Management Information Systems
Part I
- Why did Levi's consider selling their jeans at Wal-Mart?
Levis decided to sell their jeans at Wal-Mart to reach the new target customers – kids and their families. Most of the shopping for kids is done by mothers who frequently shop at Wal-mart store. Levis introduced less expensive Signature jeans line that was designed for the new target customers. These jeans for men, women and kids are priced at $23, have fewer detailed finishes than the other product lines, and they do not bear the trademark on the pocket . The company believes that the new product line shall boost the profit of the company by 100 of millions as 100 million shoppers visit Walmart each week .
2. Why did Wal-Mart consider selling Levi's jeans at Wal-Mart?
The company wanted to target affluent customers and to attract affluent customers it needs big brands. Levis is a well known high end brand. The customers of Walmart come from various income levels and lifestyle and through Levis, the company shall be able to meet the demands of the new customers.
3. Wal-Mart is one of Levi's buyers. Whose bargaining power is bigger?
The bargaining power of Wal-mart is high. This is due to the fact that Levis is facing tremendous pressure on the sales front as its revenue has declined due to the changing preferences of the customers. The company desperately needs to target a new customer segment through its new product line so as to rejuvenate the company and make profits of 100 million dollars. Walmart has an established supply chain management system that allows it to track the inventory right from the supplier factory till the warehouse. Suppliers need to be upgraded in IT system so as to allow Walmart to track inventory management.
4. What generic strategy (among the following four: (1) broad target / cost leadership, (2) broad target differentiation, (3) focused target / cost leadership, and (4) focused target / differentiation) is Wal-Mart following? Justify your answer.
Walmart is following the broad target and cost leadership strategy. The company targets a broad range of customers that belong to different income groups, age and lifestyle segments. The company differentiates itself from its competitors on the basis of low costs.
5. Define entry barrier. Discuss how Wal-Mart uses information technology to increase entry barriers of its industry. Justify your answer.
An entry barrier is defined as an advantage of established sellers in an industry over potential entrant sellers that is reflected in the extent to which established sellers can easily raise their prices above competitive levels without attracting new firms to enter the industry . Walmart has used information technology in the form of RFID tags that allow the store to track the movement of the inventory from the supplier starting from the factory and its movement to the trucks or distribution centers. Walmarts products move out of shelves, very fast and the company aims to replenish its stocks very fast at low costs. The company upgrades its supply chain management system technology to ensure inventory management so as to stay ahead of the competition.
6. List 9 activities in the value chain model. For each process, provide an example of an activity in the case of Wal-Mart (ex: services: to accept product returns at Wal-Mart).
Porter Value Chain Model includes the activities that a firm performs to design, produce, market, deliver and support its products . The various activities that are included in the value chain model include:
- Inbound Logistics
- Operations (Manufacturing)
- Outbound Logistics
- Marketing and Sales
- After Sales Services
Support Activities
- Firm Infrastructure
- Human Resource Management
- Technology Development
- Procurement
Figure 1 Porter Value Chain Model
Value Chain Analysis Model for Walmart
- Inbound Logistics: Walmart has 7000 company owned trucks that service the distribution centers and ensure that the company has replenished inventory through the transportation of goods from the distribution centers to the Walmart stores . Walmart also uses a technique cross docking in which the products are directly picked up from the supplier, factory, sorted and directly delivered to the customers .
- Operations (Manufacturing): The company operates various retail formats such as super centers, discount stores and neighborhood markets that cater to various sizes and functions . The company has operations in Argentina, Canada, UK, South Korea and joint venture in China.
- Outbound Logistics:
- Marketing and Sales: The company promotes the everyday low price offer that attracts price sensitive customers to the stores.
- After Sales Services: The company offers after sales services through product returns.
- Firm Infrastructure: Walmart has an established infrastructure with trucks that collect goods from the supplier manufacturing website and ensure delivery of finished products to the customers.
- Human Resource Management: The company trains and hires employees for customer service at various stores.
- Technology Development: Walmart uses the latest Supply Chain Management Systems technology such as RFID tags to track the movement of the inventory.
- Procurement: The company saves time and cost by sourcing products directly from suppliers to the customers.
7. What activity (or activities) in the value chain model do you think is most important in the case of Wal-Mart? Justify your answer.
In my view, the inbound logistics activity is most important in the case of Walmart. The company uses the advanced software for inventory management and tracks the movement of inventory from the supplier, factory to the distribution center or the Walmart warehouse so as to replace the inventory quickly and at low cost.
8. Describe activities that Levi's did or need to do in the area of Information Technology in order to do business with Wal-Mart. Include names of three information technologies in your answer.
Levi’s did the following activities in the area of information technology in order to do business with Walmart:
- The company needs to upgrade from a local distribution system to a regional distribution system . Levi’s added three pool points in California, Texas and Florida that would distribute its inbound freight to Walmart stores or distribution centers . Levi’s developed a scanning tool for manufacturers to check the accuracy of the cartons ready to ship .
- Levi’s implemented AS2 technology to exchange with Wal-Mart EDI transactions that support collaborative forecasting .
- Levi’s also implemented a set of Manugistics applications to collaborate on demand forecasting, product modifications and orders planning with Wal-Mart .
- Levi’s is also upgrading its networks and US based applications to handle orders for Wal-mart .
Part II
II. Search Internet to learn about the first-mover and fast-followers.
- What competitive advantages can a company reap if it is the first-mover in introducing an innovative IT system?
The term first mover in an industry was used by Alfred Chandler for the firms in a new industry that move first to dominate the industry . The company that introduces an innovative IT system can continue to dominate the industry for decades A first mover firm is the first to complete its business system to gain competitive advantage of scale and scope .
- What are the pros and cons of being a fast-follower?
A fast follower with greater resources and capabilities can overtake the first mover as happened with the case of Microsoft when it introduced Internet Explorer against Netscape . A fast follower can win the customers who are dissatisfied with the products of the first mover with better products .
The cons of being being a fast follower that in case fast followers are not fast in developing response to the first mover, they may fail.
Part III
III. Read the following article (read the first 6 pages before the section of forecasting demand in page 166) and answer the following questions.
- The Cherokee denied Mr. Smith's room reservation request, although it has 183 unreserved rooms for that night, and gave Mr. Smith a free room at another hotel because the Cherokee’s management believes that the hotel’s RM (Revenue Management) system, which makes such decisions, contributes to the hotel’s profitability. Explain how such decision can result in higher profits.
The Cherokee hotel benefits in totality of the customer spending at the hotel including room, food and gambling activities. Almost 100 percent of the rooms booked at the hotel are complementary as the hotel encourages and rewards customers that bet higher money in gambling activities through rewards and incentives that include complementary rooms. According to the customer segmentation scheme of the hotel revenue management system, it may be profitable to close room bookings for customers that have expected profit below $379.25 and instead hold 10 extra reservations for customers that have expected profit between $627.39 and $745.67 . Mr Smith must be belonging to customer segment with expected profits below $379.24 and therefore he was denied a room in the hotel.
- Discuss at least two weaknesses of segmenting customers by restrictions.
Some of the problems with segmenting customers by restrictions are accuracy of the segmentation, negative customer perception and loss of goodwill .
- What does RFB1 mean in the Table 1?
RFB1 in table 1 refers to complementary room, food and beverage at level 1 where the best rooms and restaurants are available .
References
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Giesler, M., & Lüdicke, M. (2007). A Theory of Marketing: Outline of a Social Systems Perspective. Wiesbaden: Springer Science & Business Media.
Girard, K. (2003, July 15). Supply Chain Partnerships: How Levi's Got Its Jeans into Wal-Mart. Retrieved from Cio.com: http://www.cio.com/article/2439956/supply-chain-management/supply-chain-partnerships--how-levi-s-got-its-jeans-into-wal-mart.html
Metters, R., Queenan, C., Ferguson, M., Harrison, L., Higbie, J., & Ward, S. (2008). The “Killer Application” of Revenue Management: Harrah’s Cherokee Casino & Hotel. Interfaces, 161–175.
Schmidt, B. B. (2010). The Dynamics of M&A Strategy: Mastering the Outbound M&A Wave of Chinese Banks. Frankfurt: Peter Lang.
Seangkhun. (2011). Walmart’s Value chain analysis. Retrieved from Khbuddhist.blogspot.in: http://khbuddhist.blogspot.in/2011/11/walmarts-value-chain-analysis.html
Thompson. (2010). Crafting and Executing Strategy. New Delhi: Tata McGraw-Hill Education.
