Walmart success story lies in its focus on the customer as the most important component. Walmart is keen at knowing what their customers care about. Their customers care about accessing all the goods they want at one stop and the lowest prices possible. As a result, Walmart has ensured that its customers can get all that they want under one roof and at best prices. Good prices and all shopping under one roof are what every customer admires and is what has seen Walmart attract most customers for its success.
As to how Walmart arrived at such a position where it can serve their customers with all they want at lowest possible prices, the answer is its efficient supply chain management. Walmart has one of the greatest logistical and operational triumphs in the world. The supply chain includes associates worldwide who help in delivering online orders to the customers. The chain is also enhanced through digital endless-aisle shopping in stores, pickup towers in store parking lots, automated pickup towers in stores for online orders and robotic and image analytics to help in assessing item availability. The chain also involves suppliers in ensuring efficiency. Efficiency in the chain management has not only enabled Walmart to cut down costs and be able to offer discounts and low prices to the customers but also be able to offer all products to the customer under one roof.
Why Walmart Costs Lower than Competitors?
When Walmart's costs are expressed as a percentage of total sales, the following comprises of its costs structure; COGs 26.2%, labor 2.07%, rent 0.235%, advertising 0.7792% and distribution 1.7%. According to Hill, Jones & Schilling (2014), Walmart's costs in distribution are much lower than for the major competitors such as Amazon. This is because Walmart has effectively managed its supply chains in such a way that its stores are omnipresent to the customers and that it has also linked with suppliers to minimize costs of product distribution. It has a multiple-store format to extend its market reach. Effective supply chain helps Walmart to maximize efficiencies and reduce outlays which altogether reduce costs.
Distribution costs are further checked through advanced technology in supply chain system. Walmart has been a pioneer in attaching detailed product information electronically to products so that product information could be relayed to its database and enhance inventory management systems (Hill et al., 2014). The goal of such advancement was to know what is needed, quantity and the time it is needed.
Why has Walmart had Difficulty in Succeeding in Foreign Emerging Markets?
Penetrating foreign emerging markets such as Brazil and South Korea have proved difficult for Walmart due to some challenges. In Brazil, for example, main difficulties that forced Walmart to shut down its operations include inefficient operations, labor troubles, poor locations and uncompetitive prices (Iyer & Bennur, 2017). A supply chain operation, which has been the main competitive advantage for Walmart, did not work out in Brazil. Similarly, a majority of the customers in Brazil seek the lowest prices for goods even if it means moving from one store to another to save money. This rendered Walmart's strategy of one-stop-shopping meaningless to the customers. A similar case was reported in South Korea where customers appeared to be going after lower prices than was offered by Walmart.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Iyer, J. H., & Bennur, S. (2017). Retailing in emerging markets. Bloomsbury Publishing USA.
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