the idea of walmart

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the idea of walmart

1.0 Introduction

WALMART is one of the world’s leading household goods provider. It has expanded its business to many countries and implemented the hybrid strategy at the business level offering economic and innovative products to the global consumers. The standardization of production and the one-suit-for-all business model allows WALMART to control its costs effectively and the global supply chain facilitates its implementation of the hybrid strategy. As the result, the company has achieved good financial performance and sustainability. Even impacted by the 2008 international financial crisis, WALMART made good performance. Business success of WALMART is due to a variety of reasons. Innovations, optimization of internal process, and customer orientation are major reasons contributing to WALMART’s leadership in the global furnishing industry. In fact, the increasingly intensive global market has put great pressure on companies and required them to establish and reinforce their competitive advantages. The competitive advantages of WALMART such as innovations, efficient supply chain management, and sensitivity and adaptability to the changing customer needs are rooted in its business operations. In this report, the major aspects of WALMART’s business operation are analyzed including innovation and organizational sustainability, operations and internal processes, customer and marketing, and financial performance. With analysis of these aspects, the report aims to outline the features of WALMART’s business operation as well as explain why the company manages to establish the leading and unique position in the global market.

2.0 Innovation and organizational sustainability

2.1 Innovation

WALMART is a company with strong competence of innovation. Its innovation is mainly reflected in two aspects. First, it innovatively creates the current business model. One-suit-for-all business model effectively enlarges purchasing sale of WALMART, helps it to enhance its bargaining power against the suppliers, and get preferential prices to cut down its costs. In addition, One-suit-for-all business model enhances the level of standardization making business management more easily and allowing consumers around the world enjoy the same high quality products (Enquist et al, 2007). In addition, to reduce costs, WALMART cut down the unnecessary services. For example, a majority of WALMART’s furniture is self-assembled and the company does not provide free delivery services. This is different from many companies which want to provide more services for customers to attract them and enhance consumer satisfaction. Second, WALMART pays attention to product innovations. The company leads the fashion of furniture designing in the global market. The innovative designers worked in WALMART help the company to deliver the new product models to the market. WALMART tries to provide practical and quality products with affordable prices to the customers and innovation of products is a very important element of “the WALMART Way”, the corporate culture of WALMART. Innovation competence contributes to WALMART’s business to a large extent. Nowadays, customers have higher requirements for products and services. Since they have many alternatives and can vote by feet, companies have to impress them and attract them with continuous innovations and improvements. Innovations help WALMART to achieve these objectives and differentiate itself from its competitors to establish the unique position in the global market.

2.2 Organizational sustainability

WALMART has strong competence of sustainable development. Nowadays, the business environment is changing fast and global economic fluctuation puts great pressure on companies. For instance, the 2008 international financial crisis impacted many companies and led to significant declination of their performance. WALMART managed to survive this crisis in a rather smooth way. This provides some evidence for sustainability of the company. To deal with the difficult times, WALMART explored the ways to cut down its costs. It kept seeking for quality and cheaper suppliers. In addition, its designers cooperate with the suppliers closely so as to develop the new products in a more efficient and economic way (WALMART, 2010). In addition, WALMART pays attention to develop the green and energy saving techniques in its production and product designing. These measures help the company to adapt to the new business environment since corporate social responsibility and sustainable development are given more and more attention by the public. Corporate social responsibility benefits companies to improve their reputation, promote their public relations, and win trust of the customers and other stakeholders. WALMART has been aware of the new trend and made adequate response. In general, the competence of sustainable development can largely be attributed to WALMART’s flexibility and adaptability in its business operation. It keeps improving its supply chain management and adjusts its business operations and product designing toward the changing customer requirements and business environment. Success of WALMART reveals that to achieve sustainable development, companies should take active attitude toward change management to enhance their flexibility and adaptability.

3.0 Operations and internal processes3.1 IT capabilityWALMART has adopted information technology to improve and measure its performance. The company has established its official website and exploited some social media to implement its marketing activities. It allows consumers to make purchasing orders online. In this way, the product availability of WALMART has been significantly enhanced. In addition, WALMART uses information technology system to optimize its internal operations and business management. Information technology has been used in its major aspects of business operation such as supply chain management, human resource management, and financial performance analysis. For instance, in recruiting employees, WALMART uses the online approaches to enhance its efficiency. It also collects data of customers and sets up a strong database to analyze the customer behaviors and demographic features, provide services and manage contracts. For example, the company has updated its contact centre operations by setting up the Interactive Intelligence’s Customer Interaction Centre (CIC) 4.0 (Callcentre Helper, 2013). By introducing the advanced information technology into CIC 4.0, the company hopes to improve quality of customer service and business performance.

3.2 Scale and range of productThe 4Vs model helps to analyze the business scale and range. Figure 1 shows the 4Vs model. WALMART provides a large volume of products to the global consumers with its mature network and huge business scale. It offers a high variety of products since more than 9000 kinds of furnishing goods are sold by WALMART. Its business is of medium level of variation. On one hand, WALMART has some loyal consumers who repeatedly buy its products and support its stable performance. On the other hand, the sales revenue and profits may be impacted by economic situation and other changes of business environment. The products provided by WALMART are of high level of visibility. Consumers can see, feel and touch the furnishing products in the WALMART stores. Even for the online buyers, pictures and instructions are provided for them to see the products and understand their functions and features.

3.3 Supply chain management

Supply chain management is a basic competitive advantage of WALMART which supports its business success. To provide high quality and innovative products with cheap prices is a challenging task and WALMART achieves these conflicting objectives with its strong supply chain management (Ivarsson and Alvstam, 2011). WALMART mainly adopts a buy supply chain. Theoretically, make and buy are two basic types of supply chain. Make refers to the supply chain “If an organization produces goods it incurs the full costs of owning plant and manufacturing capacity” (Hines, 2004, Chapter 6). On the contrary, buy refers to the supply chain if an organization orders and buys goods from suppliers and transfer the costs of building and operating plants to the suppliers. WALMART has more than 1220 suppliers in 55 different countries making its furniture and 31 central distribution centers in 16 countries or the suppliers deliver products to the WALMART stores (International Supply Chain Management, 2013). The buy supply chain allows WALMART to reduce risks and keep its flexibility. It can select for more efficient and cheaper suppliers to remain its cost leadership.

4.0 Customer and marketing4.1 Market segmentation

Market segmentation is a necessary approach for companies to accurately target at their potential consumers. WALMART mainly targets at two groups of consumers. One group is young consumers which prefer innovative products and enjoy DIY efforts in assembling the furniture but have limited income (Yu, 2013). In addition, many young people are supporters of easy and simply life. The WALMART products are designed with a simple style which meets with the desires of many young people. The other target consumer group is consisted of people at the middle class. This group of consumers enjoys the quality life and has their own tastes and desires for life. At the same time, they are sensitive about prices. The economic and affordable products are preferred by them. The analysis reveals that WALMART has well understood its potential consumers and clearly known what they want. The products and styles of WALMART exactly meet with needs and desires of potential consumers. In addition, the target consumer groups of WALMART cover a large number of people which indicates that the company has huge market potential.

4.2 Branding strategy

Branding strategy contributes to WALMART’s success largely. WALMART has given special attention to build and improve its corporate reputation and brand image (Tarnovskaya and De Chernatony, 2011). It adopts a brand extension strategy using the WALMART brand to all of its furnishing products. The brand extension strategy has some merits. An important one is to deeply impress customers and make them remember the brand. In fact, many people all around the world know the brand of WALMART. The high brand identification is of extremely importance. For many customers, the well-known brands send out signals of high quality of products and services. Therefore, they tend to choose these brands. In some developing countries such as China, customers are likely to trust the brands of big multinational companies including WALMART. This benefits WALMART’s business operation in these countries. In fact, the emerging countries in particular China have become the new profit sources for WALMART. WALMART effectively integrates its branding strategy with marketing activities (Tarnovskaya and De Chernatony, 2011). By emphasizing its advantages in innovations and prices in its marketing activities, WALMART successfully differentiates its brand from its competitors and win support of customers.

4.3 Sales channels

To enhance availability of products and provide better services for customers, WALMART has set up multi-channels to sell its products. Currently, in-store sales and online sales are two major sales channels of WALMART. In-store sales mean WALMART builds up stores in some countries all around the world so that customers can visit these stores to select the products they want (Reynoso, 2009). This is a traditional sales channel. Table 1 shows growth of WALMART’s stores and Table 2 shows visits of WALMART. Except for in-store sales, the company also establishes online store. The new way helps WALMART to keep up pace of the technological development.

5.0 Financial performance5.1 Analysis of financial indicators

WALMART is a private company. Comparing with the public companies, the transparency of WALMART’s financial performance is lower. Table 3 shows some major financial indicators of WALMART revealed in its summary of performance. The table shows that WALMART made good performance in sales and had strong competence of cost control. In 2009, the sales revenue of WALMART increased €312 million while the cost increased only €76 million. The strong cost control competence allows the company to achieve large profits. The financial indicators imply that WALMART has good financial competence to support its current business operation and new investments. For example, the company plans to set up a chain of economic hotels in Europe. This investment is supported with its good financial performance. On one side, WALMART can invest its own money into the new project. On the other side, the strong financial performance of WALMART helps it to get support from the financial organizations and allows it to get financial support at low costs.

Table 3: The financial performance of WALMART

Financial indicators (€million) Fiscal year 2009 Fiscal year 2008

Sales revenue 21846 21534

Cost of goods sold 11878 11802

Gross profit 9968 9732

Operating cost 7198 7078

Operating income 2770 2654

Income before minority interests and tax 2913 2813

Tax 384 546

Net profit 2538 2280

Source: WALMART. (2010).

5.2 Reasons for the current financial situation

The above financial indicators show that WALMART has set up a strong financial position currently. Even in the difficult times, the company succeeded to achieve growth of performance. Though WALMART’s financial data is not publicized timely as the public companies, the company’s good performance is reflected in its business expansion. The successful financial situation of WALMART is achieved with the following reasons. First, the company has formed a large consumer base. By improving its brand and products continuously and developing the membership policies, WALMART retain the regular consumers. These consumers contribute largely to its growing sales revenue. Second, WALMART is sensitive about the business opportunities. The company has given special attention to the emerging markets in particular China (Johansson and Thelander, 2009). It realizes China is of bright prospect with its rapid economic growth and increasing household income. The attentions given to the new markets help WALMART to avoid saturation in its traditional markets and allow it to exploit globalization more efficiently. Third, though WALMART tries to differentiate itself from its competitors with innovations and quality products, it emphasizes implementation of the cost leadership strategy and keeps improving its cost control. Nowadays, cost control pressure becomes increasingly large with inflation. This competence benefits WALMART to a large extent. Fourth, WALMART has set up its business continuity system and plans to enhance its resilience, flexibility and adaptability. Business continuity system facilitates WALMART to survive the difficult times and make stable financial performance.

6.0 Conclusion

This report analyzes the current situation and competence of WALMART. It is found that the company has set up the dominant advantages in innovations, flexibility and adaptability of international business operational process, and good understanding of consumer needs and adequate marketing segmentation. In recent years, WALMART has kept improving its major activities of business management such as supply chain management, adoption of information technology, brand construction and cost control. All these activities are guided by WALMART’s hybrid strategy which integrates the differentiation strategy and the cost leadership strategy. The competitive advantages and the clear business strategy of WALMART contribute to its stable performance and the current financial performance. In fact, WALMART also has to face the changing customer needs and the difficult times, but it manages to adapt to them by giving attention to sustainable development and business continuity. In summary, WALMART is a successful company with strong competitive competence in the global market.

References

Enquist, B., Edvardsson, B., Sebhatu, S. P. (2007). Values-based service quality for sustainable business. Managing Service Quality, 17(4), 385 – 403.Hines, T. (2004). Supply Chain Strategies: Customer-driven and Customer-Focused. Elsevier Butterworth-Heinemann, Burlington.

WALMART. (2010). Yearly Summary FY09. Available from: http://www.Walmart.com/ms/en_CN/about_Walmart/press/press_releases/annual_report.htmln [Retrieved on October 26, 2013].

International Supply Chain Management. (2013). WALMART Case Study. Accessed at: http://www.staffs.ac.uk/schools/business/resits/postgrad/InternationalSupplyChainMgmtWALMARTCaseStudy.pdf [Retrieved on October 27, 2013].Ivarsson, I., Alvstam, C. G. (2011). Upgrading in global value-chains: a case study of technology-learning among WALMART-suppliers in China and Southeast Asia. Journal of Economic Geography, 11(4), 731-752.

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