BBA STRATEGIC MANAGEMENT

The Wal-Mart Business Model

Wal-Mart is the leader in retailing industry with fiscal revenue of $454.52 billion in 2008
making it the world’s largest corporation. Wal-Mart as of 2008 had 1,283,000 employees
growing at 11.2%. The above data explains that strategy of Wal-Mart is extraordinary which
manages and operates over 4150 retail facilities globally. Wal-Mart dominates the American
retailing industry due to number of factors like its business model which is still a mystery and
its effectiveness in not letting the rivals let know about the weaknesses.

The key components of Wal-Mart (The Value Chain), which offers cheap prices than its
competitors includes firm infrastructure like frugal culture, no regional offices and pleasant
environment to work. It is learnt that Wal-Mart strives on three generic strategies consisting of
Focus Strategy, the Differentiation Strategy and overall cost leadership. Managers strive hard
to make their organizations unique, distinctive and identify key success factors that will drive
the customers to buy their products.

Wal-Mart made strategic attempts in the its formulation to dominate the retail market where it
has its presence, growth by expansion in the US and Internationally, create widespread name
recognition and customer satisfaction in relation to brand name Wal-Mart and branching into
new sectors of retailing.

Wal-Mart terms its employees as associates. Manager compensation is linked to the profit of
store operated by him, within promotions, compensation offered to associates depending on
company’s profits and also offered some incentives on their performances. The workforce at
Wal-Mart is not unionized as the company takes all the measures of their benefits and provides
them training on related issues.

Technology plays a vital role in development of the organization and Wal-Mart is well
equipped with technological innovations like POS, store performance tracking, real time
market research, satellite system and UPC. Wal-Mart procurement measures like hard-nosed
negotiations, partnerships with some vendors, centralized buying, planning packets, etc. Helps
at large the cause of providing the goods and services on cheap prices. The other factors that
increase the margin of profit for Wal-Mart are inbound logistics with frequent replenishment,
automated DCs cross docking, pick to flight, EDI, hub and spoke system. Wal-Mart strategy
of operation is innovative with big stores in small towns with monopoly in the market at low
rental costs, local prices, concentric expansion, merchandising in brand name, private labels,
little space for inventory, store within store, etc. In relation to marketing and sales,
merchandising is tailored from locals, spent less on advertising and the prices are fixed low
and it depends on the store manager to fix the latitude of pricing. All the above factors
combined together form the key components of Wal-Mart which not only increase the margin
of profits through bulk sales but also boost the confidence of the customers with services like
point of sale information system and everyday low prices.

Q.1

a) Differentiate between the terms strategy and business model. ( 5 Marks )

b) Examine the approaches that Wal-Mart has used to secure a cost advantage over
competitors. ( 8 Marks )
c) How has Wal-Mart been able to keep her employees from being unionised.
( 6 Marks )
d) Of what benefit is the above (in c) to Wal-Mart ( 6 Marks )

Total: 25 marks

Q.2

a) Examine the sources of Wal-Mart’s competitive advantage? ( 6 Marks )

b) How has Wal-Mart been able to increase her profit margins than rivals? ( 6 Marks )

c) Evaluate the benefits that technological incorporation has brought to the consumer. ( 7
Marks )
d) Evaluate whether Wal-Mart’s position in the industry is sustainable ( 6 Marks )

Total: 25 marks