Case Analysis – Wal-Mart About Wal-Mart: Wal-Mart rules the Fortune 500 for the second year in a row — and the eighth time this decade — beating Exxon Mobil decisively in the battle to be crowned America’s largest company. In just a few decades, Wal-Mart’s rapid development has created a miracle in the retail industry. Wal-Mart successfully obtained business, at the same time, put big influence to customers, suppliers or even the whole society. “Every Day Low Price” benefits its numerous customers worldwide and tens of thousands of national suppliers provide products and services to Wal-Mart.
For the retail industry and the whole business Wal-Mart has developed into a benchmark. As the nation’s largest private employer and the world’s largest retailer, Wal-Mart was established by the U. S. retail legend Mr. Sam Walton in 1962 in Rogers, Arkansas City. As of May 2011, Wal-Mart has opened more than 8970 worldwide stores, employs more than 210 million people, located in the United States, Mexico, Brazil, Argentina, Puerto Rico, the United Kingdom, Canada, China, Japan, Costa Rica, Guatemala, Honduras , El Salvador, Nicaragua and other 16 countries. Over 176 million people visit Wal-Mart every week.
Find new business model, maintain high performance, and make sustainable innovations under global economy. As a global retail giant Wal-Mart developed nearly half century, its successful experience within the industry continue to studied by competitors, while Wal-Mart’s case has become a hot topic in business school. Low price strategy is the magic weapon and in order to achieve truly low-cost, offer maximum profit to consumers, Wal-Mart strictly controls, reduces costs, improves efficiency, standardizes accuracy uniform store management, and builds a global information technology and efficient green supply chain system.
Cost control is a vital factor in corporate profits, also is one of ongoing practice, in which innovations will continue to raise the company’s bottom line . However, the Chinese old saying says “KAI YUAN JIE LIU” is the fundamentality of survival. KAI YUAN JIE LIU means to broaden the source of income and reduce the expenditure to maintain thrive. Create new business models and profit breakthrough to continually enhance the competitiveness of Wal-Mart, make it shoo-in in the increasingly fierce battle in business. ? Sell management system and standards of Wal-Mart Franchises in emerging market A . Sell Wal-Mart management system and standards of Wal-Mart What to sell? Wal-Mart’s perfect store management experience , “full information” of a strong supply chain management system and sustainable strategy can be used to provide consulting and training services for other companies . Wal-Mart’s brand concept , experiencese and maturing of the management mechanism, standardized processes in the past 50 years are valuable assets within the industry, and the whole business society.
Wal-Mart can take advantage of its complete supply chain, store management information system, management skills and other aspects of logistics experience, sustainability practices to offer guidance and help for other companies . Through the courageous and prudent strategy of market expansion, Wal-Mart occupied the terminal channels, then build a large customer base; at the same time, make use of advanced information technology to create an efficient and transparent supply chain system, Wal-Mat not only improved the supply chain efficiency, reduced costs, also controlled the entire supply chain and enhanced the bargaining power.
Wal-Mart’s market expansion strategy is through control of the consumer end, and with very powerful supply chain system to dominate the negotiations with the supplier and then ultimately realize the “Every Day Low Price” -the ultimate advantage. Wal-Mart shopping center and Sam’s Club stores are all large stores and the products cover all aspects of daily life. As too many varieties of goods, customer is very difficult to choose goods. Therefore, to establish and maintain a proper store plan is a major challenge faced by Wal-Mart.
But Wal-Mart turned challenges into its own advantages. The stores with scientific planning bring the customer shopping convenience and a better shopping experience. Wal-Mart’s new stores will be opened by a uniform standard for store planning– the size of its shop, shop decoration, store shelves size, placement of goods, commodities and other signs have placed the company uniform regulations. In addition to a unified, standard store planning, store display of goods for Wal-Mart has its own set of rules and the display starting point is the basis of their merchandise mix.
Wal- Mart retail stores in the design of merchandise on display, always will be a unique store design principles. Extremely powerful Wal-Mart’s supply chain is another key factors to offer “Every Day Low Price” – ultimate advantage. The supply chain is ultimately the customer demand-driven supply chain and the high integration, quick data exchange reaction. Its characteristics can be summarized with three points: seamless style transparent supply chain, co-management of collaborative supply chain, and the emerging “green” supply chain. Target customers:
The new companies look forward to learning Wal-Mart’s extensive standardization process management to help regulate the development; the developing companies expect to learn Wal- Mart’s advanced management system to enhance the development of their own strength, and hope to accelerate delivery speed by supply chain management system of Wal-Mart; the mature companies that want to learn and adopt Wal-Mart’s high standards of the industry, sustainable development practices to find your company new revenue and business models. Where to sell? United States and emerging markets.
With global economic integration, global cross-border trade, capital, information, materials and personnel activities are rapidly increased, while the world trade center is slowly be shifted to emerging markets. New business growth opportunities become more and more in South America, Asia and Africa. The economic developments in those regions are slow compared to developed countries, the standardization and development of enterprise are relatively immature. They recognized and accepted the Wal-Mart brand and success,and they also hope their companies to become bigger and stronger.
But it not enough only by their own efforts, they need draw lessons from experiences of companies like Wal-Mart to accelerate their development. How to build the business model and profit? Wal-Mart can set up School of Management, consulting firms or industry standards organization to offer consultation and diagnosis service to the companies who aspire to be “Wal-Mart model” . The management school will help companies develop high-quality and high capacity management while the consulting firm will establish standardized work processes, standards and efficient business practices.
When conduct advising and diagnosing these companies, Wal-Mart itself will be revealed, avoid risks and hit by new inspiration of innovation. On the other hand, Wal-Mart’s supply chain system could be the best in the world. Based on its sophisticated developments, Wal-Mart make efforts to establish industry standards/principles to guide the entire industry supply chain management and make them as industry evaluation criteria . If some companies want to apply the standards , they have to pay fees required by the standard test ,evaluation and audit.
Wal-Mart’s green strategies and practices of sustainable development is a global trend and advocacy. While it carried out within its own operations, supplies, associates and customers, Wal- Mart also can take the opportunities to promote and educate other companies to help them meet higher standards of global development. Meanwhile, Wal-Mart will enhance the corporate image, and corporate social responsibility, which will eventually return to increase business value.
Wal-Mart is the first one to use retail enterprise information management, also invested the largest dollar amount in information technology in retail industry to invest companies. Wal-Mart’s electronic information and communication system is the nation’s largest civilian electronic information systems. Wal-Mart-style buying and selling network, Satellite communication and computer high-tech contact center’s information systems play an important role. In Wal-Mart online sale system. Wal-Mart has been on the high sensitivity is much higher than the competitors.
Wal- Mart’s information systems has been leading the world. In order to maximize the utilization of the information system and reduce costs even more, Wal-Mart can provide data management services, work as other companies on behalf of management agency data management system to improve the company’s data exchange and data storage capacity. According to the company’s frequency of use and data traffic, the number of transactions, it will be charged by appropriate fee. Maybe this method will help to share technology cost between Wal-Mart and the company.
To implement new business model will go through the process of poilt, adjusting and evolving to achieve goals. Costs Equipment investment, in order to maintain high-speed operation, it maybe need the necessary expansion and additional equipment. Staffing and restructuring costs will be other costs. Employees work in the daily management and development practices are most familiar with the details of Wal- Mart, and they participated in strategy formulation and implementation with most in-depth understanding of Wal-Mart’s standardized management processes.
They could be candidates for new business model launch or to be added new job duties with increasing compensation and benefits. In the pilot phase of the new model, there will no need too much input. In the follow-up adjustment and mature stage, based on market size and demands, it may need more professional training, counseling and standards deployment staff, or adjust the existing staff positions and responsibilities. B Franchises in Emerging Market Wal-Mart started from the town, and began with discount department stores. It started at different times to get a breakthrough type of development.
In 1960s, Wal-Mart began its first time rapid expansion after the establishment , to solve the problem of survival in cracks; accelerated expansion in 1970s, due to the crisis in the industry, it achieved rapid expansion of the regional; in 1980s continue to expand regional power, successfully bought discount department store chain then first entered the southern United States, Wal-Mart achieved a breakthrough in the geography; in 1990s, Wal-Mart began an international journey. With rapid expansion into foreign markets, and increasing market share, Wal-Mart became the world’s largest company.
In operation models, Wal-Mart introduced a variety of retail forms for different levels of consumers. There four models: Discount stores, Sam’s Club stores, super center and neighborhood market. Discounters is one of the earliest development of the forms for the Wal-Mart, that made a significant contribution to the development, now the format is still occupied much of Wal-Mart’s total sales. Wal-Mart discount stores positioning strategy is for low-income consumers, Wal-Mart discount stores only intended to be the shore which can sell goods instead of providing full sets of goods in shops.
Sam’s Club is named by Wal-Mart founder Sam Walton, which is a membership warehouse store, the first Sam’s Club was founded in 1983. As of the end of 2008, there are total 602 Sam’s Club stores in the United States. Sam’s Club focus on a large number of small business owners and other individual consumers to purchase at large quantity. Customers pay a membership fee to be member of Sam’s Club, and they will enjoy different discount based on one time spending or accumulate expends for several times.
Sam’s Club stores make money on large packaging, lowprofit mode of operation, so that customers can enjoy low warehouse prices. In addition, members can also enjoy some local restaurants and leisure and entertainment discounts. Wal-Mart super center is the third format. The first Wal-Mart supercenter was opened on March 1, 1988 in Washington, Missouri, USA. 10 years later, Wal-Mart has become the love of customers, who help push Wal-Mart to continuous development. By the end of 2008, Wal-Mart has a total of 2 612 super centers in the United States.
And same with discount stores, Wal-Mart super center is oriented to low-income families. Super center is based on the philosophy of “every day low prices” to pursuit of “one stop” shopping concept, helps customers to save time and money, and provides a unique shopping experience. Neighborhood market was first opened in 1999, new retail formats has been added to Wal-Mart family. The new member growed very fast, as of the end of 2008, Wal-Mart’s neighborhood market in the United States has reached 153 stores.
Market was built on the residents community and provides community services with target of the residents. It is more like “DIY assembly PC”, all the configuration and design are related to the consumption of the community closely, its product positioning, store layout, marketing and planning are also for community residents. The market targeted at the upper household consumers, consumption patterns in this market segment is a supplement to the former three kinds of retail formats as to compete with local small food supermarkets , convenience stores and other grocery stores .
Different operational formats work for different customer groups and competitors, all together, to meet the needs of different consumer-level customers and effectively respond to the different competitors, making Wal-Mart to occupy the high, medium and low-end market and to be a No. 1 brand. What to sell? Wal-Mart’s high quality and low price products, standard service, unified supply chain, Franchise license, sustainable strategy . With investments, acquisitions, joint ventures and the different ways the expansion of retail operation models in the United States and international development, Wal- Mart has achieved some progress.
Due to saturation of US market, and the policy made by goverment of expanding demand in some emerging markets, Wal-Mart have to pay more attention to emerging markets and try to “buy the dips” to rivalize with the competitors. When expanding in emerging markets, Wal-Mart has encountered a number of localized resistance, and negative effects on reputation for many critics worried about the effect of its stores on local communities. If adopt franchise model in local small towns will be a good choice for Wal-Mart when directly owned and operated model doesn’t work well.
The model will extended Wal-Mart’s brand concept, may help to access and dominate new local market more in -depth and flexibly. Where to sell? There are tremendous business opportunities in emerging markets such as Asia, South America and Africa. The local government also will favor to promote economy and create jobs. There are high population density, commercial underway development, potential consumers with strong purchasing power and the consumer’s recognition of brand, value price, expectations for standard service and convenience products , small towns and connecting area between urban and rural area in emerging markets.
How to build new model? As a crucial supplementary model, Wal-Mart can take advantage of local manpower, real estate, marketing and other resources in emerging markets, offer franchise service and charge local stores for franchise license fee. The local stores will not be closed after Wal-Mart entries local market, they will fully supported by Wal-Marts for the franchise service. Wal-Mart will provide a unified supply chain management, buyer standardization process to guarantee product quality and low price.
The operations and decision-making power of the stores will completely authorized to owner themselves. In order to maintain the high quality brand’s reputation, Wal-Mart will set criterias to regularly assess operation indicator and sustainable development practices to decide whether the franchise stores compliance with standards required. Wal-Mart will try to get more local stores involved into the franchise in second or third ties cities/towns in emerging markets.
Convenience stores will be a proper form of franchise store, the main features of small, fast, full-small size, less investment, quick turnover of goods, all daily necessities. Wal-Mart should make efforts to culture shopping habits for local consumer and educate them for trust and recognition of low price but high product quality. Given the accelerated economic development, population growth in emerging markets and population mobility have increased, these potential customers will become the franchise’s biggest sources of revenue.
Wal-Mart franchise mode can reduce the large number of new markets initial capital investment which can be invested to high return value, make full use of local resources. It also help Wal-Mart to land softly into the new market, eliminate the negative impact to local retail stores, promote local economy and solve local job issues which will gain applause from local government. Then huge Wal-Mart affiliates will gradually include all of local retail stores, then the monopoly of local the retail industry will be possible. Cost
Franchise management related costs, staffing and logistics and distribution of the corresponding cost of goods. Conclusion While controlling costs and savings money, Wal-Mart will continue to invent new business models and make it to be breakthrough of business value and to complete from good to great In a globalized economy, sustainable development and innovation. End notes:  http://money. cnn. com/magazines/fortune/fortune500/2011/index. html *other data about Wal-Mart are from http://en. wikipedia. org/wiki/Walmart http://www. walmart. com