- The Business strategies Wal-Mart uses and how they differentiate their services/products
There are 3 generic business strategies and they consist of the Focus strategy, the Differentiation strategy, and Overall Cost leadership. The Focus strategy is usually defined as focusing on offering products and services to a particular market segment or buyer group, within a segment of a product line, and/ or to a specific geographic market. The Differentiation strategy is defined as offering a product or service that is perceived as unique in the marketplace. Wal-Mart‘s business strategy is Overall Cost Leadership, offering their customers great quality service and products at a lower price than their competition. Overall Cost Leadership is defined as offering the same or better quality product or service at a price that is less than what any of the competition is able to do. In achieving this goal it relies on a Supply Chain Management, that ensures products are available to the customers when they it. The items offered are broken down into products and services, products would be privately labeled brands such as, “George, Metro 7, Mainstays and other licensed brands from Disney and Mary-Kate and Ashley”. Services would be that they offer home goods, beauty supplies and seasonal items.
- The estimated power each of the 5 forces has (suppliers include their employees and suppliers of technology). How Wal-Mart reduces the buyer and supplier power and how Wal-Mart creates switching costs and entry barriers.
The five forces are buyer power, supplier power, threat of substitute products and services, threat of new entrants, and rivalry among existing competitors. Wal-mart follows the five forces business strategy.
Buyer Power is affected by how big your customers are and how much revenue they constitute as well as other things. For instance Wal-Mart has a lot of power with suppliers because it buys so much of their inventory and is thus a large percent of those companies revenues. It is no surprise then that these companies have lived and died with Wal-Mart's orders and would do anything to protect their business with them. Buyer power has about 55% of the five forces model that Wal-Mart uses, since the Company’s sole purpose is to ensure that its customers are, “Saving Money, Living Better”. Buyer power would also include their employees, in treating them with the respect, giving them support and having an open door policy, you create happy employees which transfers to happy customers.
Supplier power as there is a high amount of choices to be taken in and they do bring in a lot a supplies. As for a threat of a substitute product, it is high because there are alternative products for sale that can replace another item. As for a threat of a new entrant, Walmart seems to be the Leader in low cost sales so it will not be easy for a new business to come in and challenge Walmarts' ways. Supplier Power estimated percentage would be about 35, while, this percentage appears to be low, in the grand scheme of things is allows Wal-Mart to ensure that their suppliers come from a diverse group that achieves and maintains their high standards of delivering great quality services and products.
Threats of Substitute products and threats of new entrants average around 3%, simply because with Wal-Mart focusing on ensuring that their customers are happy and that their suppliers are delivering quality products at a low cost, they would ensure that they remain ahead of their competitors and in doing so, it would make it difficult for new entrants and the competition to match their prices.
In order to reduce buyer and supplier power, they would have to put a greater emphasis on the threat of substitute products. They would have to look at what are the better and cheaper alternatives on the market and tap into that resource.
Threats of new entry To create entry barriers, they would have to increase market research on what customers are actually purchasing and ensure that they are able to deliver, and become the only person offering that product at a price the customers and afford. Switching costs are easy, once customers realize they are no longer getting value for their money, they would go seek products elsewhere.
Rivalry is how competitive an industry is. For instance, if there are lots of companies selling essentially the same products there will always end up being a price war which will severely hurt the company' profits. Wal-mart has such low prices which has created a problem for years and fierce competition has made it tough for competitors to make a profit.
-The major business initiatives are used in Wal-Mart and what software is used.
For Walmart, the major business initiative being used is Supply Chain Management. A supply chain management system is an IT system that supports activities by automating the tracking of inventory and information among business processes and across companies. Wal-Mart is to ensure that all their suppliers are using Electronic Product Codes and for those who do not have the capability they work with them to find packages that are within their price range. This allows for a successful ensuring that customers get what they order in a timely manner. It allows for logistics, fulfillment, production, revenue and profit, cost and price efficiency, Another initiative is the, Go Green Concept, according to Wal-Mart’s press release as
of February 2nd 2009, “two new types of heavy-duty commercial hybrid trucks and two different alternatively fueled heavy duty trucks”, has become, “part of the company’s efforts to build on its progress in developing a more sustainable trucking fleet”. As an Overall Cost Leadership company, their strategy is that of a bottom-line company. A bottom-line strategy optimizes manufacturing processes, decrease transportation costs, and reduces cost of human capital, and minimizes errors in a process.
-IT organization and the philosophical approach Wal-Mart uses
They rely on IT enabled tight supply chain management systems to squeeze every penny possible out of the procurement, distribution, and warehousing of its products. They use business intelligence systems to predict what customers will want and when they will want it. Wal-Mart is currently using ERP, which incorporates, Customer Relationship Management system; they are also in the process of implementing SAP to strengthen their business skills. Philosophical Approach could be the Matrix, where there is collaboration across the board to ensure customers’ needs are satisfied. They have in-out flows, which is from computers to suppliers.