IT & Competitive Advantage of WAL-MART

IT & competitive advantage of WAL-MART
Department of Management Sciences
Student name: Student number: Course: Subject: Study Mode: Lecturer Name: Assignment Title: No. of pages:
Asma Hameed 05 MBA4th M1 MIS Full time YES Part-time Stage/year: 2012
Sir Tasawar Javed IT & Competitive Advantage 13
Additional Information:
( Font 12, Line space 1.5)
Asma Hameed Roll # 05 (MBA 4TH M1)
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Date due: Date submitted:
12 june, 2012 12 june, 2012
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able of contents
02 02
1. Introduction 2. Executive Summary
3. Swot Analysis Of Wal-Mart 4. Porters Five Forces Modle
03 06
5. Supply Chain Management Of Wal-Mart 6. Is At Wal-Mart
07 10
7.
References
11
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ntroduction
Wal-Mart was founded by Sam Walton in 1962 as a single discount store in Rogers and Arkansas. Sams wholesale club was introduced in 1983 and Wal-Mart supercenter was introduced in 1988. In 1991 Wal-Mart started its first international store in Mexico. Wal-Mart is operating in Mexico as Wal-Mart, in the UK as ASDA, and in Japan as Seiyu. Wal-Mart has more than 1.6 million employees1. Wal-Marts international financial year results for 2011 are Net Sales $109 Billion Retail Units 4557 Total Square Footage 287 Million2.
xecutive Summary
Use of latest information technology in all of its operations leads Wal-Mart towards its worldwide successful expansion. Wal-Mart is the world's largest dominant and most profitable retailer, and is considered No One in all over the world. Sam Walton was central to the legend; he built his kingdom on the approach of providing value to the customer and empowering employees. The culture of Wal-Mart is constructed on locating the most contemporary information about desires and requirements of customers. Wal-Mart suffered in1992 when Walton died but it continued its impressive growth. At the end of the fiscal year 2010 the Net sales were 405046$, Total assets of company were $170706 and the Current liabilities exceeds the current assets by $ 7.2 billion. While in 2011 net sales increased by 3.4 percent to $419 billion and operating income is increased by 6.4 percent to more than $25 billion, diluted earnings per share from continuing operations rose 12 percent to $4.18 per share. In this report we will check that how Wal-Mart gained competitive advantage through implementation of latest information technology in their operations, and how they managed their supply chain, which make it possible to acquire the required information all the time.
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WOT Analysis Of WAL-MART
Strengths
A firm's strengths are its resources and capabilities that it can use as a basis for developing a competitive advantage They offer in a store a huge selection of goods at very competitive prices. Because of their great size and a great bulk of purchases they can get huge discounts from suppliers and then provide the benefit of these savings to the customers3. Wal-Mart has grown substantially over recent years, and has experienced global expansion Wal-Mart is the largest employer in the United States .In 2003 Wal-Mart added 425 new stores all over the world and to meet the increasing demand for supercenters company added 4000 new super stores centers, total they added 48 million square feet of retail space 4
In January 2011 Wal-Mart has 2,200,000 fulltime employees, and in 2010 it opened 803 discount stores, 2747 supercenters, 58 neighborhood markets and 596 Sams clubs in the US and 4112 stores all over the world, in 2011 The company is operating approximately 10,231 retail units under 69 different banners in 27 countries5.
Its great strength and core competence is the information technology which Wal-Mart uses to support its international logistics system, and which made Wal-Marts logistics system remarkable6. It can see easily that how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement. Website is causing increased sales all over the world through online orders and providing convenience for customers. In order to provoke more sales and get competitive advantage Wal-Mart adopted aggressive pricing strategy, which enables them to cut prices on some products by 30 %, as toys.
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A focused strategy in placement of human resource, their management and development. Wal-Mart invests time and money in training people, and retaining and developing them, human resource is key to Wal-Mart's business.
Weaknesses
The absence of certain strengths can be viewed as a weakness.
Wal-Mart is the World's largest grocery retailer. Despite of its IT advantages Control of its huge empire could leave it weak in some areas due to the vast span of control.
Wal-Mart sells products across numerous sectors such as clothing, food, or stationary, does not have more focused or direct competitors7. Wal-Mart makes the survival of small retailers very difficult because of this many virtuous customers, retailers are worried of monopolizing position of Wal-Mart. Wal-Mart buildings cause a problem of traffic pollution, as these buildings are not environment sensitive. Sometimes Wal-Mart over stock the products and then in order to turn over the products they sale them on very low prices, result is reductions in its profit margins4. Wal-Mart is facing numerous labor issues such as health care, discrimination about women employees. In addition In 2005, company faced a number of litigations for not paying workers on time8. The Wal-Mart company is global, but having a presence in relatively few countries Worldwide.
Opportunities
The external environmental analysis could reveal certain new opportunities for profit and growth.
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Wal-Mart can emerge with, takeover and can also form strategic alliances with other global retailers to become the largest retailer in the world 9. Opportunities to expend business in some other countries as currently it is working in small number of countries. Can expend area of musical product by providing products on release date On the page which Wal-Mart borrowed from Amazon, it is making an Online Mall & will offer merchandise of lesser-known retailers in exchange of the share in revenue10. work for the improvement of environment and on the child labor laws will help Wal-Mart to improve its image and can effect global economy, environment and society Having an opportunity of growth in Asian markets and use of internet. And can have improved supply chain management through (RFID) Radio-frequency identification
Threats
Changes in the external environmental can also cause threats to the firm Being number one means that you are the target of competition, locally and globally and Intense price competition is a threat for Wal-Mart6
As a global retailer you will have to face political problems in the countries that you operate in.
When Wal-Mart open a new store in a new country after a few years the wages of that country fall down by 3% to 5%4. Issues like this cause problems for Wal-Mart.
Its competitors have direct sales force to increase the sales of name brand products but
Wal-Mart is facing a threat of brand name recognition, most of the customers looking for branded products will not look at Wal-Mart to find them.
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Wal-Marts investors may think that there is a little margin for the company to grow,
because Wal-Mart is facing slow growth in its mail product lines, apparel and food.
RFID can be a threat for Wal-Mart because some manufacturers of low-cost consumer
products may not see the advantages of this new system although this system can improve the supply chain management a lot
Increase in the number of General discount stores, specifically in those areas where
Wal-Mart cant operate is a threat for wal-mart4.
orters five forces
Wal-Mart has a clear porters five forces model, by using & implementing proper strategy, WalMart have almost removed the threat of new entrance and rivalry of competitors.
Threat of new entrance

Wal-Mart adopted expansion strategy and getting hold of new firms continuously and having enough strength to cope with the threat of new entrance 9. Furthermore constraints for new entrance are very high and strong.
Rivalry in the industry

This time in US, retail market has three main companies Wal-Mart, Sears, Target. Offered a maximum business to suppliers is provided by Wal-Mart, which gave power and strong position to Wal-Mart. Target is strongest competitor of Wal-Mart11.
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Bargaining power of suppliers

Wal-Mart drives the manufacturers to sell same products on lower prices or ultimately moves towards outsourcing Wal-Mart has strong negotiating power on suppliers because they are a
8.
large portion of suppliers business
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That makes bargaining power of suppliers less strong.
Bargaining power of buyers

According to Fisherman (2006), Americans spend $26 million every hour at Wal-Mart9. Individual buyers have no pressure on Wal-Mart. However, in some markets like apparel there is significant buyer power12
Bargaining power of buyers

In order to satisfy the customer Wal-Mart is selling products of daily common use on very low prices and with discounts 9. There is no direct substitute of these products
upply Chain Management of Wal-mart
Wal-Marts supply chain practices are surprising the world, these practices results in great operational efficiency and best customer services. In 2000, in order to make sure that their suppliers meet the social & environmental standards, Wal-Mart decided to make its supply chain management GREEN13.
Asma Hameed Roll # 05 (MBA 4TH M1) Page 11
Secondary activities
Infrastructure
Wal-Mart has no regional offices, but it has economical culture and pleasant work environment to work.
Human Resource Management

Wal-Mart made heavy investment in the training of it human resources. They developed its human resource very efficiently and by consider them as asset. Managers are compensated on the bases of the profit of the store they manage. Benefits and compensations offered to employees based on companys profit and According to their performance9.
Technology
Use of efficient technology is the basic factor behind the success of Wal-Mart. Technology plays an important role in all of its operations like store performance tracking, satellite system, real time market research, POS and UPS9.
Procurement
Due to their uncompromising dealings with the supplier and partnership with limited manufacturers, the provision of goods and services to their customers, on cheap prices became a comparatively easy task for Wal-Mart. They purchase products directly from manufacturer and are a tough negotiator on prices and make deals only after confirming that these products are not available anywhere else on cheap price9. One of the earliest employees, Claude Harries, said;
Asma Hameed Roll # 05 (MBA 4TH M1) Page 12
Every buyer has to be tough. That is the job. I always told the buyers: you are negotiating for your customers and your customer gets the best pries that you can get. Dont ever feel sorry for the vendor. He always knows what he can sell and what his bottom price is
Primary Activities
Inbound & Outbound Logistics
Wal-Mart has a very fast and responsive transportation system; they always hired only those drivers who had driven more than 300,000 accident free miles without any major traffic violation. Moreover, company keeps the records of the drivers activities in order to keep strict control on them. Wal-Mart is using a logistics technique known as cross-docking9. In this technique finished goods are directly uploaded from the suppliers manufacturing plant and then directly provided to the customers. This will diminish the cost of mediators and storage of finished goods. In order to attain the maximum return from cross-docking Wal-Mart makes basic change in their managerial control approach. This technique shifted the focus from supply chain to demand chain14. Wal-Mart owned 3,300 trucks and has 51 distribution centers, which carries almost 83% of companys purchased consignments from suppliers to warehouse and from warehouse to stores15. With the use of IT in distribution system Wal-Mart has gained competitive edge on their competitors by reducing cost of distribution.
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Operations
To track sales and inventory across the country more effectively and efficiently Wal-Mart invested a heavy amount in IT and set up their own satellite communication system in 1983 14.
In order to track its inventory and cut down the cost of supply chain management, WalMart forced their manufacturers, for common labeling, they should adopt Universal bar code System.
Wal-Mart starts using EDI (Electronic data interchange) technology in early by 1980s to 199016.
Wall-Mart collaborated with P&G, and built an automated reordering system by linking the computers of both companies with each other,14
POS (Point-Of Sale) system in was introduced in 1980s to monitor the sales and merchandise stock levels, which manage the replacement of goods at store .
Wal-Mart is using RFID (Radio frequency identification technology) which uses radio frequencies to transmit data labeled on individual products. Wal-Mart has reduced their 16% out of stock merchandise by using RFID
Wal-Mart is using Massively Parallel Processor (MPP) in order to track the movement of goods and stock levels14
Marketing & Sales

Wal-Mart is not too much marketing oriented, their marketing strategy is to promote their low prices always strategy but they spends less money on marketing as compared to its competitors.
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IS at Wal-mart
IT techniques used by Wal-Mart are mentioned above discussion. Information system at WalMart is very complex and effective, it tracks data almost about all types such as sales data, inventory levels, employee turnover even they have information about a single pair of socks. Wal-Mart is using different technologies in their information system some are as follows;
Cross docking EDI POS ASN (advance slip notice)15 RFID UPS Satellite communication system Automated reordering system
eferences
1. Visited on 1st June, 2012 (http://2myprofessor.com/Common/Sample%20Projects/walmart.pdf) 2. Wal-Mart annual report 2011 3. Visited on 10 June, 2012 (http://www.rapid-business-intelligence-success.com/swotanalysis-of-wal-mart.html) 4. Kara Groff , Wal-Mart SWOT analysis 2005.Xavier Universty marketing department (Wal-mart company profile 6) 5. visited on 12 june, 2012, http://finance.yahoo.com/q/pr?s=WMT+Profile 6. Shahzad trading and consulting FZE (http://www.shahzadtc.com/pdf/SWOTTOWS.pdf)
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7. http://marketingteacher.com/swot/walmart-swot.html 8. By Caroline Wilbert (How Wal-Mart Works) 26 April 2006, HowStuffWorks.com. (http://money.howstuffworks.com/wal-mart.htm) 9. By Namita Chitnis A case study of Wal-Mart (http://www.scribd.com/doc/37088393/wal1 ) 10. By Miguel Bustillo and Geoffrey A.Fowler, sep 1,2009(http://online.wsj.com/article/SB125176311963174365.html ) 11. Wal-mart porters five forces analysis (www.ooopapers.com) 12. By Cole Ehmke, Joan Fulton, and Jay Akridge AICC;industrial analysis & five forces Purdue university EC 722 13. BY Adam Haying & Whitney Sanzaro, May 4,2009,( A Case Study of wal-marts GREEN supply Chain management) 14. By P Mohan Chandran,2003, ICFAI Center of management research Wal -Marts supply Chain management practices (ICMR case collection) 15. (http://2myprofessor.com/Common/Sample%20Projects/walmart.pdf) 16. By Cisco Retail customer success stories The Wal-mart Story, using technology to support everyday low prices & increased customer satisfaction
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IT & Competitive Advantage of WAL-MART

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IT & competitive advantage of WAL-MART

Department of Management Sciences

Sir Tasawar Javed IT & Competitive Advantage 13

( Font 12, Line space 1.5)

Asma Hameed Roll # 05 (MBA 4TH M1)