Wal-Mart Stores in 2003
Identify the issue
Wal-Mart stores, one of the most successful retailing chain in the world, has gain competitive advantage over its competitors. Thanks to his unique set of features, like its powerful IT system, its way of manage suppliers or its logistic system, Wal-Mart is able to responds quickly at demand changing, maintain low costs and satisfy its customers.
Framework used in analysis
The analysis will be conducted using the value chain framework in order to analyze the situation and activities that Wal-Mart currently faces. The different resources and capabilities will be organized and categorized according to the value chain. Therefore, it will be possible to find out the unique set of competitive advantage that permits Wal-Mart leadership in retailing industry.
* D.C. : Distribution centre
Distribution is one of the most important activities of Wal-Mart. The company decided to build his own warehouses in order to buy in volume at attractive prices. Wal-Mart’s distribution centres are huge(One million square feet in size), highly automated, near to stores and operate 24 hours a day. Goods are delivered to stores usually within 48 hours of being ordered. The percentage of merchandise flowing through distribution centres are higher for Wal-Mart (compared to competitors). These features permit high efficiency (Wal-Mart inventory turns is 7.6 compared to 5.4 of Kmart and 6.1 of Target. Wal-Mart inventory cost accounts in 2003 only for 2- 3% of revenues compared to 4-5% of other retailers) The Scan’n pay system reduces the risks of unsold items for Wal-Mart and it’s an indication of its huge bargaining power . Innovation has always played a central role in Wal-Mart distribution system. The introduction of “cross-docking system” and RFID technology (which should increase the efficiency in the distribution system and reduce pilferage) are examples.
Product management includes marketing aspects like product assortment and pricing. Wal-Mart offers to its costumers a wide range of products. In the last years growth in Supercenter has lead to an increase of the selling of consumables ( it’s the main responsible of the Wal-Mart growth). The product mix is composed both of nationally branded and private label products. The growth of the latter is an index of the attempt to reduce prices for the customers more and more. The information- intensive approach to product assortment (using sales data, qualitative criteria, programs for tailoring product assortments to local demographics, MCAPS, Retail link) permits to merchandise stores individually. Hence, this lets Wal-Mart offer a wider variety than competitors and reduce stock outs. EDLP, promotions and “Rollback” are widely used in the pricing system. Capability of pricing nationally and locally permits a 2-4% pricing differential between Wal-Mart and its best competitors in most market.
Marketing: other marketing activities are advertising,...