Due to the social influence people who want one stop service prefers Wal-Mart for shopping Nyakreal, At current situation Wal-Mart is more innovative and productive company, and its supply chain and logistics management is more successful now than before. In terms of technology, Wal-Mart is far away from its competitors. The modern technology is using by Wal-Mart for the purpose of marketing and selling its product Manjoo, MNC and Foreign Exchange Strategies Multinational companies trade across the borders in order to maintain supply and demand of their products globally.
China is one of the prominent examples where international trade takes place. S at low prices by adding small margin to compete its competitors. Wal-Mart imports from China and the intense pressure of exchange rate fluctuations results in exchange gains and losses both to the customer and supplier. Chinese Yuan is currently pegged at 6. S manufacturers and trade groups. Chinese supplier faces negative foreign exchange risk in supplying goods to Wal-Mart by the revaluation of Chinese Yuan or vise- versa Jan, Wal-Mart often requires fixing its currency exchange rate in purchasing contracts with Suppliers of China to manage the currency concern.
In terms of fixing the currency exchange rate will lead Wal-Mart to lock its product costs and profitability. So, by using this kind of strategies Wal-Mart can protect itself to increase in the value or unexpected drops of the RMB and U.
S dollar Carpenter and Dunung, Wal-Mart also hedges a portion of foreign currency risk by entering into currency swaps and net investment hedges in order to hedge against foreign exchange rate variations exposure associated with the potential payments of principal plus interest of non-U.
Any fluctuations in the foreign currency rates results in exchange gains and losses underlying these swaps. In addition to swaps, approximately GBP 3 billion debt in was hedged against net investments in United Kingdom. Again, any increase or decrease in British Pounds against US Dollar results in exchange gains or losses.
The company acquired Asda in Corporate Watch, Some say that there is an evil company in Arkansas. The company can do anything to get higher market profit Seglin, Wal-Mart opened stores with huge shelves due to which people have to use ladders in order to reach the top shelves.
These are some of the cultural issues for the failure of Wal-Mart in Asian Countries. It is difficult to find out one exact competitor. Target can be the biggest threat in terms of competing with Wal-Mart in all levels. The low price strategy followed by the Target is the same strategy which is Wal-Mart using. Target is gaining recently more market share by adding more grocery options in stores and expended its stores internationally Gough, Competitors around the World There are many International competitors available in the market but we are only looking at some main competitors of Wal-Mart.
Wal-Mart is the biggest in terms of revenue as compared to its competitors. However, in terms of compound annual growth rate, U. K is increasing by Overall International Market Growth The company is enjoying notably from its operations almost everywhere except Japan. In Chine, Wal- Mart has reasonable increase in market share and almost doubled their revenue growth Stone, Analysis of industry competition Here five competitive forces by Michael Porter are using to distinguish the competition in the given industry as seen below in figure 4.
Rivalry among existing competitors If there are a few competitors in the industry then rivalry can be weak but many competitors will lead to increased competition and shrink market attractiveness. Bargaining power of suppliers There are some reasons when suppliers are more powerful such as; in market there are few substitutes available, supplier product is unique or most effective, and switching cost from one to another supplier is high.
Bargaining power of buyer If the products are not differentiated then buyers can switch to another retailer as buyer seems to be more prices sensitive. If the products are similar then the buyer will compare the price among suppliers which increases the competition and lead to lower prices and profits. It is usually more costly for new firms to enter in high barrier industries. However, if the firm enters in the market then it will find difficulties to exist in the market Mallon, n.
Threat of substitute product Customer mainly influenced by low prices. Therefore, if cost of switching the product is low then threat of substitutes is higher. Normally, there are three factors that can influence the customer to switch the product such as; willingness of buyers to switch the product, performance and price.
On the other hand, if the buyers become loyal to the products then threat of substitute can be decreased Campbell, Internal Analysis 3. SWOT Analysis This model can help to evaluate the market position of the company through its strong operating performance. Strength 1. Scale of operations.
Wal-Mart can also achieve higher profit because of its huge size and it has a strong buyer power on suppliers to trim down the costs as compared to competitors Anon, Competence in information systems. The company is saving significant cost by using its information system properly that managed inventory level, orders, sales and other information. Any information can be easily accessible at each store at any time Khade and Lovaas, Wide range of products.
The company is offering broad range of both branded and own label products to attract its customers. Wal-Mart sells health and wellness, entertainment, clothing, home and grocery related goods under different categories Novellino, Cost leadership strategy. Everyday low price strategy makes different to Wal-Mart from its competitors.
Wal-Mart built different discount stores and selling goods at low cost as much as no other competitor can do. Low cost strategy has helped Wal-Mart to become leader in the Market Gough, International operations. Wal-Mart has expended its store Worldwide and the company is also looking to open more stores in different countries in upcoming days.
Weaknesses 1. Labor related lawsuits. Poor work conditions, voluntary overtime work, gender discrimination and litigation costs are some of the examples that Wal-Mart has always been criticized for. This has resulted in the company to pay million dollars of penalties and lawsuits every year Farfan, High employee turnover. It has to incur a lot of expenses for employee on-the-job training and recruitment expenses; the main reason behind these expenses is low skilled labor and low wages jobs Ungar, Negative Publicity.
Several lawsuits against the company have damaged its brand image; therefore negatively publicized Jurevicius, Opportunities 1. Retail market growth in emerging markets. The company plans to raise its sales by 5 to 7 percent in next year. According to CEO of Wal-Mart International, the company will make balance in existing market and through acquisitions will enter higher growth and large markets Walmart, Rising acceptance of own label products.
The company also sold products on the Internet through its tC website, walmart. According to analysts, Wal-Mart was able to achieve a leadership status Refer Exhibit II in the retail industry because of its efficient supply chain management practices. Captain Vernon L.
No one does that better than Wal-Mart. In his first job, Walton had displayed the qualities of a good salesman. He realized the importance of building loyalty among customers as well as employees. In the mid s, Walton gave up his job and decided to set up his own retail store. He purchased a store franchise from Ben Franklin in Newport, Arkansas. It was here that he learnt his first lessons in retailing — offering significant discounts on product prices to expand volumes and increase overall profits.
The business was successful and Walton soon acquired a second store within three years. Walton not only looked for opportunities to open stores in other small towns but also explored the possibility of introducing innovative practices such as self-service. As the need for people to manage his stores increased, Walton tried to attract talented and experienced people from other stores.
By the y late s, the retail chain had established a pharmacy, an auto service center, and several jewellery divisions. Customers could buy goods at wholesale prices by becoming members and paying a nominal membership fee. No Wal-Mart suffered a setback in , when Walton died after a prolonged illness. But it continued its impressive growth in the s, focusing more on establishing its stores overseas.
In , Wal-Mart expanded its operations in Mexico by entering into a joint venture with Cifra. Two years later, the company acquired Woolco stores from Woolworth, Canada. By , Wal-Mart had become the largest volume discount retailer in Canada and Mexico.
In January , Wal-Mart expanded its German operations by buying 74 stores of the hypermarket chain, Interspar. The stores were acquired from Spar Handels AG, which owned multiple retail formats and wholesale operations throughout Germany. By , Wal-Mart had emerged as the largest company in the world in terms of revenues. Analysts felt that Wal-Mart had come a long way since , when the company generated annual revenues of more than a billion dollar for the first time.
By , the company was doing a billion dollar business in a week and by , it was crossing the billion dollar mark in every 1. The company was able to offer a vast range of products at the lowest costs in the shortest possible time.
The company procured goods directly from manufacturers, bypassing all intermediaries. Wal-Mart was a tough negotiator on prices and finalized a purchase deal only when it was fully confident that the products being bought were not available elsewhere at a lower price.
That is the job. And your customer deserves the best prices that you can get. He always knows what he can sell, and we want his bottom price. Our truck will pick it up at your warehouse. Now what is your best price? By making the process transparent, the retailer could be certain that the manufacturers were doing their best to cut down costs. Once satisfied, Wal-Mart believed in establishing a long- op term relationship with the vendor. However, the company, generally, preferred local and regional vendors and suppliers.
Over 80, items were stocked in these centers. According to rough estimates, Wal-Mart was able to provide replenishments within two days on an average against at least five days for competitors.
Shipping costs for Wal-Mart worked out to be roughly 3 percent as against 5 percent for competitors. No Each distribution center was divided into different sections on the basis of the quantity of goods received and was managed the same way for both cases and palletized goods.
The inventory turnover rate was very high, about once every two weeks for most of the items. Goods meant for distribution within the US usually arrived in pallets, while imported goods arrived in re-usable boxes or cases. In some cases, suppliers delivered goods such as automotive and drug products Do directly to the stores.
The distribution centers ensured a steady and consistent flow of products to support the supply function. As Wal-Mart used sophisticated barcode technology and hand-held computer systems, managing the center became easier and more economical. Every employee had an access to real- time information regarding the inventory levels of all the products in the center. They had to just make two scans — one to identify the pallet, and the other to identify the location from where the stock had to be picked up.
Different barcodes were used to label different products, shelves and bins in a center. The hand-held computer guided an employee with regard to the location of a particular product from a particular bin or shelf in the center.
When the computer verified the bin and picked up a product, the employee confirmed whether it was the right product or not. The quantity of the product required from the center was entered into the hand-held computer by the employee and then the computer updated the information on the main server.
The hand-held computer also enabled the packaging department to get accurate information about the products to be packed. It displayed all information about the storage, packaging and shipping of a particular product thus, saving time on unnecessary paperwork. This enabled the company to satisfy customer needs quickly and improve the level of efficiency of the distribution center management operations.
Each distribution center had facilities for maintaining personal hygiene such as shower bath and fitness centers. It also had provision for food, sleep and personal business. The distribution center could also be used for meetings and paperwork.
The truck drivers of Wal-Mart sometimes availed these facilities. The distribution centers were serviced by more than 3, company owned trucks. These dedicated truck fleets allowed the company to ship goods from the distribution centers to the stores within two days and replenish the store shelves twice a week. The truck fleet was the visible link between the stores and distribution centers. Wal-Mart believed that it needed y drivers who were committed and dedicated to customer service.
The company hired only experienced drivers who had driven more than , accident-free miles, with no major traffic op violation. Wal-Mart truck drivers generally moved the merchandise-loaded trailers from Wal-Mart distribution centers to the retail stores serviced by each distribution center. These retail stores were tC considered as customers by the distribution centers. The drivers had to report their hours of service to a coordinator daily.
The coordinator scheduled all dispatches depending on the available driving time and the estimated time for travel between the distribution centers and the retail stores. The driver was usually expected to take a loaded truck trailer from the distribution center to the retail store and return No back with an empty trailer. He had to dispatch a loaded truck trailer at the retail store and spend the night there. A driver had to bring the trailer at the dock of a store only at its scheduled unloading time, no matter when he arrived at the store.
The drivers delivered the trailers in the afternoon and evening hours and they would be unloaded at the store at nights. There was a gap of two hours between unloading of each trailer. For instance, if a store received three trailers, the first one would be unloaded at midnight 12 AM , the second one would be unloaded at 2 AM and the third Do one at 4 AM.
Although, the trailers were left unattended, they were secured by the drivers, until the store personnel took charge of them at night. Wal-Mart received more trailers than they had docks, due to their large volume of business. The purpose of the book was to educate the drivers with regard to the code of conduct.
This book also contained a list of other activities, the non-compliance of which would result in the termination of the driver. The system reduced the handling and storage of finished goods, virtually eliminating the role of the distribution centers and stores.
There were five types of cross-docking Refer Exhibit IV. These purchase orders were then forwarded to the manufacturers who conveyed their ability or inability to supply the goods within a particular period of time. In cases where the manufacturer agreed to supply the required goods within the specified time, the goods were directly forwarded to a place called the staging area.
The goods were packed here according to the orders received from different stores and then directly sent to the respective customers. To gain maximum out of cross-docking, Wal-Mart had to make fundamental changes in its approach to managerial control. Traditionally, decisions about merchandising, pricing and promotions had been highly centralized and were generally taken at the corporate level. The cross- docking system, however, changed this practice. This approach placed a premium on frequent, informal cooperation among stores, distribution centers and suppliers with far less centralized control than earlier.
Stores could choose from a number of delivery plans. For instance, there was an accelerated delivery system by which stores located within a certain distance of a geographical center could receive replenishment tC within a day. Wal-Mart invested heavily in IT and communications systems to effectively track sales and merchandise inventories in stores across the country. With the rapid expansion of Wal-Mart stores in the US, it was essential to have a good communication system. Hence, Wal-Mart set up its own satellite communication system in If we have something really important or urgent to communicate to the stores and distribution centers, I, or any other Wal-Mart executive can walk back to our TV studio and get on that satellite transmission and get it Do right out there.
I can also go every Saturday morning around three, look over these printouts and know precisely what kind of work we have had. Instead of cutting inventory across the board, Wal-Mart made full use of its IT capabilities to make more inventories available in the case of items that customers wanted most, while reducing the overall inventory levels. Wal-Mart also networked its suppliers through computers. These helped them to keep track of the inventory in stores, deliveries and backup merchandise in stock at the distribution centers.
The order management and store replenishment of goods were entirely executed with the help of computers through the Point-of-Sales POS system. Through this system, it was possible to monitor and track the sales and merchandise stock levels on the store shelves. Wal-Mart also made use of the sophisticated algorithm system which enabled it to forecast the exact quantities of each item to be delivered, based on the inventories in each store. Since the data was accurate, even bulk items could be broken and supplied to the stores.
Wal-Mart also used a centralized inventory data system using which the personnel at the stores could find out the level of inventories and the location of each product at any given time. It also showed whether a product was being loaded in the distribution center or was in transit on a truck. Once the goods were unloaded at the store, the store was furnished with full stocks of inventories of a particular item and the inventory data system was immediately updated.
Wal-Mart also made use of bar coding and radio frequency technology to manage its inventories. Using bar codes and fixed optical readers, the goods could be directed to the appropriate dock, y from where they were loaded on to the trucks for shipment.
Bar coding devices enabled efficient picking, receiving and proper inventory control of the appropriate goods. It also enabled easy order packing and physical counting of the inventories. More than 10, Wal-Mart retail suppliers used the retail link system to monitor the sales of their goods at stores and replenish inventories. The details of daily transactions, which approximately amounted tC to more than 10 million per day, were processed through this integrated system and were furnished to every Wal-Mart store by 4 a.
In October , Wal-Mart tied-up with Atlas Commerce for upgrading the system through the Internet enabled technologies. Wal-Mart owned the largest and most sophisticated computer system in the private sector.
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