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Wal Mart Stores Inc Case Solution

Solution Id Length Case Author Case Publisher
2884 1749 Words (8 Pages) Sharon Foley Harvard Business School : 794024
This solution includes: A Word File A Word File

The Wal-Mart Stores, Inc. case study discusses the background behind Wal-Mart's dominance over the discount retailing industry along with its plans for the future. The case delves into each aspect of Wal-Mart’s operations, such as its Human Resources and Supply Chain, to explain how Wal-Mart managed to become one of the most successful discount retailers through its focus on cost leadership and operational efficiency, along with its motto of "Everyday low prices". The main conflict of the case revolves around how Wal-Mart has grown too large and is now facing backlash from competitors, along with doubts about how it manage to sustain its rapid growth amid decreasing Returns on Equity and stock prices. The case also delves into the dynamics of the different industries that Wal-Mart was involved in, such as the discount retailing industry and the food industry. It also touches upon how Sam Walton visualized Wal-Mart and how Wal-Mart was run after his demise.

Following questions are answered in this case study solution

  1. Has Wal-Mart Stores, Inc. been able to sustain its competitive advantage and superior performance as explained in the case?

  2. How can Wal-Mart continue to sustain its superior performance?

  3. What are the sources of Wal-Mart's competitive advantage in discount retailing?

  4. How sustainable is Wal-Mart's competitive advantage in discount retailing in 1994?

  5. Can Wal-Mart achieve a competitive advantage into food retailing with the Supercenter format?

Case Analysis for Wal Mart Stores Inc Case Solution

1. Has Wal-Mart Stores, Inc. been able to sustain its competitive advantage and superior performance, as explained in the case?

Wal-Mart Stores, Inc. Has sustained its competitive advantage and superior performance due to multiple reasons, as mentioned in the case. Firstly, Wal-Mart has always prioritized optimizing its operations to improve efficiency and cut down on waste, usually by heavily investing in innovative technologies. For example, electronically scanning each Uniform Product Code at the point of sale ensured accurate pricing and improved efficiency. Secondly, Wal-Mart invested in a satellite system, which collected and analysed sales data daily, thus allowing managers to determine which merchandise had low inventory turnover rates, and thus avoid purchasing excess stock.

Second, Wal-Mart pioneered the idea of "cross-docking," a process that allowed for merchandise to be continuously delivered to warehouses and then delivered to stores without ever having to sit in storage for an extended period. This provides two benefits: 1) it enables Wal-Mart to offer competitive prices, and 2) it guarantees product availability, which is a key driver of customer satisfaction and loyalty. Thirdly, Wal-Mart values its workforce, which keeps employee productivity high and reduces employee turnover costs and the subsequent training costs for new hires. Due to its focus on associates, who were driven by greater responsibility than associates at rival chains, Wal-Mart was recognized as one of the best workplaces in America. The “Yes We Can Sam” suggestion program shows an interest in employee feedback and helps employees feels a sense of ownership, and it also helped the company save approximately $85 million.

Finally, Wal-Mart is a no-nonsense negotiator and ensures that no supplier accountsfor more than 2% of its total purchases. The relationships it formed with some suppliers transformed into partnerships that involved performance improvement via digital information sharing. This improved the supply chain and reduced distribution costs while also ensuring that no one supplier dictated Wal-Mart’s prices.

2. How can Wal-Mart continue to sustain its superior performance?

Conducting Porter's 5 Forces analysis on Wal-Mart yields the following insights:

a. Industry Rivalry: High as it was quite easy for a customer to switch to another discounter and because saturation had resulted in intense competition within the industry

b. Bargaining Powers of Suppliers: Low, as Wal-Mart ensured that no one supplier had enough power to affect prices. Wal-Mart also had more than 2,000 suppliers connected through its satellite network.

c. The threat of New Entrants: Low as there were high barriers to entry, plus any new entrant would need to have a well-established distribution network to compete with the industry giants as the top 5 discount chains pulled in 71% of industry sales.

d. Bargaining Power of Buyers: Low as Wal-Mart had a very rare customer base, and each customer had too little power to negotiate with a large company.

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