Wal mart

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  • Massive distribution center built -bentoville,purchase in bulk quantities and distribution through own trucks
  • No need for storage –receive and dispatch
  • Setting up stores of huge size in small towns, lack of volumes available to competitors not feasible
  • High switching cost
  • Forward integration
  • Wal mart

    1. 1. WAL-MART COST LEADERSHIP STRATEGY
    2. 2. COST LEADERSHIP  Lower cost of products or services relative to what competitors have to offer  Broad target- offer full range of products and services to wide range of customer group, ample geographic area served
    3. 3. Positioning of firm Achieving cost leadership
    4. 4. The commencement….  Stores set up in large buildings with minimum rent paid  Not much emphasis laid on the interiors No investment in standardized ordering programs  Not enough staff-store manager handled the store and also its accounts  Focused –Strict cost controls -constant store supervision -expansion into new territories 
    5. 5. As Wal-Mart grew  Company invested in infrastructural facilities  Became a Publicly-held company to access more funds for expansion plan  After being equipped with funds it reorganized its business activities
    6. 6. Re organizing business activities  Placed a Standard distribution system and inter store communication system  Centralized distribution system -retail hub(distribution center) and spoke(store) system o Distribution center - Bentonville Goods dispatched to stores by company owned trucks o
    7. 7.  Cross docking technique used to eliminate inventory handling cost.  Reduced its purchasing cost by procuring goods directly from manufacturers on tough negotiation  Company achieved High level standardization of products using mass purchasing techniques, thus yield lower per unit cost
    8. 8. Economies of Scale  Expansion strategy –build stores around the distribution center(within a 300 mile radius)  Popularity of store increased and lead to word of mouth publicity thus reducing spending on advertisement
    9. 9. EDLP Setting up large discount stores in small towns  Extremely Attractive to rural customers  Branded merchandise priced attractively  Catered to customers who bought merchandise in bulk  Recruited service oriented individuals  Aiming at the average customers to gain Broader target –high capacity utilisation essential to realise cost advantage
    10. 10. Maintaining low cost through reinvestments  Surplus generated was reinvested Building facilities Expanding into metropolitan cities Membership club business “Sam’s clubs”- offered goods in bulk at wholesale prices- exclusively to its members o
    11. 11. Installed modern IT systems -improve distribution efficiency  Investment in cost saving technologies can help achieve economies of scale making the service competitive in market • Electronic data interchange(EDI) and SCS -linked stores, distribution center and suppliers P&G  Lead to significant improvement in its supply chain efficiency-inventory control •
    12. 12. • Point of sale(POS) and Retail Link - massive databases  Helped determine preferences of customers
    13. 13. Industry Analysis Porter’s five competitive forces
    14. 14. Potential threat of new entrants  Cost advantage acts as an effective entry barrier for entrants, who cannot offer the product/service at a lower price  Access to distribution channels  Long term relationship maintained with vendors and suppliers
    15. 15.  Good financial position -Adequate capital  Economies of scale –lower per unit cost  Switching cost faced by new entrants  Establishing a new network of relationship
    16. 16.  Discouraged competition since it was impractical to build huge structures in small cities  Tough for competitors to duplicate the cost reduction techniques used by Wal*Mart
    17. 17. Rivalry among competitors  Products priced 20% lower than those of its competitors –high demand-snatch market share from rivals  Exist barriers Economic factors –huge investment in business, high fixed cost of exist Emotional factor-ancestral business o o
    18. 18.  Industry growth-desire to be a market leader leads to rivalry
    19. 19. Bargaining power of buyers Large number of buyers  Price sensitivity  Buyers incentives -e.g.: Sam’s store  Buyers volumes  Products priced 20% low as compared to other stores-low bargaining power of customers  Tough negotiation of buyers with suppliers due to bulk purchase of product 
    20. 20. Bargaining power of suppliers  Importance of volume to suppliersCentralized purchase of goods by walmart and in huge quantities
    21. 21. Threat of substitute products  Substitutes are available but not a threat cause of the company offers quality products at the lowest possible price in the market
    22. 22. WAL-MART SWOT
    23. 23. Strengths. A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage.  Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.  Wal-Mart has grown substantially over recent years, and has experienced global expansion
    24. 24.  The company has a core competence involving its use of information technology to support its international logistics system IT also supports Wal-Mart's efficient procurement.  A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining and developing them.
    25. 25. Weaknesses. The absence of certain strengths may be viewed as a weakness.  Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.  Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.
    26. 26.  The company is global, but has a presence in relatively few countries Worldwide. In some cases, a weakness may be the flip side of a strength.  Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness
    27. 27. Opportunities. The external environmental analysis may reveal certain new opportunities for profit and growth.  To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.
    28. 28.  The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.  Opportunities exist for Wal-Mart to continue with its current strategy of large, super centres.
    29. 29. Threats. Changes in the external environmental also may present threats to the firm.  Being number one means that you are the target of competition, locally and globally.  Being a global retailer means that you are exposed to political problems in the countries that you operate in.
    30. 30. The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat 
    31. 31. THANK YOU JONATHAN  SHADAP  MARINA  LIZA  JESSICO  KIRK  Group 4

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