Critical Success factor of Wal-Mart

1. 2. 3. 4. 5. 6. 7. Cost control Targeting a neglected niche Supplier partnership Distribution system Employees Wal-Mart Core philosophy Technology

Competitive Advantage Strategy - Cost Leadership/Cost Focus Porters five forces model Wal-Mart 1. 2. 3. 4. Existing competitive rivalry between suppliers Medium to High Threat of new market entrants Medium Bargaining power of buyers -Low Power of suppliers - Low

5. Threat of substitute products (including technology change) Low

Brief Critical success factors of Wal-Mart and its sources.

Cost control 1. EDLP a key communication propagated by Wal-Mart throughout the year 2. Offer/schemes (such as special Buy, roll back) emphasis on discount, bulk buying 3. Averaging around 20% less than their competition. 4. Agency cost management a. Austerity measures by top management to keep the cost down pass on the benefits to the end customer b. No investment in areas where there is no direct return. Targeting a neglected niche 1. Catering to the needs of the smaller market, which are ignored by other players. (small town shoppers) 2. First mover advantage Wal-Mart centered on small-towns first then tried to move to large
cities. 3. Saturated small markets barrier to entry, strong loyalty by existing customers

4. During initial growth stages no direct competition while building competitive advantages to cater to larger customers. 5. Reduced land acquisition cost and real estate prices

Supplier partnership a) Keeping suppliers needs/growth in mind b) Initiatives for process improvement of supplier c) Driving supplier to achieve economies of scale by constant price reduction d) Technology investment, management expertise e) Strong Bargaining power with suppliers Distribution system 1. Efficient inventory management centralised large warehouse, half day inventory,
optimum utilization of distribution centres

2. Excellent distribution system hub & spoke distribution system 3. Own Truck fleet Employees a. Motivated employees excellent customer service b. Esops shifting focus from Employee to Owner of the company, from salaries to stock performance. c. Job rotation involvement and knowledge of different functions of the company d. Building trust by sharing of information Wal-Mart Core philosophy 1. Core Philosophy in lieu with American psychographics a. Excellent customer services b. Showing respect and strive for excellence c. Ten specific business rules d. Convenient location, Freebies offered like free parking e. Close watch on the competition (monitoring competitors store to keep the lowest price of any product available in the market)

Technology 1. Technology infusion a. Implementations of Electronic Data Interchange (EDI) b. Bar codes to understand customer shopping habits.