Description
A company incorporated in 1969, way after the emergence of discounted stores in USA in the mid 1950’s managed to not only survive for nearly two decades but also be the market leader in its segment. This has been possible mainly because of the clear and unique strategy that was adopted by Wal-Mart.
Strategic
Management – I
PGP – I
Group Assignment
Wal
Discount Operations
A perspective from
Group Assignment -1
Wal-Mart Stores
Discount Operations
A perspective from the article by Michael E. Porter
Submitted to – Prof. D.L.Sunder
Submitted by – Group 10, Section
Anjali Bhushan
Karthikeyan R.
Rahul Bakshi
Mehta Dhruval Bhavenbhai
Saurabh Tandon
Vikash Thakur
Mart Stores
Discount Operations
Prof. D.L.Sunder
Group 10, Section – A
2011PGP549
2011PGP684
2011PGP807
2011PGP721
2011PGP857
2011PGP938
Page 2 of 3
A company incorporated in 1969, way after the emergence of discounted stores in USA in the
mid 1950’s managed to not only survive for nearly two decades but also be the market leader in
its segment. This has been possible mainly because of the clear and unique strategy that was
adopted by Wal-Mart.
Despite the conventional wisdom to have a full-line discount store in an area with a
population base of at least 100,000, Wal-Mart had a clear strategy to go about launching
in small towns.
o This allowed the company to command an unmatched 10% - 20% of its total retail
sales from those areas due to lack of competition.
o They later on started turning to increasingly populated areas for growth.
They had a clear vision of focusing on the Sunbelt region which saw greater increase in
population over 1975-1985 periods.
In the early 1980s, being an established player in the market, in order to grow further they
diversified business by coming up with store like Sam’s warehouse club etc.
o They went about with the strategy of again targeting areas with lower population
base (~1,25,000)
o They targeted their gross margins to 9% - 10% with a lower startup cost of $5
million to $10 million.
There initial positioning was for the segment of customers that were not being directly
targeted by the existing competitors during the discount retail boom.
This had a trade-off of not targeting the customers in the metropolitan regions and
missing on an established market.
They had a ‘Distribution Centre’ to serve stores within a 300 mile region and with
packed store outlets and vendor operated factories within its territory the trucks had 60%
capacity utilization.
They took no more than a fifth of the volume from any of their vendors. Thus helping to
mitigate price hike risk and not letting themselves being governed by vendors.
Uniqueness of Adoption
Access based Positioning
Page 3 of 3
They had a perfect 2
nd
order fit where there strong distribution network and lower cost of
inbound logistics reinforced the fact that Wal-Mart had larger gross area available as
selling space with reduced back room storage.
Wal-Mart seemed to achieve 3
rd
order fit with higher optimization of effort. They were
the first one to install computerized system to track inventory and have an electronic
selling of the Uniform Product Code (UPC) at the point of sale thus helping them to
improve the productivity and efficiency.
Wal-Mart used a computer-aided design to develop a program to suggest a merchandize
mix for each store. Thus coming up with innovation in their supply chain management.
Store managers were given greater liberty in setting prices and allocating shelf space,
ordering stock and displays. Thus having an everyday shelf price and a clear market gain
in terms of profits.
The company headed under the effective leadership of Sam Walton who emphasized
on communication within the company.
The vice president and the top management in their weekly meeting discussed over
the next week’s target thus helping to clearly define the company’s unique position,
making trade-offs and forging fit among activities.
The chairman and CEO, Sam Walton himself spent three to four days a week
travelling on roads and met with each new supplier thus leading by examples.
Fit to help drive sustainability
Efficient Leadership
doc_762458203.pdf
A company incorporated in 1969, way after the emergence of discounted stores in USA in the mid 1950’s managed to not only survive for nearly two decades but also be the market leader in its segment. This has been possible mainly because of the clear and unique strategy that was adopted by Wal-Mart.
Strategic
Management – I
PGP – I
Group Assignment
Wal
Discount Operations
A perspective from
Group Assignment -1
Wal-Mart Stores
Discount Operations
A perspective from the article by Michael E. Porter
Submitted to – Prof. D.L.Sunder
Submitted by – Group 10, Section
Anjali Bhushan
Karthikeyan R.
Rahul Bakshi
Mehta Dhruval Bhavenbhai
Saurabh Tandon
Vikash Thakur
Mart Stores
Discount Operations
Prof. D.L.Sunder
Group 10, Section – A
2011PGP549
2011PGP684
2011PGP807
2011PGP721
2011PGP857
2011PGP938
Page 2 of 3
A company incorporated in 1969, way after the emergence of discounted stores in USA in the
mid 1950’s managed to not only survive for nearly two decades but also be the market leader in
its segment. This has been possible mainly because of the clear and unique strategy that was
adopted by Wal-Mart.
Despite the conventional wisdom to have a full-line discount store in an area with a
population base of at least 100,000, Wal-Mart had a clear strategy to go about launching
in small towns.
o This allowed the company to command an unmatched 10% - 20% of its total retail
sales from those areas due to lack of competition.
o They later on started turning to increasingly populated areas for growth.
They had a clear vision of focusing on the Sunbelt region which saw greater increase in
population over 1975-1985 periods.
In the early 1980s, being an established player in the market, in order to grow further they
diversified business by coming up with store like Sam’s warehouse club etc.
o They went about with the strategy of again targeting areas with lower population
base (~1,25,000)
o They targeted their gross margins to 9% - 10% with a lower startup cost of $5
million to $10 million.
There initial positioning was for the segment of customers that were not being directly
targeted by the existing competitors during the discount retail boom.
This had a trade-off of not targeting the customers in the metropolitan regions and
missing on an established market.
They had a ‘Distribution Centre’ to serve stores within a 300 mile region and with
packed store outlets and vendor operated factories within its territory the trucks had 60%
capacity utilization.
They took no more than a fifth of the volume from any of their vendors. Thus helping to
mitigate price hike risk and not letting themselves being governed by vendors.
Uniqueness of Adoption
Access based Positioning
Page 3 of 3
They had a perfect 2
nd
order fit where there strong distribution network and lower cost of
inbound logistics reinforced the fact that Wal-Mart had larger gross area available as
selling space with reduced back room storage.
Wal-Mart seemed to achieve 3
rd
order fit with higher optimization of effort. They were
the first one to install computerized system to track inventory and have an electronic
selling of the Uniform Product Code (UPC) at the point of sale thus helping them to
improve the productivity and efficiency.
Wal-Mart used a computer-aided design to develop a program to suggest a merchandize
mix for each store. Thus coming up with innovation in their supply chain management.
Store managers were given greater liberty in setting prices and allocating shelf space,
ordering stock and displays. Thus having an everyday shelf price and a clear market gain
in terms of profits.
The company headed under the effective leadership of Sam Walton who emphasized
on communication within the company.
The vice president and the top management in their weekly meeting discussed over
the next week’s target thus helping to clearly define the company’s unique position,
making trade-offs and forging fit among activities.
The chairman and CEO, Sam Walton himself spent three to four days a week
travelling on roads and met with each new supplier thus leading by examples.
Fit to help drive sustainability
Efficient Leadership
doc_762458203.pdf