Accounting
Introduction
Wal-Mart has been in the retail business since 1962 and after more than half a century, the store that Sam Walton started in Rogers, Arkansas is today’s leader in the retail industry. The success of the company in becoming a multi-billion dollar business was owed from its efficient and effective strategies aided with the most sophisticated and highly advanced systems in the world. The discussion will highlight the important strategies that enabled Wal-Mart to achieve its current success. In addition, the company’s competitive advantage will be examined to determine the key role of various control systems in executing its strategies. The most important aspect of this discussion is to determine strategic factors and implemented systems that allowed Wal-Mart to reach considerable level of operational efficiencies that was not observed among its competitors. It is apparent that the company’s supply chain and logistics, saturation strategy, best-yesterday ledgers, and complex inventory system was able to increase its operational efficiencies.
Wal-Mart Strategy
There are several operational areas that the company implemented its key strategies in order to optimize its resources and one of which is its powerful supply chain and logistics strategy that allowed the company to move its inventory and other resources within its network of stores both on-shore and offshore. For example, Wal-Mart is considered the larges employer in the world with more than 1.6 million associates worldwide. This means that its top executives will need to move constantly to remote areas of its operation, which encompasses constant mobility comparable to an average commercial flight. Instead of relying on commercial means to move its people to different areas of operation, the company invested on having its own fleet of aircrafts to increase human mobility. Another example of key strategies implemented by Wal-Mart is the saturation strategy in which the store expansion was based on the amount of time that the distribution center can deliver to the stores.
In this strategy, the proximity between the stores and the distribution center is crucial because it determines how fast and how often the trailers can get to the stores. The important aspect of saturation is to optimize the capacity of one distribution center in delivering goods. It can be compared to the principles of product life cycle strategy in supply chain management where the products are classified and moved in the supply chain based customer requirements, and meet such demands in the soonest possible time (Aitken et al., 2003). Furthermore, the strategy also enabled the stores to optimize its inventory management in which electronic data from the stores help reduce stock-outs and markdowns on slow moving products. More importantly, the core of Wal-Mart’s strategy is its market strategy where branded products are being sold at the stores at a low cost (Neumark et al., 2008).
The Basis of Wal-Mart’s Competitive Advantage
What makes Wal-Mart different from the rest of its competitors is its ability to offer low prices. This strategy enabled them to gain advantage in the competition in terms of increasing customer visits, which is an average of 138 million each week worldwide. In addition, the strategy demonstrates an effective implementation of product differentiation strategy. This is where one business can gain advantage over the competition by increasing the value of their offer through price, excellent customer service, or combination of one to several strategies (Dirisu et al., 2013). It is particularly effective in an industry where the businesses are offering similar product lines such as retail. More importantly, instead of focusing on area population as the basis of establishing stores, Wal-Mart positioned itself a major destination for everyday low prices, which was effective in terms of pulling in more customers instead of relying on advertised sale strategy.
The Role of Wal-Mart Control System in Executing Strategy
Given the number of operational and business strategies that Wal-Mart have integrated into its business, the best method of implementing them is to use technology in executing strategies. For example, tracking and monitoring of stocks with the use of RFID from distribution centers to the stores including the laser guided warehousing facility enabled the company to efficiently execute its inventory strategies. Effective execution of strategies was also implemented by Wal-Mart through its various management systems in which electronic data from the stores such as profit, loss, sales, and expenses are being analyzed and collected in real-time basis. This particular use of data was able to provide the company with enough information to improve operational efficiency of every store. For instance, the data from best performing store are being used as model for problematic stores. Supply chain and logistics is also an integral part of the company’s overall strategy in which the implementation of cross-docking techniques enabled the distribution centers to fill store orders and receive supplier deliveries simultaneously (Chiles and Thi Dau, 2004). Technology plays an important role in the effective execution of the company’s strategies, which was aided by highly complex systems.
Conclusion
Wal-Mart is an example of a very successful business in which its competitive advantage was built on strategies that aims to improve operational and business efficiencies. Strategies are only effective if executed well and Wal-Mart demonstrates efficacy by integrating technology when implementing strategies. Apparent, Wal-Mart’s supply chain and logistics, saturation strategy, and complex inventory system was able to increase its operational efficiencies.
References
Aitken, J., Childerhouse, P., & Towill, D. (2003). The impact of product life cycle on supply chain strategy. International Journal Of Production Economics, 85(2), 127-140. http://dx.doi.org/10.1016/s0925-5273(03)00105-1
Chiles, C. & Thi Dau, M. (2004). An Analysis of Current Supply Chain Best Practices in the Retail Industry with Case Studies of Wal-Mart and Amazon.com (Master of Engineering in Logistics). Massachusetts Institute of Technology.
Dirisu, J., Iyiola, O., & Ibidunni, O. (2013). Product differentiation: A tool of competitive advantage and optimal organizational performance. European Scientific Journal, 9(34), 258-281. Retrieved from http://eujournal.org/index.php/esj/article/viewFile/2174/2059
Neumark, D., Zhang, J., & Ciccarella, S. (2008). The effects of Wal-Mart on local labor markets.Journal Of Urban Economics, 63(2), 405-430. http://dx.doi.org/10.1016/j.jue.2007.07.004
