WAL MART STORES INC Harvard Case Solution & Analysis

Wal Mart Stores Inc Case Study Solution


Walmart is one of the world’s largest brick and mortar retailer, on which its revenue increased to $67 billion in 1993 from $16 billion in 1987. The founder of the company was Sam Walton who first opened a retail shop by the name of Ben Franklin franchise store in 1945. In the year 1994, Walmart had around 1,953 overall stores in U.S. One of the Key strategies of Walmart distribution was that it established retail stores in low populated rural areas where its competitor would ignore building stores.

Walmart’s main strategy was selling the products at low prices and also displaying the products on the shelves according to the most product demand and customer preferences. The pricing strategy was through charging less than the department and specialty store on the branded merchandise. Walmart did less promotional activities as compared to its competitors due to being cost effective. For attracting the customers, the company established a policy in which the customers would be able to return the merchandise with no questions asked.

Around 70% of the Walmart stores shelves were used for displaying other company’s product whereas 30% of shelves were occupiedby the company owned product. The company used a “cross-docking” distribution technique in which the company would transfer the store-bound vehicle which enabled the goods to be delivered continuously. The company had around 3,000 trucks in which ran around 60% full or back hauls. Walmart considers its human resource management for the main reason of company’s success. The company has around 528,000 full and part-time employees on which it empowered its employees, provided health benefits, motivated its employees and also took initiatives on its employees’ ideas. The reasons as for why Walmart had acquired a strong position in the U.S market is due to empowering of employees, technological superiority, maintaining loyalty among its suppliers, vendors, and customers.

Industry structure

The company’s industry structure or industry analysis would conduct by using the analysis tool which is the porter 5 forces. The porter 5 forces consist of bargaining power of suppliers and customers, the threat of substitute and new entry and competitive rivalry.

Porter 5 forces

Bargaining power of customers

The bargaining power of customers is low since Walmart retail stores are offering very low prices on the products compared to the specialty and department stores. The switching costs for the customers is low since it is difficult for people to find stores which offer the same lower prices on the products.

Bargaining power of supplier

The bargaining power supplier is low to moderate as Walmart is one of the biggest retailers in the U.S. The company buys the products in bulk from its vendors and immediately put the goods on the shelves and which is further purchased by the customers. The switching cost for Walmart is low since it could easily switch to another vendor without incurring major costs.

Threat of Substitute Product

The threat of substitute is low since there are not many retailers which could offer the same lower prices at Walmart. There are only a few retailers which have lower prices as Walmart which are Kmart, Target, Costco and few others. However, online shopping has been becoming a substitute product for Walmart since it offers convenience to the customers.

Threat of New Entrants

The threat of new entrants in the discounted retail stores is low since it requires heavy investment, effective strategy and recognized brand name. The discounted store have to sacrifice an amount of profits by keeping the prices low and it is difficult for the new entrant retailers to follow the price discount strategy. Apart from price, heavy investment and skilled human resources are required as well as strong brand image.

Competitive Rivalry:

The competitive rivalry is medium in the retail industry as there are several well-known brands in the market such as Kmart, Target, Costco and few others. However, for competing in the retailing industry, it is essential to have a strong brand image in the market. Such as Walmart which has the strongest brand recognition in the world for providing products at low price.

WAL MART STORES INC Harvard Case Solution & Analysis



Competitive Advantage:

Walmart gains a competitive advantage in the market through the cost leadership strategy by providing products at lower cost to the customers. Through Walmart’s promotion strategy “Everyday-low-prices”, the company has managed to gain  a significant competitive advantage over its competitors. In which it offers low prices branded products comparative to department and specialty stores. Not only Walmart gains competitive advantage through low prices on products but also because of its strong brand image and skilled human resources......................

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