Transcript Key Source of Wal-Mart`s Competitive Advantages

Background
Historical competitive advantages and its
sustainability
Whether its business concepts work in HK
& China
Recommendation to Wal*Mart to sustain
its growth
Wal*Mart
• First established as a self-service discounting
store in 1962 by Sam Walton
• Formats:
Wal*Mart
Warehouse
Supercenter
Hypermarket
Close-out store
Wal*Mart
• Major competitors:
Kmart
Target
• Phenomenal success:
At the end of 1993:
No.1 of the top 50 Discount Department store
- Market value: 57.5 billion
- Sales per square foot: $300
(the industry average is $210)
Everyday-low-prices
Commit to customer service
Maintaining technological superiority
Building loyalty among associates and suppliers
Business strategies
Product Place Price Promotion
Product:
Stationery
Food
Home
hardlines
Automative
Wal*Mart
Household chemicals
& consumables
Sporting
goods
Paint &
hardware
Health &
beauty aids
Product Place Price Promotion
Place:
Small towns
Rural areas
- pattern of expansion:
-pushing from the inside out
Product Place Price Promotion
• Price:
“Always low prices-Always”
- Between 1992-1993:
- 2.2% below Kmart
- 3.7% below Target
Product Place Price Promotion
• Promotion:
“Everyday-low-prices”
- few promotion:
- advertising expense: 1.5% of sales
(while 2.1% for direct competitors)
Why Wal*Mart could succeed?
High Responsiveness and Flexibility
1. Changing Customer Demand
Flexible shelf space allocation
Private label lines
2. Changing prices
“Always low prices, always”
3. Technological Change
Heavy investment in information technology
Innovative Strategy
 Discount stores -> Supercenters
Wal*Mart’s Strategy
Industry-wide
Single segment
Low Cost
Differentiation
Cost
Leadership
Differentiation
Focus
Key Source of Wal*Mart’s
Competitive Advantages
Successful Vendor
Relationship
Efficient Communication
Network
LOW PRICE
Value
Employees Most
Efficient
Operation Management
Customer-Oriented
Direct Factors to Low Price
Lower Land Rent
Few Promotion
Sustainable?
Successful Vendor Relationship
•No-nonsense negotiator
•Partnership with suppliers
eg P&G-Sharing information electronically
Efficient Purchasing
Efficient
communication
•Vendor-managed inventory systems
eg Wrangler & GE
Minimize
inventory cost
Sustainable?
Lower
Cost
Efficient Communication Network
•“There are no superstars
at Wal-Mart”
•Combined informal
Entertainment with business
Better
Communication
•Sharing the numbers
Sustainable?
Higher
Productivity
Lower
Cost
Value Employees Most
•“Yes We Can Sam” suggestion program
•“Store within a store”
•Shrinkage incentive plan
Motivation
•Profit Sharing Scheme
•Management Training Program
Sustainable?
High
Productivity
Lower
Cost
Efficient Operation Management
•Distribution Network
-Hub-and-spoken distribution network
-Owned warehouses
-Cross-docking
Higher
Productivity
•Operating system
-Uniform Product Codes (UPC)
-Satellite system
Sustainable?
Lower
Cost
Customer -Oriented
No. 1 Boss – the customer
Loyalty
People Greeter
“Satisfaction Guaranteed” policy
Sustainable?
The Applicability of Business Concepts
Business strategy
low price
successful vendor
relationship
efficient communication
network
value employees most
efficient operation
management
customer oriented
Work / not
In HK
Work /not
In China
Low Price
in Hong Kong
• Land rent
• Promotion
in China
• Land rent
• Promotion
Successful Vendor Relationship
in Hong Kong
• 2 dominant supermarkets
in China
• compete with established competitors
Efficient Communication Network
In Hong Kong
In China
• flat organization
• information sharing
Value Employees Most
In Hong Kong
In China
• payment system
• programming
Motivation
+
incentive
Efficient Operation Management
In Hong Kong
In China
• operation system
• shrinkage
• distribution network
In Hong Kong
In China
Customer Orientation
In Hong Kong
In China
• provide subsidiary services
• customer = the boss
The Applicability of Business Concepts?
In Hong Kong
In China
1. Maintain and reinforce Wal-Mart’s core
competitive advantages.
2. Growth Strategies:
Technology:
Join forces with a well-known Interactive Service
Provider(e.g.AOL) to bridge the physical and
virtual world.
Advantages:
(1) Global Promotion
(2) Cost saving
(3) Customers Serving
i) By setting up searching engine
ii) By providing personal online services
iii) Could listen to consumers’ opinions promptly
(4) Facilitation on operation management
Culture:
- Change core values in different countries.
E.g. Hong Kong
Formats:
- Increase the number of supercenters
Conclusion:
1. Catch up the trend of e-commerce
2. Reinforce Wal*Mart’s core competitive advantages.
3. Adopt changes when necessary
THE END
Thank You!