Essay, Pages 4 (856 words)
Wal-Mart is a company that has taken its core competencies, which are the capabilities the firm emphasizes and performs especially well while pursuing its vision (Ireland, Hoskisson, Hitt, 2008), and turned them into competitive advantages. Core competencies must satisfy four characteristics in order to be a competitive advantage. These advantages, according to our text, include: *valuable, *rare, *difficult to imitate,*nonsubstitutable.
Culture- One core competency Wal-Mart has is its culture.
Wal-Mart’s employees are hardworking, efficient, and process oriented. In the video “The Age of Wal-Mart” it pointed out that Sam Walton, founder of Wal-Mart, called his employees associates and treated them as partners.
He wanted their input and ideas on how to make the company better. Also, no matter what Wal-Mart you go into across the country, Walton wanted you to know you will ALWAYS receive low prices, excellent customer service, and feel at home. From door greeters to big charity contributions, this type of culture is rare and difficult for competitors to imitate.
Low Cost Operations
As the video pointed out, Sears was a leading retailer during the 70’s, but was greatly affected by the recession. They targeted middle class families, expanded their overhead, and developed in larger cities. Wal-Mart focused on small towns and lower overhead during this time. As the economy worsened, people began looking for lower prices and moving to smaller towns and suburbs. Today Wal-Mart can generate big sales volume which allows the company to gain profits with low profit margin giving it an advantage over its competitors.
Wal-Mart operates an unrivaled global network of 146 distribution centers (Troy, 2003). Because of this, the trickle-down effect happens. Trucks do not have to travel long distances to make deliveries which helps to reduce lead times for the company to serve its stores and for suppliers to ship merchandise to the distribution centers. This means less stock has to be stored and out-of-stock items can be replaced more efficiently and quickly. Lower stock means a higher inventory turnover rate. This is another competency that is rare and difficult for Wal-Mart’s competitors to imitate.
Relations with Suppliers
Wal-Mart has in place a system that helps to achieve their goal of lower prices. This Information Technology system includes computers, networking, and internet that cuts inventories and waste and helps with speedy delivery. This system also helps Wal-Mart to keep in constant contact with suppliers by transferring the data that suppliers need so they know what Wal-Mart needs. Wal-Mart also works with suppliers to improve their production and squeezes the best prices out of its supplier. The video referred to Wal-Mart as the customer’s agent.
All of this focus Wal-Mart puts on suppliers reduces costs and lowers prices. Wal-Mart’s technological/logistical leadership remains unmatched by competitors (Web, 2005).
The video pointed out that internationally Wal-Mart has just scratched the surface and has lots of room for growth. Expect to hear more from Wal-Mart about where we’re going in emerging markets like India and China (Gogoi, 2007). Wal-Mart is committed to being a global company and feels like expanding internationally will drive growth and hopes to add 500,000 jobs worldwide in within the next 5 years (Clifford & Rosenbloom, 2010).
Brazil, Mexico, China, Japan, Argentina, India, Britain, was just a sample of the countries that attended the 2010 stockholder’s meeting in Fayetteville, Arkansas. In the video you could see the flags of different countries being waved. This kind of international growth is a definite competitive advantage for Wal-Mart. The video pointed out several other beliefs and ideas that Wal-Mart finds important that gives them a leading edge. These include the following:
- Don’t be ordinary- be special.
- Be obsessed with improvement.
- Focus on lowering the cost of living for everyone. Find the lowest cost producers.
- Make price is the driving object.
- Focus on how to treat people.
- Be willing to embrace change.
All of the competencies listed above are why Wal-Mart is the low cost leader among their competitors. Wal-Mart has built enough influence with suppliers that they can manage the prices and change suppliers manufacturing processes in order to wring out more savings for the consumer. Like the video pointed out, everything that Wal-Mart does is to save the customer money; even doubling up executives in hotel rooms.
Hopefully, Wal-Mart can continue and build on this strategy in the future.
- Clifford, Stephanie, and Stephanie Rosenbloom. “With Backdrop of Glamour, Wal-Mart Stresses Global Growth. ” New York Times. 04 June 2010: n. page. Web. 2 Oct. 2011. <http://www. nytimes. com/2010/06/05/business/05walmart. html>
- Gogoi, Pallavi. “Wal-Mart goes abroad for growth . ” Bloomberg Businessweek. 22 February 2007: n. page. Web. 2 Oct. 2011. <http://www. msnbc. msn. com/id/17262613/>
- Ireland, Duane R. , Robert E. Hoskisson, and Michael A. Hitt. Ed. Understanding Business Strategy. 2nd ed. Mason, Ohio: South-Western, 2008. 72-72.
- Print. “Newly Vulnerable Wal-Mart Retains Unmatched Core Competencies. ” allBusiness Your Small Business Advantage. Nielsen Business Media, Inc. , 2005. Web. 2 Oct 2011. <http://www. allbusiness. com/operations/4457558-1. html>.
- Troy, Mike. “Logistics still cornerstone of competitive advantage – Wal-Mart The Category King: A New Era of Excellence”. DSN Retailing Today. FindArticles. com. 02 Oct, 2011. http://www. hulu. com/watch/46536/cnbc-originals-the-age-of-wal-mart