Walmart Analysis
a. Which strategic management concepts are useful in the analysis of this case?
There are three major concepts we need to analyze. The first one is Wal*Marts value creation. The second one is Wal*Marts value chain. The third one is how Wal*Mart creates competitive advantage. We can use the building blocks of competitive advantage to analyze the last one.
b. Why do you think each of your selected concepts is useful for understanding this case?
The case is about how Wal*Mart uses its distinctive competencies to gain the competitive advantage in the retail industry.
Value creation helps us to capture Wal*Marts pricing options and to understand how Wal-Mart maximizes both profitability and customer value.
We also need to look at the chain of activities Wal*Mart do to make its product valuable to the customers.
Finally, we study the competitive advantage that led Wal*Mart to the largest retail shop in US. The Buildings Blocks of Competitive Advantage is well-known on analyze competitive advantage by using the companys distinctive competencies.
c. How did you apply the specific concept?
Before applying the specific concept, we need to know how Wal*Mart position itself to create value to customer and maximize profitability.
Value creation
Wal*Mart pricing option: lower prices create more customer surplus to generate demand. Its effort to improve logistic and import new information system to manage stock and inventory helps the company to lower the cost (C). Therefore, Wal*Marts price is 2%-4% below the best competitors such as Kmart and Target. The result is more value created (larger U-C).
Value chain
Primary activities:
Production: Wal*Marts national brand strategy: the majority of its product is nationally advertised branded product.
Marketing Sales: Its slogan “Always low prices-Always” delivers the core company value to the customers.
Customer service: Long hours of opening, different payment methods and a wide variety of merchandises create more value to the customer.
Support Activities:
Information systems: Electronic scanning of UPC ensures accurate pricings and improves effectively. It also improves the communications between stores, distribution center and the head office.
Materials Management: Two-step hub-and-spoke distribution network and Cross-docking
Human resource: Compensation, profit