-stock areas with different merchandise.
    Wide distribution of vendors which gave them huge bargaining
    power
    Had many distribution centers to do on-time delivery to

    Generic Strategy of Wal-Mart

    Some of the stores were given for lease in-order to cut down on
    rentals
    The distribution of merchandise in Wal-Mart stores where based
    on customer needs and preferences and fast moving goods.
    Computerized system to track inventory and perform
    accounting functions
    Strategy of price-sensitivity. Charge lower prices where
    competitors are spread. Charge comparatively higher prices
    where Wal-Mart is the sole retailer.
    Not much importance was given to promotion through
    advertising during the initial years. Advertising through
    circulars, newspapers & spot TV had been done later on.
    Save money through more of Cash & Carry than credit
    transactions
    No unionization of employees in Wal-Mart.

    What Should Wal-Mart do?

    Enter markets not served by competitors


    Enter markets with lower population to capture the market
    Stay Competitive in terms of price
    Emphasis on human resource management
    Get into Sams Wholesale Club

    Sams wholesale club

    Yes, Wal-Mart should get into Sams wholesale club as this


    brings in a differentiation
    Exciting retail format with significant volumes to tap and
    noteworthy sales to be generated
    Can leverage on Wal-Marts existing infrastructure and supply
    chain operations
    Although there is immense competition and close to 100
    metropolitan areas in the US, Wal- Marts competitive
    advantages can be leveraged to gain leadership position

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