STRATEGIC MANAGEMENT:

WALMART CASE
Authors:
G. Gimondo
N. McConville
A. ODell
S. Smith
O. Vadillo
M. van de Rijt
 Table of Contents
Introduction

Industry and Firm Analysis

Competitive Advantages and Sustainability

Recommendations
 Walmart
Worlds largest company
Discount store and Superstore model
Net income of $8 billion and sales of $245
billion in 2003
Shareholders expect growth
Domestic
International
 INDUSTRY AND FIRM ANALYSIS
To what extent is WMs performance attributable to industry attractiveness
and to what extent to competitive advantage?
 Sources of Superior Profitability
INDUSTRY
ATTRACTIVENESS
Which CORPORATE
RATE OF PROFIT businesses STRATEGY
ABOVE THE should we be
COMPETITIVE LEVEL in?

How do we
make money? BUSINESS
COMPETITIVE STRATEGY
ADVANTAGE

How should we
compete?
5
 Factors Which Underpin Industry
Attractiveness
Strong barriers from new entrants 3
High differentiation 2
Growth rate and growth potential 3
low price sensitivity 1
High value added 2
High level of resource utilisation 3
Attractive level of profitability now and in the future 3

Overall score : 2.4/6

-1975 Ban on resale price maintenance (big retailers favored)

-Different sizes and concepts
 Profitability of global industries
Utilities
Utilities 6.2
Telecom Services 6.5
Transportation
Transportation
Energy
6.9
2003 figures:
7.7
Materials
Materials 8.4
Retailing
Overall Average
9 Retailing = 9 = Overall Average
Overall
Consumer durables Average
and apparel 9

Food retailing 9.5

Automobiles andFood retailing
components 9.6
Wal-Mart = worlds largest
Capital goods 9.9 company
Hotels, restaurants,
Capitalleisure
goods 9.9
Technology hardware and equipment
10.3
Food , beverages, tobacco
Technology hardware and equipment 10.3

WM performance not really

Healthcare equipment and services
11
Semiconductors
Healthcare equipment and services
Commercial services 11.3
attributable to industry
Media 11.9

ComputerCommercial services
software and services 12.8
attractiveness
Household and personal products 14.7
Pharmaceuticals
Computer software and services 15
15.2
Pharmaceuticals 18.4

0 5 10 15 20

Average ROIC 1963-2003 (%)

7
 Factor Which Underpin The Judgment
on Competitive Advantage
Market share -1
Quality of product/service offer -3
Customer loyalty -2
Innovation ability -2
Control of inputs and distribution -1
Quality of assets -1
Technology -1
Labour Productivity -1
Overall Score: -1.5 / 6

-SCM, DCM, Merchandising principle

Technology strategy must support the business
strategy in developing a competitive advantage
(Managing Tecbnology course)
AGGRESSIVE
KEY COMPETITIVE ADVANTAGES
AND SUSTAINABILITY
 Support Activities
Firm Infrastructure:
High store volume
No regional HQ
IT support systems for managerial decisions

Human Resource Management:

Introduction of senior manager with background outside retailing
(IT)
Lower wages than competitors
Less people employed/store
Higher sales volume / employee
Associates
Management Techniques
Balanced Scorecard
 Support Activities
Technology Development:
Cutting-edge technology always used in order to
maintain CA
Benchmark of competitors successful measure
IT
Procurement:
High bargaining power with suppliers
Long period for Account Payables
 Primary Activities
Inbound Logistics
One of first users of EDI to communicate with suppliers
Disintermediation
High bargain power
Example of flags after 9/11 (pp.7)
Operations
They uniquely operate each store
Better in-store execution than competitors
Outbound Logistics
Wal-Mart Distribution Centres
Distribution costs 2-3% compared with 4-5% of competitors
Inventory Turns (7.6 compared with 6.1 5.4 from competitors)
Marketing & Sales
Unbeatable prices

Services
People Greeter
 Distribution Network
Economies of Scale
Hub and spoke model
84 distribution centers in
United States
Each center serves 150
stores within a 150 mile
radius
Cut out the middle man
Inventory Turnover
High store volume
Distribution Network Sustainability
Sustainable due to size and relationship with
suppliers
Some aspects can be replicated by
competitors
Hub and spoke model
Buying directly from the manufacturer
However difficult to replicate due to necessary
capital and size
 Information Systems
Electronic Data Interchange (EDI)
Retail Link
Operating efficiencies
Ex: partnership with Procter and Gamble
Inventory turnover
Unique merchandise in stores
Local adaptation
Information Systems Sustainability
Partly sustainable
The technological system itself can be
replicated/purchased
Capabilities difficult to replicate
Partnerships
Superior supply chain management
How information
 Cost Control
Bargaining power with suppliers
Disintermediation lower cost lower prices
Longer accounts payable periods
International Trade
China
Fewer employees lower labor costs
Management techniques
Exclusion of unions
 Cost Control Sustainability
Sustainable
Bargaining power is difficult to replicate
Influence
Disintermediation
Ability to keep indirect costs low
Culture of frugality
Difficult to imitate
Labor costs
Exclusion of unions
 Resource & Capabilities Analysis
1st Step: Assessment of the main resources and
capabilities that affect the company and its
industry

2nd Step: Use the R&C Matrix to show the key

strengths of the company
Code Description Performance Importance

R1 Financial Strength 9 10
R2 IS Infrastructure 8 9
R3 Distribution Infrastructure 10 9
R4 Human Capital 8 4
R5 Store Locations 8 7
C1 Bargaining Power s/ Suppliers 10 9

C2 Inventory Management 7 8
C3 Employee Relations 4 6
C4 Marketing 5 5
C5 Cost Controls 10 10
C6 Management Expertise 7 9
C7 Distribution Processes 8 7
C8 Social Responsibility 2 4
C9 International Adaptation 3 8
 10
3 5
1
Relative Strength of the R&C

6
Capabilities 7 2 1
Resources
2 5

Key Strengths
Superfluous Strengths
4

3 4

Zone of Irrelevance Key Weaknesses

8 9

10
Importance
RECOMMENDATIONS FOR THE
FUTURE
 Future of Walmart
How can Wal-Mart sustain its recent
performance and defend against other
threats?

Story of evolution, not revolution

(Bradley et al, 2003)
Recommendations and Challenges

Four Key Determinants:

Distribution Infrastructure
Globalisation
Competitive Threats
Social Issues
 Distribution Infrastructure
Building upon existing framework in order to
sustain competitive advantage

Globalisation
Market expansion
Challenges
Failure
Cultural insensitivity
 Competitive Threats
Intense price competition
Potential competition or too big to fail?

Social Issues
Sustainability 360
Corporate image
Negativity associated with
Walmart regarding HRM issues
 Conclusion
Industry and Firm Analysis

Competitive Advantages

Sustainability of each advantage

Recommendations for the future

 References
Bradley et al. (2003). Walmart Stores in 2003. Harvard Business Review.

Djeddour, M. (2011). Strategic Management Lecture. [Handout], Strategic

Management Module. Grenoble Graduate School of Business.