background historical competitive advantages and its sustainability

Background Historical competitive advantages and

its sustainability Whether its business concepts work in

HK & China Recommendation to Wal*Mart to sustain its growth

Wal*Mart• First established as a self-service

discounting store in 1962 by Sam Walton

• Formats:

Warehouse Supercenter Hypermarket Close-out store

Wal*M art

Wal*Mart• Major competitors:

TargetKmart

At the end of 1993: No.1 of the top 50 Discount Department store - Market value: 57.5 billion - Sales per square foot: $300 (the industry average is $210)

• Phenomenal success:

Everyday-low-prices Commit to customer service

Maintaining technological superiority

Building loyalty among associates and suppliers

Business strategies

Wal*Mart

Automative

Health &beauty aids

Stationery

Sporting goods

Paint &hardware

Household chemicals & consumables

Food

Home hardlines

Product Place Price PromotionProduct:

Place:

- pattern of expansion: -pushing from the inside out

Rural areas Small towns

Product Place Price Promotion

Product Place Price Promotion • Price:

- Between 1992-1993: - 2.2% below Kmart - 3.7% below Target

“Always low prices-Always”

Product Place Price Promotion

• Promotion:

- few promotion: - advertising expense: 1.5% of sales (while 2.1% for direct competitors)

“Everyday-low-prices”

Why Wal*Mart could succeed?Why Wal*Mart could succeed?High Responsiveness and Flexibility

Innovative Strategy

1. Changing Customer DemandFlexible shelf space allocation

Private label lines2. Changing prices

“Always low prices, always”3. Technological Change Heavy investment in information technology

Discount stores -> Supercenters

Wal*Mart’s StrategyWal*Mart’s StrategyLow Cost Differentiatio

n

Industry-wide CostLeadership

Differentiation

Single segment Focus

Key Source of Wal*Mart’s Key Source of Wal*Mart’s Competitive AdvantagesCompetitive Advantages

Successful VendorRelationship

Efficient Communication

Network

Value Employees Most

Efficient Operation Management

LOW PRICELOW PRICE

Customer-Oriented

Direct Factors to Low PriceDirect Factors to Low Price

Lower Land RentFew Promotion

Sustainable?

Successful Vendor RelationshipSuccessful Vendor Relationship•No-nonsense negotiator Efficient Purchasing

•Partnership with suppliers eg P&G- -Sharing information electronicallyEfficient communication

•Vendor-managed inventory systems eg Wrangler & GE Minimize inventory cost

LowerCost

Sustainable?

Efficient Communication NetworkEfficient Communication Network•“There are no superstars at Wal-Mart”

•Combined informal Entertainment with business

•Sharing the numbers

BetterCommunication

LowerCost

Sustainable?

HigherProductivity

Value Employees MostValue Employees Most•“Yes We Can Sam” suggestion program

•“Store within a store”

•Shrinkage incentive plan

•Management Training Program

•Profit Sharing Scheme

LowerCostMotivation

HighProductivity

Sustainable?

Efficient Operation ManagementEfficient Operation Management•Distribution Network-Hub-and-spoken distribution network

-Owned warehouses-Cross-docking

•Operating system-Uniform Product Codes (UPC)

-Satellite system

HigherProductivity

LowerCost

Sustainable?

Customer -OrientedCustomer -OrientedNo. 1 Boss – the customer

People Greeter

“Satisfaction Guaranteed” policy

Loyalty

Sustainable?

The Applicability of Business ConceptsThe Applicability of Business ConceptsBusiness strategy Work /

not In HKWork /not In Chinalow price

successful vendor relationshipefficient communication networkvalue employees most

efficient operation managementcustomer oriented

Low Price Low Price in Hong Kong

in China

• Land rent

• Land rent

• Promotion

• Promotion

Successful Vendor RelationshipSuccessful Vendor Relationshipin Hong Kong

in China

• 2 dominant supermarkets

• compete with established competitors

Efficient Communication NetworkEfficient Communication Network

In Hong Kong

In China• flat organization

• information sharing

Value Employees MostValue Employees Most

In Hong Kong

In China• payment system

• programming

Motivation+

incentive

Efficient Operation ManagementEfficient Operation Management

In Hong Kong

In China• operation system• shrinkage• distribution network

In Hong Kong

In China

Customer OrientationCustomer OrientationIn Hong Kong

In China• provide subsidiary services

• customer = the boss

The Applicability of Business Concepts?The Applicability of Business Concepts?

In Hong Kong

In China

Technology:- Join forces with a well-known Interactive

Service Provider(e.g.AOL) to bridge the physical and virtual world.

1. Maintain and reinforce Wal-Mart’s core competitive advantages.

2. Growth Strategies:

Advantages:(1) Global Promotion(2) Cost saving

(3) Customers Serving i) By setting up searching engine ii) By providing personal online services iii) Could listen to consumers’ opinions promptly

(4) Facilitation on operation management

Culture:- Change core values in different countries. E.g. Hong Kong

Formats: - Increase the number of supercenters

Conclusion: 1. Catch up the trend of e-commerce2. Reinforce Wal*Mart’s core competitive advantages.3. Adopt changes when necessary

Thank You!

THE ENDTHE END