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The history and strategic analaysis of Walmart

Published in: Business
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  1. 1. Burcu Durmuşoğlu Büşranur Akgül Özgün Kuran Bige Özcan
  2. 2. Brief Description • Company Background • Industry Analysis • Competitive Advantages On Principal Functions And Activities • Performance On Retailing Sector And Format Overseas Countries • VRIO Analysis • Recommendations
  3. 3. Sam Walton opened his first WalMart in 1962. According to Sam Walton “Our strategy was to put good-sized stores into little one-horse towns that everyone else was ignoring. ”.
  4. 4. • In 1970, WalMart opened 30 discount stores in Arkansas, Oklahoma, and Missouri. • In 1974, WalMart was the first retailer to use computers for inventory control. • In 1977, WalMart initiated EDI (Electronic Data Interchange) with its vendors. • A few years later, WalMart introduced bar code scanning. • In 1980, there were 330 stores in 11 states.
  5. 5. In mid-1980s Sam’s Clubs which is main distribution center was opened. What lies behind of opening Sam’s Club? • To maximize economies in purchasing, minimize operating costs, and pass the savings on to members through very low prices. • To take advantage of having own distribution channel. • To demonstrate its ability to transfer its retailing capabilities to a very different distribution format.
  6. 6. Retailer Discount Store US Retail Format Sam’s Club Super- center
  7. 7. • In 1984, WalMart started using their own satellite. • In 1990s, WalMart was pioneering the use of data-mining. • Since 1992, WalMart started to internationalize. • In 1995, WalMart was in all 50 states in the US.
  8. 8. In 2007, WalMart became the world’s biggest retailer.
  9. 9. QUESTION 1 To what extent is Wal-Mart’s performance attributable to industry attractiveness and to what extent to competitive advantage?
  10. 10. Rivalry among Existing Firms Fierce Competition Potential Entrants Threat: Low - High barriers of entry. - Existing companies established strong and stable supplier networks. Substitutes Threat: Low - Low number of company that can sell their products at lower prices. Buyers Power: Modarate - Buyers are price-sensitive. - Rural domination of WalMart.. Suppliers Power: Low - Own distribution channel. - Strong negotiation with suppliers.
  11. 11. According to this analysis • WalMart has competitive advantages in • Suppliers • New Threats • Substitutes Products
  12. 12. QUESTION 2 In which of WalMart’s principal functions and activities (namely: purchasing, distribution and warehousing, instore operations, marketing, IT, HRM, and organization and management systems/style) do WalMart’s main competitive advantages lie? Identify the distinctive resources and capabilities in each of these functions/activities?
  13. 13. • Commitment to “everyday low prices” • Matchless responsiveness to customer needs • Logistics supported by leading-edge IT • Commitment to employees • Unremitting cost cutting
  14. 14. Purchasing and Vendor Relationships - Electronic Data Interchange - Real time store- by-store information - Economies of scale Warehousing and Distribution - Cross-docking - Direct import - Hub and spoke configuration In-store Operations - “Store of the Community” philosophy. - Point-of sale data - “Satisfaction Guaranteed” program. Marketing - “Everyday Low Prices” - Word-of-mouth - Patriotism and national causes Information Technology - Bar code scanning - Data-mining - Radio-frequency identification Human Resource Management - Organization culture: - Respect - High expectations - Close communication Organization and Management Style - Flat organizational structure - Fast-response management system - Internal recruitment
  15. 15. QUESTION 3 To what extent has WM been able to transfer the competitive advantage it established in discount retailing in the US to other countries, to other retail sectors and formats? Why has WM’s overseas performance to date been so patchy?
  16. 16. WalMart’s first format was discount store. They changed their discount stores to supercenters which are equal to Discount stores + Grocery süpermarket.
  17. 17. • They transferred their competitive advantages into • Distribution/Logistics sector • Manufacturing sector • Retailing sector • Service sector
  18. 18. Success Mexico Joint Venture Canada Acquisition Argentina Green field Brazil Joint Venture UK Acquisition
  19. 19. Failure Japan Germany South Korea Indonesia China
  20. 20. Reasons for failure • Stick so closely to the domestic culture • Wrong market selection which is already dominated • Less concentration on geographical differences • Unable to respond customer needs and wants
  21. 21. QUESTION 4 To what extent is WM’s competitive advantage sustainable? Why have other retailers had limited success in imitating WM’s strategy and duplicating its competitive advantage?
  22. 22. Sustainable Competitive Advantages Competency Valuable Rare Inimitable Organised Competitive Impact Information Systems Yes Yes Yes Yes Sustainable Logistics System Yes Yes Yes Yes Sustainable Culture Yes Yes Yes Yes Sustainable Management Routines and Practices Yes Yes Yes Yes Sustainable
  23. 23. Why cannot be imitated? Culture Supply Chain Information Technology
  24. 24. QUESTION 5 • Looking ahead, what measures does WM need to take to sustain its recent performance and defend against competitive (and other) threats?
  25. 25. • More advertisement and marketing activities • More social responsibility activities • More concentration on labor rights • More focus on environmental issues • More flexibility on culture • Give importance on market research rather than start-ups