Wal-Marts Cost Leadership Strategy

Presented By:
Group-7
Section-C
IMT Ghaziabad

 Vision:
If we work together, well lower the cost of living for
everyonewell give the world an opportunity to see
what its like to save and have a better life.
Mission:
To help people save money so they can live better.
Tagline:
Always Low Prices. Always (till 2007)
Save Money. Live better (present)

Even the advertising communication of Walmart said

Because you work hard for every dollar, you deserve
the lowest price we can offer every time you make a
purchase. You deserve our Every Day Low Price.
According to Walton By cutting your price, you can
boost your sales to a point where you earn far more
at the cheaper retail price than you would have by
selling the item at the higher price. In retailer
language, you can lower your markup but earn more
because of the increased volume.

A Brief Timeline
1962-Walmart Begins

1972-Walmart Goes
Public

1980-Walmart Comes Of
Age

21st Century-One Of The Most

Successful Retailers in the World

Sam studied discount retailing and undertook an extensive

tour round the country.
Came to conclusion that American consumers needed a new
type of stores.
Put 95% money for the 1st Walmart store they launched in
Arkansas.
By 1970 , 15 Walmart stores were opened.
In 1972 Walmart was listed in New York Stock Exchange.
By 1980 Walmart had grown to 276 stores in 11 states in USA
and sales revenue touched $1 Billion.

In 1983, the first Sam's Club members -warehouse opened.

In 1988, the first Supercentre comprising of grocery and 36
departments of merchandise opened.
By 1989, 1402 Walmart stores, 123 Sam's Club locations
opened and revenue increased to $26 Billion.

8692 stores , 15 countries

2.1 million associates,176 million customers in a year.

LOW

PORTERS COMPETITIVE FORCES LOW

Customers have few

options to buy elsewhere
as far as lowest price was
concerned

MEDIUM

LOW

Walmart is a very big buyer and

accounts for almost 40-50 % of
their supply
Switching cost for Walmart to
another supplier is also very less as
that supplier might only be
supplying about 5% of Walmarts
requirements

Very difficult to match cost leaders

as WM has already achieved a
tremendous amount of economies
of scale having been in the market
for decades.
The brand recognition of Walmart
is very much higher and its vast
product portfolio under a single
roof is its most important
differentiating factor from the new
entrants.

MEDIUM

Major competitors which Walmart

faces are K-Mart and Target which
in turn again faces stiff
competition from big wholesalers
such as Costco.

Online shopping provides

advantage as the customer need
not be physically present to buy
the product and can simply make
an order and have the items
delivered at his doorstep.

: The Value Chain Framework of Michael

Porter is a model that helps to analyze specific
activities though which a firm can create value
and competitive advantage.

Primary Activities
Inbound Logistics
-VMI system (Vendor
managed inventory)
continuous
replenishment
-More than 7000
company owned trucks
-EDI (Electronic Data
Interchange

Operations
3 business segments:
a)WalMart stores
- Super centers
- Discount centers
- Neighborhood markets
b) SAMS Club
c)WalMart international

Outbound Logistics
-Hub and spoke
distribution system. One
of the pioneers to master
the model.

Marketing and sales

- Word of mouth
communication.

-focuses on everyday low

prices.
- CROSS DOCKING:
-The majority of sales in the
logistic technique to make stores account for nationally
the distribution process
advertised merchandise. The
more efficient
company both sells their own
brands and licensed brands.
-Trucks with Wal-Mart run Wal-Mart is committed to
backhauls. This savings
purchasing products from
passed on to its customers. local and regional vendors,
instead of buying it cheaper
from elsewhere.
-Employees wore blue vests to
identify themselves.
-people-greeter who gave
directions and struck-up
conversations.

Service
-Opening hours at WalMart generally range
from 7.00 a.m. to 11.00
p.m. six days a week, and
from 10.00 a.m. to 8.00
p.m. on Sunday.
- All Wal-Mart stores
maintain uniform prices,
except where lower
prices are necessary to
meet local competition.
-Sales are primarily on a
self-service, cash- andcarry basis with the
objective of maximizing
sales volume and
inventory turnover while
minimizing expenses.

Secondary Activities
Firms infrasctructure:
-2485 Wal-Mart stores, 682 Supercentres, 457 Sams Clubs, 5 WalMart Neighbourhood Markets and 1007 units of Wal-Mart International.
-It serves over 100 million customers weekly worldwide.
-There are 1035000 associates, and the company is Americas largest private employer.
Human resources:
- Based on Interaction practices between company and employees
-Low pay but other benefits (health care plans, retirement plans, or promotion opportunities)
-2.2 million associates globally.
-Every time a supercenter opens, it creates roughly 300 jobs
-Women comprise 57% of U.S. workforce, 27% of corporate officers, and 20% of our Board of directors.
-Wal-Mart has been ranked as one of Americas 100 best companies to work for in recent surveys.
Techonology development: It is the key factor of the company. It constitutes a competitive advantage against competitors.
- Computer-based technology
- POS (Point of sales) system
- Satellite Communication System
-Information links all aspects of supply chain.
-Wal-mart uses Bar-coding & RFID technologies, different processes like efficient picking, receiving & proper inventory control of the products
along with easy packing and counting of the inventories is ensured.
Procurement:
-Wal-Mart deals directly with manufacturers, by passing all intermediaries.
- EDI : Electronic data interchange- All vendors are required to have EDI.
-Walmart encourages its employees to demand the absolute bottom rices possible.
MANUFACTURER WALMART CUSTOMERS

Porters Generic Strategy

Sources of low cost leadership

Corporate Strategy
Walmarts corporate strategy has been that of expansion and growth , so it has been
following growth as directional strategy

Concentration Strategy
Vertical Integration :

WalMart has always followed aggressive expansion. The company practices vertical
integration for it used to
only be a retailer - a place where customers shop for
consumer goods but in 1991 WalMart expanded into offering consumer goods in bulk to
small and medium size businesses also.
Horizontal Integration:
The company has also expanded its operations into other geographic locations (274 new
stores opened worldwide in 2003) and also increased the range of products and services
offered to current markets by becoming the first-mover into food and merchandise
retailing business through Supercenters in 1987.

Diversification Strategy
WalMart began diversifying its business into food and merchandise retailing.
Since they were heavily dependant upon discount stores for the major chunk
of its revenues and Sams club business was maturing they planned to move
into a related market of food and merchandise retailing which was estimated
to be thrice that of discount stores business
Since the companys core competency revolved around their excellent supply
chain system, their diversification strategy is a concentric.

Thank You