One way to evaluate its speed is to compare the company with other retailers such as J. As of , J. Penney's global presence was minimal; only three of its 1, stores were located outside the United States - in Chile and in Mexico.
In , Kmart was a wholly domestic company, deriving all of its sales revenues from its United States stores. Further, international sales as a percentage of Sears' total sales remained more or less constant from to Thus it is clear that Wal-Mart established a global presence at a far more rapid rate than did its three large United States competitors.
Carrefour's first international move outside France occurred in , when it entered Spain. In , Metro A. In , some 7 percent of its total sales were generated outside Germany compared with 4 percent in and 5 percent in As of that year, its degree of globalization was on a par with Wal-Mart's.
In , Metro took the major step of acquiring S. Makro of the Netherlands. Metro's consolidated sales revenues for are estimated at DM billion, out of which foreign sales would constitute 37 percent. Wal-Mart succeeds in the United States simply by selling branded products at low cost. But that doesn't explain it all. Following is an analysis of Wal-Mart's competitive strategy.
Wal-Mart enjoyed scale economies in purchasing as a result of its more than 50 percent market share position in discount retailing. Though Wal-Mart may be the top customer for consumer product manufacturers, it deliberately did not become too dependent on any one vendor no single vendor constituted more than 4 percent of its overall purchase volume. Further, Wal-Mart had persuaded its nearly 3, vendors to have electronic "hook-ups" with stores to reduce overall order entry and processing costs for itself and its vendors.
In-bound logistics About 85 percent of all the merchandise that Wal-Mart sold was shipped through its distribution system to the stores competitors averaged less than 50 percent. Wal-Mart used a "saturation" strategy for store expansion. The standard was to be able to drive to a store within a day from a distribution center.
A distribution center was strategically placed so that it could eventually serve between and Wal-Mart stores within a day. Stores were first built as far away as possible but still within a day's drive of the distribution center; then the area was filled in back to the distribution center. The distribution centers operated 24 hours a day using laser-guided conveyer belts and cross-docking techniques that received goods on one side while simultaneously filling orders on the other.
The company owned a fleet of more than 3, trucks and 12, trailers most competitors outsourced trucking. Wal-Mart had implemented a satellite network system that was used to share information between the company's network of stores, distribution centers and suppliers so orders could be consolidated, enabling the company to buy full truckloads without incurring excess inventory costs. Wal-Mart's distribution and logistics infrastructure saved transportation costs 2 percent to 3 percent cost advantage relative to competitors , increased flexibility, insured percent in-stock position and increased store selling space by reducing the space required for back-room inventory storage.
Store operations As a result of better management of stores, Wal-Mart enjoyed cost advantages and sales per square foot advantages versus competitors.
These advantages were derived from several sources. Store location : In the early years, Wal-Mart's strategy was to build large discount stores in small rural towns. The locations resulted in lower operating expenses, especially payroll and rent. Competitors, such as Kmart, which were focused on large towns with populations of more than 50,, ignored Wal-Mart. This built effective entry barriers as it became highly uneconomical for competitors to enter regions Wal-Mart had already saturated.
Human resource management : Wal-Mart created a dedicated work force - with higher labor productivity, lower turnover and excellent customer service - offering profit sharing, incentive bonuses and discount stock purchase plans; promotion from within; promotion and pay raises based on performance, not seniority, and an open door policy.
Management information and control systems : Wal-Mart's management information and control systems helped the company manage its more than 3, stores in remote places thousands of miles away from headquarters. Store-level data were collected, analyzed and transmitted electronically to see how a particular region, district, store, department within a store or item was performing.
This eliminated stock-outs, reduced the need for markdowns on slow-moving stock and maximized inventory turnover. The benchmark information across stores was also a valuable tool to help "problem" stores. Shoplifting controls : Wal-Mart has cut its pilferage-related losses by instituting a policy in which 50 percent of the savings created by pilferage decreases in a particular store versus the industry standard is shared among store employees.
Marketing Wal-Mart's marketing strategy was to guarantee "everyday low prices" as a way to attract customers. The traditional discount retailer, which relies on "sales," not only has to do more advertising and promotions but also has to rely more on catalog mailing, buildup of inventory before a sale, markdowns on the unsold inventory, etc.
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Recommended Stories. History lessons. How the best soccer team in the world lost its luster. S but it makes German people feel uncomfortable when being greeted with a smile by strangers and Walmart had to change this policy after they realized the issue about it.
The problem with language also causing the gap in communication within the hierarchy of the company. The entry strategy of Walmart through acquisitions of two pre-existing chains Wekauf and Interspar was not effective as those are two weak chains and they cannot compete with other powerful retailers. Walmart should consider other entry strategies such as greenfield or joint ventures.
However, in this case, a joint venture with local firms seems to be the most appropriate since local firms would have better knowledge at the local people and culture and it can help Walmart to slowly accommodate the German market. A joint venture would reduce the risk significantly the risk of entering Germany and provide a better platform for Walmart to analyze the German market which can be different from the U. K despite the close proximity between the two countries.
Walmart should know that the German retail market in the s is very difficult to enter and operate based on the 0. If Walmart does some proper research, they would have known that the strategies that they use in the U. For example, Walmart should allow employees to use German in the workplace instead of making them use English to communicate since German is their official language or not forcing employees to smile with the customers which would not cause dissatisfaction within both employees and customers.
Login Register 0. Go to cart. Company background Walmart is a retail corporation that manages a chain of supermarkets, grocery stores, and discount stores located in the United States.
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