Wal-Mart’s Cost Leadership

Strategy

By : Group 2

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 : ELDP - the pricing strategy : Cost leadership Strategy : Massive expansion strategy : Global sourcing strategy

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

Over the years

• Discount stores :1573 to 1568

• Sam’s Clubs : 148 to 1258

• Super Centers : 3 to 525

• Neighborhood markets: 0 to 49

• Revenue - $244.5 billion

• Awards

2002 : ‘Ron Brown’ award for corporate leadership by President

2002 & 2003 : #1 in Fortune 500 list of world’s largest

companies

“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

SWOT OF

WAL-MART

1.Scale of operations

2.Funding ability

3.Competence in information systems

4.Wide range of products

5.International operations

Strengths

1. Labour related lawsuits

2. High employee turnover

3. Little differentiation

4. Negative publicity

Weaknesses

1. Retail market growth in developing countries

2. Rising acceptance of own label products

3. Trend toward healthy eating

4. Online shopping growth

1. Increasing competition from brick and mortar and online competitors

2. Increasing resistance from local communities

3. Political issues in developing countries

Opportunities

Threats

Porter's Generic Strategy

Cost Leadership

Differentiation

Cost Focus Differentiation Focus

Source of Competitive Advantage

ScopeN

arro

w

Boa

rd

Cost Differentiation

Sources of low cost leadership

Economies of Scale

Experience Curve

Capacity Utilization

Process Design

Economies of Scale

Quantity Mark Up

Experience Curve

Discount store – Sam’s Club – Super Centres – Neighbourhood Markets

Importance of IT system (POS, SCS & Automated conveyor system)

Impact of Experimentation

Distribution Process Design

Hub & Spoke Model

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”

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)

Porter’s Value Chain

General administrationHuman resource management

Technology development

Procurement

Inbound logistics

Operations Outbound logistics

Marketing and sales

Service

Primary ActivitiesInbound 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)

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

Thank You.