Walmart

Wal-Mart’s Cost Leadership

Strategy

By : Abhimanyu R &Ajoy Infant Raj A

Over the years

Total Retail Units as of May 31, 2015 - 5,212

Walmart Supercenters - 3,431

Walmart Discount Stores - 460

Neighborhood Markets - 630

Small Formats* - 41

Sam's Club – 650

Revenue - $487.5 billion (2015)

Awards

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

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

Small formats include Amigo, Supermercado, Walmart Express, Walmart on Campus and Super

Ahorros banners. 

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

: EDLP - 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

“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

• Competition from B & M and Online comptetitors

• Political influences in developing countries

• Retail Market in developing counties

• Online Shopping growth

• Lawsuits• High employee

Turnover• Negative

Publicity

• Economies of Scale

• Wide range of products

• Competence in IT

Strength Weakness

ThreatOpportunities

Porter's 5 Force Theory

“By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume.”(Walmart, 2010)

“Because you work hard for every dollar, you deserve the lowest price we can offer every time you make a purchase. You deserve our Every Day Low Price”.

Walmart in 2010

According to Cowgill of Zenith Management Consulting, “Walmart’s strategy is not low price”. Rather Walmart has been called as “Master of Manipulating Perception”.

Master of Manipulating Perception

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 Location Integrations

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.