Group 11

Rachit DM15244 |Sarvagya DM15250 |Keerthi DM15267 |Vaibhav DM15262 |Seerat DM15251
Strategy
Low cost Lower operating expenses than industry average. Primary cost
advantage: superior distribution capabilities (location of stores, inside-out
growth patterns, cross-docking, information management). Cost of
inbound logistics in 1993 was 3.7% of discount store sales vs. 4.8% for
competitors. Operating expenses from 1983-93 average at 16% of discount
store sales. The company has successfully reduced operating expenses y-
o-y.




High Volume: Low prices and lower operating costs indicates a strategy
that aims at capturing more market share by selling higher volumes
Customer Satisfaction: Low prices, efficient IT and control systems and
highly motivated and committed employees have helped in providing the
best customer experience in the discount retailers segment.

WalMart Industry
Operating Expenses 18.1% 24.6%
Competition: HIGH
Lack of differentiation in product
offerings
Low switching cost for
consumers
Increase market share at the cost
of profitability (Price Wars)

Substitutes: MODERATE
Food supermarkets,
grocery store, dept store,
specialty store, etc
Direct Sales Channels like
e-commerce
Barriers to entry: HIGH
Extensive distribution
network
Large number of stores
State-of-the-art data
management systems
Bargaining Power of
Buyers: MODERATE
Easy availability of
substitutes
Low Switching costs
Lack of differentiation
among players
Bargaining Power of
Suppliers: LOW
Availability of alternative
suppliers
Retailers have high
negotiation power due to
high volumes purchased
Porters Five Force Analysis Discount Retail
Industry
Competitive
Advantage
of Walmart
Distribution
Capabilities. Cross
docking helped
reduce costs by 2-
3% by avoiding
usual inventory
handling costs
Intranet to
connect stores:
Retail Link gives
vendors and
suppliers access
to extensive data
Expertise in store
management.
High Sales/sq.ft of
$300 vs. industry
average of $210
Excellent Human
Resource
Management.
Employees are call
associates and
treated as partners
with profit sharing
too
Economies of
Scale. From 642
stores in 1962, it
grew to 1953
discount stores
by 1993
Sophisticated IT
and control
systems allow
for efficient data
management
Recommendations
International Expansion:
Walmart could not continue to expand in the US alone because the domestic markets
had saturated and the US accounts for only 4% of the World population.
The strategy of Walmart is relevant in any country and in emerging markets where
disposable incomes are low, the opportunity for discount retailing is high
It can leverage its two main resources :- a) High buying power with domestic suppliers to
procure good in a cost effective manner. b) Its skill in efficient store management,
effective use of IT, merchandising skills, etc.
Convert discount stores to supercenters:
Supercenters are more profitable than discount stores as it combines discount and
supermarket format. Walmart superstores were twice as profitable
(EBIT/Investment=66%) compared to supermarkets (33.3%)
Diversify into new product categories and services:
Increase availability of high quality products to attract a new customer base
Offer more services to increase its position as a one-stop-solution. Example:- banking,
home and garden improvement, entertainment, etc.
New Store Formats