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Walmart Case EssayWalmart has thrived in a very rivalrous industry by building on its bringing principles and ontogeny arguably the industries best come out chain. It has integrated its sales to its suppliers, streamlined order fulfillment and driven down its be, which is one of its key invention principles, Our purpose is fortune our customers save money so they can live break out (Grant text, 5 walmart core 5 values). Walmart has had great success in North America, but its heathenish values sacrifice not translated well in other parts of the world. Great sales growth has not translated into significant margins. Walmart has incurred losses on its external operations. Carrefour (founded in France) and Walmart both retreated from Germany. Some of the key issues facing Walmart include adapting their founding 5 core principles to vastly different cultures the drive to truncated costs clashes with treating the employees as part of family (which part of the family has much value? Is treated with integrity? ) the drive to cut costs has been driven far down the supply chain to a myriad of suppliers, sub-suppliers and sub-sub-sub suppliers.how can Walmart audit or control these suppliersstandards imposed by Walmart? Current Situation Brief History Walmart has grown oer the past 50 years from a local general merchandiser with 15 submits in Arkansas to become the largest in the world with over 10,000 stores world-wide. Wal-Marts six market segments atomic number 18 groceries fashion clothes pharmacy health clinics financial services and music downloads. Its main North American competitors are Target, dollar General and Costco. Walmart has four formats plus on-line that it has adapted to itsinternational expansion. These formats have not always been successful, especi all in ally in their foreign expansion with retreats in Germany, second Korea and losses in Japan. The formats are The smallest are neighbourhood formats averaging 42,000 second causalit y feet Traditional Discount store averaging 102,000 square feet Sams Clubs averaging 127,000 square feet Super Centers averaging 187,000 square feet No matter who we are or where we come from, our values pull us together and keep us together. They constantly push us advancing to become a better and stronger company. Mike Duke, Walmart President CEO Sam Walton drove this growth founded on five(5) core principles with its roots in small townsfolk US family values Integrity Be Trustworthy and honest in all your business activities (Sam valued Honor) Opportunity If, you work hard and do a good job, you give be promoted (approx.. 75% of store managers started as associates) Family and Community Your customers, suppliers and associates are your neighbours. Work with a purpose Deliver them the lowest costs (EDLP) and their lives will be improved.Responsibility Make the world a better place These became Wal-Mart Stores 3 core values The Value Statement Service to the customer, Respect for the idiosyncratic and Striving for excellence. From the website Delivering a seamless shopping experience Talent is key to success Benefiting our communities. The Mission Statement Save Money/Live Better (from the website). thither is consistency in Sams values and Walmarts stated values today. Walmart built its US operations using a hub and spoke system. The hub (distribution center) supports the spokes (stores). severally wheel was the launch board to the next hub and spoke as a hub could support growth of sufficient stores to build a new hub. Today Walmart has expand overseas primarily with joint ventures or acquisitions and then built wheels to support the new regions. Additional distribution models much(prenominal) as Remix and the integration of IT systems have been built to streamline ordering, deliveries and drive costs further down the supply chain. Expansion overseas and growth have impacted margins, at least in theinternational operations, and affected the ability to centrally control the operations and keep the personal relationships between head office and the various(prenominal) store managers. Porters 5 forces the pick based approach (C. K. Prahad incumbrance Competencies) to firm analysis The External Environment Porters 5 forces can be termed the outside-in approach to industry and firm analysis. The general trade industry is very competitive with few to no barriers to entry, buyers can easily switch among many substitute products with cost becoming the primary factor of prize for buyers.The only strength for a merchandiser is the choice among many suppliers. Barriers to new entrants (Low) Few to none Location and min financing Power of Suppliers (HIGH) Little power many substitutes Power of Buyers (HIGH) Many alternatives can price compare customer service is of minimal concern Substitutes (Low) Most products have many substitutes Industry Competitors vehement rivalry no obvious barriers to entry suppliers have little power the only avenue for uniqueness is national competencies Based on the porters 5 forces analysis, we found the general merchandise industry is not attractive.We need to use a different model to assess Wal-Martss competitive advantage The real competitive advantage for any firm is how it uses its resources, but more(prenominal) importantly its capabilities to create competitive advantages over its rivals. The resource based view as popularized by C. K. Prahad. The Core Competence of the Corporation will be used to evaluate Wal-Marts core competencies and its ability to leverage these competencies to create a sustained competitive advantage. Walmarts Resources and capabilities (The internal environment) Tangible resources22-24% debt to total assets has remained stable ability to borrow Their working smashing has remained steady at 0. 9 to 1 pay bills as they come referable Major investment in fixed assets at 56-58% stores and fixtures to support sales growth US Super centres 3022 629 U S discount stores (declining numbers) 611 US Samsclubs 196 US Neibourhood Markets 5651 International unitslots of stores 23% ROE will allow Wal-Mart to easily raise funds in the equity markets Walmarts financial strength allows it to finance growth without increasing its leverage.Its debt to equity and working working capital has remained stable over the past 10 years with little impact from the financial crisis. This, in confederacy with the industrys highest return on equity, means Wal-Mart can borrow at a very low weighted (WACC) average cost of capital (interest costs have averaged less than 5% of long-term debt) or raise capital in the stock market at favorable prices. Its major investments are in inventory and fixed assets. The fixed assets are supported by 93% long-term debt and equity financing meaning part of working capital is supported by long-term financing.This is a conservative approach and explains why Wal-Mart was not greatly impacted by the credit crunch brought ab out by the financial crisis. Intangible resources Founding 5 core principles small town values EDLP community responsibility opportunity Proprietary distribution sw systems- satellite RDFI for logistics mgmtand inventory control Links all stores, to system all the way to suppliers tracks items Own their own satellite use EDI with suppliers POS to suppliers for inventory reorders Store layoutGrowth through Hub and spoke (distribution) system Cross-docking system minimal warehousing goods go immediately from dist pts to stores minimizes costs Customer satisfaction guarantee program use of greeters EDLP Decentralized store management layout,pricing, sales strat by dept mgrs. , product mix at bottom store Use of IT to integrate entire value chain Communication and supervision twist keeps stores close to HO Reg VP? 10-15 Dist Mgrs ? 8-12 stores VP visit stores/no offices data accum M-th data anal Fri-sat decision made Sat Dist mgrs.Contacted sat for following week Wal-Marts founding p rinciples as enshrined in its mission and vision gives every associate right up to the management team a focus and an ground of where each component of the value chain. fits in this picture and where each of their jobs and duties lie. There is no doubt, nor is there any drift. Each job has a purpose within Sams greater vision. Greeting the customer or stocking what is in demand is all part of the Customer Satisfaction Guarantee. The distribution (RDFI), purchase (EDI) and sales (POS) systems have been integrated in order to control costs at all parts of the value chain.In effect driving costs back to the suppliers. This singular focus on cost has allowed Wal-Mart to pass this savings to its customers. This has been facilitated by minimizing bottle-necks using cross-docking and REMIX and growth with the hub and spoke strategy including regional mega distribution centers such as Shanghai China to support global growth. Decision making at the customer level has been decentralized to the store level allowing store managers and part managers control over layout, input on pricing and products on the shelf.This allows for EDLP (everyday low pricing) to be competitive at the local level in all regions. The hebdomadary meeting is a hallmark of Wal-Mart. It has been changed to monthly, but the weekly gathering of information to facilitate decisions from the corporate to store level remains. The VPs meet with their district managers who visit all their assigned store managers (stores) gathering the intelligence needed to drive the strategy and the tactics. This information is culled to develop ongoing strategies from supplier acquisition or termination to individual store strategies all to facilitate Save more, Live better.Human Resources Empowered sales associates 94% of employees have health benefits With one year or more of service employees are covered by a pension Pay scale is higher than competitors All store managers from around the world recruit in a monthly meeting via satellite (formerly the famous Wal-Mart weekly meetings) Wal-Marts employees (or associates) are family. They are your neighbours. Associates are empowered and when deserved, promoted . They are given better than average health benefits and wages. All associates are covered by a pension plan.Associates will someday become the VPs, district managers and managers. They are Sams community to be treated with honour and respect, just the same as the clients. Capabilities Corporate Functions Multi-district mgr/VP coordination worldwide to Benton HO Centralized purchasing from Benton HO Management information Complete integration of sales, inventory and supplier information through sophisticated IT systems to facilitate managerial decision making Eg. The VP/Dist mgr/Store mgr meetings and data gathering trading operations Operational efficiencyCentralized and proprietary supply chain system allows Walmart to drive down costs at all stages of the supply chain more efficiently t han their competitors Walmart is able to use the capabilities of its EDI, POS and other data systems and combine this with the VPs weekly info gathering exercise to make weekly managerial decisions. This is more sophisticated and faster than the competitions Store design layout of aisles and stocking of shelves benefits from the information capabilities REMIX Program uses 3rd distribution