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Thursday, February 22, 2024
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Walmart’s Business Strategy and Competitive Advantages

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Walmart is one of the most successful brand in retail business. It has retained the top position on the Fortune 500 list for a consecutive fifth year. Walmart operates approximately 11,700 stores and clubs under 46 banners in 28 countries and e-commerce websites. Walmart employs 2.3 million employees around the world — nearly 1.6 million in the U.S. alone. What is the secret of success of Walmart? What is Walmart’s business strategy? We will try to find the answer of these questions in this blog post.

Walmart’s Business Strategy, Mission and Vision

Walmart’s Mission Statement

Walmart’s mission statement is “to save people money so they can live better.” Walmart’s business strategies are a direct manifestation of this mission statement and these strategies and purpose involve using price as a selling point to attract customers.

Walmart fulfills the first part of its mission statement “to save people money” by selling low price goods through its stores as compared to other mid-scale or high end stores. The mission’s last part “live better” component remains uncertain as there is another argument that large-scale sales of cheap imported goods have long-term negative effects on community and small local businesses. Also if people are getting the desired value from the cheap goods to live better is also debatable.

Walmart’s Vision Statement

Walmart’s vision statement is “Be THE destination for customers to save money, no matter how they want to shop.” This vision statement was introduced in the company’s 2017 investment community meeting. Earlier the Walmart’s vision statement was To be the best retailer in the hearts and minds of consumers and employees. You can see that earlier the vision of the company was to become top player in the retail industry but now this has been changed to accommodate e-commerce also apart from the sales through conventional bricks and mortar stores. It clearly reflects that the company also wants to shift to the online sales to cope up with the changing technology and change in customer’s methods of buying the retail goods. There is another change in the new vision statement, that is, removing “employees” from the prevision vision statement. This change reflects a possible reduction of strategic suppler for the company’s employees.

Competitive Advantages of Walmart

Walmart’s main competitive advantage is derived from its vision statement that is selling low cost goods. Apart from this there are many other competitive advantages of Walmart, which are discussed below:

Selling Low Priced Goods

As discussed earlier also, the main competitive advantage of Walmart is to sell goods at low prices as compared to its competitors. “Everyday low prices” is their philosophy and their slogan is “We save people’s money so that they can live better”. Since beginning the company is fulfilling its promise and providing retail goods of daily needs at lower prices than other players in the market.

Satisfying Customers through Providing Best Customer Services

Walmart ensures that not only the customer gets the goods in low prices but also the best customer services. Some of its policies like 90-day return policy without receipts, using digital tools to ease the shopping process are the manifestation of this promise. Walmart is committed to continuously improve its customer services through best hiring and training programs for its employees and the company continuously motivates its employees to provide best services to its customers.

Cost Leadership

Have you though how Walmart is able to sell the goods at low prices and still makes profit? Walmart does it through keeping the cost of goods low through its various resources like human resources, knowledge resources and operating at large scales, etc. Walmart invests heavily in technology, which helps to reduce its costs. Location of stores, effective management and use of technology helps Walmart achieve economies of scale and having the cost leadership in retain industry.

Unmatched Supply Chain Management

The inimitable supply chain of Walmart is one of its greatest competitive advantage. Walmart has invested heavily on the development of its supply chain and warehouses. It continuously implements technological solutions to improve efficiency of its supply chain. Walmart is the fastest among its competitors to use barcode, RFID, etc. Walmart has established its regional warehouses and distribution centers at strategic locations which enable it direct shipping from the manufacturers and hence help reduce transportation, labor and storage costs significantly. Walmart’s efficient planning and management enables it to cut down the inventory costs and improves customer experience. Walmart’s strategy also includes maintaining long term relationship with its vendors.

Global Expansion

Walmart started with one store and presently has expanded its operations in 28 countries and 11700 stores around the world. The speed of penetrating in different countries is also unmatched. The global presence of Walmart is inimitable by its competitors and therefore is also one of its greatest competitive advantage. 

Market Monopoly in Small Places

One of the Walmart’s strategic move is to make presence in the small cities and towns also. These small cities and towns didn’t have capacity and scope of maintaining multiple stores. With the help of promotions, cost efficiency and service offerings, Walmart is able to operate in these small cities and due to its presence in these places other players find it very difficult to enter in these small cities and towns. Due to this reason, Walmart has been able to successfully achieve monopoly in these small places. This is how Walmart captures the market and it is also a competitive advantage of Walmart.

Key Business Strategies of Walmart

Below are given few business strategies, Walmart has adopted to sustain and grow in the retail industry:

Selling Low Price Goods

As reflected in its mission statement, Walmart has been successful in keeping the price of its products low. This is also one of its greatest competitive advantages. There are various ways by which it has been able to do so like keeping the cost of operations low, use of latest technology, establishment of its distribution centers and warehouses at strategic locations, making its supply chain efficient through effective management, etc. Hence attracting the customers by offering daily essentials at low prices is Walmart’s one of the main strategies.

Better Customer Service

Another strategy of Walmart is to offer best services to its customers. Ninety-day return policy without receipt, using digital tools to ease the purchasing process and for excellent customer experience are some of the measures, Walmart implements in its strategy. Walmart regularly imparts training to its employees to improve its customer services.

Focus on Strengthening the Supply Chain

Walmart’s strategy to develop a robust supply chain helps it cut the operation costs and deliver the products to its customers smoothly. Walmart has largest distribution center in the world and it serves a large number of clubs, stores and consumers across the globe. Walmart has also established six disaster centers in USA which are strategically located and are stocked sufficiently to cater the needs of the communities during disasters. An important part of its supply chain management is logistics management.  Walmart owns a large fleet of trucks and employs a team of skilled truck drivers. This large fleet of trucks ensure it to deliver goods to its customers smoothly.

Another aspect of its supply chain management strategy is its focus on technology for efficiently managing its supply chain. Its supply chain is considered to be the most advance and efficient in terms of technology. Walmart was among the first players which introduced barcodes and RFID for a better inventory management system.

Maintaining long term and direct relationship with its manufacturers is also a part of Walmart’s strategy. This strategy eliminates suppliers and enables the manufacturers managing inventory in its warehouses. In this way Walmart manages a more efficient & smoother inventory flow and better availability of products on its stores. This also led to cost effectiveness and better savings which can be transferred to customers in the form of cheap products. A shared database between Walmart and its suppliers enables better management of its supplies. Its database consists of all the required information from PoS (point of sale) data to warehouse inventory and is assessed to all the stakeholders of its supply chain. The easy sharing of data is enabled by the private satellite system owned by the Walmart.

Keeping the Operational Costs Low

Walmart is successful in keeping the low price because of its low operational and overhead costs. Introducing latest technology, better supply chain management and establishment of its distribution centers and warehouses at strategic locations are parts of its strategy which help it keeping the operational and overhead costs low.

Strong Global Presence

Walmart ‘s strong global presence is one of its competitive advantages. It is growing at a fast speed and have expanded its operations in many countries. It operates around 11,700 stores and clubs under 46 banners in 28 countries and e-commerce websites. One of its strategy is to remain in social and environmental activities in the countries it operates.  

Expanding its Operations to E- Commerce

Seeing the technological shift, Walmart has moved fast into e-commerce. Its e-commerce base is in Silicon Valley, California that leads all the online innovations for Walmart. It has hired some brightest minds that are working continuously to provide the customers a seamless and excellent shopping experience. Walmart has transformed the online shopping experience and its main website receives more than 100 million unique visitors every month and this number is growing every year.  By connecting its online and in-store shopping activities, Walmart has made another innovative move which enables it providing facilities like home free, site to store, pick up today, shop from store and same day delivery to the customers. Hence the combination of price leadership and technology has created a great system for Walmart which is not easy for its competitors to imitate.

Walmart’s $16-billion acquisition of India’s largest e-commerce firm Flipkart is such a move to strengthen its e-commerce business.

Conclusion

Walmart has achieved leadership position in the retail sector by adopting strategies like price leadership, effective and efficient supply chain management, making strong global presence, unique customer services, moving fast into e-commerce sector, keeping its operational and overhead costs, etc. While the price leadership and strong supply chain are the main differentiators, it has transformed the shopping experience for the customers with the help of technology. After securing its position in the international market also, now the brand is now concerned for improving its social image and it is taking initiatives in the social and environmental activities as well as community welfare activities in the countries it is operating its business.

Also read: Types of Business Level Strategies and Examples, How the Business Strategy Provides a Competitive Edge to the Business?“>How the Business Strategy Provides a Competitive Edge to the Business?

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Rajesh Pant
Rajesh Panthttps://managemententhusiast.com
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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