Wal-Mart Situational Analysis

Situational Analysis

Walmart is the largest retailer in the world with sales of $419B in 2010 (show list), hired 1.5M employees or associates and has 4,300 facilities. It was founded by Sam Walton in 1962 where the first store opened in Rogers, Arkansas. It is present in 28 other countries some of which are Argentina, Brazil, Canada, China, Costa Rica, EI Salvador, Guatemala, Honduras, Japan and United Kingdom. Their strategy is “everyday, low prices”. It is known for its efficient distribution channels and technologies which includes the following:

Strengths in the distribution channel:

a. Strong bargaining power with suppliers - keeps prices low and assures right goods on the shelves. They are not dependent on a single supplier like P&G, Clorox or Johnson & Johnson. Thus, no single vendor constituted more than 4% of total purchase volume. Also, to drive up supply chain efficiencies, it persuaded its suppliers to have electronic “hook ups” with stores and adapt latest supply chain technologies like RFID increase monitoring and management of millions of inventories.

b. Unrivaled sourcing and distribution channels - “Hub-and-spoke” network of 103 massive distribution centers (DCs) such that no store is more than a day’s drive to and from a DC. They executed the “saturation” strategy for expansion to serve 150-200 stores a day. Each DC operated 24 hours using laser guided conveyor belts and cross docking techniques that received goods on one side while simultaneously filling orders on the other. As a result, distribution costs were only 1.3% of sales compared to 3.5% of nearest competitor. (show value chain)

c. Reliable transportation and logistics - It did not outsource trucking. Instead, it owned a fleet of more than 6,100 trailer trucks and employed 7,600 truck drivers. It also managed 20 aircrafts to travel managers to far flung locations.

Advanced information systems (considered second to Pentagon’s system)

a. Icon of JIT system

b. Computer data base satellite network system which allowed information to be shared among the stores, DCs and suppliers. It can use database to analyze customer’s regional buying habits and therefore customize the offerings inside each store to suit regional demand. This reduced the likelihood of stock outs and need of markdowns for slow moving items to maximize inventory turnover.

c. Existence of a website with online shopping features. (show website)

Walmart is already an established