Discounting products contributes to a competitive advantage Wall-Mart tries to establish. Remaining competitive In an industry with competitors like Target and Smart proves to be challenging for Walter. Keeping cost lower than the amount customers are willing to pay helps build higher profit than their competitors. As the largest retailer in the United States and one of the top two largest employers.
With sales in excess of nearly BIBB, the company represents a driving force in the global economy.In 2013 the company had 1. 4 Million employees and represented 45% of general merchandise sales in the United States. From its inception, the company has been driven to innovate in the tail space in order to deliver on their mantra of Everyday Low Prices.
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In order to continue to drive growth, the company expanded heavily into international markets; however, they were greeted with somewhat tepid responses. The single greatest threat facing Walter is that from competition among existing companies.The ongoing shift in consumer preference for online transactions presents Walter with a very real, very substantial threat from companies like Amazon. Walter continues to fight this by promoting the notion of ‘Ship to Store” which allows consumers to eave a user experience similar to that of Amazon and letting the company take advantage of their supply chain investment to quickly and efficiently move products from supplier to consumer.
A challenge with this is that consumers, on occasion, equate low prices with low quality and, as such, means Walter is competing with a completely different brand placement approach from Amazon, who focuses on providing mostly name-brand products with a no-hassle return policy. Because of their size, Walter doesn’t really face a threat from supplier influence; however, there could be active repercussions associated with Amazon taking over as a primary buyer from companies like Rubberier as such a change would allow Rubberier to gain retribution against Walter for their past practices.Such a power shift could negatively influence Walter. Competitors like Target, Loses, and Smart really have very little influence on Walter and their primary tactic to counterbalance Walter power in the marketplace is to broaden their product offerings and simultaneously specialize because Walter doesn’t have enough shelf space to devote precious resources to products that have a limited base of consumers. The real threat to Walter comes from major internet based retailers like Amazon. Mom who have substantially smaller operating costs.
Walter continues to have a competitive advantage in this area because of their culture of being the low price option as well as their substantial investment In supply chain technologies. Amazon is gaining ground in this area, however, as they continue to invest in their own supply chain technology. Walter faces few challenges from new competitors because the sheer magnitude of investment that would be necessary to compete effectively is simply too great o be considered reasonable.
The biggest potential risk in this area would be a tie-up between competitors like Amazon and Target. Such an arrangement would pose a very real threat to Walter’s ability to maintain their existing competitive advantages. Economic Analysis – Walter 2010-2013 2013 2012 201 1 201 0 ROAR 0. 0874 0. 0851 0. 0883 0. 0878 ROE 0.
2326 0. 2307 0. 2328 0. 2123 Gross Profit Margin 25% Cash Flow Per Share $ (11. 25) $ (9.
41) $ (8. 72) $ (6. 93) Current Ratio 0. 8346 0. 8824 0. 8875 0. 8648 Quick Ratio 0.
2247 0. 2289 0. 2658 0.
758 Debt to Assets 0. 2665 0. 2762 0. 2425 Debt to Equity . 7091 0.
7492 0. 7275 0. 5864 Inventory Turnover 10.
7107 10. 9778 1 1 . 5775 12. 4747 According to the case, Walkers Inventory Turnover ratio fell by 14% between 201 0 and 2013. This is a measure of the pace at which products are sold and restocked and, because revenue grew by 15% during the same period, would seem to reveal that something has changed in their product mix. This trend could represent significant changes afoot within Walter as they change their product offerings.
In the short term this probably doesn’t represent anything too dramatics as their debt levels continue to stay within he normal zone; however, cash flow per share continues to shrink. Despite all of this, return on shareholder equity remains consistent. Recommended strategies include continued investment in supply chain technology, investment in branding including increased focus on their highly profitable private label offerings, increased focus on globalization, and partnering with local retailers and companies to leverage operational efficiencies of a multi- national corporation while taking advantage of localized expertise.Competitive Advantages From its very inception, Walters culture has been focused upon delivering owe price products to consumers while delivering excellent customer service.
The organization is steeped in the tradition to adapting their operating practices quickly and universally in any reasonable way that supports this principle. Because this mindset is an innate part of the Walter operating philosophy, everything that they do is centered on reducing the costs of the products they sell.Originally this was accomplished through conventional means like cost control and financial management; however, over time the role of technology in the company’s operations has changed and today cost intro is primarily an extension of the existing investment in supplier engagements, big data, real-time analytics, and supply chain management. This rich data-driven approach allows the company to quickly assess and predict product performance across multiple organizational boundaries; which ultimately underscores the company’s culture.The strategic value of the company culture is very high because it enables Walter to exploit cost reduction opportunities while simultaneously neutralizing competitive threats. Although it is relatively easy to replicate a culture of cost unconsciousness many companies seem to find it extremely difficult to sustain that culture and so it is somewhat rare to find it employed as effectively as it is at Walter.
A key component of Walter’s success at developing and sustaining their culture is the firm’s organization, including the policies and procedures employed to make the low cost, customer friendly goal a part of everyone’s job whether they serve customers directly or not. Because Of the symbiotic relationship between culture and technology as well as management’s promotion of technological innovation within their supply Hahn, the existing investment in supply chain technology is also a competitive advantage. As Walter has grown, continued innovation throughout their supply chain has been used to attain increasingly efficient results.One way to capture these additional efficiencies is to identify and remedial inventory bottlenecks by recognizing buying patterns in advance and redirecting inventory from where it’s not being used to where the demand exists.
In order to accomplish this the company has been implementing technologies like Radio Frequency Identification (RIFF) which allows for a beacon to be attached to a product or pallet by the manufacturer which can then be passively or actively tracked through the product lifestyle from the manufacturer’s location all the way to the store or perhaps even the point of sale.Such visibility allows the company to assess and leverage the value of their “in-process” inventory because, while product is not sitting on a shelf, it is a carrying cost and anything that can be done to expedite or reduce the amount of time it takes for products to transition from a carrying cost to revenue increases revenue and reduces cost. REID, Big Data, and Real-Time analytics are examples Of technologies that help the company predict consumer behavior, reduce cost, and increase revenue and because of the high cost barriers to entry for competitors to reproduce the efficiencies gained from them, this is also a competitive advantage.The value of the supply chain innovations that the company has already made are extremely high. The value of this existing investment, including the proprietary and custom developed solutions, makes the ability to imitate very difficult. Because of how difficult and expensive it is to imitate such a substantial chemical infrastructure, we also consider Walter’s technology to be rare and the organization is extremely proficient at leveraging this advantage.As the company has transitioned into being the single largest retailer in the US, the operational advantages that have resulted from their investment in supply chain technologies and the innate cultural temerity to implement them has delivered the company into the enviable position of being able to dictate terms to many suppliers.
As such a large component of the LIES economy, they represent a single, majority volume customer to many manufacturers and his gives the company great power and leverage when negotiating price and terms.A major contributing factor to the success of the company has been Retail Ink, the company’s home-grown analytics software that the company has been able to use to influence the behavior of their suppliers by offering them insight into consumer demand or threatening them to withdraw the same. Because the company can deliver such large volumes of business to their suppliers, they are similarly a huge consumer and so the company also exerts significant influence upon those that supply their needs.The most iota able Of these is the LOS government where Walter’s Stature among the top employers in the nation plays into relevant policy decisions. The value in the marketplace of carrying such power as both a buyer and seller is extremely high and, although not as rare as culture and technology, also rare. Size and the benefits of economies of scale that we see from Walter are not difficult to imitate and the organization is well situated to take advantage of them. Development Walter’s enormous size helped them acquire considerable purchasing clout with suppliers.
The company’s enormous size provides an advantage in their allegations with suppliers and has led to increased savings by negotiating price reductions as well as a two percent discount if bills are paid within fifteen days. Smaller manufacturers can receive as much as fifty percent of their revenues from large discount retailers like Walter. Walter alone accounts for more than twenty-eight percent of Dial’s sales.
It would take the next seven largest Dial customers doubling their sales in order to replace the lost Walter sales.Walter adopted a new technology called Radio Frequency Identification (REID) to identify and track products. The use of this new technology reduced shrinkage as well as eliminated the need for employees to scan PUC codes. This technology helped Walter keep informed about the supply and demand in order to reduce items that Were either overstocked or out of stock. This technology was particularly useful in deciding what products should be placed in each store depending on market conditions. Walter used their additional distribution centers to achieve success in its organizational strategy.
Additionally, cross-docking techniques were used to decrease the cost of sales by two to three percent. As the company expanded their grocery offerings, the company established a second distribution network specifically to support the unique requirements of the grocery business. Walter also created high velocity distribution centers that distributed both grocery and merchandise products that needed to be consistently replaced in the stores. Walter’s organizational system of distribution by two thousand company-owned trucks replaced goods routinely twice a week.From the very start, Walter’s core principle was to offer Everyday Low Prices. By doing this the company’s advertising and labor sots were reduced which fueled their growth. The resultant economies of scale that large businesses like Walter provide a key advantage; they can spread their overhead costs over many more stores.
This means that labor costs are also reduced as employees do not have to reorganize stock before or after sales. Walter used rich sales data to help decide what items should be placed in which stores according to demographics for that store or region.Also, managers would meet to discuss store operations as well as what competitors were doing.
This enabled the managers to use practices that ere successful in one store to be implemented into other stores or perhaps try idea practices that were working well for the competitors. In the international markets Walter used practices that ranged from Greenfield development, franchising, joint ventures, and acquisitions. During the year 201 3, Walter added four hundred ninety seven stores, much of which involved acquisitions in support of growth in international markets.In recent years, the company’s focus has returned to basic growth. Sustainability The culture of Walter is sustainable, as long as management continues to aka it a priority. Employees must understand that each of them is a vital part of the “low cost” philosophy that has made the company successful. Unfortunately, we believe that one particular aspect of Walter’s culture is declining, as their promise of excellent customer service seems to be stressed much less than the low cost aspect.However, even though Sam Walton always encouraged the practices of customer satisfaction and service, low prices were then and are now, the primary focus of the business.
Two of Walter’s biggest competitors in general discount retail are Target and Smart. Target has approached discount retail from a slightly different avenue than Walter, with a focus more on a trendy product mix and marketing aimed at an affluent customer base. Like most other retailers, Target does not have a chance of matching Walter’s low costs, and focuses instead on its own niche of discount.Smart has already attempted and failed to imitate Walter’s everyday low price State. Smart also tried to copy Walter’s vision for its workers, calling them associates and offering bonuses to managers, but this positive change came perhaps too late, after many associates were aid off in downsizing decisions by the company. Walter biggest true competitor today is Amazon, an internet-based retail giant. The threat from Amazon is very real; the lack of physical stores eating up profits with operating expenses makes low product costing much easier for Amazon.We think it would be very easy for Amazon to imitate Walter’s culture of everyday lowest prices.
Walter has always embraced technology: electronic data interchange (EDI) links with its suppliers to streamline inventory processes, high-tech distribution centers, radio frequency identification (RIFF) or tracking and identifying merchandise. Technology is an advantage that can be sustained, as long as Walter remains willing to engage new technological advances and maintains their forward momentum in inventory and operational processes.For example, Walter needs to continue to drive the progressive use of RIFF to better track products. Even though some retailers have been reluctant to introduce the system because of the expenses involved in compliance, once it is up and running RIFF can help track inventory and reduce extra labor and loss from product shrinkage. In order to compete with Walter, companies like Smart and Target would first have to catch up to the retail giant technologically. Amazon, on the other hand, is a legitimate challenge with its advanced fulfillment capability and online ordering and tracking.Already, Amazon has proven its ingenuity with Prime, which reduces shipping charges and wait times, and the introduction Of Kindle e-readers and prime Instant Video’s online media content.
Amazon has dedicated much of its early profits to the long-term investment required for technology and a solid infrastructure. Walter will need to make its own ointment to online ordering and shipping technologies in order to maintain any advantage in this area. The sheer size of Walter gives it a competitive advantage unlike any other retailer.This is a sustainable advantage as long as the company continues its steady growth, or at least maintains its size over other firms. Even though we believe that Walter will not be able to grow as rapidly as it has been, the company can preserve its physical existence in discount retail while building a stronger online presence.
This combined force will allow Walter to continue to influence suppliers as ell as government policy. No other retailer, discount or otherwise, can match Walter’s size, influence and buying power.Although Amazon is growing rapidly and gaining a market share in discount retail, they have no brick and mortar, physical presence to command influence like Walter. Walter will need to continue to improve on its ship-to-store and other online technologies, as well as successfully growing its international presence, to maintain its advantage in buying power and economies of scale. Strategic Options Walter has numerous strategic Options to maintain a competitive advantage.
One major strategic plan in place is a detailed distribution center network. This allows goods to move quickly and more efficiently than their competitors.In doing so, Walter keeps transportation and processing cost low allowing the company to pass the savings onto their customers. The detailed distribution center is a complex supply chain that allows Walter to deal directly with manufacturers.
Vendors can better handle inventory and ensure Walter has the products needed to stock store shelves. Walter entered the international market around 1992 and by 2013 their international ales were nearly 30% of the company’s sales (Barney, 2015). Expanding internationally poses many challenges including a backward type supply chain. Walter’s strategic plan includes implementing the U.
S. Distribution strategies. This poses a few challenges in foreign countries. One being supplier distribution may be limited or less effective when it comes to timeshares of delivery and product selections.
Globalization impacts the levels of Hallmarks expansion. It’s recommended that Walter continues to follow the globalization movement to ensure economic liberalizing, genealogy advancements continue as a strategic option. Sing the advancement of what globalization brings will help Walter remain competitive. An example of the logistics of globalization is listed below: *Retrieved from: http://BMW. Lodestars.
Net/anguishes/Walter-competing- in-the-global-market Besides using globalization as a strategic option, international brand recognition is another strategic option Walter should consider to remain competitive. Their logistics and culture doesn’t fit every culture around the world, its recommended that Walter shifts their focus on branding. Create reduce differentiation that appeals to the local culture instead of across the board standards. Localize their products and services to fit the consumers tastes and beliefs.
These products may include offering local staple food items grown locally.This could help with consistent positioning of always being a low price retailer. Another recommendation is to co-brand with local food retailers or other local businesses.
In order to implement the ideas mentioned, Walter needs to create a situational analysis to ensure a competitive advantage. An example of this analysis is listed below. *Retrieved from: http://www. Lodestars. Net/anguishes/Walter;competing- in-the-global-market Recommendation The case study examines the challenges that Walter faces in the competitive discount store industry which is considered the greatest threat.
Walter is a largest retailer that dominates the industry, but as previously mentioned, a risk associated with a tie-up between competitors like Amazon and Target. Its recommended that Walter continues to invest in supply chain technology, investment in branding, and stepping up moves towards globalization. Another strategy is partnering with local retailers and companies to leverage operational efficiencies, especially when considering expanding internationally.