Wal-Mart Business Model - Case Study Example

It set-up giant all-in-one stores in small towns which quickly gained patronage because of the service that Wal-Mart associates provide and customers are able to buy the products they need in one convenient place. Today, Wal-Mart is the world's largest retailer with $345 billion in sales, with more than 176 million customers per week visiting its more than 6,500 stores worldwide, 61,000 suppliers and providing more than 3 million American jobs. (walmartstores.com 2008) Wal-Mart's continuing success may be attributed to Sam Walton's foresight in including information technology in its business model to facilitate organizational innovation.

As early as 1966, Walton was recruiting IT professionals from IBM to help him wire his company. This led to innovations in just-in-time inventory, choreographed logistics and warehousing. (Beckham 2002) Wal-Mart's business model mandates that it provides the products and services that customers would want to buy. With the company's enormous data warehouse which includes customers' purchases, Wal-Mart knows what its customer wants and "it provides merchandise and designs its stores according to customer preferences.

" (Felgner 2006) In support of its objective of customer satisfaction, through technology, Wal-Mart is able to process more than 20 million customers per day, with credit card approvals done in less than a second. (Scheraga 2004) In 2000, Walmart.com was founded. Aside from fostering the ideals of its parent company, its additional goal is to provide easy access to more Wal-Mart with "more than 1 million products available online" and innovative services such as Music Downloads and Photo Services which allow customers to order online and pick-up at the nearest Wal-Mart, all available to Wal-Mart's customers 24/7. (walmart.com 2008) In 2001, Wal-Mart worked with NCR for the design and deployment of kiosks in the stores to help customers scan in items for bridal and baby registries, an innovation to improve customer service.

According to Walton, "People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information." (Beckham 2002) In its industry, Wal-Mart is acknowledged for its legendary replenishment and forecasting system which Ron Ireland, one of the people who built it, says is what "retailers are scrambling to do today what Wal-Mart achieved years ago." (Hickey 2006) Because of Wal-Mart's use of technology, its inventory accuracy is above 96% vs. 70% for other food retailers.

Wal-Mart has improved in-stocks, reduced holding inventory, reduced manual intervention and achieved much greater profit margins, according to Ireland. (Hickey 2006) All these cut down Wal-Mart's cost of operations and contribute to lowering selling prices for its customers. With Wal-Mart's employment of technology and e-Business practices of integration and synchronization among connected players, it is able to achieve operational efficiency and revenue enhancement, according to Ralph Drayer, former vice-president of Procter & Gamble.

(Hickey 2006) "Wal-Mart's success is due not just to computers, but many other things besides: the late Sam Walton's entrepreneurship; his strategy of avoiding early competition by 'putting good-sized discount stores into little one-horse towns which everybody else was ignoring"; his insistence on saturating one area with stores before moving on to the next; his drive to keep costs