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Background Historical competitive advantages and its sustainability

Background Historical competitive advantages and its sustainability Whether its business concepts work in HK & China Recommendation to Wal*Mart to sustain its growth. Wal*Mart. First established as a self-service discounting store in 1962 by Sam Walton

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Background Historical competitive advantages and its sustainability

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  1. Background • Historical competitive advantages and its • sustainability • Whether its business concepts work in HK • & China • Recommendation to Wal*Mart to sustain • its growth

  2. Wal*Mart • First established as a self-service discounting store in 1962 by Sam Walton • Formats:

  3. Wal*Mart • Major competitors: Kmart Target • Phenomenal success: At the end of 1993: No.1 of the top 50 Discount Department store - Market value: 57.5 billion - Sales per square foot: $300 (the industry average is $210)

  4. Fundamental Principles Everyday-low-prices Commit to customer service Maintaining technological superiority Building loyalty among associates and suppliers

  5. Business strategies Product Place Price Promotion Product: Stationery Food Automative Home hardlines Wal*Mart Sporting goods Household chemicals & consumables Paint & hardware Health & beauty aids

  6. Place: Product Place Price Promotion • pattern of expansion: -pushing from the inside out • Small towns • Rural areas

  7. Product Place Price Promotion • Price: • Between 1992-1993: - 2.2% below Kmart - 3.7% below Target • “Always low prices-Always”

  8. Product Place Price Promotion • Promotion: • few promotion: - advertising expense: 1.5% of sales (while 2.1% for direct competitors) • “Everyday-low-prices”

  9. Why Wal*Mart could succeed? High Responsiveness and Flexibility • Changing Customer Demand • Flexible shelf space allocation • Private label lines 2. Changing prices • “Always low prices, always” 3. Technological Change • Heavy investment in information technology Innovative Strategy • Discount stores -> Supercenters

  10. Wal*Mart’s Strategy Focus

  11. Key Source of Wal*Mart’s Competitive Advantages Successful Vendor Relationship Efficient Communication Network LOW PRICE Value Employees Most Efficient Operation Management Customer-Oriented

  12. Direct Factors to Low Price • Lower Land Rent • Few Promotion Sustainable?

  13. Successful Vendor Relationship • No-nonsense negotiator Efficient Purchasing • Partnership with suppliers • eg P&G- • -Sharing information electronically Efficient communication Lower Cost • Vendor-managed inventory systems • eg Wrangler & GE Minimize inventory cost Sustainable?

  14. Efficient Communication Network • “There are no superstars • at Wal-Mart” • Combined informal • Entertainment with business Higher Productivity Better Communication Lower Cost • Sharing the numbers Sustainable?

  15. Value Employees Most • “Yes We Can Sam” suggestion program • “Store within a store” High Productivity Lower Cost • Shrinkage incentive plan Motivation • Profit Sharing Scheme • Management Training Program Sustainable?

  16. Efficient Operation Management • Distribution Network -Hub-and-spoken distribution network -Owned warehouses -Cross-docking Higher Productivity Lower Cost • Operating system -Uniform Product Codes (UPC) -Satellite system Sustainable?

  17. Customer -Oriented • No. 1 Boss – the customer Loyalty • People Greeter • “Satisfaction Guaranteed” policy Sustainable?

  18. Business strategy Work / not In HK Work /not In China low price successful vendor relationship efficient communication network value employees most efficient operation management customer oriented The Applicability of Business Concepts

  19. Low Price in Hong Kong in China • Land rent • Promotion • Land rent • Promotion

  20. Successful Vendor Relationship in Hong Kong in China • 2 dominant supermarkets • compete with established competitors

  21. Efficient Communication Network In Hong Kong In China • flat organization • information sharing

  22. Value Employees Most In Hong Kong In China • payment system • programming Motivation + incentive

  23. Efficient Operation Management In Hong Kong In China • operation system • shrinkage • distribution network In Hong Kong In China

  24. Customer Orientation In Hong Kong In China • provide subsidiary services • customer = the boss

  25. The Applicability of Business Concepts? In Hong Kong In China

  26. Recommendation for Wal-Mart Technology: - Join forces with a well-known Interactive Service Provider(e.g.AOL) to bridge the physical and virtual world. 1. Maintain and reinforce Wal-Mart’s core competitive advantages. 2. Growth Strategies: Advantages: (1) Global Promotion (2) Cost saving

  27. Recommendation for Wal-Mart (3) Customers Serving i) By setting up searching engine ii) By providing personal online services iii) Could listen to consumers’ opinions promptly (4)Facilitation on operation management Culture: - Change core values in different countries. E.g. Hong Kong

  28. Recommendation for Wal-Mart Formats: - Increase the number of supercenters Conclusion: 1. Catch up the trend of e-commerce 2. Reinforce Wal*Mart’s core competitive advantages. 3. Adopt changes when necessary

  29. THE END Thank You!

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