Wal-Mart’s Cost Leadership Strategy

1. Wal-Mart’s
Cost Leadership
Strategy
By : Group 2

2.  Wal-Mart – July 2, 1962 by Sam Walton at Rogers,
Arkansas US
 First discount store
 Core philosophy - cost leadership – offer better value for money
 Strategy : focus on stores at small towns
: ELDP - the pricing strategy
: Cost leadership Strategy
: Massive expansion strategy
: Global sourcing strategy

3. Growth through :
 Heavy IT investments
 Surplus reinvestments
 Increasing no. of stores
 Consistent Cost cutting measures
 Public issue
 Economies of scale
 Sam’s Clubs
 Scanners
 Satellite communication system
 Hyper mart – food retailing (Super centers)
 Neighborhood markets n Super centers combo
 ‘Store of the community’ program

4. Over the years
• Discount stores :1573 to 1568
• Sam’s Clubs : 148 to 1258
• Super Centers : 3 to 525
• Neighborhood markets: 0 to 49
• Revenue - $244.5 billion
• Awards
2002 : ‘Ron Brown’ award for corporate leadership by President
2002 & 2003 : #1 in Fortune 500 list of world’s largest
companies

5. Vision:
“If we work together, we’ll lower the cost of living for
everyone…we’ll give the world an opportunity to see what it’s like
to save and have a better life.
Mission
To help people save money so they can live better
Tagline
Save Money. Live better

6. SWOT
OF
WAL-MART

7. Strengths
1.Scale of operations
2.Funding ability
3.Competence in information systems
4.Wide range of products
5.International operations
Weaknesses
1. Labour related lawsuits
2. High employee turnover
3. Little differentiation
4. Negative publicity

8. 1. Retail market growth in developing countries
2. Rising acceptance of own label products
3. Trend toward healthy eating
4. Online shopping growth
1. Increasing competition from brick and mortar
and online competitors
2. Increasing resistance from local communities
3. Political issues in developing countries
Opportunities
Threats

9. Porter's Generic Strategy

10. Cost
Leadership
Differentiation
Cost Focus
Differentiation
Focus
Source of Competitive Advantage
Scope
Narrow Board
Cost Differentiation

11. Sources of low cost leadership
Economies
of Scale
Experience
Curve
Capacity
Utilization
Process
Design
Location Integrations

12. Economies of Scale
Quantity Mark Up

13. Experience Curve
Discount store – Sam’s Club – Super Centres – Neighbourhood Markets
Importance of IT system (POS, SCS & Automated conveyor system)
Impact of Experimentation

14. Distribution Process Design
Hub & Spoke Model

15. Location
3 things are important in retailing “Location, Location & Location”
Rural
From rural to cities
Connectivity from distribution centres to retail store
Stores are 300 Miles (482 KM) away from distribution centres
158 Distribution centres for 11000 retail stores, in 27 countries

16. Integration
They focused on backward integration rather than forward integration
They learned how manufactures are performing
Focused more on “EDLP”
Obtained bargaining power through backward
integration
 Gained ability to replacement with in 2 Days (Forward integration)

17. Porter’s Value Chain
General administration
Human resource management
Technology development
Procurement
Inbound
logistics
Operations Outbound
logistics
Marketing
and sales
Service

18. Primary Activities
Inbound Logistics Operations Outbound Logistics Marketing and sales Service
-VMI system
(Vendor managed
inventory)
continuous
replenishment
-EDI (Electronic
Data Interchange
3 business segments:
a)WalMart stores
- Super centers
- Discount centers
- Neighborhood
markets
b) SAM’S Club
c)WalMart
international
-Hub and spoke
distribution system.
- CROSS
DOCKING:
logistic technique to
make the distribution
process more
efficient
-Word of mouth
communication.
-focuses on everyday
low prices
“Save money, live
better”
-Sales are on a self-service,
cash-and-carry
basis.
-accepting returned
goods
-Satisfaction
guarantee
- Opening
hours(24/7)

19. Firms infrasctructure: close connection between headquarter and local stores.
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 we open a supercenter, we provide roughly 300 jobs
-Women57% of our U.S. workforce, 27% of corporate officers, and 20% of our Board of directors.
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 System
Procurement:
-Wal-Mart deals directly with manufacturers, by passing all intermediaries.
- EDI : Electronic data interchange
MANUFACTURER – WALMART - CUSTOMERS

20. Thank You.