Wal-mart - Case Analysis

Strategy adopted by Wal-Mart-

Low cost- Wal-Mart created a huge customer base by adopting a low cost strategy. As the main component sold was food products, it comprised of 35% of sales. They focus on opening stores which are huge and provide value for money to the customer and this cost practice makes them cost leaders.

Location-Wal-Mart acquired volume through a careful consideration of locations away from the city; moreover this was adopted by them as they wanted to open huge spacious stores which would have been costlier in the city. Thus it was easier for them to go for internationalization and increase their market reach in different countries.

Competitive advantage of Wal-Mart-

Responsive supply chain/distribution network-The network was centralized and automated.Efficient distribution with cross docking and concentrating on Hub and Spoke model. The center position (hub) was occupied by the 84 distribution centres/warehouse which served other 150 stores within a 150 mile radius.

Hub &spoke Model:

Bargaining power over the suppliers- Wal-Mart had a higher bargaining power over its suppliers as the system was centralized and there was no decentralization of authority. The suppliers had no decision making power and this was difficult to be replicated by the competitors.

EDLP (Every Day Low Price) - They maintained everyday low prices which provided convenience to the customers. Consumers had access to a variety of products under the same roof and hence this confirmed customer loyalty.  Wal-Mart was able to sustain its EDLP model with fewer expenses on advertising and matching volume driven strategy.

Recommendation-

Wal-Mart had a competitive advantage because of its responsive supply chain. The sustainability of the supply chain was outcome of the good relationship with suppliers since they treated them more than just partners.  As Wal-Mart has already shown its commitment and seriousness in its operations so the relationship will prosper more over a period of time. Also, they have the benefit of exclusivity and no imitability because replication of the models and strategies require huge capital investment.

Therefore, building upon the existing distribution network would help them sustain their existing competitive advantage; moreover, internationalization could increase their market penetration and assist them in sustaining as the market leader.

Contributed by:-

Tanvi Lal

Section A

Strategic Management

Class of 2013-15