With operations in 28 countries, Wal-mart was considered the world's largest company in 2017. It has an annual revenue of over $480 billion and had mostly vanquished its competitor retailers in the U.S. It has moved to the growing e-commerce arena as a solution to a nearly stagnant market but experienced very strong competition from Amazon. The "Wal-Mart Update, 2017" case study looks into how Wal-mart could outperform Amazon's e-commerce presence.
David B. Yoffie; Eric Baldwin
Harvard Business Review (717468-PDF-ENG)
April 04, 2017
Case questions answered:
- What are Wal-Mart’s competitive advantages?
- How sustainable are those advantages?
- How transferable are those advantages as Wal-Mart moves into new formats and especially into new international locations?
- How should Wal-Mart respond to Amazon’s superior performance in recent years?
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Wal-Mart Update, 2017 Case Answers
-Wal-Mart Update, 2017 Case Study
Established in 1962 by Sam Walton, Wal-mart has positioned itself as the largest retailer in the world, with its operation spanning across 28 countries and annual revenues of over $485 billion. With its corporate strategy of ‘everyday low prices,’
Walmart leverages its core competencies of price leadership, economies of scale, procurement strategy, and buying power and has scaled its operation to 11,700 stores across the globe, serving 260 million customers per week.
It has also established itself as the second-largest online retailer in the United States. Although Walmart enjoys a significant market share, over the years, its revenues have been declining, and its growth has been modest. Moreover, with booming e-commerce businesses, a major threat to Walmart comes from e-commerce retailers like Amazon.
This “Wal-Mart Update, 2017” report examines Walmart’s corporate strategy, identifies its corporate advantage, and proposes strategies to leverage in the global market.
Wal-mart’s Corporate Strategy:
Since its inception in 1962, the corporate strategy of Walmart has been ‘everyday low prices.’ This commitment to price leadership is achieved by vertically integrating the supply chain, thereby achieving economies of scale, significant buying power, and an impressive procurement strategy.
Its corporate scope has also expanded over the years to include groceries, health & wellness segments as well as entertainment (Appendix 1). Since Walmart’s corporate strategy targets consumers with medium spending power, being readily accessible is an important aspect. Walmart achieves this in various geographic markets by operating different format stores like supercenters, neighborhood stores, and Walmart Express.
To stay relevant in the digital world, Wal-mart has been investing in expanding its e-commerce site and integrating it with brick-and-mortar stores. Although the company is the second-largest online retailer in the USA, it is facing increasing competition in e-commerce, primarily from Amazon.
To bolster its position, the company has invested in 15 startups, including Jet.com, in an effort to improve its online operations. With the acquisition of Jet.com in the US and a joint venture with JD.com in China, Walmart now has access to innovative logistics, pricing technology, and customer and network delivery data.
Thus, the corporate advantage for Walmart stems from offering product differentiation, cost leadership, and its multimarket presence. Equipped with these resources and a strong brand image, Walmart has the potential to dominate domestic & international markets.
Strategy for USA Market:
On the domestic front, Walmart and Target are two major players in the big-box discount retail segment. Where Walmart’s strategy is low pricing for customers with low to medium spending power, Target has built a reputation of being an upscale discount retailer. Thus, both companies cater to different target markets.
Upon analyzing financial data, it is evident that Wal-mart is…
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