Case Analysis Of Walmart

Walmart's strategic position is cost leadership. It targets price-sensitive consumers and cut cost to the bone by performing superior efficient activities. Therefore, it was capable of lowering price as much as possible; it performed much better than its competitors in terms of price. Regarding growth strategy, Walmart employed product development by gradually introducing private label lines and diversification by opening close-out stores, Sam's Clubs and Supercenters. Its main target growth was international expansion by joint ventures with local large retailers. It respected associates, got them involved in business and provided profit sharing plan and stock purchase plan. In terms of financial performance between 1983 and 1993, the net sales increased 1343% while ROE and ROA both decreased due to rapid expansion. The number of discount stores increased 204%.
It can be said that the performance was attributable to the industry's attractiveness. Firstly, consumers were willing to try cheaper retailers at that time meaning that Walmart was filling their demands. Also, because consumers were new to discount retailing, they were not able to bargain with Walmart. So, the power of buyers was very week. Secondly, the sales of discount retailing industry were increasing annually which means that the industry remained profitable. Besides, the concentrated industry environment between 1986 and 1993 enabled the company to face fewer competitors. Moreover, Walmart was well known for its salient economies of scale and other competitors also had price advantage. Therefore, sustainable profitability, few large competitors and intense price competition exerted high barriers of entry so that new entrants were difficult to break in and compete on price. Walmart's competitive advantage is low cost because of its superior operational efficiency and effectiveness. First of all, it purchased merchandise in volume at lower price and stored them in their own warehouse that minimized the products price. Secondly, it used inventory and sales data to display products based on customer preference and demand that reduced overstocking cost and improved customer satisfaction. Thirdly, it had few advertisements that lower the promotional cost. Fourthly, it leased most of their stores that eliminated rental expense. Also, it constructed stores at location where it could be expanded easily which reduced constriction cost. So, its operation expenses were 6.5% below the average industry. Fifthly, its electric scanning and satellite system reduced inventory cost and improved efficiency. More importantly, it adopted cross-docking technique to manage its distribution networks that helped reduce handling costs, operating costs, and inventory cost. Besides, it employed vender-managed inventory system by installing electronic data interchange to better interact with vendors, maintain the correct inventory and to reduce display maintenance expense. These two techniques fostered efficient

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