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WALMART CASE
Authors:
G. Gimondo
N. McConville
A. ODell
S. Smith
O. Vadillo
M. van de Rijt
Table of Contents
Introduction
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
Which CORPORATE
RATE OF PROFIT businesses STRATEGY
ABOVE THE should we be
COMPETITIVE LEVEL in?
How do we
make money? BUSINESS
COMPETITIVE STRATEGY
ADVANTAGE
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 3
ComputerCommercial services
software and services 12.8
attractiveness
Household and personal products 14.7
Pharmaceuticals
Computer software and services 15
15.2
Pharmaceuticals 18.4
0 5 10 15 20
7
Factor Which Underpin The Judgment
on Competitive Advantage
Market share -1
Quality of product/service offer -3
Customer loyalty -2
Innovation ability -2
Control of inputs and distribution -1
Quality of assets -1
Technology -1
Labour Productivity -1
Overall Score: -1.5 / 6
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 lower prices
Longer accounts payable periods
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
R1 Financial Strength 9 10
R2 IS Infrastructure 8 9
R3 Distribution Infrastructure 10 9
R4 Human Capital 8 4
R5 Store Locations 8 7
C1 Bargaining Power s/ Suppliers 10 9
C2 Inventory Management 7 8
C3 Employee Relations 4 6
C4 Marketing 5 5
C5 Cost Controls 10 10
C6 Management Expertise 7 9
C7 Distribution Processes 8 7
C8 Social Responsibility 2 4
C9 International Adaptation 3 8
10
3 5
1
Relative Strength of the R&C
6
Capabilities 7 2 1
Resources
2 5
Key Strengths
Superfluous Strengths
4
3 4
8 9
10
Importance
RECOMMENDATIONS FOR THE
FUTURE
Future of Walmart
How can Wal-Mart sustain its recent
performance and defend against other
threats?
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