Several factors have contributed to the success of Walmart retailers. Some of the aspects that have resulted in success and robust growth of Walmart include ideal distribution model, functional international operations, effective human resources management, vibrant marketing, well thought out store format and ethical merchandising cultures and practices.
In distribution, Walmart retailer has been able to employ advanced and sophisticated technology especially in tracking frequencies, which have enhanced efficiency and reduction of wastage. Walmart has a trained and effective human resources management which is ranked among the best in the world in term of efficiency and facilitating diverse marketing strategies crucial for organizational success. The mutual and cordial relationship between Walmart and supplies and the established merchandising practice have significantly contributed to the success of the Walmart.
Elements that has made malmart to have lower cost than its competitors
Below is the primary factor that has led to difference system technology in Walmart success in retailer and its low-cost business model.
One of the reasons behind Walmart success was due to structure and systems were efficient. The primary model of Walmart operation was coined around distribution, marketing, store format and human resources; all these organs contributed to the success of Walmart. The second reason is, Walmart operating cost advantages, especially on rent expenses, advertising, labor, and distribution, has dramatically assisted the company to achieve enormous investment higher than its close competitors. The third reason is, Walmart has a critical factor that makes its operation cost effective. Huge sales volume and broad customer base have facilitated the company to capture substantial market share by selling products in bulks and almost present everywhere. Walmart has many buying opportunities through their multiple store formats.
A supplier chain anchored on electronic product information, the role of vendor in distribution and appropriate warehouses layout also assist in reducing cost. The fourth reason, Walmart is a pioneer in using advanced technology in term of barcodes on product information to master the art of what, how much and when the products are needed. Leveraging on its effort of bargaining power to compel suppliers to reduce prices has also lowered the cost. By pushing the supplier to cut their expenses down, operational cost reduces.
Fifth reason, Walmart cost structure differs significantly with it closes competitors. For instance, at one point the article portrayed that the labor cost of Walmart was 10.1% as compared to its close competitor who was 11.1%. This difference is mostly triggered by low basic salaries, benefits and incentives the company awards to its employees as compared to its competitors.
The sixth reason, Walmart hires appropriate people direct from colleges who mostly do not demand high compensation. Seventy reason, the operating cost of advertising and rent of Walmart company stand at 1.8% and 1.1% respectively compared to an average industry which stands at 2.2% and 2.3% percent of rent and advertising respectively (Sharaaz, 2016). Eighty reason, in term of rental, Walmart has established its warehouse which has significantly reduced rent expenses. And lastly, malmart has distribution cost is recorded to 1% behind the competitors due to the improved strategy the company has adapted particularly with their suppliers for efficiency.
Think that has made difficult for Walmart to succeed in foreign markets
Despite the malmart success, it had severe challenges when venturing into other nations market. Below are some of the difficulties Walmart faced in the foreign exchange. First is reason is, In China, Walmart stores did not have enough local merchandise, and the prices of available goods prices were very high compared to domestic products. In Russia, malmart encountered stiff competition from their competitors. This reason made Walmart stop expanding their stores. Second reason is, In Germany, malmart faced challenges from strong labor union demands and competition from locals such as aid and life.
Third reason is, in South Korea, Walmart meet the consumer who was very loyal to local chains and retails. Fourth reason is, In India, Walmart faced challenges with Indian government due to regulations that demanded Walmart to buy 30 percent of its product from the Indian market. Fifty reasons, In United Kingdom Walmart they lacked modern technology in supply chain department as compared they, competitors. Sixth reason, seventh reason, In Brazil and Argentina, Walmart was not able to acquire complete command due to financial and cultural pressures. Eighty reason, In 2010 Walmart store format still dominated the market, Lastly, malmart after ten years the format was supplanted by modern supercenters, this challenge was contributed by lack of innovation from Walmart to adapt to changing an environment.
Sharaaz, M. J. M. (2016). Strategy and Profitability: Managing Profits in Inflation Economy (Doctoral dissertation, Walden University).
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