THE RISE AND RISE OF WALMART: BATTLING KMART Harvard Case Solution & Analysis

THE RISE AND RISE OF WALMART: BATTLING KMART Case Solution

Employee Discipline and Dedication:

Walton presented 10 rules in Walmart to make business successful, half of them were for the development of employees. Walmart always treated employees like a family, Sam called them associates. Each employee was treated with full respect and the business always respected their opinions and suggestions, which caused great employees’ satisfaction and automatically productivity of the business went up. Employee were the main asset of organization and they were one who worked consistently to build success.

 

  • Better Distribution channels and Information Technology:

Since day one Walmart was actively focusing on all the aspects of the business. Information technology is one of the most important pillar to build a giant network. The efficient use of IT leads to employee and customer satisfaction but if IT goes wrong the organization will experience damage to sales. Sam actively worked on IT, visited other competitors and took some classes from IBM, moreover, he hired some officials to create an efficient network through IT. Walmart looked on the strategies and equipment regarding IT of those businesses that were good in IT to improve IT infrastructure of the firm.

Although Walmart already had an efficient distribution channel of its own and they were considered as leader in the logistics industry but still Walmart kept on investing on its distribution channels to make them more efficient while decreasing lead times which in turn decreased their transportation costs and reflected in their strategies to sell items at lower prices than its competitors.

  • Walmart’s Culture:  

Sam presented a much disciplined culture in the organization, each employee had to respect the discipline. Sam believed that if the employees will spend even $1 extra that would actually cost our customers but if we save $1 then our company will move another step forward. Walmart did have entreating nights and fun program for employees. Walmart’s culture was a great strength behind its success.

Answer 2:

Kmart was a leading business in the industry until Walmart defeated it in the competition. The leading business applied successful strategies in some areas for example, the business was very successful to negotiate with its suppliers and got even cheaper rates than Walmart that helped Kmart to improve gross profit margin of business but there were some areas where they required to copy their competitors, following are the places where Kmart could have imitated Walmart to gain success:

  • Expansion Policy:  

Kmart considered building new stores as a key of success, the business built approximately 238 retail stores on average per year in the large cities. After few years of building huge number of stores proved to be not as much profitable as the firm expected. The business growth wasn’t accelerating in terms of more revenue and having new customers. The firm then started to close down some stores on yearly basis. Kmart could have imitated the same strategy as the Walmart, where Walmart focused on saturated expansions.

  • Distribution Channel:

The distribution means of organization were very inefficient, the firm didn’t think to have self-owned distribution channel. Their stores were located hundreds of miles away from their warehouses and other stores that was why the company was having difficulties related to the stocks of their supplies due to which many products were out of stock most of the time. Kmart could have imitated the distribution strategy of Walmart as Walmart had efficient distribution businesses to provide best services.

  • IT Problems:

Kmart could have imitated Walmart in their IT infrastructure because the IT department and software were not up to date. Moreover the company was backward in the application of technology. Only 25% of the stores were equipped with technological gadgets by the end of 1986.

  • Cultural Problems:

The company was recruiting new employees from high school level which caused a big expense of training for the organization whereas Walmart was hiring new workers with high level of study and experience.

Recommendations:

Walmart should focus on their new projects and strategy closely because now the competitors are aggressive in competition and a small mistake can lead to a big damage to revenues and customers. Kmart should focus on the mistake the firm has made in recent years and try to copy its competitors to get its position back. The areas of information technology, distribution and recruitment process should be revised closely by Kmart.

Appendix: SWOT Analysis

SWOT Analysis of Walmart:

Strengths:

  • Strong positioning in the customer’s mind for Walmart.
  • Successful implementation of new strategies
  • Strong command on distribution channels and IT.
  • Disciplined organizational culture.
Weaknesses:

  • Negotiations with suppliers were not efficient because COGS was high.
  • Hyper marts failed to earn profit;
Opportunities:

  • Walmart has the opportunity to expand its business to those countries where it’s not operating.

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Threats:

  • Kmart and other businesses are still big threat for the organization, any wrong step can lead to big damage.

SWOT Analysis of Kmart:

Strengths:

  • Negotiations with suppliers were efficient than Walmart because COGS was low.
  • Since day one Kmart has strong financial background.
  • Positioning of Kmart was strong in customer’s mind.
Weaknesses:

  • Expansion policy had proved to be a failure for the organization.
  • IT and Distribution means were not efficient.
  • Recruitment process of the organization failed to employ skilled workers.
Opportunities:

  • After applying a revised strategy Kmart has the opportunity to retain its market share back from Walmart.

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Threats:

  • Walmart and other businesses are big threat for the organization in terms of competition.
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