Case – 2

1. To what extent is Wal-Mart’s performance attributable to industry attractiveness and

to what extent to competitive advantage?

Walmart's success is a result of a combination of industry attractiveness and competitive advantages.

Even though Wal-Mart used industry attractiveness to its favor pretty well, I can easily say that Wal-
Mart's performance mainly attributable to its competitive advantages. Its early strategies especially to
reduce cost, supply chain innovations, technological adoption, bargaining power, and adaptability to
diverse markets played crucial roles.

Industry Attractiveness:

• Walmart's early strategy of targeting smaller towns and building distribution centers to serve
those areas was a key factor in its growth. This strategy allowed Walmart to tap into markets
that other retailers were ignoring.
• Walmart's experimentation with various store formats, including discount stores, Sam's
warehouse clubs, supercenters, neighborhood markets, and convenience stores, demonstrates
adaptability to diverse consumer needs and preferences in different markets.
• Walmart's international expansion reflects its efforts to tap into global markets. However, the
success in different countries varied, highlighting the importance of adapting to local consumer
habits, regulatory environments, and competitive landscapes.

Competitive Advantage:

• Walmart's focus on building its own distribution centers and implementing an efficient “hub-and-
spoke logistics system” was a major competitive advantage and one of the biggest strengths.
This allowed Walmart to control costs, maintain low prices, and manage inventory effectively.
• Walmart's early adoption of information and communications technology such as “EDI”, bar-
code scanning, and a sophisticated data analysis system, provided a significant edge in
inventory management, demand forecasting, and customer satisfaction.
• Walmart's massive purchasing power and negotiation skills with suppliers gave it a competitive
edge. The centralized purchasing model and initiatives like "Vendor Row" allowed Walmart to
maintain low product costs.
• Store Management and Customer Service was another strength for Walmart. Walmart's
emphasis on decentralized store management, customer service, and Sam Walton's principles
of engaging with customers contributed to “a unique store culture”. The "10-foot attitude" and
"Sundown Rule" reflected Walmart's commitment to customer satisfaction.
• Walmart's ability to adapt its retailing system to local circumstances in each country it entered
showcased its flexibility and responsiveness to diverse markets.

2. In which of Wal-Mart’s principal functions and activities (namely: purchasing,

distribution and warehousing, in-store operations, marketing, IT, HRM, and
organization and management systems/style) do Wal-Mart’s main competitive
advantages lie? Identify the distinctive resources and capabilities in each of these
functions/activities.
It's important to note that Walmart's competitive advantages have evolved over time, and the company
continually adapts its strategies to remain competitive in a dynamic retail landscape. However, the main
competitive advantage of Walmart is bargaining power.
Purchasing:

• Walmart's massive purchasing power allows it to negotiate lower prices with suppliers,
contributing to its strategy of offering everyday low prices.
• Centralized purchasing at Walmart's Bentonville headquarters allows for streamlined
negotiations and consistent procurement practices.

Distribution and Warehousing:

• Walmart's efficient distribution system, based on large distribution centers serving multiple
stores in a region, enhances supply chain efficiency.
• Walmart's reliance on its distribution network and trucks for 82% of purchases contributes to
cost control and logistics efficiency.
• Developing new distribution strategies to create more cost-efficient systems such as “Cross-
docking, remix, new packing systems” helps to support the company culture.

In-Store Operations:

• Walmart's decentralized approach empowers store managers to make decisions on

merchandise, product placement, and pricing, promoting adaptability to local markets.
• The "Satisfaction Guaranteed" program and personal interactions emphasize customer service,
contributing to a positive shopping experience.

Marketing:

• Everyday Low Prices (EDLP): Walmart's marketing strategy revolves around EDLP,
emphasizing consistent low prices over promotional activities. This feature creates an
opportunity to spend less on advertising compared to competitors, contributing to cost savings.

IT (Information Technology):

• Walmart's early adoption of IT, including EDI, bar code scanning, and satellite systems,
enhances inventory control and supply chain efficiency.
• Walmart's extensive use of data mining and analysis helps in forecasting, inventory
management, and personalized merchandising.

HRM (Human Resource Management):

• Walmart's emphasis on associates and opportunities for advancement fosters employee

involvement and empowerment.
• Decentralized decision-making at the store level gives managers and employees autonomy in
their roles.

Organization and Management Style:

• Walmart's management style, rooted in Sam Walton's principles, emphasizes close

communication between headquarters and individual stores.
• The Saturday meetings and decentralized management structure contribute to a fast-response
system, allowing quick adjustments and decision-making.

3. To what extent is Wal-Mart’s competitive advantage sustainable? Why have other

retailers had limited success in imitating Wal-Mart’s strategy and duplicating its
competitive advantage?
Based on the article, Walmart's competitive advantage is deeply rooted in its history, founder's
philosophy, and operational strategies. All these strategies mostly earned by time and create “value”
for the brand name. Therefore, it was hard to imitate Walmart’s strategy.
Walmart's commitment to EDLP is a core element of its strategy. This pricing philosophy builds
customer trust by offering a broad assortment of quality merchandise at consistently low prices. This
has become a part of Walmart's identity and is deeply ingrained in its corporate culture.

Walmart's innovative approach to distribution is a significant factor. Building its distribution centers and
developing a hub-and-spoke configuration for logistics allows it to efficiently manage inventory and
respond quickly to customer demand. The emphasis on cross-docking and other distribution strategies
increases speed and reduces costs.

Walmart has been a pioneer in applying information and communication technology to enhance
efficiency and customer responsiveness. The use of data mining, inventory control systems, and the
integration of IT throughout its value chain enable Walmart to forecast, replenish, and merchandise at
a granular level. The company's early adoption of technology has given it a significant edge.

Walmart's experimentation with various store formats, including supercenters, Sam's Club,
Neighborhood Markets, and Walmart Express, allows it to cater to different customer needs. This
flexibility in adapting to market demands and consumer preferences is a strength that other retailers
might find challenging to replicate.

Walmart's approach to international expansion involves adapting its retailing system to the specific
circumstances of each country. This flexibility in strategy allows Walmart to navigate diverse markets
successfully. However, as noted in the text, success varies in different regions.

Sam Walton's principles and values, such as thrift, customer-centric focus, and a culture of cost-cutting,
have continued to guide Walmart even after his death. The emphasis on respecting individuals, striving
for excellence, and a focus on customer service is deeply embedded in the company's culture.

Walmart's relationships with suppliers go beyond typical buyer-supplier interactions. The company
involves itself in its suppliers' employment and environmental policies, imposing detailed requirements
monitored through third-party audits. Collaboration for efficiency and cost savings is a hallmark of its
supplier relationships.

Walmart's unique management style, commitment to employee advancement, and a strong emphasis
on involvement and empowerment contribute to a motivated workforce. While the company faces
criticisms for low pay, its management practices generate a level of involvement and enthusiasm among
employees that is not common among large retail chains.

4. Looking ahead, what measures does Wal-Mart need to take to sustain its recent
performance and defend against competitive (and other) threats?

As of the provided information, up until 2015, Walmart has been a dominant force in the retail industry,
with a strong emphasis on low prices, efficient logistics, and technological innovation. To sustain its
recent performance and defend against competitive and other threats, Walmart could consider adapting
itself to base on the market needs.

Continuous strategy innovation to reduce cost while increasing efficiency to create low price
environment for its customers is the most important strategy that Walmart should hold on. Walmart’s
“brand value” lies under the strategy of “Everyday Low Price” which creates huge competitive
advantage. Therefore, no matter what, Walmart should be the low-price retail store that people easily
access and feel happy to be, which is the heritage of Sam Walton.