Walmart Case Study

Walmart

Wal Mart's position starts at two ends of the spectrum - make as many things as widely available to as many people as possible with small margins. So big turn over nets big profits but ots of sales need to be made to get that profit.

Next, because you have so many customers, SQUEEZE the life out of your suppliers - get them to give you even cheaper wholesale rates and advertising support - make them carry the cost of distribution and warehousing, force them to meet your IT needs. This reduces your own costs whilst forcing your suppliers to carry the can - the end result - greater margins for you.

Next, deny access to new suppliers who don't give you an even better wholesale rate. But keep them interested enough so that when one of your current suppliers goes out of business because you have milked them dry and they go bankrupt, you'll have a new supplier ready to step into the grave.

Its not a very wholesome way of doing business, essentially being more parasitical than participative but it works.

Another powerful part of the Wal-Mart market strategy is their use of information. They match the inventory of the store with the preferences of the customers by analyzing every sale. They look at sales volume, inventory turnover, packaging, price points, and a many other variables by product or group of products to create a profile of the buying habits of the customers at the store/site level.

Founded in 1962 by Sam Walton, Wal-Mart followed an amazing pattern of success and growth, eclipsing all other U.S. department store retailers by the early 1990?s.? In early spring 2001, Wal-Mart enjoyed a huge market capitalization of over $230B, which was down from highs of nearly $300B in early 2000.? Over the last year, however, Wal-Mart had suffered a number of failures in its Internet-based operations, as it tried feverishly, along with many other traditionally ?bricks-and-mortar? companies, to make a transition to the Internet.? As much of the commotion in the markets relative to the Internet subsided due to a slowing economy and a number of high-profile ?dot-com? failures, Wal-Mart continued to experiment with it?s Internet presence and corporate strategy.? In this paper, we discuss Wal-Mart and its technical transition to the Internet.? First, we examine the company from a value chain and core competency perspective, to gain insight on what value the company brings to the table, both in its traditional and Internet operations. We give a synopsis of Wal-Mart?s recent and current online philosophies, and then turn to Wal-Mart?s strategy as it relates to the transition.? Finally, we provide an analysis of Wal-Mart?s prospects and recommendations for the future.

Sources of Value ????????

Wal-Mart had always invested heavily in infrastructure.? They were among the first to use point-of-sale Uniform Product Codes (UPC) scanning, and intra-store radio frequency (RF) transmission of product UPC and pricing information between central store inventory systems and personnel with scanners on the store shelves.? However, their most valuable infrastructure investments were made at a significantly higher level.? A satellite system connecting all stores was initially installed in 1983, and grew into a complex communication network that included all stores, headquarters, and distribution centers, as well suppliers.? This system facilitated a modified just-in-time process of inventory control, a feat virtually unheard of in general merchandise retailing.? Put simply, as each store sells an item, a message is automatically sent to the supplier of that item, who then knows to include a replacement in the next shipment (usually that day) to the nearest distribution hub. This degree of connectivity allows rapid response to inventory needs, and reduces dramatically the amount of inventory required.?

A second area of major investment was in distribution technology.? Wal-Mart established a network of innovative hubs which used ?cross-docking? to minimize distribution center inventory and to facilitate the need-based inventory delivery system enabled by the satellite network.? In this model, as shipments arrive at the warehouse, merchandise is moved directly to the trucks carrying the outbound shipments to specific stores.? In many cases, the same trucks can even be used for inbound and outbound shipments, including those carrying new merchandise to stores and those carrying returned, outdated, or unneeded merchandise from stores, thus minimizing round-trip shipping costs.

Wal-Mart operates as an aggregator, distributor, and retailer of