Wall Mart Competitive Advantage Over Competitors
A company has a competitive advantage over its rivals when its profitability is greater than the average profitability of all companies in its industry. It has a sustained competitive advantage when it is able to maintain above-average profitability over a number of years. Wal-Mart is a good example to understand this. First of all we have to know how the industry is’s attractive.
We can know with the five forces porter. Analyzing five forces porter we find out if this is an industry attractive or not. • The threat of new competitors is not very high. This makes the industry is closed and businesses one point of tranquility. • The rivalry among competitors is very high and this will cause the continuing price war among supermarkets. • The bargaining power of suppliers is an important point in this sector. Depends on the suppliers throughout the rest of the chain.
• Buyers do not have much bargaining power so this will make the industry more attractive. There is a strong threat of substitutes in this industry. The center of Wal-Mart’s efforts to gain market share through a wide range of categories is still his attitude towards the management of the supply chain. Long recognized as a key competitive advantage, Wal-Mart operates an unrivaled global network of 146 distribution centers. Included in this total are 103 domestic distribution centers that service to approximately 2,800 discount stores, Supercenters, Neighborhood Markets and 525 Sam’s Clubs, and 43 other establishments that 1,300 international units of service Wal-Mart located in nine countries.On the other hand it is important to say that in marketing and strategic management, competitive advantage is an advantage that a company has over other competing companies. To be truly effective, advantage should be: 1.
Difficult to match 2. Only 3. Possible to maintain 4. Clearly above the competition 5. Applicable to various market situations Thanks to innovations in its logistics system, Wal-Mart became the largest chain of stores worldwide. In fact, for their excellent management, today Wal-Mart is the largest company in the world.The most important innovation logistics Wal-Mart, known as cross-docking, is to transfer goods from one truck to another, in places intended for this exchange, without storing them in warehouses never intermediate in its distribution network.
In summary, the advantage that WM was compared to its rivals was to give ordinary people the opportunity to compare the same things as the rich. A big advantage that Wal-Mart accounts is the low price of their products. The strategy of Wal-Mart to offer financial products as just an open secret.In general, the traditional strategy of any retailer of large volumes: a phenomenal power to negotiate prices and payment terms. What sets Wal-Mart is a very wide shoulders that allow you to exert fierce pressure in suppliers. Wal-Mart has a clear purchasing policy: “I buy your product to X dollars. The price is not negotiable.
Take it or leave it. ” 2. IN WHICH OF WAL-MART’S PRINCIPAL FUNCTIONS AND ACTIVITIES (NAMELY: PURCHASING, DISTRIBUTION AND WAREHOUSING, IN-STORE OPERATIONS, MARKETING, IT, HRM, AND ORGANIZATION AND MANAGEMENT SYSTEMS/STYLE) DO WM’S MAIN COMPETITIVE ADVANTAGES LIE?IDENTIFY THE DISTINCTIVE RESOURCES AND CAPABILITIES IN EACH OF THESE FUNCTIONS/ACTIVITIES. With Wal-Mart the power shifted from manufacturers to distribution channels. Then the same pattern was seen in Home Depot and Toys “R” Us. A similar change could be to CarMax or Amazon. com in the near future.
And like McDonald’s, Toyota and others have become inefficient competitive advantage by repairing weak links in their value chain, Wal-Mart fixed the link forming a partnership with its largest supplier, “Procter & Gamble to align objectives coordinate and share information.No supplier could do business with those companies, unless they wanted to become a strong link, and for some competitors, represented an opportunity to fill the space. Firms that wanted to do business with Wal-Mart had to change their business models by inserting improvements in systems, electronic data interchange and just-in time. WM uses logistics management as a competitive advantage. How do you get? * Lower cost of purchases: Strategic partnership with key activities Supplier * Many advances in logistics (cross-docking, FTL, LTL, …
Lower cost of sales: * External and joint planning of the chain with key distributors and retailers * Optimized design process: reduction of lead-time chain Business Design * Seek to add value to the customer (price) * Collaborative management of the entire supply chain (from supplier to customer) * They are located in small towns (no competition) * Investments in new technologies over the sector * Supplier Collaboration: Exchange of standardized information * Expansion from the inside out (villages to cities / USA to the world)Low cost * Lower operating costs than the competition * High bargaining power with suppliers (centralization of purchases) * Agility in the distribution (optimization of the supply chain) * ECR (Efficient Cost Response) and CRP (Continuous Replenishment Process) Human Resources * Empowerment of employees (associates) * Culture of involvement and belonging to the company (despite not having unions) * Communication and brainstorming of ideas continued employee * Compensation system is very effective benefits Leader (Sam Walton) and very strong Like other companies, the leadership of entrepreneurial energy operator and generated a cultural basis on which to base its competitive advantage. Walton was obsessed with keeping prices below competitors. For example, your rule was that travel expenses would not exceed 1% of purchases, so you had to share hotel room or walk instead of taking taxis In addition providers’ initially resisted providing information, and they believed it would weaken its competitive position. But now they have adopted the system.For example, Wal-Mart works closely with its suppliers integrating their data with their own in order to control which items are selling. This allows the company to keep storage costs down and suppliers to adjust production up or down depending on the progress of sales. 3.
TO WHAT EXTENT HAS WM BEEN ABLE TO TRANSFER THE COMPETITIVE ADVANTAGE IT ESTABLISHED IN DISCOUNT RETAILING IN THE US (A) TO OTHER COUNTRIES, (B) TO OTHER RETAIL SECTORS AND FORMATS? WHY HAS WM’S OVERSEAS PERFORMANCE TO DATE BEEN SO PATCHY? The Wal-Mart operation in overseas markets was mixed.His strongest performance was in Mexico and adjacent countries and Canada. But also in Britain, where its Asda supermarket chain of Wal-Mart systems enthusiastically adopted and culture. In Argentina and Germany were difficulties in fitting local conditions. In most overseas markets, Wal-Mart was far from being the market leader. In Britain its subsidiary (Asda) was the second largest supermarket chain after Tesco. The chain, in Brazil it was the third in the market, but in Germany, Argentina, and China was a relatively small competitor.
Until 2002, there was little evidence that increasing competition Wal-Mart had dented operating gross margins and net margins were small changes between 1994 and 2002. Looking ahead, Wal-Mart could continue to find new sources of cost effectiveness it would allow its competitors to lower. Some competitors have adopted many of Wal-Mart efficient practices, offering more differentiation in quality and luxury items. One of the key strategies for grabbing the external market, which is accompanied by Wal-Mart’s culture, has been the purchase of large retail stores in the country.For example the case of Germany where the group acquired 21 supermarkets Wertkauf in 1997, a year after Interspar added 74 supermarkets. Acquired Cifra in Mexico in 1998, which was the largest retailer in the country. In the UK, WM scored 232 ASDA supermarket chain in 2000.
Japan did not escape this international growth strategy in 2002 get 6. 1% interest in the fourth major supermarket in the country. The international expansion led to Wal Mart to build global distribution systems and transportation of goods. Wal-Mart’s performance in overseas markets was mixed.Its strongest performance was in adjacent countrie (Mexico and Canada) and also in Britain, where its Asda supermarket chain enthusiastically adopted Wal-Mart’s systems and its culture. In Argentina, and Germany it encountered major difficulties in adjusted t local conditions, while in Indonesia, a joint venture with PT Multipolar collapsed amidst acrimony and lawsuits. 4.
TO WHAT EXTENT IS WM’S COMPETITIVE ADVANTAGE SUSTAINABLE? WHY HAVE OTHER RETAILERS HAD LIMITED SUCCESS IN IMITATING WM’S STRATEGY AND DUPLICATING ITS COMPETITIVE ADVANTAGE?Sustainable competitive advantage is one that has endured for a long enough period of time. With the idea of maximizing the economies in purchasing, minimize operating cost and pass the savings to members through low prices, WM has managed to archive competitive advantages sustainable. This is the case of WM; the company operates its sustainable competitive advantage through operational excellence, where the company provides consistent quality at competitive prices. This is achieved by standardizing business systems in such a way that minimizes the cost and the difficulties faced by the customer to buy the product.As I said before WM strategy is based on obtaining for them the lowest market price. To meet that goal, WM uses a low-cost strategy and operational excellence, which means: a) The sales margin (mark-up) of their articles is limited. b) Building and facilities are austere.
c) Many of their products are only sold in closed boxes and not by units. d) Do not invest heavily in advertising. e) Reduced numbers of SKUs (number of different items that make up the assortment of products), allowing you to have greater operational excellence that Wal-Mart. ) Reduced number of personnel, by incorporation of electronic and mechanical forms of entry, exit and control of merchandise. Thus, the principal factors threatening the sustainability of competitive advantage of WM are three: 1) Imitation 2) Substitution 3) Other actions of existing competitors or new competitors. Imitation is often profitable for the ‘copycat’, since copying is one third cheaper than innovate, and the result becomes the third market faster than an innovation. However, there are business models, or components thereof, which are easier to copy than others.
This happens with WM.In response to These Threats, Wal-Mart historical continually added to central office staff. Would Existing Competitors imitate the Wal-Mart’s strategy and systems? In discount stores, Target, Had successfully adopted much of the retail, Wal-Mart and supply chain practices, while Costco WAS seen by Many as outflanking the Sam’s Club stores, Wal-Mart by Combining down market prices with up market appeal. And new Competitors emerge with new Access “Than retail? Despite the collapse of the dotcom boom, online retailers increasingly were capturing the retail market through a wide range of computer products pharmaceuticals.The competition comprised not just other discount chains – Target, Kmart, and Dollar General – but also specialist mass retailers— particularly the “category killers” that dominated specific product markets: Home Depot in home improvement products, Toys-R-Us in toys, Office Depot in home office supplies, Best Buy in appliances and consumer electronics. That is why other retailers had limited success in imitating WM’s strategy and duplicating its competitive advantage. 5.
LOOKING AHEAD, WHAT MEASURES DOES WM NEED TO TAKE TO SUSTAIN ITS RECENT PERFORMANCE AND DEFEND AGAINST COMPETITIVE (AND OTHER) THREATS?Looking ahead, Wal-Mart could continue to find new sources of cost effectiveness it would allow its competitors to lower. Some competitors have adopted many of Wal-Mart efficient practices, offering more differentiation in quality and luxury items. Target Positioned Itself as an up-market Wal-Mart, while Costco is an up-market Sam’s Club. The Economist suggested that the cost competitiveness of Wal-Mart may suffer from difficulties in maintaining its cost advantage of labor on other retailers and mounting legal expenses and work 20 performances at any time they turned Wal-Mart 8. 00 return primarily personal injury lawsuits claiming employees, but also collective action lawsuits alleging violations of the Fair Labor Standards Act allowed. The four factors that build and sustain competitive advantage (quality, customer responsiveness, superior efficiency and innovation) are the product of the company`s distinctive competences. And WM have all of this factor but especially the two last.
Anyway, WM must always ensure especially in these times of imitations from competitors.A good strategy would be to raise barriers to imitation that allows send a signal to the rivals that the company has some valuable distinctive competency that allows it to create superior value. WM already is negotiating with the lasts innovations in control of the goods. The most recent innovation has to do with control of the merchandise through a card inserted into the product since its development, allowing it to follow in case of theft from employees or customers. Anyway, I think that WM does not have to worry about short-term efficiency as their infrastructures manage overall Project and facilitate cross functional cooperation.Their productions cooperate with R&D on designing products. The Marketing section provides market information to R&D.
The R&D develop new process though I believe WM could also develop more new products and further expand its products offerings, such as computers and appliances. In the other hand de materials management no primary responsibility, and the information systems of WM with some of the most advanced in the world because WM use the information systems to coordinate cross-functional and cross-company product development work with the last technology. And finally the Human Resource hires talented scientist and the best engineers.
