Wal-Mart

Key sources of competitive advantage

 Consumers became increasingly well informed.. Discount

retailing flourished

Discounters’
Year Sales($)

1960 2 billion

1985 68 billion

 First mover advantage

 Competitive prices
 Key sources (cont..)

 Stores in areas inhabited by its competitors

 Purchasing and Distribution Dept

 Terminals wire merchandise requests to a central computer

 The central computer passes the information onto the distribution

center

 Stock out situations never arise

 Intricately webbed distribution system

 Key sources (cont..)

 Store Operations
 More than 70000 SKU’s

 Computerized system to keep a track on their sales, inventory and

accounting

 Electronic scanning of Uniform Product Code at the point of sale

 Marketing
 Competitive pricing strategy

 Mostly Cash and Carry basis

 Also accepted Master Card, Visa and other credit Transactions

 Human Resource

 Walstreet – “ Wal-mart is known for having different human resource

practices

 Shrinkages were reduced to 1.3% of sales

 Will Sam’s wholesale clubs prove as
successful?
• Limited gross margins to 9%-10%.

• Sell merchandise before its payment is due

• Located in areas with populations of 4-5 lakh people

• Storing top-selling items

• Unique concept of “memberships”

• In 1985 their sales had reached $4.4 billion and expecting this to exceed
to $20 billion by the early 1990s.
• Stores were on lease making the exit option easy

• Very low cost of initial setup

• Service – Cost evaluation by the customer.

Sustainability of Wal-Mart’s advantage in the
Discount Retailing
• Trends prevalent during the early 1950’s led to the rise of this format

• By 1986, the idea of Discount Stores was so engrained in the Wal-

Mart’s scheme of things that it accounted for 91% of the company’s
sales and 96% of the company’s pretax profits

• Discount Stores resulted in revenue rise of $2 billion to $68 billion from

1950 to 1986

• They grew at around 64% in the 1970’s

• The growth fell to 8% in the 1980’s

•Contrary to popular wisdom, Sam Walton believed that the real growth
was in the small southwestern towns
• However, as the years rolled by, Wal-Mart realized that markets, which were its
strong holds, no longer remained the same

• Due to the entry of other major retailers, the margins that Wal-Mart used to deal
with were drastically altered

• Operating, selling and administration expenses were on a rise, resulting in a

change in the balancing equation for Wal-Mart

• Strength of Wal-Mart was their delivery and distribution networks and they need to
capitalize on this front, to ensure that they retain their lead in the market.