This case study was conducted in 2016 on Amazon and Walmart and includes a brief overview of the two companies and strategies that Walmart can take to defend its market share, focusing on use of management information systems. This was written approximately one year prior to the purchase of Whole Foods by Amazon.

1. Running head: CASE STUDY: WAL-MART AND AMAZON’S EPIC STRUGGLE 1
CASE STUDY:
WAL-MART AND AMAZON’S EPIC STRUGGLE
Aimee Peterson
Texas A&M University – Central Texas
Submitted in Partial Fulfillment of:
CIS 511: Management Information Systems
Date: September 10th, 2016

2. CASE STUDY: WAL-MART AND AMAZON’S EPIC STRUGGLE 2
There has been much speculation about the epic struggle between Wal-Mart and
Amazon.com. Both retailers are world leaders in the respective domains of traditional and online
retailing, and both are advancing into each other’s domain. In this paper, the business model and
business strategies of both companies are explored, with a focus on information systems. Each
company’s value chain and competitive forces are also explored. The strengths and weaknesses of
each company are explored to identify alternatives Wal-Mart might employ to take advantage of
opportunities, or thwart threats posed by Amazon.com.
WAL-MART
Wal-Mart’s business model can be described as “every day low prices on a broad assortment
– anytime, anywhere” (Wal-Mart Stores, Inc., 2016). Wal-Mart provides a convenient, one-stop
shopping experience to customers, offering an exhaustive assortment of merchandise (Brea-Solís,
Casadesus-Masanell, & Grifell-Tatjé, n.d.). In addition to this broad product selection, Wal-Mart’s
physical presence is immense: Two-thirds of the US population are located within five miles of a
store (Laudon & Laudon, 2015). Wal-Mart also uses other marketing channels for its retail business,
including its web site (e-commerce), and mobile app (m-commerce) (Wal-Mart Stores, Inc., 2016).
As the largest retailer in the world, Wal-Mart has the size and scale to implement the
strategy of low cost leadership (Jantzen, Pescatrice, & Braunstein, 2009). This strategy allows Wal-
Mart to offer the lowest prices, thereby increasing its’ customers’ bargaining power with other
retailers. This, in turn, exerts pressure on competitors such as Costco, potential new market entrants,
and providers of substitute products and services.
Wal-Mart’s strategy of supplier intimacy allows it to dominate as the most powerful member
in its value chain, integrating and coordinating the activities of its suppliers and distributors
(Rangan, 2006; Erdem, & Harrison-Walker, 1997). This allows Wal-Mart to exert pressure on
suppliers to provide lower prices. Indeed, Wal-Mart is a powerful giant that exerts pressure in all
directions.
Information systems are central to enabling Wal-Mart’s strategies and competitive
advantage. Wal-Mart’s Retail Link supply chain management system increases efficiency and
supplier intimacy (Howland, 2015). Information systems allow Wal-Mart to scan the pricing
environment of its competitors, and respond with lowered prices on its web site in real time
(Laudon & Laudon, 2015). Wal-Mart uses information systems to allow its’ customers the benefit
of multi-channel shopping experience (Laudon & Laudon, 2015).
Investment in information systems is a strategy in and of itself. Wal-Mart pursues this
strategy by developing information systems in-house and acquiring tech firms with specialized
expertise (Laudon & Laudon, 2015). Through these tactics, Wal-Mart is expanding the capabilities
of its in e-commerce and m-commerce channels (Laudon & Laudon, 2015). This strategy is a
logical step, given the fact that Wal-Mart’s traditional customers – consumers with an income less
than $50,000 annually – are increasingly using technology (Laudon & Laudon, 2015). It is also a
necessary step to defend against increasing competition from online retailers, particularly
Amazon.com (Laudon & Laudon, 2015).
AMAZON
In the last six or seven years, the percentage of Wal-Mart’s customers that also shop at
Amazon grew from 25% to 50% (Laudon & Laudon, 2015). Amazon began as an online bookstore
in 1995, but has grown to offer an extensive selection of products – including those sold by Wal-
Mart (Kimble & Bourdon, 2013; Laudon & Laudon, 2015). Having no physical store of its own,

3. CASE STUDY: WAL-MART AND AMAZON’S EPIC STRUGGLE 3
Amazon’s business model is to sell merchandise online to a broad customer base. Amazon has a
strong competitive advantage regarding product assortment, competitive prices, and fast, reliable
shipping (Laudon & Laudon, 2015).
Amazon employs strategies of customer intimacy and investment in information technology.
It offers its’ customers a high degree of customization through the use of customer relationship
management systems and big data analytics (Kimble & Bourdon, 2013). These systems trace and
streamline customers’ actions on its’ web site, allowing Amazon to adapt product selections and
recommendation to its customers’ profiles (Kimble & Bourdon, 2013).
Amazon also employs the strategy of low cost leadership, which is enabled by economies of
scale, low inventory costs, and strategic alliances (Grundy, 2015; Laudon & Laudon, 2015).
Amazon has reached economies of scale such that it is able to have highly efficient logistics and
distribution networks tailored for e-commerce (Laudon & Laudon, 2015). The efficiency of
Amazon’s value chain enables Amazon’s competitive advantage of low prices and fast, reliable
shipping (Grundy, 2015; Laudon & Laudon, 2015). Amazon is further extending its’ value chain
through strategic alliances with 7-Eleven and Staples to allow customers to pick up their purchases
at these stores (Laudon & Laudon, 2015).
Amazon’s value chain is actually a value web composed of customers, partners, suppliers,
and indirect suppliers. Amazon connects with customers through customer relationship management
systems, and with partners through strategic alliances. Amazon offers separate business models for
suppliers, depending on whether they manage their own logistics or use Amazon’s logistics and
distribution networks (Dages, Li, & Moore, 2016). The value proposition and value architecture that
Amazon has created poses a high entry barrier to new market entrants; It also increases the
bargaining power of suppliers and customers with respect to Amazon’s competitors (Dages, Li, &
Moore, 2016).
COMPARISON OF WAL-MART AND AMAZON
Amazon and Wal-Mart are similar regarding their broad market and product focus, low cost
leadership strategies, and extensive use of information systems (Grundy, 2015). Although their
main marketing channels differ, both are expanding to offer multi-channel shopping experiences.
This movement brings the two companies in even closer competition, albeit as substitutes.
Despite these similarities, Wal-Mart has significant advantages over Amazon, such as its’
physical presence. Wal-Mart can attract customers that are unbanked and/or do not have a computer
or smartphone. Wal-Mart can also offer customers the instant gratification of taking a product home
immediately. Wal-Mart may be behind Amazon regarding online retailing, but it is in a much better
financial position to close the gap. In 2014, Wal-Mart’s net profit was $16.363 billion, while
Amazon’s earnings showed a net loss of $241 million (Dages, Li, & Moore, 2016).
WAL-MART’S OFFENSIVE AND DEFENSIVE OPTIONS
Wal-Mart has several opportunities. Wal-Mart can try to match Amazon on shipping by
building a duplicate logistics and distribution network, one tailored to e-commerce. Wal-Mart can
try to match Amazon on customer intimacy by investing heavily in customer relationship
management systems and big data analytics. However, it may not be cost-effective to explore these
avenues, given the fact that Wal-Mart’s online sales are only a fraction of Amazon’s (Laudon &
Laudon, 2015).
Alternatively, Wal-Mart can create greater value for its’ customers by investing in its mobile
app and web site, and the integration of its marketing channels. Customers could find recipes and

4. CASE STUDY: WAL-MART AND AMAZON’S EPIC STRUGGLE 4
build a shopping list on the web site, then access the shopping list on the mobile app. Customers
could scan items with the mobile app to as they go through the store, allowing them to mark items
off their shopping list, find product information, order out-of-stock items, and expedite the check-
out process. Wal-Mart could use geolocation to provide its’ in-store customers with targeted
advertising, and even allow customers to request assistance from an Associate. Wal-Mart could
even use the mobile app for mobile payments and other financial services offered in its stores.
Many aspects of this solution are already being implemented by Wal-Mart. Wal-Mart has
been adding new applications to its mobile app and web site, such as Endless Aisle, which allows
shoppers to order an item that is out of stock through the mobile app (Laudon & Laudon,2015).
Wal-Mart’s acquisition of Yumprint was made in the hopes of helping customers create shopping
lists from recipes (Laudon & Laudon, 2015). An effective use of these types of capabilities relies on
how well Wal-Mart integrates the various information systems of the three marketing channels.
RECOMMENDATION
The best solution is a fully integrated, multi-channel marketing strategy that capitalizes on a
strength of Wal-Mart’s that is Amazon’s greatest weakness: its’ physical presence. This solution
may significantly reduce the threat posed by Amazon in a more cost-effective manner than tactics
that attack Amazon head-on. Wal-Mart may not be able to match Amazon on some aspects, but it
can become a strong follower in online retailing. At the same time, Wal-Mart can strengthen its’
position as the market leader in traditional retailing, a realm that Amazon cannot easily enter.
Employing this solution, Wal-Mart can come out the winner in this epic struggle.

5. CASE STUDY: WAL-MART AND AMAZON’S EPIC STRUGGLE 5
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