Essay: Walmart Retailers Inc

1.0 Introduction
Walmart Retailers Inc. is an American public cohesiveness that runs a chain of substantial price department store along with warehouses. According to Pereira (2004), the Founder Sam Walton created Walmart in 1962 and he proclaimed that the three strategy objects which will define his business are, respect for the individual, service to clients and endeavoring for excellence.
According to the Walmart Annual Report (2013), Walmart profits are generated by physical merchants and like most top retailers, it has both online and offline business service. Walmart runs over 10,000 shops throughout twenty-seven countries, in which the company has experienced a vivid growth. (Walmart, n.d.) According to Walmart (2012), ‘it serves more than 200 million times per week at more than 8159 retail units under 55 diverse banners in 27 countries’.
Furthermore, according to Fortune (2014), Walmart with $476294 billion revenues, has been ranked the first in the Global Fortune 500 List. According to Walmart Annual Report (2013), with the fiscal year of 2009 and a gross sale of $401 billion, it employed around 2.1 billion employees worldwide.
Moreover, according to Chandran(2006), Walmart has continuously empahasized on strengthening its relationships with its customers, merchants and workers. The company made efforts to capitalize on every cost saving opportunities. Bloom (2001), in his article states that all the savings on cost were always distributed on to the customers, thus adding value at every stage and process.
According to Basker (2008), Sam Walton has always focused on improving the sales, continuously by reducing costs, embracing efficient distribution, adapting to logistics management system and innovative information technology tools.
Therefore, the reason for Walmart success is the vivid growth in information system. Technology has tightly synchronizes Walmart value chain supply management system as this system delivers a mineable data asset that is unparalleled in U.S retail. (Chiles, 2005). McKinsey (2010), found out in his study that Walmart has been responsible for 12 percent of the increase productivity in the U.S Economy.
Lastly, keeping its traditional operations standard Walmart has enjoyed massive benefits and growth. However, would it be enough for Walmart to sustain itself with new technologies on the rise and competitors using these technologies to gain competitive advantage.
2.0 Background of the Case Study
Walmart has always been the leading retailer through its integration of information system with its Supply Chain. It later was reputed for the innovation of Warehouse Management System (WMS), Radio Frequency (RF) and Data Communication System.
According to Abbaterusso (2010), with the development of global economic integration, the competition between the enterprises is fiercer; many enterprises are faced with changeable market requirements of cost reduction, improving quality, condense delivery time and improving service.
According to Basker(2008), having own transportation system will enable Walmart to replenish the shelves four times faster than its competitors. The transportation costs for Walmart were estimated at 3 percent of the total cost as compared to 5 percent for their competitors.
Therefore, to reduce its capital and operating cost associated with its fleet, Walmart came up with the IT solution of having a Vehicle Management System (VMS). The primary focus of VMS is to ensure its distribution facilities are safer for its companies and to provide a safe work environment for its workers. (Vehicle Management System, 2013)
3.0 Current Market: Porters 5 Forces
According to Fortune(2014), Walmart has been ranked the number one retailer in the global market. Walmart competes with different companies in several categories. For general merchandise it competes with Kmart and Target whereas in Warehouse club it compete against Costco and lastly, for Safeway it competitor is Alberston’s.
Furthermore, some of the strengths of Walmart includes cost adavantage as it uses the formula of Every Day Lower Price. It has been using strong supply chain which has increases it production and reduced cost on operation. The primary goal is to satisy and guarantee suitable prices to customers in order to succeed.
On the other hand, it faces some challenges in miscellaneous public relations and extensiver labor relations. (Prater, 2005)
Source: Ward Peppard, 3rd ed., p. 41
3.1 Rivalry among existing competitors
Retail sectors are heavily associated with lot of competitors either locally or internationally. According to McKinsey (2010), some of the major competitors for Walmart are K-Mart and Costco in United States, whereas international competitors are Tesco and Discount Variety Store. At the start, Walmart’s intensity of competitive rivalry was low but now competitive rivalry is medium. According to Festus (2010), the reason is the competitors like Target’s or Kmart’s prices were higher before than Walmart but now, they have adopted Walmart’s mechanism and have implemented low cost strategy.
Therefore, Walmart needs stay ahead of other competitors by adopting to the new Vehicle Management System which will reduce the capital and operating cost. Lastly, Walmart’s core advantage is technology and price over its rivals.
3.2 Bargaining power of suppliers
Due to an increase in scale of Walmart, its market power and inputs are thus increased giving them an advantage to negotiate with contractors or suppliers. According to Basker (2008), Walmart can import at lower average cost than other retailers, stimulating further growth.
Prater(2005)states that as Walmart is a big buyer and accounts for about 40-50 percent of their supply, suppliers need to meet the requirements of Walmart. On the other hand with Walmart’s great success and higher reputation in the market suppliers needs to come in terms with Walmart to stay in business. Bloom (2001), states that suppliers tend to depend on Walmart for their products since they are their key customer thus the bargaining power is low.
3.3 Bargaining power of buyer
Walmart has the policy of ‘Every Day Low Prices’ thus face very low or no pressure from the customers. (Chandran, 2006) Even though the customers tend to purchase items from its other competitors at an analogous price, Walmart still has a unique selling scheme.
3.4 Threat of new entrance
Walmart will face medium to low pressure from other upcoming retailers because Walmart is the cost leaders and has had already achieved tremendous amount of economies of scale in market for the past decades (Festus, 2010). It is costly for new firms to enter in high barriers industries or markets. Moreover, Walmart’s brand image is too strong for any new born firm to compete.
However the new entrants can provisionally reduce their prices but in the long run it is very difficult to exile the giant from the industry.
3.5 Threat of Substitute Products
According to Raynor(2003), due to an improvement in technology the chances of substitution for products are getting higher, but the convenience and low pricing provided by Walmart is rare for any competitors. The competitors like Target and Carrefour have adopted Walmart’s strategy thus the threat of substitution is medium. According to Zhang (2013), even when there are even substitution, Walmart still tries to offer flexible prices to their customers which reduces the competitors but threat of substitutes still remains.