Walmart, founded in 1962 by Sam Walton, is one of the largest retail corporations in the world. Headquartered in Bentonville, Arkansas, this multinational company operates a chain of hypermarkets, discount department stores, and grocery stores. Walmart serves customers across the globe, offering a wide array of products ranging from groceries to electronics and household goods.
Walmart aims to save people money so they can live better. This mission reflects their commitment to providing low prices and quality merchandise to enhance the lives of their customers. The company adopts an operational philosophy of efficiency and innovation, continuously working towards sustainability and social responsibility.
With over 10,000 locations worldwide, Walmart’s impact on the retail landscape is significant. The company not only provides numerous job opportunities but also fosters local economies through its operations. Furthermore, Walmart is recognized for integrating technology into its retail strategy, enhancing the shopping experience for its customers.
In conclusion, Walmart stands as a colossal entity in the retail sector, embodying a commitment to affordability and customer service. Their vast range of products and innovative approaches to retail management continue to set them apart in a competitive market.
Problem Scenario
To evaluate the advantages of any organization, it is important to consider the data, especially financial data since its inception, and compare it with the competition. From the data, it is evident that since going public in 1972, Walmart has recorded significant profitability and growth, having recorded an average annual sale of 22% between 1972 and 2009. Also, the report indicates the organization’s return on equity had not fallen below 20%. It is also evident from the financial performance that the organization registered increasing inventories and total assets from 2005 up to 2018 (Grant, 2021).
Walmart’s main competitive advantage lies in its management system. (Errida & Lotfi, 2021) note that organizational management is a critical determinant of corporate success and the ability to steer the organization forward. Walmart’s competitive advantage is largely sustainable due to its unique business strategy, cost leadership strategy, and efficient supply chain management (Wang, 2021). Walmart faces different challenges that require prompt intervention for sustained operations.
Performance
The performance of the organization can be attributed to the exploitation of competitive niches and industrial effectiveness. However, the industry provides significant opportunities for profitability and growth attributed to the increasing consumer demand for goods and services. It is also important to note that Walmart’s sustained success emanates from exploiting competitive niches. For example, the organization’s business-level strategy involves providing everyday low prices and managing costs. This strategy has enabled the organization to differentiate from other competitors and also maintain a competitive niche in the industry (Alsharari, 2021). The organizational emphasis on low cost and increasing customer value has provided an incremental value proposition to the customers and enabled them to attract other new customers. This approach has continued to develop customer loyalty, which is imperative for overall organizational performance.
There are also other factors that positively contribute to the organization’s performance, including centralized purchasing, a procurement system, and maintaining positive vendor relationships. This approach has enabled the organization to maintain a positive image and be able to negotiate better procurement terms with suppliers. This undertaking enables the organization to obtain high economies of scale.
From the analysis of Walmart’s financial performance up to 2018, it is evident that the organization has continued to manage its current obligations while consequently increasing stakeholders value. For example, from 2005 up to 2018, Walmart’s current ratio has stabilized at 0.9. This aspect implies that the organization can be able to settle its current obligations using its current assets, and thus, lenders would be willing to offer credit to the company (Husna & Satria, 2019). The return on assets and return on equity have also stabilized over the years, implying that the organization is making significant progress in terms of performance. When evaluating the expansion of the entity, it is also evident that the number of stores in the US and internationally has increased significantly. For example, the number of international stores increased from 1587 in 2005 to 6360 by 2018. This implies that the performance of the organization has been significant over the years, which can be attributed to adopting a business-level strategy that enhances its competitiveness.
The organization’s distribution logistics are also an imperative aspect of enhancing its competitiveness. Adopting a hub-and-spoke configuration and making direct purchases from overseas suppliers has enabled Walmart to control its supply chain and optimize distribution. This has led to faster turnover and a high-cost saving. Besides, the application of radio frequency identification (RFID) for logistics management and inventory control has increased organizational efficiency and innovativeness, contributing to faster lead times (Grant, 2021).
Competitive Advantage
The organization has succeeded in its purchasing, distribution, and warehousing functions, in-store operations, and IT functions and activities. These functions are supported by the company’s resources and capabilities, which allow it to maintain its position as the world’s largest retailer. Thus, organizational management has been instrumental in shaping organizational performance.
Concerning the purchasing function, Walmart’s organizational size and negotiating power with suppliers gives it a significant competitive advantage. The company’s centralized purchasing approach allows it to dictate terms and negotiate lower prices from suppliers. Also, the internal standards for suppliers enhance compliance with quality requirements, which reduces operational costs, minimizes waste, and increases organizational value. Walmart also collaborates with suppliers through EDI and retail links. This engagement enables the entity to forecast demand and manage its inventory.
Distribution and warehousing are also key competitive advantages for Walmart. The organization has adopted a hub-and-spoke distribution system. In this approach, goods are distributed from the distribution centers to stores in Walmart trucks. Therefore, the entity is able to manage delivery and scheduling. The adoption of cross-docking and the remix system increases efficiency in the distribution network. Additionally, the company’s use of RFID for logistics management and inventory control improves accuracy and speed in the distribution process.
In-store operations are also critical for organizational competitive advantage. The company has adopted the store of the community philosophy, which ensures that products are within reach of consumers. This approach enables the entity to meet consumer’s needs in their most basic state (Grant, 2021). Besides, the local stores are able to offer different branded products to a segment of customers and thus meet the customer’s needs, ensuring that the product range in each store is tailored to local customer needs. Moreover, the organizational commitment to saving customers money resonates well with buyers and enables a positive shopping experience.
Another source of competitive advantage is the organization’s IT function. The company is continually adapting its logistic system to increase lead times and offer more value to customers. This incorporates using current technologies such as RFID, EDI, and Retail Link. These processes enable real-time tracking of customer sales and inventory management.
Sustainability
Besides, the organizational leadership style based on Sam Walton’s values and principles of keeping in touch with customers is effective in enhancing sustainability. Walmart has long been the leader in customer-friendly costs and seeking efficiencies in its operations (McMann, 2019). This strategy is deeply enshrined in the company’s culture, as the founder, Sam Walton, believed in providing value for money to customers.
Walmart’s scale and market presence also contribute to its sustainable competitive advantage. With over 11,700 stores and e-commerce websites under 65 banners in 28 countries, Walmart has a wide reach that competitors find challenging to match. Its large customer base and extensive network allow it to negotiate better deals with suppliers and achieve economies of scale, further lowering its costs. Additionally, the organization’s strong brand recognition and reputation give it a competitive edge, as customers trust its commitment to providing value and quality.
Furthermore, Walmart’s efficient supply chain management plays a crucial role in maintaining its competitive advantage. The company’s distribution system has a highly organized configuration that allows for effective scheduling of deliveries and utilization of trucks. The use of technology, including the RFID, helps streamline operations and improve inventory control. Walmart’s collaboration with suppliers through initiatives like “Retail Link” and the “on-time, in-full” program ensures that products are delivered in a timely manner, reducing out-of-stock situations and enhancing customer satisfaction.
Walmart vs. Others
Other retailers have struggled to imitate Walmart’s strategy and duplicate its competitive advantage due to several reasons (Burbach, 2021). Firstly, Walmart’s scale and market presence make it challenging for competitors to match its bargaining power with suppliers and achieve similar economies of scale. Smaller retailers may not have the resources or infrastructure to negotiate favorable terms with suppliers, leading to higher costs and less competitive pricing.
Secondly, Walmart’s focus on cost efficiencies and its commitment to EDLP require a unique organizational culture and operational practices that may take time for other organizations to replicate. difficult for other retailers to replicate. The emphasis on thrift, value, and cost control permeates every aspect of Walmart’s operations, from store management to vendor relationships (Chen, 2021). This culture has been shaped by the legacy of founder Sam Walton and is deeply ingrained in the company’s DNA.
Adopting continuous innovation and leveraging research and development has been a critical aspect of Walmart’s competitive advantage. These approaches enhance adapting to consumer needs and preferences.
Challenges
One of the most critical challenges is increased competition from both traditional competitors, such as Costco and Target, and new entrants like Amazon and Alibaba (Volpe & Boland, 2022). These competitors offer more stylish, quality-focused, and service-oriented options that appeal to different segments of customers. For instance, Amazon’s acquisition of Whole Foods has intensified the competition in the grocery sector, which is a key driver of Walmart’s sales growth.
Another challenge arises from external stakeholders such as environmentalists, anti-globalization activists, and labor unions, who criticize Walmart’s business practices and employee treatment. This has shifted the entity’s outlook on social and environmental responsibility and corporate ethics (Resche, 2020). All these factors demand increased investment and resources to enhance corporate social responsibility. To sustain its current performance and defend against these threats.
Measures
Walmart needs to take several measures. First, it should continue to focus on its cost leadership strategy by maintaining its “Everyday Low Prices” strategy and cost control initiatives. This will help it maintain its competitive advantage in terms of pricing.
Also, it is imperative to enhance e-commerce capabilities to compete with other competitors, such as Alibaba. Walmart needs to invest in technology and logistics to improve its online shopping experience, increase convenience for customers, and offer seamless integration between online and offline channels.
Third, Walmart should continue to expand its product offerings to cater to different customer segments and enhance its brand image. This includes improving the quality and assortment of products, especially in its grocery segment, to compete with more specialized retailers like Whole Foods. Fourth, Walmart should strengthen its relationships with suppliers through collaboration and synchronization initiatives. This will help it ensure timely and efficient deliveries, reduce inventory costs, and maintain its supply chain advantage.
Conclusion
Thus, Walmart’s performance is highly attributed to its competitive advantage. The adopted business structure has enabled the entity to exploit new avenues for generating revenues amidst increasing competition in the market. The company’s on-time, in-full initiative for suppliers ensures that goods are delivered within a specified window, further enhancing supply chain efficiency. Also, diversifying into new areas such as groceries, fashion clothing, online operations, and health clinics gives the company an upper hand and enables it to stay ahead of competitors.
References
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- McMann, S. (2019). Turnover rate: Walmart.
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