Central Issue The main issue facing the management of Wal -Mart was how to sustain their extraordinary growth. As the domestic market reaches saturation, a strategy for at home and for global expansion will be necessary. Recommendation Wal-Mart needs to identify and nurture the primary core competency that fueled their growth: fulfilling customer needs with a wide spectrum of products at "everyday low prices." This competency is the product of the aggregate of competencies across individual skill sets and organization boundaries: Wal-Mart is a leader in channel management, inventory control, distribution and customer service. This is a result of the company's ability to coordinate a complex information management and distributing network and to efficiently manage supplier relations, through the use of new technologies and the seamless flow of information. Wal-Mart's extensive communications network connects all stores, warehouses, offices and suppliers.
This enables Wal-Mart to not only provide value to its customers by offering a wide variety of goods at the lowest prices, but also to provide value to its suppliers as a large, ever present channel for sale of goods. This channel also provides a highly efficient feedback loop on unit sales, demand and inventory, facilitating a just in time supply management system and an effective needs-based position. Through careful bargaining and sheer-size, Wal-Mart has power over the suppliers, and can purchase goods cheaper than the competition. Wal-Mart can also differentiates through private branding, i.
e. Sam's Choice. In addition to the added differentiation, they can become less dependent on branded manufacturers, further eroding the power that suppliers may wield. This also allows them to exploit their initial strategy of opening stores in rural areas that were traditionally neglected, by maintaining a steady supply of low priced goods with low inventory costs. This raises the barriers to entry. By offering such a broad spectrum of products at the lowest prices, Wal-Mart reduces the threat of bargaining power of buyers.
Wal-Mart was a leader in Uniform Product Codes scanning. For the two years that it took K-Mart to implement their system, Wal-Mart had, at least temporarily, a competitive advantage that was both valuable and rare. Another characteristic that is valuable and difficult to imitate: a loyal and motivated workforce. It requires time to develop a company culture of dedication and commitment to hard work. Providing value to the customer through low prices and excellent customer service, the threats of substitution are reduced. Customers won't switch to competitor chains.
The management of Wal-Mart must nurture and continually improve these competencies across the organization to remain dominant in the domestic market. To sustain their phenomenal growth, these core competencies must be intrinsic to a strategy designed to transfer Wal-Mart's competitive advantages into the global marketplace. Implementation Now that the core competencies have been identified, Wal-Mart must continue to innovate and take advantage of new technologies to maintain their position as the cost leader in the industry, from supply chain management to customer service. Operational efficiency in itself is not an effective strategy.
Flexibility is critical and willingness to take some risks is important in the formulation of new systems and ideas, lest their competencies become core rigidities. In the domestic arena, Wal-Mart should take advantage of the trend towards "one-stop" shopping by expanding their chain of super centers. Through these centers, Wal-Mat can deliver a unique mix of value to the consumers through a variety-based position; not only can consumers purchase department store items and food, but also services such as banking, car rental, video rental, etc. Although diversification into the food retail industry only provides "razor thin" margins, the supermarket section serves as a draw to the higher margin merchandise departments. The two largest super centers chains, Meijer and Fred Meyer, plan on staying regional. Wal-Mart has the infrastructure to exploit the concept nationwide.
Management should continuously benchmark operating results and best practices against those of their competitors. This includes not only Target and K-Mart, but the major supermarket chains as well. Management must nurture their competitive advantages and convey their importance to the organization as a whole. The management and associates need to understand their responsibilities and what they need to contribute to maintain the system of best practices that translate into advantage. To expand globally, Wal-Mart should enter into joint ventures or acquire foreign mass retailers already established in the market, as they did with Cifra S. A.
in Mexico. By buying an established business, Wall-Mart would be relieved of some of the initial capital investments for land and buildings, as well as skirting the morass of zoning ordinances and regulations. Having an experienced local partner will also eliminate some of the problems associated with customer tastes, styles and cultural differences. The consumer will already be "educated" to the concept of a discount store. Wal-Mart will need to budged significant sums of capital for communications infrastructure improvements, not only for the store systems, but also for the suppliers All of the aforementioned competencies are critical to global expansion, but patience and commitment are paramount to implement the systems and to develop an organizational culture as effective as that found in the U. S..