Wal-Mart Case

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Agenda Introduction Porter’s Generic Strategy Supply Chain The Success Strategy

Introduction

Porter’s Generic Strategy

Supply Chain

The Success Strategy

Introduction Wal-Mart is the largest retail store in the United States, and is larger than any other retail chain in the world. According to the Fortune 500 index of the wealthiest and most powerful corporations in the world, Wal-Mart holds the number one spot, ranked by its total sales.

Wal-Mart is the largest retail store in the United States, and is larger than any other retail chain in the world.

According to the Fortune 500 index of the wealthiest and most powerful corporations in the world, Wal-Mart holds the number one spot, ranked by its total sales.

Introduction (cont’d) Divisions of Wal-Mart: Wal-Mart Stores: This division has the largest share of company sales and were the nation’s largest discount chain. This division generate approximately 75% of profit Wal-Mart Supercenters: This division were the company’s fastest growing division and included Super centers, hyper marts, and Bud’s Warehouse. Sam’s Clubs: This division is the largest wholesale club in the country in 1993, and it generates approximately 10% of gross margin in 1993 McLane Company: Wal-Mart acquired this company in 1990 as retail grocery supplier to service its supercenters and Sam’s Club Wal-Mart International expansion: Perspective on future growth by emerging the global market.

Divisions of Wal-Mart:

Wal-Mart Stores:

This division has the largest share of company sales and were the nation’s largest discount chain. This division generate approximately 75% of profit

Wal-Mart Supercenters:

This division were the company’s fastest growing division and included Super centers, hyper marts, and Bud’s Warehouse.

Sam’s Clubs:

This division is the largest wholesale club in the country in 1993, and it generates approximately 10% of gross margin in 1993

McLane Company:

Wal-Mart acquired this company in 1990 as retail grocery supplier to service its supercenters and Sam’s Club

Wal-Mart International expansion:

Perspective on future growth by emerging the global market.

Wal-Mart Supply Chain Suppliers Sam’s Club Discount Stores Super Centers Customer Footprint McLane Company Services Distribution and Logistic Company

Porter’s Generic Strategy High High Low Low Cost Leadership Differentiation Wal-Mart

Porter’s Generic Strategy (cont’d) Cost Leadership Wal-Mart commits to deliver quality products with the lowest price Wal-Mart’s prices are up to 15% cheaper than other stores. Wal-Mart’s store managers are given authority to lower prices based on the local competition. Wal-Mart stores are built in the border of large cities and communities with the warehouse appearance that giving them the competition advantages in low leasing and maintenance costs. Wal-Mart provide a good quality at bargain price for customers

Cost Leadership

Wal-Mart commits to deliver quality products with the lowest price

Wal-Mart’s prices are up to 15% cheaper than other stores.

Wal-Mart’s store managers are given authority to lower prices based on the local competition.

Wal-Mart stores are built in the border of large cities and communities with the warehouse appearance that giving them the competition advantages in low leasing and maintenance costs.

Differentiation Excellent inventory system: Focus particularly on eliminating less profitable products and reducing the variety of products in a given category. Impact sales long term for some consumer goods suppliers if the products or varieties of a given supplier or targeted for elimination which will resulted greater sales volume Restructure the flow of goods from manufacturer to the store shelf. This higher quick turnover results in more turns and therefore less inventory. Good quality at bargain price for customers Porter’s Generic Strategy (cont’d)

Differentiation

Excellent inventory system:

Focus particularly on eliminating less profitable products and reducing the variety of products in a given category.

Impact sales long term for some consumer goods suppliers if the products or varieties of a given supplier or targeted for elimination which will resulted greater sales volume

Restructure the flow of goods from manufacturer to the store shelf.

This higher quick turnover results in more turns and therefore less inventory.

Good quality at bargain price for customers

Threats: Competitors could easily imitate Wal-Mart’s method of inventory system Anticipation: Develop bargaining power over its suppliers Build the customer loyalty & awareness by advertisement & campaign Availability of good products at lower prices. Build CSR by caring the environmental and social issue This anticipation approach will build up customer loyalty and market share. Porter’s Generic Strategy (cont’d)

Threats:

Competitors could easily imitate Wal-Mart’s method of inventory system

Anticipation:

Develop bargaining power over its suppliers

Build the customer loyalty & awareness by advertisement & campaign

Availability of good products at lower prices.

Build CSR by caring the environmental and social issue

This anticipation approach will build up customer loyalty and market share.

The Success Strategy Expansion Opened discount stores (95,000 square feet) Opened super centers (185,000 square feet) Opened footprint (45,000 square feet) Looked for expansion opportunities in urban locations International expand Acquisition Partnership Go-it-alone strategies 350 locations in Europe and over 440 locations in Asia

Expansion

Opened discount stores (95,000 square feet)

Opened super centers (185,000 square feet)

Opened footprint (45,000 square feet)

Looked for expansion opportunities in urban locations

International expand

Acquisition

Partnership

Go-it-alone strategies

350 locations in Europe and over 440 locations in Asia

Technology Attraction Bar coding and electronic data interchange (EDI) tools to share information within stores and with suppliers. EDI for forecasting, planning, replenishing, and shipping applications. Radio frequency identification deployment E-commerce operations. Low Price Lowering mark-up and earn profit to increase the volume of sales The Success Strategy (cont’d)

Technology Attraction

Bar coding and electronic data interchange (EDI) tools to share information within stores and with suppliers.

EDI for forecasting, planning, replenishing, and shipping applications.

Radio frequency identification deployment

E-commerce operations.

Low Price

Lowering mark-up and earn profit to increase the volume of sales

Human capital Vision: Embraced employees as associates, and encouraged them to analyze sales data to find ways to improve store performance Mission: Emphasize its commitment to: Good working conditions Publicized its generous efforts aggressively Safety workplace System: Low pay for full timers Heavily reliance on part-timers Temporary help Reduced expenses associated with benefits packaged (e.g. Bonus, healthcare coverage) The most admired company in the U.S in 2003 (Fortune) The Success Strategy (cont’d)

Human capital

Vision: Embraced employees as associates, and encouraged them to analyze sales data to find ways to improve store performance

Mission: Emphasize its commitment to:

Good working conditions

Publicized its generous efforts aggressively

Safety workplace

System:

Low pay for full timers

Heavily reliance on part-timers

Temporary help

Reduced expenses associated with benefits packaged (e.g. Bonus, healthcare coverage)

The most admired company in the U.S in 2003 (Fortune)

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