Summative Assessment:Walmart case study

Summative Assessment:Walmart case study

In this report I aim to examine the Walmart company on a whole, I will look in to the history of the company   the strategy and performance of Walmart, looking at the company itself and its history, whilst discussing and analysing the different ways the company has developed over the years. I will also analyse the company’s sustainability and what ethics and values they promote.

Wal-Mart Stores, Inc., commonly known as Walmart, is an American multinational retail organization working as a chain of markets, grocery stores, and supermarkets. (Strategic Management of Walmart, 2018) Walmart operates by giving the customer what they want values they feel separates them from the rest of the market, they are a person-centred company with the customers’ and employees needs paramount in operations. The company follows the values of its founder Sam Walton his values which are stated in their vision declaration. “To be the best retailer in the hearts and minds of consumers and employees.” (Strategic Management of Walmart, 2018) “The secret of successful retailing is to give your customers what they want. And really, if you think about it from your point of view as a customer, you want everything: a wide assortment of good-quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience.” – Sam Walton (1918-1992). Walmart’s mission statement is “Saving people money so they can live better.” (Strategic Management of Walmart, 2018).  Walmart work alongside ethics and values, they work alongside and manage their company with integrity, making sure they stick to there mission statement this has been essential and a major contributing factor to their continued success.

Walmart work with a cost leadership strategy, A strategy that seeks to achieve competitive advantage they work with a business model which is so unique it is often imitated by other supermarkets, by keeping its costs low, to make more profit than its competitors at the same price. An organisation’s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste and tight cost control. Cost leadership is a concept developed by Michael Porter, used in business strategy. It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry. ( Low cost leadership strategy – low cost, 2020 ) it is more than evident that Walmart value themselves on the ability to provide low cost prices which is a competitive advantage , this is achieved by supply chain management and operational efficiency bulk purchasing which creates a huge financial  saving, stock is only held for 48 hours which highlights there quick turnover.

Working with this strategy allows them to stick to their mission statement of low cost and allows the company to grow. Differentiation is something Walmart pride themselves highly on,  Walmart have created products and services which are unique, there has been a great deal of work put into product development in order to make sure that there products have a high level of quality and customers are satisfied with purchases. They also have this as a competitive advantage as they also ensure they have a high level of expertise in the business and several different skills, this again is a competitive advantage for Walmart. Focus strategy, Walmart paid particular  attention to local factors, they focused on areas which there competitors gave no thought to, they offer a shopping experience which made it easier for customers to shop conveniently and quickly they did this by allowing customers to scan as they shop and use there smart phones to pay for there products. “We had a net opening of 1 Supercentre and remodelled nearly 150 stores, we had nearly 3,100 grocery pickup locations, more than 1,400 stores with same-day grocery delivery and about 1,400 pickup towers.” (Stock.walmart.com, 2020) Online sales in the retail industry is very challenging and competitive. Walmart have a focus on e-commerce where they are trying to improve sales through an expansion of brands and marketplace. (strategic management of Walmart, 2018) Comp sales increased 3.2%, with comp ticket higher by 1.9% and comp transactions grew 1.3%. eCommerce sales grew 41% and contributed approximately 170 basis points to segment comp sales growth. Online grocery was a meaningful contributor to eCommerce growth. On a two-year stacked basis, comp sales were up 6.6%, marking growth by more than six percent for five of the last six quarters. Strong sales trends continued across most key categories. (Stock.walmart.com, 2020) Gross profit rate was better than expected despite a decline of 4 basis points. Continued price investments pressured gross profit but were partially offset by favourable merchandise mix, including strength in private brands, and lower supply chain costs. The eCommerce team delivered gross profit rate improvement year over year. (Stock.walmart.com, 2020)

Walmart designs of goods and service has been a big part of their operations management, Walmart offers it own brand of goods such as Great value and Sam’s Choice. (Panmore Institute, 2020) they put a heavy emphasis on efficiency  and cost effectiveness Walmart is known for low costs because of its cost leadership generic strategy (Panmore Institute, 2020) in order for this strategy to work the company puts a great deal of focus on efficient staff, Walmart’s goods are designed in such a way which makes it easy for mass production at minimal production costs. Operating expenses leveraged 21 basis points. Both stores and eCommerce teams delivered expense leverage. Physical stores leveraged expenses for the 11th consecutive quarter due to strong productivity improvements, partially offset by growth of eCommerce in the segment. (Stock.walmart.com, 2020) Walmart has three tiers of quality standards. The lower tier specifies minimum quality expectations of most customers. The lower tier is used for Walmart own brands such as great value. The middle tier specifies market average quality for low cost retailers. This tier is applied for the performance of Walmart employees, especially sales personnel. The upper tier specifies quality levels that exceed market averages. This tier is applied to only a minority of Walmart’s outputs, such as goods under the Sam’s Choice brand. (Panmore Institute, 2020) these three tiers ensure that there is a high level of quality promoted in all areas of the company. Behavioural analysis, forecasting and monitoring is used to deal with process and capacity design. The behavioural analysis is considered when managing the store processes, capacity, personnel and equipment. Forecasting is implemented when looking at the human resources aspect of the company. Continuous monitoring keeps high management aware of any changes or developments in the company.  As mentioned earlier Walmart pay attention to geographical factors customers may choose other options such as going to convenience smaller stores rather than going to Walmart due to convenience of location, in this part of their strategy they ensure that they have stores located in more urban areas this may help to solve this problem. They consider all details such as where they locate their warehouses to ensure materials and goods are always available to consumers. Walmart look at the behaviour analysis to help deal with layout design, they use this to decide where products should be laid out within the store. Walmart are always recruiting new staff this is part of there human resources and job design, inevitably the company suffer from a very high turnover for several reasons one being the low wages. Walmart address this issue by continuously recruiting and training support programs. The company use information technology to address supply chain management which helps with minimizing operation cost. Because the use of this employees is aware of when to move products and how much product across the supply chain.  Walmart operate with a very flexible scheduling rota which helps them to have minimum loses regarding full capacity. Comp store inventory was up 2.7% and total inventory increased 1.7% on net sales growth of 3.2%. This was due in part to strategic investments in certain categories and eCommerce. We feel good about the quality of our inventory position. (Stock.walmart.com, 2020) s

There has been a great rise in online retailers over the years companies such as amazon are great competitors for Walmart then of course there is the rise of Amazon .com, No. 29 on the 500 this year, with $89 billion in sales. Over the past three years, a period during which Walmart’s sales grew by a total of 8.6%, revenue at Amazon has nearly doubled—though it has yet to establish itself as a consistent profit-maker. With a market value of $173 billion, Amazon is well on its way to catching up with Walmart’s $265 billion stock valuation  (O’keefe, 2015)   , offering services such as prime and same day delivery. You can pretty much get everything on amazon without the rush of the stores and from the click of a smart phone. Walmart have addressed this competition by expanding there omni- channel experience where customers can online order and do in store pick up. Packaged Facts estimates that Walmart’s “click-and-collect” grocery sales will grow a whopping 154% on average each year from 2017 through 2021. (Schmidt, 2020) Walmart popularity has a great deal of impact on their success especially on the online business in a day and age where social media is crucial to marketing and advertising for companies the fact Walmart has such a major social media presence is another competitive advantage for them. “Walmart is mentioned 60,000 times per day on social media. If that seems bananas, well, consider bananas, Walmart’s No. 1–selling item: It sells 1 billion pounds of them a year. Everything about Walmart is supersize.” (O’keefe, 2015)

Walmart have also worked on their stock replacement to tackle Amazon’s prime service and same day delivery. Wal-Mart Stores said “the company will share more data with suppliers to move faster in replenishing out-of-stock items as it tries to better compete with rivals like Amazon “ (Fortune, 2020). Walmart use a very good supply chain to distribute inventory, which makes sure the amount of stock va but also financial services.  Walmart have been very successful with the sale of pet products. More pet owners purchase from Walmart than any other retailer, according to Packaged Facts. Of the 67 million pet-owning households in the U.S, 43 million shop at Walmart. (Schmidt, 2020) customers were drawn to Walmart for pet products due toits cheap price, convenience of store and the range of selection.

Walmart’s huge success could also be one of its challenges. That includes its challenges. With sales approaching half-a-trillion dollars, Walmart is in uncharted growth territory. For the company to grow sales by a pedestrian 3% this year it would need to add $14.5 billion in revenue—more, for example, than either Whole Foods or Marriott had in total in 2014. The Wall Street consensus, however, is that the retailer will grow sales by less than 1% in 2015. Walmart has slowed the pace of expansion in China, a key growth market. And the company recently suffered through six straight quarters of negative or flat U.S. same-store sales growth—an almost unheard-of sign of weakness in Bentonville. Over the past five years Walmart’s stock price is up 47%. That’s only half the gain of the S&P 500 and badly trails the returns of retailers from Costco to Whole Foods to TJX (O’keefe, B 2015) companies such as target and Costco are beginning to rival Walmart, along with other companies such as Kroger and Safeway are changing there busiess model to be able to contend with the likes of Walmart. Also customers who are struggling financial are opting to go to ‘Dollar stores’

The Theory of Constraints is an organizational change method that is focussed on profit improvement. The essential concept of TOC is that every organization must have at least one constraint. A constraint is any factor that limits the organization from getting more of whatever it strives for, which is usually profit. (Lean.org, 2020) when looking at the theory of constraints in relation to Walmart it looks at the factors which stop or slow down the business there is a fw things which could slow down the flow in a supermarket such as old equipment, lack of training and outdated manual processes. When a constraint is identified it is important for the company to get rid of it, one of the constraints which is faced by Walmart is the low wages

In conclusion Walmart has done well to stick to its strategy and keep and run a coat effective business constantly maintaining low prices and good quality products for there customers.  They have ben able to sell a wide range of different products .

References

Kumari, E. and Tewari, V. (2018). Strategic Management of Walmart. Research Journal of Social Sciences.

Lean.org. (2020). What is the Theory of Constraints, and How Does it Compare to Lean Thinking? | Lean Enterprise Institute. [online] Available at: https://www.lean.org/common/display/?o=223

LOW COST LEADERSHIP STRATEGY – LOW COST. (2020). LOW COST LEADERSHIP STRATEGY – LOW COST. [online] Available at: https://lowcostleadershipstrategyjif.wordpress.com/

Mind, C. (2020). How Walmart “feeds the bottleneck” | Consultant’s Mind. [online] Consultant’s Mind. Available at: https://www.consultantsmind.com/2013/11/18/how-walmart-feeds-the-bottleneck/

O’keefe, B. (2015) ‘The Chosen One’, Fortune, 171(8), pp. 134–144.

Panmore Institute. (2020). Walmart: Operations Management 10 Decisions, Productivity – Panmore Institute. [online] Available at: http://panmore.com/walmart-operations-management-10-decisions-areas-productivity-case-study-analysis

Schmidt, S. (2020). Walmart’s Competitive Advantage: 3 Key Success Factors. [online] Blog.marketresearch.com. Available at: https://blog.marketresearch.com/walmarts-competitive-advantage-3-key-success-factors

Stock.walmart.com. (2020). Walmart Investor Relations – Investors. [online] Available at: https://stock.walmart.com/investors/default.aspx