Wal-Mart has pursued a strategy of cost leadership over the years. It focuses on offering low prices through supply chain efficiencies and large scale operations. As of 2015, Wal-Mart operated over 5,000 retail units globally generating $487.5 billion in annual revenue. Wal-Mart leverages technologies like IT investments, a hub and spoke distribution system, and EDI to gain advantages in procurement, logistics, and inventory management that allow it to maintain everyday low prices. Its low cost strategy has made it the largest retailer in the world but it also faces challenges from competitors and negative publicity around its employment and business practices.

1. Wal-Mart’s
Cost Leadership
Strategy
By : Abhimanyu R &Ajoy Infant Raj A

2. Over the years
Total Retail Units as of May 31, 2015 - 5,212
Walmart Supercenters - 3,431
Walmart Discount Stores - 460
Neighborhood Markets - 630
Small Formats* - 41
Sam's Club – 650
Revenue - $487.5 billion (2015)
Awards
2002 : ‘Ron Brown’ award for corporate leadership by President
2002 & 2003 : #1 in Fortune 500 list of world’s largest companies
Small formats include Amigo, Supermercado, Walmart Express, Walmart on Campus and Super Ahorros banners.

3. Wal-Mart – July 2, 1962 by Sam Walton at Rogers,
Arkansas US
First discount store
Core philosophy - cost leadership – offer better value for money
Strategy : Focus on stores at small towns
: EDLP - the pricing strategy
: Cost leadership Strategy
: Massive expansion strategy
: Global sourcing strategy

4. Growth through :
Heavy IT investments
Surplus reinvestments
 Increasing no. of stores
Consistent Cost cutting measures
Public issue
Economies of scale
Sam’s Clubs
Scanners
Satellite communication system
Hyper mart – food retailing (Super centers)
Neighborhood markets n Super centers combo
‘Store of the community’ program

5. “If we work together, we’ll lower the cost of living for
everyone…we’ll give the world an opportunity to see what it’s like
to save and have a better life.
Save Money. Live better
To help people save money so they can live better
Vision:
Mission
Tagline

6. SWOT
OF
WAL-MART

7. • Competition from B
& M and Online
comptetitors
• Political influences in
developing countries
• Retail Market in
developing counties
• Online Shopping
growth
• Lawsuits
• High employee
Turnover
• Negative Publicity
• Economies of Scale
• Wide range of
products
• Competence in IT
Strength Weakness
ThreatOpportunities

8. Porter's 5 Force Theory

10. “By cutting your price, you can boost your sales to a point where you
earn far more at the cheaper retail price than you would have by selling
the item at the higher price. In retailer language, you can lower your
markup but earn more because of the increased volume.”(Walmart,
2010)
“Because you work hard for every dollar, you deserve the
lowest price we can offer every time you make a purchase.You
deserve our Every Day Low Price”.
Walmart in 2010

11. According to Cowgill of Zenith Management Consulting, “Walmart’s
strategy is not low price”. RatherWalmart has been called as “Master
of Manipulating Perception”.
Master of Manipulating Perception

12. Porter's Generic Strategy

13. Cost
Leadership
Differentiation
Cost Focus
Differentiation
Focus
Source of Competitive Advantage
Scope
NarrowBoard
Cost Differentiation

14. Sources of low cost leadership
Economies
of Scale
Experience
Curve
Capacity
Utilization
Process
Design
Location Integrations

15. Economies of Scale
Quantity Mark Up

16. Experience Curve
Discount store – Sam’s Club – Super Centres – Neighbourhood Markets
Importance of IT system (POS, SCS & Automated conveyor system)
Impact of Experimentation

17. Distribution Process Design
Hub & Spoke Model

18. Location
Rural
From rural to cities
Connectivity from distribution centres to retail store
Stores are 300 Miles (482 KM) away from distribution centres
158 Distribution centres for 11000 retail stores, in 27 countries
3 things are important in retailing “Location, Location & Location”

19. Integration
They focused on backward integration rather than forward integration
They learned how manufactures are performing
Focused more on “EDLP”
Obtained bargaining power through backward
integration
 Gained ability to replacement with in 2 Days (Forward integration)

20. Porter’s Value Chain
General administration
Human resource management
Technology development
Procurement
Inbound
logistics
Operations Outboun
d logistics
Marketin
g and
sales
Service

21. Primary Activities
Inbound Logistics Operations Outbound Logistics Marketing and sales Service
-VMI system
(Vendor managed
inventory)
continuous
replenishment
-EDI (Electronic
Data Interchange
3 business segments:
a)WalMart stores
- Super centers
- Discount centers
- Neighborhood
markets
b) SAM’S Club
c)WalMart
international
-Hub and spoke
distribution system.
- CROSS
DOCKING:
logistic technique to
make the distribution
process more
efficient
- Word of mouth
communication.
-focuses on everyday
low prices
“Save money, live
better”
-Sales are on a self-
service, cash-and-carry
basis.
-accepting returned
goods
-Satisfaction
guarantee
- Opening
hours(24/7)

22. Firms infrasctructure: close connection between headquarter and local stores.
Human resources:
- Based on Interaction practices between company and employees
-Low pay but other benefits (health care plans, retirement plans, or promotion opportunities)
-2.2 million associates globally.
-Every time we open a supercenter, we provide roughly 300 jobs
-Women57% of our U.S. workforce, 27% of corporate officers, and 20% of our Board of directors.
Techonology development: It is the key factor of the company. It constitutes a competitive advantage
against competitors.
- Computer-based technology
POS (Point of sales) system
Satellite System
Procurement:
-Wal-Mart deals directly with manufacturers, by passing all intermediaries.
- EDI : Electronic data interchange
MANUFACTURER – WALMART - CUSTOMERS

23. Thank You.