STRATEGIC MANAGEMENT:

WALMART CASE
Authors:
G. Gimondo
N. McConville
A. ODell
S. Smith
O. Vadillo
M. van de Rijt

Table of Contents
Introduction

Industry and Firm Analysis

Competitive Advantages and Sustainability
Recommendations

Walmart
Worlds largest company
Discount store and Superstore model
Net income of $8 billion and sales of $245
billion in 2003
Shareholders expect growth
Domestic
International

INDUSTRY AND FIRM ANALYSIS

To what extent is WMs performance attributable to industry attractiveness
and to what extent to competitive advantage?

Sources of Superior Profitability

INDUSTRY
ATTRACTIVENESS

RATE OF PROFIT
ABOVE THE
COMPETITIVE LEVEL

Which
businesses
should we be
in?

How do we
make money?
COMPETITIVE
ADVANTAGE

CORPORATE
STRATEGY

BUSINESS
STRATEGY

How should we
compete?
5

Factors Which Underpin Industry

Attractiveness

Strong barriers from new entrants

3
High differentiation
2
Growth rate and growth potential
3
low price sensitivity
1
High value added
2
High level of resource utilisation
3
Attractive level of profitability now and in the future

Overall score : 2.4/6

-1975 Ban on resale price maintenance (big retailers favored)
-Different sizes and concepts

Profitability of global industries

Utilities
Utilities

6.2

Telecom Services

6.5

Transportation
Transportation
Energy

2003 figures:

6.9
7.7

Materials
Materials
Retailing

8.4

Retailing = 9 = Overall Average

Overall Average
Overall
Average
Consumer durables
and apparel

9
9.5

Food retailing
retailing
Automobiles andFood
components

Wal-Mart = worlds largest

company

9.6

Capital goods

9.9

Hotels, restaurants,
Capitalleisure
goods

9.9

Technology hardware and equipment

10.3

Food , beverages, tobacco

Technology hardware and equipment
Healthcare equipment and services

10.3

WM performance not really

attributable to industry
attractiveness

11

Semiconductors
Healthcare equipment and services
Commercial services

11.3
11.9

Media
services
ComputerCommercial
software and services

12.8

Household and personal products

14.7

Pharmaceuticals
Computer software
and services

15
15.2

Pharmaceuticals

18.4

10

15

20

Average ROIC 1963-2003 (%)

Factor Which Underpin The Judgment

on Competitive Advantage

Market share
Quality of product/service offer
Customer loyalty
Innovation ability
Control of inputs and distribution
Quality of assets
Technology
Labour Productivity

Overall Score: -1.5 / 6

-SCM, DCM, Merchandising principle
Technology strategy must support the business
strategy in developing a competitive advantage
(Managing Tecbnology course)

-1
-3
-2
-2
-1
-1
-1
-1

AGGRESSIVE

KEY COMPETITIVE ADVANTAGES

AND SUSTAINABILITY

Support Activities
Firm Infrastructure:
High store volume
No regional HQ
IT support systems for managerial decisions

Human Resource Management:

Introduction of senior manager with background outside retailing
(IT)
Lower wages than competitors
Less people employed/store
Higher sales volume / employee
Associates
Management Techniques
Balanced Scorecard

Support Activities
Technology Development:
Cutting-edge technology always used in order to
maintain CA
Benchmark of competitors successful measure
IT

Procurement:
High bargaining power with suppliers
Long period for Account Payables

Primary Activities

Inbound Logistics

One of first users of EDI to communicate with suppliers

Disintermediation
High bargain power
Example of flags after 9/11 (pp.7)

Operations
They uniquely operate each store
Better in-store execution than competitors

Outbound Logistics
Wal-Mart Distribution Centres
Distribution costs 2-3% compared with 4-5% of competitors
Inventory Turns (7.6 compared with 6.1 5.4 from competitors)

Marketing & Sales

Unbeatable prices

Services
People Greeter

Distribution Network
Economies of Scale
Hub and spoke model
84 distribution centers in
United States
Each center serves 150
stores within a 150 mile
radius

Cut out the middle man

Inventory Turnover
High store volume

Distribution Network Sustainability

Sustainable due to size and relationship with
suppliers
Some aspects can be replicated by
competitors
Hub and spoke model
Buying directly from the manufacturer

However difficult to replicate due to necessary

capital and size

Information Systems
Electronic Data Interchange (EDI)
Retail Link
Operating efficiencies
Ex: partnership with Procter and Gamble

Inventory turnover
Unique merchandise in stores
Local adaptation

Information Systems Sustainability

Partly sustainable
The technological system itself can be
replicated/purchased
Capabilities difficult to replicate
Partnerships
Superior supply chain management
How information

Cost Control
Bargaining power with suppliers
Disintermediation
lower cost
Longer accounts payable periods

lower prices

International Trade
China

Fewer employees

lower labor costs

Management techniques
Exclusion of unions

Cost Control Sustainability

Sustainable
Bargaining power is difficult to replicate
Influence
Disintermediation

Ability to keep indirect costs low

Culture of frugality
Difficult to imitate

Labor costs
Exclusion of unions

Resource & Capabilities Analysis

1st Step: Assessment of the main resources and
capabilities that affect the company and its
industry
2nd Step: Use the R&C Matrix to show the key
strengths of the company

Code

Description

Performance Importance

R1

Financial Strength

10

R2

IS Infrastructure

R3

Distribution Infrastructure

10

R4

Human Capital

R5

Store Locations

C1

Bargaining Power s/ Suppliers

10

C2

Inventory Management

C3

Employee Relations

C4

Marketing

C5

Cost Controls

10

10

C6

Management Expertise

C7

Distribution Processes

C8

Social Responsibility

C9

International Adaptation

Relative Strength of the R&C

10

3
6

Capabilities

5
1
1

Resources
2 5

Key Strengths

Superfluous Strengths
4

Zone of Irrelevance

Key Weaknesses

Importance

10

RECOMMENDATIONS FOR THE

FUTURE

Future of Walmart
How can Wal-Mart sustain its recent
performance and defend against other
threats?
Story of evolution, not revolution
(Bradley et al, 2003)

Recommendations and Challenges

Four Key Determinants:
Distribution Infrastructure
Globalisation
Competitive Threats
Social Issues

 Distribution Infrastructure
Building upon existing framework in order to
sustain competitive advantage

Globalisation
Market expansion
Challenges
Failure
Cultural insensitivity

 Competitive Threats
Intense price competition
Potential competition or too big to fail?

Social Issues
Sustainability 360
Corporate image
Negativity associated with
Walmart regarding HRM issues

Conclusion
Industry and Firm Analysis

Competitive Advantages
Sustainability of each advantage
Recommendations for the future

References

Bradley et al. (2003). Walmart Stores in 2003. Harvard Business Review.

Djeddour, M. (2011). Strategic Management Lecture. [Handout], Strategic

Management Module. Grenoble Graduate School of Business.