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Walmart

A study indicate that WalMart’s direct and indirect influence on the area of retail industry led to 3.1percent reduction in overall consumer prices between 1985 and 2004

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Wal-Mart has seemed as the grant of retailer in the world, a study indicate that Wal-Mart’s direct and indirect influence on the area of retail industry led to 3.1 percent reduction in overall consumer prices between 1985 and 2004 (Edmonson 2005).

Application of internet and electronic system could increase efficiency of capital and information flow in the supply chain (Edmonson 2005). Wal-Mart use management system and online sale strategy depend on internet to distribute information among customer and supplier, such as RFID system and Site-to-Store, which can increasing work efficiency, reduce price and provide advance satisfaction for customer in both sell-side and buy-side of retail business (Tory 2008 & Liard 2004).

Edmonson (2005) said that customer spent $263 billion less than they would have if Wal-Mart were not around. The main impact in sell-side and buy-side of supply chian when Wal-Mart using internet to exchange information is that internet application in retail business could change the traditional business strategy; increase the accurate of information and save cost for intermediation.

The application of internet impact buy-side of Wal-Mart’s supply chain dramatically. Wal-Mart use RFID system to exchange information with its supplier, which could limit the out-of-stocks.

A study shows that to reduce 1% of out-of-stocks could generate 2.5 billion profits for Wal-Mart (Liard 2004). “The researchers at the University of Arkansas noted a 16% reduction in out-of stocks since Wal-Mart introduced RFID technology into its supply chain” (Sullivan 2006 & Healthcare Purchasing News 2005). On another side, the RFID application could meaningfully reduce the manual order in business process (Healthcare Purchasing News 2005), which means that saving cost on labour and increasing work efficiency.

Recurrently, Wal-Mart create a new global standard, Generation 2, for all of the Wal-Mart store locate in everywhere of world, which means that reductions in technology cost and region barrier (Healthcare Purchasing News 2005), and also accelerate the speed of adoption of RFID technology through the world, which will increasing the enter marketplace barrier in order to reduce the competitive fierce. Mal-Mart force its suppliers to implement new technology in order to match Mal-Mart’ supply chain and to continue trading with the retailer (Selva 2003).

“Wal-Mart has more than 61,000 suppliers in the United States alone, and about 330 uses RFID, with another 300 scheduled to join in January.” (Sullivan 2006). The element of new technology could be a huge barrier for other company who want to enter retail market. Wal-Mart apply the RFID system which base on internet to delivery information among supplier directly, the online system help Wal-Mart to bypass the intermediary, therefore reduce the price of good. E-commerce reduces the importance of intermediation such as agency and distributor in modern market place by directive sale (Chaffey 2004). Wal-Mart applies online system trade with its supplier to reduce out-of-stocks, price of good and save human resource. Wal-Mart also rise the enter marketplace standard by new technology system in order to occupy the advantage of competition.

Successful application of Wal-Mart‘s e-business is not only presented in the buy-side of Wal-Mart’s supply chain, not also in the sell-side. The world’s most successful retailer is already prepare an online website, wal-mart.com, to work close to store and to built leading customer retail on the Web (Seipel 2007). Wal-Mart uses its website, such as Site to Store, to attract client and supplement traditional communication approach (Troy 2008).

Online sale system improves the ability of distribution, saves cost for intermediation and increases customer satisfaction. It is very easy for client to access Wal-Mart’s any store in the world through internet (Tory 2008). Customer could easily to access to one of 3500 store in US, which is incomparable for another retailer (Tory 2004).

Site to Store website enable customer to select and search merchandise in home and chose which store they want to go to pick up the merchandise for free, and then customer will receive a inform letter if the item they ordered already in the store. This online business process increase work efficiency and effective in entire supply chain, from supplier to customer.

For customer, fear of use internet is a negative element to online sale business process (Chaffey 2004), in order to fix this problem, Wal-Mart launch a national rollout in March 2007, the result indicate that the number of customer adopt online shopping increase rapidly (Tory 2008). In addition, once customer use the Site-to-Store, they will spent more money on that and it is hard to change customer’s shopping behaviour (Tory 2008 & Chaffey 2004). Security of online shopping is a sensitive topic for majority client. However, Wal-Mart announced that its website could not leave any cookies, or files to save personal information, on customer’s PC (Halkias 1999). Wal-Mart utilize internet as a intermediary to carry out communication and sale with customer, meanwhile concern about privacy issue, which is not comparable for another retailer.

Wal-Mart has been seemed as the grant of retailer in the world, a study indicate that Wal-Mart’s direct and indirect influence on the area of retail industry led to 3.1percent reduction in overall consumer prices between 1985 and 2004 (Edmonson 2005). Application of internet and electronic system could increase efficiency of capital and information flow in the supply chain (Edmonson 2005). Wal-Mart use management system and online sale strategy depend on internet to distribute information among customer and supplier, such as RFID system and Site-to-Store, which can increasing work efficiency, reduce price and provide advance satisfaction for customer in both sell-side and buy-side of retail business (Tory 2008 & Liard 2004).

Edmonson (2005) said that customer spent $263 billion less than they would have if Wal-Mart were not around. The main impact in sell-side and buy-side of supply chian when Wal-Mart using internet to exchange information is that internet application in retail business could change the traditional business strategy; increase the accurate of information and save cost for intermediation.

The application of internet impact buy-side of Wal-Mart’s supply chain dramatically. Wal-Mart use RFID system to exchange information with its supplier, which could limit the out-of-stocks. A study shows that to reduce 1% of out-of-stocks could generate 2.5 billion profits for Wal-Mart (Liard 2004). “The researchers at the University of Arkansas noted a 16% reduction in out-of stocks since Wal-Mart introduced RFID technology into its supply chain” (Sullivan 2006 & Healthcare Purchasing News 2005).

On another side, the RFID application could meaningfully reduce the manual order in business process (Healthcare Purchasing News 2005), which means that saving cost on labour and increasing work efficiency. Recurrently, Wal-Mart create a new global standard, Generation 2, for all of the Wal-Mart store locate in everywhere of world, which means that reductions in technology cost and region barrier (Healthcare Purchasing News 2005), and also accelerate the speed of adoption of RFID technology through the world, which will increasing the enter marketplace barrier in order to reduce the competitive fierce.

Mal-Mart force its suppliers to implement new technology in order to match Mal-Mart’ supply chain and to continue trading with the retailer (Selva 2003). “Wal-Mart has more than 61,000 suppliers in the United States alone, and about 330 uses RFID, with another 300 scheduled to join in January.” (Sullivan 2006). The element of new technology could be a huge barrier for other company who want to enter retail market.

Wal-Mart apply the RFID system which base on internet to delivery information among supplier directly, the online system help Wal-Mart to bypass the intermediary, therefore reduce the price of good. E-commerce reduces the importance of intermediation such as agency and distributor in modern market place by directive sale (Chaffey 2004). Wal-Mart applies online system trade with its supplier to reduce out-of-stocks, price of good and save human resource. Wal-Mart also rise the enter marketplace standard by new technology system in order to occupy the advantage of competition.

Successful application of Wal-Mart‘s e-business is not only presented in the buy-side of Wal-Mart’s supply chain, not also in the sell-side. The world’s most successful retailer is already prepare an online website, wal-mart.com, to work close to store and to built leading customer retail on the Web (Seipel 2007).

Wal-Mart uses its website, such as Site to Store, to attract client and supplement traditional communication approach (Troy 2008). Online sale system improves the ability of distribution, saves cost for intermediation and increases customer satisfaction. It is very easy for client to access Wal-Mart’s any store in the world through internet (Tory 2008). Customer could easily to access to one of 3500 store in US, which is incomparable for another retailer (Tory 2004). Site to Store website enable customer to select and search merchandise in home and chose which store they want to go to pick up the merchandise for free, and then customer will receive a inform letter if the item they ordered already in the store.

This online business process increase work efficiency and effective in entire supply chain, from supplier to customer. For customer, fear of use internet is a negative element to online sale business process (Chaffey 2004), in order to fix this problem, Wal-Mart launch a national rollout in March 2007, the result indicate that the number of customer adopt online shopping increase rapidly (Tory 2008). In addition, once customer use the Site-to-Store, they will spent more money on that and it is hard to change customer’s shopping behaviour (Tory 2008 & Chaffey 2004). Security of online shopping is a sensitive topic for majority client. However, Wal-Mart announced that its website could not leave any cookies, or files to save personal information, on customer’s PC (Halkias 1999). Wal-Mart utilize internet as a intermediary to carry out communication and sale with customer, meanwhile concern about privacy issue, which is not comparable for another retailer.

Wal-mart, the world’s biggest retailer is facing stiff challenges as it continues to provide customers’ with varied products at the lowest possible cost (Huffman, P. T 2003). Some of the major challenges that Wal-Mart face are:

  • Inflatory Pressures: The major challenge that a retailer like wal-mart faces is to keep the costs low and competitive under the continual inflation environment. Since wal-mart’s distinctive business strategy is to maintain the lowest prices, it is going to be challenging for them to do so in increases inflation (D'Innocenzio, A 2008). Wal-mart will have to cope with rising prices of gas and manufacturing and still ensure lower prices than the local players.
  • Resistance from small & local business: Smaller and local businesses are resisting the expansion of wal-mart into everyday products. They believe that wal-mart could potentially take them out of business if it enters selling products like groceries and flowers (Frontline 2004).Wal mart faces similar issues in countries like China & Japan where regional players are resisting the wal-mart expansion. Therefore wal-mart potentially faces problems of “road transportation, private and commercial trucking, Customs clearance for imports, and interprovincial purchasing, whether distribution or wholesale” (Huffman, P. T 2003).
  • Innovation and competition: In countries like India wal mart faces the pressure of the rise of local retailers. Wal mart faces challenges to counter the rapid development of local supply chains like reliance and pantaloons (Gentleman, A 2007). Wal mart will have to continually produce newer products at lower prices to beat local competition while ensuring quality. Wal-mart thus can become a victim of its own success. Other major issue that Wal mart faces in India is that it has made a late entrance into the field of retailing. Thus it faces competition from local brands. Wal-mart’s strategy of "everyday low prices" can also be self destructing as its profits are going down as compares other players like Target Corp, Costco, and Kroger etc (Bianco, A. et.al 2007).
  • Organization of the labour unions: Since the profit margins for supermarkets are narrow, the cost on labour can be a critical factor which Wal-Mart has not been able to address (Grant, L 2003). Wal-mart Continues to have major problems with staffing and maintaining its workforce. Thus it will be critical for wal-mart to ensure a stable workforce to support its enormous operations. Wal-mart also faces issues of unsustainable wages wherein workers and manufacturers for wal-mart complain of inadequate wages (Sinagra, A.M. 2004).

Inflatory pressures challenges and its solutions:

Wal-Mart has followed innumerable number of strategies to counter challenges regarding inflatory pressures by stocking the products which are high in demand occupying most of the shelf space and the products which are less in demand are stored centralized or for online purchasing. (Simchi-Levi et. al 2002). Wal-Mart is the first retailer to leverage the domestic market front for the US market and determined to expand its market on world scale level, the first steps in this direction was opening a store in Mexico in 1991 and then in 1994, Wal-Mart acquired Woolco in Canada. (Colla et.al, 2002).

Internationalization is the one of the major concern of Wal-Mart and it has shown an exceptional ‘speed and scope’ in the same direction. Wal-Mart gave a major blow to its competitors by acquiring ASDA, the No.3 retailer in the United Kingdom. (Colla et.al, 2002). Wal-Mart is also known to force the manufactures that does business with Wal-Mart to reduce the prices at the manufacturing front so that they can offer a ‘every day low prices’ (Fishman, 2003) tag to their customers.

For Instance, Vlasic’s gallon jar of pickles, an year supply of pickles, is one of the product which Wal-Mart gave to their customers in less than $3. They used it as statement item in their stores. This represents, the way Wal-Mart do business with their manufactures and doesn’t have any sympathy regarding the manufacturer. The pickle maker had spent decades in convincing the customers that they should pay premium for its brand. Eventually, Wal-Mart stopped doing business with them and another manufacturer perished in lieu of losing their largest world-class retailer. (Fishman, 2003).

Resistance from small & local business challenge and its solutions:

Resistance from small and local business is a problem for Wal-Mart storage which is located in foreign country. To resolve this barrier, I recommend that keeping domestic good and production on shelve and seeking assistant from local government. For example, In China, Chinese like local product and has potential sense to protect domestic production. Wal-Mart resolve this problem by put much more local production on shelves (Huffman 2003).

For the international brand, almost international production is made in china, so local people will count as domestic good. Therefore, although Wal-Mart is international company, however, merchandise on shelve is still local production, which could help Wal-Mart to struggle with the resistance of local business.

Innovation and competition challenge and its solutions:

Wal mart acknowledges the pressure of maintaining its image as the lowest price offering supply chain. The new strategic options that wal-mart will have to consider in order to maintain their strong market presences are:

Defining its customer base and understanding what they expect from wal-mart

Wal-mart will have to identify and target its customers. For example there are the suburban women who have low incomes but high money spending urges and then there are the urban residents who are highly brand conscious (Barbaro, M 2007).

Thus to counter this wal-mart will have to be innovative yet competitive to sustain its customer’s expectations. It will have to provide cheap alternatives to people that need cheaper alternatives but also have branded products to attract the brand conscious people.

Strong positioning through strong marketing

Wal-mart will need some good advertising to let people know about the benefits that it offers. Wal-mart’s new slogans emphasize on saving money which are very appealing to customer. Thus to overcome local player’s presence wal-mart will have to provide distinction in its products while ensuring quality.

References

Bianco, A. et.al 2007, “Wal-Mart's Midlife Crisis”, business week, Issue 4032, p46-56, 9p, viewed on 27 th August 2008,

http://web.ebscohost.com/ehost/detail?vid=6&hid=116&sid=836299a7-f6fb-4fc8-b84c-d7898d0acb8f%40sessionmgr2&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=aph&AN=24786698

Chaffey, D 2004, E-business and e-commerce management: strategy, implementation, and practice Harlow, England, E-business and e-commerce management.

Colla, E et.al 2002, ‘Research and managerial issues on global retail competition: Carrefour / Wal-Mart, International Journal of Retail and Distribution Management, Volume 30, Number 2, ISSN 0959-0552

D'Innocenzio, A 2008, “Wal-Mart to report 2Q earnings, facing challenges”, Associated Press, viewed on 26 th August 2008,

http://www.economicnews.ca/cepnews/wire/article/108122

Edmonson, RG 2005, 'Wal-Mart's supply-chain moves reduce consumer prices.' Pacific Shipper, vol. 80, no. 38, Nov 11, pp. 122-122.

Frontline 2007, “Is Wal-Mart Good for America?”, viewed on 26 th August 2008,<http://www.pbs.org/wgbh/pages/frontline/shows/walmart/transform/protest.html >

Fishman, C 2003, The Wal-Mart You Don’t know, viewed 25 th August 2008, http://www.fastcompany.com/magazine/77/walmart.html

Gentleman, A 2007, “Indians protest Wal-Mart's wholesale entry”, International Herald Tribune, viewed on 26 th August 2008,

http://www.iht.com/articles/2007/08/09/business/walmart.php

Grant, L 2003, “Retail giant Wal-Mart faces challenges on many fronts”, USA Today, viewed on 26 th August 2008,

http://www.usatoday.com/money/industries/retail/2003-11-10-walmart_x.htm

Halkias, M 1999, 'Wal-Mart to Launch Online Travel-Reservations Site', Dallas Morning News, Dec 10.

Huffman, T.P. 2003, “Wal-Mart in China: Challenges Facing a Foreign Retailer's Supply Chain”,viewed on 25 th August 2008, <http://www.chinabusinessreview.com/public/0309/wal-mart.html>

Liard, M 2004, 'RFID in the Supply Chain: The Wal-Mart Factor.' Circuits Assembly, vol. 15, no. 1, Jan 11, pp. 14-14.

Osterwalder, A et.al 2002, ‘An e-business Model Ontology for Modeling e-Business, 15 th Bled Electronic Commerce Conference

Selva, M 2003, 'Wal-Mart Wants All Suppliers to Switch to New Supply Chain Technology', Sunday Business Jun 15.

Sullivan, L 2006, 'Hey, Wal-Mart, a new case of pampers is on the way [supply chain]', InformationWEEK, no. 1073, Jan 23, pp. 28-29.

'Study of Wal-Mart reveals first benefits of RFID' 2005, Healthcare Purchasing News, vol. 29, no. 12, Dec12, pp. 6-6.

Sullivan, L 2004, Wal-Mart's Way, InformationWeek (September 2004), viewed 15th July 2008, < http://www.informationweek.com/story/showArticle.jhtml?articleID=47902662 >.

Simchi-Levi, D, ‘The Effect of E-Business on Supply Chain Strategy, Massachusetts Institute of Technology, Working Paper Series

Sinagra, A.M. 2004, “The WAL-MART SAGA”, Seek truth (General Chapter 2004), viewed on 26 th August 2008,

http://www.adriandominicans.org/misdocs/PAB%20Fresh%20Perspectives/Walmart.html

Troy, M 2008, 'E-COMMERCE: WAL-MART SCORES WITH SITE-TO-STORE.' Retailing Today, vol. 47, no. 1, January 7, pp. 17-17.

Wal-Mart, 2008, saving people money, so they can live better, “Corporate Facts: Wal-Mart By the Numbers, www.walmartstores.com


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