Thesis Statement
This report evaluates the Wal-Mart Stores. Thus, it explores the Company in terms of its low-cost strategy, product diversity and the high number of large physical stores. Using these capabilities, Wal-Mart has and continues to lead in the retail industry.
The report, therefore, evaluates how these capabilities have enabled Wal-Mart to realize its mission of helping people save money to live better. This mission continues to drive everything that happens at Wal-Mart. Customers continue to trust the everyday low price strategy through which they are able to save their money.
Wal-Mart’s Cost Advantage
Supply Chain Advantage
Wal-Mart successfully implemented an efficient supply chain management strategy in all its operations. Through this, the Company is able to lower cost of products while providing a highly competitive pricing for its consumers. Additionally, the efficient supply chain management strategy enables Wal-Mart to offer its customers the products they need where they need them.
In purchasing, the Company managers use the system to find products they will sell and look for suppliers. Thereafter, they procure products from suppliers at low prices to meet Wal-Mart profitability goals. The Company establishes long-term partnerships with suppliers so that it can get large quantities of products at lowest possible market prices. The focus is on buying from cheaper domestic suppliers.
Operations managers then use forecasts to determine customer demand for products. These products are then supplied to various distribution centers to meet customer demand and needs. Here, Wal-Mart lowers inventory carrying costs. On the other hand, the distribution function ensures that products move from manufacturers to the Company stores before getting to the customers.
Besides cutting down costs for inventory and product transportation, the Company drastically reduces the time taken to transport these products hence eliminating system inefficiencies.
There is efficiency in Company operations, as well as the distribution strategies achieved through having stores in large cities close to each other. “Every distribution center supports 90 to 100 stores in a 200-mile radius” (Wal-Mart). This lowers distribution costs incurred by the supply chain department.
Besides, the Company uses technology to make sure integration of the supply chain. Wal-Mart has embraced technology as a strategy to have a competitive edge in the highly competitive retail industry. For instance, through innovation, the Company has revitalized its supply chain lowering costs and pass resulting savings to its product consumers.
Traub in his article titled “Wal-mart Used Technology to Become Supply Chain Leader” says that Wal-Mart achieved this by use of a supply chain management system in its operations. For instance, the Company uses technology in forecasting customer demand accurately while tracking and predicting inventory levels within various stores.
Moreover, technological innovations have enabled Wal-Mart to create transportation routes that are highly efficient hence lowering costs (Walmart Stores 9). With information technology, the Company tracks product movement until they are finally delivered into its stores.
The efficiency in the supply chain system helps Wal-Mart save money with benefits being passed on to consumers in terms of low product prices. Any investor would enjoy having a strategic alliance with a company having such an excellent supply chain management system in place. I highly recommend Tech-Shield to invest in Wal-Mart.
Low Manufacturing Cost
Given that Wal-Mart controls most of the activities in the retail industry, it is a key business partner to its suppliers. Wal-Mart has a lot of control over the market. For instance, if Wal-Mart was to switch from doing business with other suppliers, this creates a scare among existing suppliers.
Currently, the Company has partnered with over 3,000 suppliers (Wal-Mart Stores). The Company purchases goods in large quantities from its suppliers.
Additionally, all suppliers have transparent production and delivery system to enable Wal-Mart track delivery of products. In order to cut costs, the Company has set up its own distribution channels hence eliminating a need for wholesalers (Rosenfeld). On the other hand, most manufacturers’ survival in the industry depends on the ability of Wal-Mart to market their products.
For this to happen, they have to play within requirements that Wal-Mart puts on the table. This has given the Company the audacity to bargain for products prices helping it acquire them at low prices. To ensure low costs, Wal-Mart advises suppliers to locate in countries with low production costs.
For instance, Wal-Mart imports most of its products from its manufacturers in China, Vietnam and Bangladesh (Clifford). Grocery suppliers have had to offer their products at low prices to maintain their partnership with Wal-Mart (Geller and Wohi). Wal-Mart has been able to lower costs through a low wage strategy to its workers (Berfield).
Low cost benefit consumers of all income groups as they are able to buy products at affordable prices. Wal-Mart, being a leader in the retail industry, significantly benefits from economies of scale. These are as a result of an outstanding system that the Company enjoys in terms of developed distribution channels and system, brand name, huge financial capital and location of stores.
Given that new entrants require huge capital investments to compete with the Company, most of them keep off. Additionally, given its good financial returns annually, Wal-Mart enjoys a cost advantage over rivals in the industry.
For instance, customers looking for quality products at low prices shop at Wal-Mart. Nevertheless, large suppliers like Coca Cola do have more bargaining power compared to smaller ones. With such a good strategy to lower Wal-Mart’s manufacturing costs, Tech-Shield should think about entering a strategic alliance with Wal-Mart.
Wal-Mart’s Product Diversification Strategy
Wal-Mart continues with its commitment to offer quality goods and services to customers at the lowest market prices as they believe that they are in business to serve customers. “Customers are the reason why we’re in business. And when we exceed their expectations, we’re at our best” (Walmart 2012 Annual Report 3).
Moreover, Wal-Mart has a workforce of more than 2 million serving over 200 million customers in its 10,000 retail units in over 27 countries.
The workforce has been vital in helping Wal-Mart achieve its mission, as well as grow its business.Using its mission of “Save Money, Live Better” (Wal-Mart Stores 1), Wal-Mart continues to serve its customers by offering quality products at lower prices compared to rivals in the industry. Here, focus is on delivering value and quality to customers.
Furthermore, Wal-Mart endeavors to help its customers buy commodities at affordable prices. Through this, Wal-Mart helps to improve the situations of people in the communities it operates. This mission has been embedded not only in the Company’s business, but also in its culture to impact every part of Wal-Mart. This includes Wal-Mart’s shareholders, workforce, customers and the communities where it operates.
Through a product diversification strategy, Wal-Mart offers a range of products to its customers. This is through its various formats like supermarkets, hypermarkets, retail stores, discount stores, supercenters, restaurants among others (Walmart 2012 Annual Report 6-10).
The range of products includes groceries, jewelry, toys, pharmaceuticals, books, household essentials, health care products, cell phones, electronics, home appliances, office equipment (Wal-Mart Stores) among many others. Here, Wal-Mart virtually has everything in their stores.
Matters of product quality and quantity in the retail industry are crucial when it comes to purchasing decisions that customers make. Product diversity gives Wal-Mart a competitive advantage as customers can find any product they need at the various stores. Tech-Shield would definitely look to invest in such a company.
Wal-Mart Store Size and Location
Wal-Mart internationalized its operations in 1991. This saw the Company embark on an expansion strategy to meet customer needs beyond the United States. Since then, the Company has been able to start operations in 27 countries. In order to serve its customers better, Wal-Mart partners with over 800,000 associates operating more than 5,500 stores (Wal-Mart Stores).
The mission behind the expansion strategy is ensuring every community has a store. Besides, the stores are large enough to ensure customer convenience during shopping. “Retail centers range in size from 8,900 square feet to 110,000 square feet. Its wholesale stores range in size from 35,000 square feet to 70,000 square feet” (Reuters). Most of these stores are close to each other, as well as the warehouse.
The warehouse system where it locates close to stores reduces Wal-Mart overhead hence the costs of production. In another move aimed at ensuring customers conveniently access its products, Wal-Mart came up with “Neighborhood Market stores” (D’Innocenzio).
These small stores within neighborhoods increase product sales while helping Wal-Mart remain competitive in an industry where rivals have dollar stores and drug chains.
Points of Correlation
The low price strategy has enabled the Company offer quality products to customers. Through various strategies, Wal-Mart is able to lower costs and pass on the savings to its customers. For instance, it works closely with suppliers to lower transportation costs. On the other hand, the Company does not use wholesalers in its operations hence enabling it to lower costs.
Through integrating information technology into its supply chain system, Wal-Mart tracks product movement until it reaches its stores. In this case, inventory costs are drastically reduced. Besides, the Company offers quality products in large quantities through its stores in over 27 countries. Moreover, these stores are large enough for customers to shop conveniently.
Wal-Mart has a customer relationship management (CRM) system to manage its relationship with customers. The Company aims at creating a better customer experience with its customers so that they enjoy shopping at the retail chain.
The Company values its customers with a believe that they are the number one boss. Customers are hence interested in shopping at Wal-Mart because of the wide range of quality products offered at lowest market prices.
Wherever a customer is, they can walk to a Wal-Mart store and get whatever product they need. Consequently, customer needs are met by having a range of products sold at lower prices compared to what other retailers in the industry. An investment is Wal-Mart is worthy given the cost advantage strategy, product diversity, and global presence of the Wal-Mart brand.
Conclusion
From the evaluation, I would recommend to Miguel that Tech-Shield should consider investing in Wal-Mart. The Company has huge growth potential given its high market share. Additionally, there are numerous opportunities for Wal-Mart to seize and continue with its dominance in the retail industry. For instance, diversify of Wal-Mart offers crucial areas in which Tech-Shield can be a partner through strategic alliances.
The low cost advantage helps Wal-Mart increase its market share. As such, it is a great opportunity for Wal-Mart to leverage through economies of scale plus the various cost cutting mechanisms in place.
On the other hand, investing in Wal-Mart is a way through which Tech-Shield can increase its market share and venture into other business ventures. Therefore, I would not hesitate to recommend that Tech-Shield invests a significant capital into Wal-Mart through a strategic alliance.
Works Cited
Berfield, Susan. “Are American Taxpayers Subsidizing Wal-Mart’s Low Wages?” 3 June 2013. Bloomberg Businessweek. Print.
Clifford, Simon. “Walmart Plans to Buy American More Often.” 15 January 2013. The New York Times. Web.
CNN Money. Global 500. 23 July 2012. Print.
D’Innocenzio, Ann. “Wal-Mart plans to open small stores faster.” 10 October 2012. Associated Press. Print.
Geller, Martinne and Jessica Wohi. “Analysis: Wal-Mart’s price push tests manufacturers’ prowess.” 6 March 2012. Reuters. Print.
Reuters. Wal-Mart Stores Inc (WMT.N). 2013. Print.
Rosenfeld, Herman. “Challenging Wal-Mart. Globalization, Supply-Chain Dominance and Sweatshop Labour.” 13 March 2007. Global Research. Web.
Traub, Todd. Wal-mart Used Technology to Become Supply Chain Leader. 2 July 2012. Print.
Walmart 2012 Annual Report. 50 years of helping customers save money and live better. Annual Report. Arkansas: Wal-Mart Stores, 2012. Print.
Wal-Mart. 2013 Global Responsibility Report. 31 January 2013. Print.
Wal-Mart Stores. Our Mission: Saving people money so they can live better. Global Sustainability Report. Arkansas: Wal-Mart, 2013. Print.
Walmart Stores. Walmart 2011 Annual Report. Building the next Generation Walmart. 1 January 2011. Web.