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Strategies Used by Wal-Mart - Essay Example

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Strategies used by Wal-Mart to drive their business today Wal-mart is a global retailer that operates in the US and 27 other international markets with retail sales totaling $409 Bn in financial year 2010. Wal-Mart had a net income of $16.9 Bn. The business generated a return on investment of 19.2% and the free cash flow from operating activities for Wal-Mart was $10.9 Bn…
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Strategies Used by Wal-Mart
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Download file to see previous pages For the small and medium enterprises, Wal-Mart has a “Sam’s Warehouse club” where member businesses can buy retail and office items at cheaper rates. In serving both these customer segments, the key strategy of Wal-Mart is to maintain price leadership. Its business is based on the premise that Wal-Mart can guarantee the best (lowest) price to its customers. This best price guarantee is reflected in what they call is their “Every Day Low Price” (EDLP) program. Wal-Mart gets this price advantage mainly through a two-pronged strategy. The first lever to ensure low price is their economy of scale, and the second lever is the global sourcing which allows them an “arbitrage opportunity” between supplier prices across a broad spectrum of geography which other retailers may not be able to access. The second key element of strategy for Wal-Mart is to address the sustainability and environmental issues. Due to the nature of its business, Wal-Mart and other retailers are constantly under pressure from NGOs and other activists to render the business more environment friendly and more socially responsible. Therefore, Wal-Mart’s strategy is to work closely and transparently with several organizations to address these issues and to provide an annual update on these elements in their annual report. This strategy helps Wal-Mart maintain its friendly image and prevents customers sensitive to these issues from moving away from Wal-Mart. Expected changes in their strategy to expand the business The retail business is under pressure from several fronts. From direct and indirect retail competitors (large store based retailers and small neighborhood shops), from pressure due to poor economic condition causing less security and job losses, and from emerging technologies (e-commerce and mobile commerce) which can entire alter the retail business landscape. These pressures are also bound to affect the profitability of their operations. Thus, Wal-Mart can be expected to bring in several strategic changes that enhance their productivity and lower costs. Further, in order to respond to these challenges, Wal-Mart can be expected to being several strategic changes to their sales operations as well including changing the current store plans, introducing new store formats, and scaling up its e-commerce operations. Wal-Mart realizes that current stores need to be made more relevant to the customer; that is expanding the assortment of products offered. In order to do this, they may need to not only generate more supplier contracts but also alter the allocation of their retailing pace. Further, in order to counter the competition from small local stores, Wal-Mart can be expected to introduce new retail formats – neighborhood stores/convenience stores. As the volumes and variety of products at these stores is expected to be lower than in their traditional large retail stores, they could be expected to make significant changes in their supply chain for serving these retail stores too. Next, as internet-based and now mobile-based commerce is becoming increasingly important, they can be expected to increase their investment in providing solutions for these opportunities. Developing Smartphone ...Download file to see next pagesRead More
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