Apart from that, as per figures it generated 1. Walmart and Costco are leading in the retail industry with their low prices and large assortments of merchandise and services. While the US retail industry is marked by heavy competition, growth in the recent years was primarily supported by higher digitization and better economic activity. Bargaining power of suppliers: The bargaining power of suppliers in the US retail industry is low.
Moreover, apart from a few of the bigger brands the smaller suppliers do not hold any major clout. They are bound to offer their products on lower prices or risk losing business. There are more than one lac small and big businesses that are the suppliers of Walmart. Moreover, the suppliers are required to follow the rules set by the business. The immense bargaining power of the big retailers like Walmart also comes from their financial clout.
Bargaining power of buyers: Control is in the hands of the customers or the buyers in the 21st century. Retail brands are doing every thing to keep their customers happy and satisfied. Apart from everyday low prices, retail brands like Walmart are also focusing on better customer service as well as leveraging technology to provide a better and personalized customer experience.
Some of the factors that moderate the bargaining power of the buyers are the brand image, low prices, quality products and services and high level of customer service. The overall bargaining power of customers in the retail industry is moderate to high. The bigger brands like Walmart and Costco enjoy higher loyalty. Threat of substitute products and brands: The threat of substitute products in the retail industry is high because of the high number of retail brands in the market.
The threat gets moderated in case of the larger brands like Walmart and Costco because of their competitive advantage in the form of lower prices and a wider product assortment. Threat of New entrants: The threat of new entrants is moderate because it will not require a very large investment for a new brand to enter the retail market and it is why several foreign brands are also in a race to enter the US market.
However, in case of the bigger brands this threat is low because of the high level of loyalty that they enjoy as well as their international presence.
The overall threat remains moderately low. In case of the large brand like Walmart or Costco, switching costs can be high for customers since all brands do not sell at as low prices. Level of competitive rivalry in the retail industry: The level of competitive rivalry in the retail industry is very high.
There are several influential and financially strong players in the market like Walmart, Krogers, Costco and Bets Buy. The overall competitive rivalry in the retail industry is highly intense. Walmart Core Competence: The core competence of Walmart is its everyday low prices that it has used to grow its market share by increasing customer base.
The brand offers a large range of good quality products and services and that too at very low prices which can sometimes be much lower than the nearest competitor. In this way the brand has been able to obtain very high level of customer loyalty. Walmart buys in bulk from its suppliers which allows it to obtain products at extra low prices and it passes on the benefit to the customers. Its another core competence is customer service. Its customer centered business strategy also focuses on high degree customer convenience.
Higher customer convenience means higher popularity and faster growth in customer base. A third core competence that is enabling its growth in the recent years is technology.
Walmart is investing in e-commerce and purchased a large stake in Indian brand Flipkart apart from its own website in 28 countries. These are some of the main sources of competitive advantage. In past Walmart was known to pay its staff very less to minimize its operational costs and to protect its price advantage. During the recent years, it increased the basic wages as well as benefits for its associates. In , the brand crossed the Billion dollar mark in terms of revenue for the first time.
Net sales of the brand reached past Billion. Fiscal has been very good in terms of financial performance. Its merchandise mix consists of three main categories that include grocery, health and wellness and general merchandise. The general merchandise include entertainment, apparel, hardline and apparel products. Apart from these Walmart offers fuel and financial services and related products. This is a major strength for the brand which has helped it acquire higher popularity as well as increase its market share and customer base.
India is still not open to Foreign direct investment but Walmart entered the Indian market by buying a large and controlling stake in the Indian e-commerce brand Flipkart.
Apart from US, Mexico is the largest market for Walmart with the number of stores there in at Its revenue from Walmart International was Its several websites operate under 65 banners in 28 markets.
Growing focus on e- commerce and digitization are also going to help the brand acquire faster growth. However, this has a negative effect on the human resources and drives attrition rate high. During the recent years, Walmart has increased the wages but yet, the HR environment and culture at Walmart needs to be innovated to provide the workers with security and satisfaction. This image happened because of its poor record in supply chain and HR.
While it has managed its reputation and image somewhat better during the recent years, it will need to focus more on CSR, ethics and HR management to shed its old image completely. Apart from US all the major markets including the ones in Asia Pacific are seeing higher sales online.
However, studying these habits and catering to their needs offers faster opportunities of growth to the brand. This generation of consumers likes to shop online and is a high tech savvy generation.
Understanding its shopping habits and using technological innovation to provide it with a better shopping experience will help increase sales. It will help the brand manage a better reputation and create a positive work environment which is good for productivity.
Competition is one of the biggest challenges in the retail industry and a primary threat to growth. To overcome tis pressure, Walmart will need expand to more markets and increase its online presence. A stronger dollar can have an adverse impact on the profit of the American brands. Fluctuation in the currency exchange rates can lead to lower profits.
All these stages add value to the product and managing them efficiently helps a brand grow its business performance. Walmart has optimised its value chain very well. Primary Activities: Inbound logistics: Walmart has a large and global supply chain that consists of more than , suppliers of various sizes.
These suppliers are located al around the globe from which Walmart sources the products that it sells at its stores and clubs. Since it buys in bulk from its suppliers, it is able to press them for lower prices. The fresh category products are sourced from the suppliers located close to its stores and clubs. Walmart has managed its supply chain very well with the help of technological tools including apps and software. In , its total number of stores reached Out of the total, were located in US and were located internationally.
It serves its customers under 65 banners in 28 countries through its stores and e-commerce websites. Outbound logistics: Walmart has managed an excellent and extensive distribution network.
Walmart has managed an excellent private fleet of trucks but also hires private careers to ship perishable grocery merchandise. It also has 30 dedicated fulfillment centers that it uses to ship merchandise to its customers that have purchased from its online platform. Walmart uses its distribution centres for cross docking the material received form the suppliers which can then be forwarded to the stores.
Apart from reducing the transportation and storage costs, it also reduces inefficiencies in the system and Walmart stores are replenished easily and immediately. Marketing and Sales: The brand has gained very high level of popularity because of its consistently low prices but apart from its brand image, it also actively invests in marketing.
In , it spent 3. It is using advanced technology in new ways for marketing its brand more efficiently and to grow its sales as well as serve its customers better. Apart from having raised the basic salary for its associates, it is also spending on their training and development. Procurement: Walmart has managed trustful long term relationships with its suppliers who provide standard quality products and do business according to the requirements mentioned in the Code of conduct for the suppliers.
Firm Infrastructure: The infrastructure of any organization plays a key role in the success of that firm. Walmart has built a very large infrastructure that includes its management, supply chain, human resources, its distribution and fulfilment centers and more. Apart from excellent management of its technological and financial resources now it is focusing on managing its employees better to be more successful.
It has kept increasing its investment in technology and people during the recent years considering their importance for the faster growth and success of the brand. This is also the thing that Walmart is most known for. It is known for helping Americans save money, buy more with their money and live better lives.
On the one hand it buys in bulk from most suppliers grabbing the lowest prices from them and then passes this advantage on to its customers. This is an effective strategy because in the retail industry which is intensely competitive, this can be the best method of differentiation.
This is also who Walmart has differentiated its brand from the other retailers in US. Another key strategy used by Walmart is that of quality. It sells only good products because if you sell low quality products at lower prices than you will be unable to generate a competitive advantage. So, Walmart sells the right quality products at affordable prices. Lower pricing strategy helps create a competitive advantage which is sustained through good quality products.
To further strengthen its competitive advantage Walmart focuses on customer service and better customer experience. This helps retain its customers and also create a positive word of mouth which works to attract new customers.
Good customer service is like an essential in the 21st century where all the power rests in the hands of the customers. Walmart is also eyeing faster business expansion and it has strategically acquired a few brands that can help its brand expand faster. In , it acquired Modcloth and Bonobos. Apart from them India is a potentially big but a bit complex retail market where a direct entry would not have been possible for Walmart. Such strategic acquisitions can enable Walmart to grow faster in the Asia Pacific region.
Long Term Objectives 20 Sustainable Commodities by Walmart chose our initial list of commodities based upon business risk and opportunity e. For each commodity, Walmart is working to understand the current state of the supply chain and is developing a strategy to enhance sustainability.
We then work with stakeholders to promote action to help address major social and environmental hot spots while creating shared value. It will take all of us working together—retailers, suppliers, NGOs, governments and others—to drive lasting, high-impact sustainability improvement. Generic and Grand Strategies Generic Strategy The primary generic strategy that Walmart has used to build sustainable competitive advantage is the cost leadership strategy.
A firm using this strategy mainly focuses on keeping the prices of its goods and services lower than the competitors. Walmart is mainly known for its everyday lower prices.
How Walmart has kept the everyday prices low is through economies of scale. It has built strong long term relationships with the vendors from whom it buys in bulk. It helps the brand obtain the best deals on the purchases it makes from its suppliers. Long term relationships with the suppliers are mutually beneficial for both the parties. Apart from these things it has also maintained low operational and production costs.
Coupled with them, excellent supply chain management and logistics management have helped it reduce costs of operation. In the past Walmart was known for paying very low wages to its employees.
However, owing to prolonged protests and criticism the brand has raised the minimum wages for its employees. Now, the situation at Walmart is much better. This has not just helped it sustain the image of a brand obsessed with low prices but also generate huge sales and revenue.
Grand Strategy Market Penetration: Market penetration involves selling more of the existing products and services to the existing customer base. Walmart started as a small discount retailer in Rogers Ark. Since then it has opened thousands of stores in US.
It has kept the prices of products it sells lower than its competitors since always. This does not just give it an edge over the competitors and help it grow its sales over these years but also helps it grow its brand name and attract more and more customers.
As a result its customer base has is very large and has kept growing rapidly over time. To grow its popularity and customer base, Walmart has also introduced app and websites so customers can shop with ease and convenience.
When customers find more convenience and better prices they will shop for more and this is the primary growth strategy Walmart has utilized. Market development: This is another important strategy that Walmart has continued to employ to develop its markets and grow its customer base. Apart from US, Walmart has also expanded its presence internationally.
Today, it operates in 28 countries and has more than 11, retail units running under 59 banners. Through these 11, retail stores, Walmart employs more that 2. Out of them, 1. This international expansion has helped the brand and its sales grow vastly. In all these areas Walmart is popular owing to its low pricing scheme.
Out of the 28, its e-commerce units are operational in 11 countries. In this way, Walmart continues to bring value to its customers and communities globally. It also uses various store formats like super centers, discount stores and neighborhood markets that it utilizes based on the need of the communities in which it operates. These are the two main intensive strategies utilized by Walmart for creating growth and profits globally.
Its focus on product development or diversification has remained relatively minimal. Overall, Walmart has grown to become a celebrity retail brand and even sorted out its HR issues nearly.
In past it has been accused of paying its employees less and making them do more. However, there have been positive developments during the recent years and the company has increased the minimum wages to nearly the same level as its competitors. However, its competitive advantage and long term strategy both have played an important role in helping the brand find supple growth.
The coordinator scheduled all dispatches depending on the available driving time and the estimated time for travel between the distribution centers and the retail stores. The driver was usually expected to take a loaded truck trailer from the distribution center to the retail store and return No back with an empty trailer. He had to dispatch a loaded truck trailer at the retail store and spend the night there.
A driver had to bring the trailer at the dock of a store only at its scheduled unloading time, no matter when he arrived at the store. The drivers delivered the trailers in the afternoon and evening hours and they would be unloaded at the store at nights. There was a gap of two hours between unloading of each trailer.
For instance, if a store received three trailers, the first one would be unloaded at midnight 12 AM , the second one would be unloaded at 2 AM and the third Do one at 4 AM. Although, the trailers were left unattended, they were secured by the drivers, until the store personnel took charge of them at night.
Wal-Mart received more trailers than they had docks, due to their large volume of business. The purpose of the book was to educate the drivers with regard to the code of conduct.
This book also contained a list of other activities, the non-compliance of which would result in the termination of the driver. The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.
There were five types of cross-docking Refer Exhibit IV. These purchase orders were then forwarded to the manufacturers who conveyed their ability or inability to supply the goods within a particular period of time. In cases where the manufacturer agreed to supply the required goods within the specified time, the goods were directly forwarded to a place called the staging area. The goods were packed here according to the orders received from different stores and then directly sent to the respective customers.
To gain maximum out of cross-docking, Wal-Mart had to make fundamental changes in its approach to managerial control.
Traditionally, decisions about merchandising, pricing and promotions had been highly centralized and were generally taken at the corporate level. The cross- docking system, however, changed this practice. This approach placed a premium on frequent, informal cooperation among stores, distribution centers and suppliers with far less centralized control than earlier. Stores could choose from a number of delivery plans. For instance, there was an accelerated delivery system by which stores located within a certain distance of a geographical center could receive replenishment tC within a day.
Wal-Mart invested heavily in IT and communications systems to effectively track sales and merchandise inventories in stores across the country. With the rapid expansion of Wal-Mart stores in the US, it was essential to have a good communication system.
Hence, Wal-Mart set up its own satellite communication system in If we have something really important or urgent to communicate to the stores and distribution centers, I, or any other Wal-Mart executive can walk back to our TV studio and get on that satellite transmission and get it Do right out there. I can also go every Saturday morning around three, look over these printouts and know precisely what kind of work we have had. Instead of cutting inventory across the board, Wal-Mart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels.
Wal-Mart also networked its suppliers through computers. These helped them to keep track of the inventory in stores, deliveries and backup merchandise in stock at the distribution centers. The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales POS system.
Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves. Wal-Mart also made use of the sophisticated algorithm system which enabled it to forecast the exact quantities of each item to be delivered, based on the inventories in each store.
Since the data was accurate, even bulk items could be broken and supplied to the stores. Wal-Mart also used a centralized inventory data system using which the personnel at the stores could find out the level of inventories and the location of each product at any given time.
It also showed whether a product was being loaded in the distribution center or was in transit on a truck. Once the goods were unloaded at the store, the store was furnished with full stocks of inventories of a particular item and the inventory data system was immediately updated.
Wal-Mart also made use of bar coding and radio frequency technology to manage its inventories. Using bar codes and fixed optical readers, the goods could be directed to the appropriate dock, y from where they were loaded on to the trucks for shipment. Bar coding devices enabled efficient picking, receiving and proper inventory control of the appropriate goods. It also enabled easy order packing and physical counting of the inventories.
More than 10, Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories. The details of daily transactions, which approximately amounted tC to more than 10 million per day, were processed through this integrated system and were furnished to every Wal-Mart store by 4 a. In October , Wal-Mart tied-up with Atlas Commerce for upgrading the system through the Internet enabled technologies.
Wal-Mart owned the largest and most sophisticated computer system in the private sector. All information related to sales and inventories was passed on through an advanced satellite communication system. To provide back-up in case of a major breakdown or service interruption, the company had an extensive contingency plan. The company was very vigilant and sensed the smallest of changes in store layouts and merchandising techniques to improve performance and value for customers.
The company made efforts to capitalize on every cost saving opportunity. The savings on cost were always passed on to the consumers, thereby adding value at every stage and process. Wal-Mart also enjoyed the benefits of low transportation costs since it had its own transportation system which assisted Wal-Mart in delivering the goods to different stores within or sometimes less than 48 hours.
Having its own transportation system enabled Wal-Mart to replenish the shelves four times faster than its competitors. Wal-Mart priced its goods economically and the prices varied from day to day. The company enjoyed good bargaining power as it purchased huge quantities. This enabled it to price its products competitively and pass on the benefits to the consumers.
The company offered higher discounts than any other retailer and they earned good revenues in the form of higher volumes. Low pricing ensured that the sales volumes were high and consistent.
It also helped reduce the dependency on the distribution center management personnel resulting in minimization of training costs and errors. The stock-out of goods and the subsequent loss arising out of it was completely eliminated. It eliminated old stocks and maintained quality of goods. Bar coding and radio frequency technologies enabled accurate distribution of goods.
Cross-docking also helped Wal-Mart to reduce inventory storage costs. It also helped to cut down the labor and other handling costs involved in the loading and unloading of goods. Wal-Mart has been able to achieve respectable leadership in the retail industry because of its y focus on supply chain management.
Discuss in detail the distribution and logistics system adopted by Wal-Mart. What were the supply chain management processes adopted by Wal-Mart and how far were they effective? What was the nature of benefits derived by Wal-Mart from the efficient supply chain management practices and how far it has contributed to its sustainable competitive advantage? No Explain. Do 1 The time taken for goods to reach Wal-Mart stores from the place of manufacture. Home improvement 53, 2 5 Kroger U.
Supermarket 37, 20 9 Tesco U. Supermarket 34, 15 12 Costco U. Penny U. Home Improvement 22, 7 Source: www. All data is corporate level for retail-diversified companies, excluding VAT and non-retailing revenue when available. The different businesses of Japanese Conglomerates are accounted for separately.
According to the Wal-Mart's Private Fleet Driver Handbook, a driver could be terminated from his job if he refused to deliver an assignment given to him. However, if a driver refused to deliver the assignment due to fatigue or insufficient rest, the refusal was not considered as a violation. This book included other rules, the violation of which would result in immediate termination of the driver.
This book was maintained by Wal-Mart to create awareness about the role, duties and responsibilities of a driver towards the company, society and profession in various situations.
The expected actions of each driver and the 'code of behavior' was clearly detailed in this handbook and the driver had to strictly adhere to these rules and regulations. However, drivers were not terminated simply because they violated the rules and terms mentioned in the handbook. The facts, circumstances, situations and other collaborative evidence were taken into account and thoroughly assessed to decide about the termination. When a driver violated a rule or 'code of behavior', he was not terminated immediately, but was first y taught the correct code of behavior by Wal-Mart.
Instead, he was given a warning and asked to behave properly. He was terminated only when he showed no improvement. The drivers were also required to secure the truck trailers at the time of tC delivering them to the stores. The inability or failure to do so was not considered as a breach of contract that would result in immediate termination. Paul Darwin, who took charge in for leaving a trailer unsecured at one of the stores near a highway. No Moreover, according to the rules mentioned in the handbook, the drivers should exchange the truck trailers in a totally 'safe and responsible' manner, so that neither the trailers are damaged during exchange or in transit, nor does it result in any loss to other people in the form of injury, etc.
When a driver leaves an unloaded trailer in front of the Wal-Mart store for the store personnel to pick it up, he should ensure that the trailer is properly safeguarded and secured against a closed dock in the store. This would ensure that no other person would gain access to Do the unloaded trailers.
For Wal-Mart, an avoidable accident was a more severe offense than refusing to deliver an assignment for dispatch. Paul Darwin, the then Private Fleet Manager of Wal-Mart, once dismissed a driver for being involved in an accident that could have been avoided or prevented. However, the driver's dismissal was later withdrawn. Source: U. This method of cross docking enabled the company to directly ship the goods needed by the retail customers, without storing them in the warehouse bins or shelves.
Opportunistic cross docking could also be used when the warehouse management software, installed by the retailer, alerted him that a particular product was ready for moving and could be moved immediately. Flow-through Cross docking In this type of cross docking, there was a constant inflow and outflow of goods from the distribution center.
This type of cross docking was mostly suitable for perishable goods, which had a very short time span, or goods that were difficult to be stored in the warehouses. This cross docking system was mostly followed by the supermarkets and other retail discount stores, especially for perishable items. No op intermediaries were involved in this process.
This enabled the retailer to save a major portion of the costs in the form of storage. As the retailer did not need to maintain a distribution center for storing various kinds of goods, he helped him save warehouse costs.
The lead time for the delivery of goods from the manufacturer to the consumer was also drastically reduced. However, this method had some disadvantages too. The transportation costs for both the manufacturer and the retailer tended to tC increase over a period of time, when the goods were required to be transported to different locations several times. Moreover, the transportation system had to be very fast. Otherwise, the very purpose of cross docking was lost.
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