Walmart Case Study

10/17/2011

Team 5

Neal Bohling

Steve Campbell

Keyshia Conner

Nick Nash

Sandra Sanchez-Pierre

Sean Samsel

Team 5

Neal Bohling

Steve Campbell

Keyshia Conner

Nick Nash

Sandra Sanchez-Pierre

Sean Samsel

How was Wal-Mart successful early on? What were its sources of competitive advantage?

Wal-Mart was successful early on in various ways, but the greatest success they experienced came when Sam Walton decided to put his stores in small towns, which had been ignored by the larger retailers. By doing this, not only did Wal-Mart have little competition from the larger retailers, but with the larger stores continuing to ignore the smaller towns, Wal-Mart was able to greatly increase its market share, in a relatively short amount of time, through expansion. While this strategy had its benefits, it also presented Wal-Mart with problems. Distributors were hesitant to deliver goods to Wal-Mart in the small towns, as opposed to being eager to deliver to Wal-Mart’s competitors in the larger cities. Walton alleviated this problem by building his own warehouses. This allowed Wal-Mart to buy in greater bulk, at more competitive prices. By positioning warehouses in centralized locations, close to Wal-Mart stores, not only did they keep the Cost of Goods Sold down, but the company was also able to use less floor space in its stores for inventory storage, allowing for more products to be sold to the public. This allowed Wal-Mart to have significantly higher sales per square foot than its competitors.

Wal-Mart’s competitive advantage extended beyond inventory and sales, however. It was ingrained into every aspect of business, with Walton leading by example. Whenever management traveled on business, they shared rooms in order to keep costs down. Corporate functions were also kept close to the main office in Arkansas in order to keep overhead costs to a minimum. This ingrained attitude of cost cutting was yet another way that Wal-Mart held a competitive...