Oscar Wasmosy March 7, 2003

Key Factors Contributing Wal-Marts Success In this article I found sever factors contributing to Wal-Mart Success. They are scale, scope, speed (turnover), low prices, good information systems, unified commitment, and exploration of new markets. 1. Scale The scale part is evidenced by the following examples. Wal-Mart is the largest single revenue generator for Hollywood in the world Wal-Marts sales on one day last fall were larger than the GDPs of 36 countries. Wal-Mart is not just Disneys biggest customer but also Procter & Gambles and Krafts and Revlons and Gillettes and Campbell Soups and RJRs and on down the list of Americas famous branded manufacturers. Wal-Mart is also the nations biggest seller of DVDs is also its biggest seller of groceries, toys, guns, diamonds, CDs, apparel, dog food, detergent, jewelry, sporting goods, videogames, socks, bedding, and toothpaste. 2. Scope The scope part allows Wal-Mart to flex its toy section before the holidays and collapse it afterwards while Toys R Us is stuck selling toys year-round. Scope also lets MalMart use entire categories - like gas, soft drinks, whatever as loss leaders to pull people into stores.

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Oscar Wasmosy March 7, 2003

3. Speed The speed part may be the most intimidating. Wal-Mart turnover is so rapid that 70% of its merchandise is rung up at the register before the company has paid for it. In order to gain speed it routes ships form China through the Suez Canal and across the Atlantic. 4. Low prices The Wal-Mart slogan is Always Low Prices. How Wal-Mart thinks is: Buy stuff at the lower cost possible, pass the gains on the consumer through super-low prices, watch stuff fly off the shelves at insane velocity. Wal-Mart is famous for boiling everything down to a one-number negotiation. Theyll negotiate hard to get the extra penny, but theyll pass it along to the customer. By systematically wresting pricing power from the manufacturer and handing it to the consumer, Wal-Mart has begun to generate an economy-wide Wal-Mart Effect. Even though the negotiation for price with its suppliers is strictly very tough, Wal-Mart operates in partnering mode, in which both sides swap information to streamline the flow of goods from raw materials to checkout counter. They would rather extract fat from the process than extract their suppliers profits. Predictable volume let keep its factories running full and steady. Companies like Levi Strauss, once too cool for discount stores, has bet its future on sub$30 jeans to hit Wal-Mart. 5. Good Information Systems Besides continually cutting your costs, you need to handle all that data pouring off RetailLink (the system that lets suppliers track their wares through Wal-Mart World) since you wouldnt want to annoy Wal-Mart with excess inventory or, worse yet, not enough. An electronic vendor scorecard will let you know how youre doing.

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Oscar Wasmosy March 7, 2003

6. Unified Commitment The public face of Wal-Mart continues, after all these years, to be the folksy visage of Sam Walton, and its easy to get the impression that the founder is orchestrating his creation from beyond. One mean used to maintain a unified commitment may be the fact that Division president Steven Scheyer gives every new employee a copy of Sam Waltons autobiography. 7. Exploration of new markets Examples of Wal-Marts experiments are: Wal-Mart vacations, Internet access, Flower delivery, and Online DVD rentals a la Netfix. The company use itself as testing lab, tweaking and refining a concept.

Conclusion I learned many things in this article. First of all, I learned that Wal-Mart is bigger that I expected. Second, I learned the strategy used by Wal-Mart to maintain low prices and at the same time making its suppliers more profitable by maintaining a constant volume. Third, I learned a way to maintain a unified commitment. Fourth, I didnt know that WalMart is continually exploring new markets. In this article I found seven factors contributing to Wal-Mart success but I am sure that there are mole, such as, Wal-Marts Satisfaction Guaranteed policy.

Source: One Nation Under Wal-Mart, FORTUNE, March 3, 2003, Pag 66-78.

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