The distribution and logistics practices adopted by Wal-Mart. Wal-Mart’s supply chain contribution to its competitive advantage
Wal-Mart’s success is attributable to its focus on solid supply chain, which has given its management a competitive advantage over other companies in the retail industry. For example, Wal-Mart’s logistic structure is among the impetuses that have caused positive impacts on its supply chain. Their logistic systems focus on visibility through enhanced information sharing within the management structure and between Wal-Mart’s Inc. and its suppliers. While researchers have accredited numerous logistical functions for its market visibility, the focus has always been put on its recently adopted Green Supply Strategy, which focuses on environmental conservation (Plambeck and Denend par. 5).
In an attempt to expand its supply chain, Wal-Mart Company has subscribed to three major objectives; they include dealing exclusively in renewable energy, a zero tolerance strategy on industrial waste, and dealing in goods that do not conflict with the company’s principles, while giving environmental friendly habits a big edge (Heying and Sanzero 6). While most observers note that numerous strategies aimed at strengthening Wal-Mart Company’s supply chain have not been explicitly successful, there is room to believe that the company is doing all within its capacity to yield better results.
In 2006, for example, the company reached out to HP and Oracle companies in an effort to broaden its supply chain, especially within the social networking outreach. Accordingly, the resultant Wal-Mart’s network debut in the hi-tech systems such as radio-frequency identification (RFID) with an enhanced website was a great marketing strategy that beckoned other market niches, which had been difficult to exploit. In the succeeding years, Wal-Mart marketing strategy took a new turn by focusing primarily on managerial practices and dealing in promotional items. Currently, notes Plambeck and Denend, Wal-Mart’s sustainability program that emphasizes the new network structure of green logistics technologies and other futuristic initiatives are some of the contributory factors to its widening supply chain (par. 8).
Wal-Mart’s business approach of going green is a marketing strategy that observers see as a decision that will positively affect the company’s growth, especially with respect to its distribution scope, both the regional and global corporate identity. The company’s market dominance as well as the adoption of distribution systems is an impressive identity factor and strategic champion for an eco-friendly business model. Notably, these factors are some of the managerial foresights that are expected to push its competitive agenda in future (Huston par. 3).
Wal-Mart as a company with significant buyer power
In situations where customers’ demands become a leading element in a market, the process of selling products becomes a critical factor for many companies. Majority of companies that find themselves in this situation normally shift their marketing strategies to meet the changing demands of the market trends. Companies that supply customer-packaged goods naturally pile pressure on suppliers without necessarily seeking productivity through new business innovations (Heying and Sanzero 3).
In the modern world of business dispensation – characterized by customer priorities, there is a great need to offer better responses that guarantee customer satisfaction. Of much significance is the emphasis on sales management, which primarily should be the prime focus of every company. In the supply management, sales activities are increasingly becoming more inclined to fewer, more complex and even larger purchasing powerhouses. In supply organizations, shifts in market situations have been more rapid and even revolutionary.
Lately, advancements in information technology have made marketing more efficient via cable networks and other local and international media outlets than through the traditional modes. These shifts have moderated market situations, and in most cases, the retailer has shifted its concentration from the traditional seller situation, hence giving the buyer an inordinate edge. The resultant product of this scenario is that businesses have witnessed stiff competitions at the manufacturer level with remarkably less product differentiation (Heying and Sanzero 7).
With the increased customer focus, companies are intensifying their competitive advantage and the ever-changing customer choices have forced most companies to approach the supply management from a different dimension. Similarly, customers in the supply chain have not shown willingness to retract their position and accommodate the pressure-tight selling techniques. To deal with these market discrepancies, Wal-Mart has strategically streamlined its purchasing agenda in ways that are highly likely to change its marketing scope (Scott 23).
In addition, Wal-Mart embraced a program that aimed at procuring its surplus directly from the manufacturers in order to deal with the discrepancies in the market. By adopting and implementing the program, Wal-Mart succeeded in bypassing all the intermediaries that had been in the supply chain. Currently, Wal-Mart has been able to tag its pricing with much aggression knowing that an impressive net profit margin is always imminent with all the marketing conditions withheld. To combat these market trends, Wal-Mart embarked on investing much of its time and energy in championing its vendors to accommodate its pricing strategies. Wal-Mart made it possible for prospective markets to evaluate its pricing strategy. Consequently, most suppliers believed that Wal-Mart’s impressive offer could not be found anywhere else, hence making most of them to stick with Wal-Mart Stores.
IT impacts and benefits for Wal-Mart
Even with great advancements in information technology, research indicates that many companies across the globe still operate with minimal use of these technologies. The fact is that many companies are yet to embrace the usable data in accounting for profitability and loss, while it is common knowledge that in the absence of such data there is greater impossibility for the administration to impact on its strategic sales and inventory management (Walmart 2013 Annual Report 5).
In using IT applications, Wal-Mart has been able to reduce its inventory backlog given that the stores could administrate on their stocks independently. The IT system has also ensured timely pricing protocol. In applying the modern-type information technology across the management domains of Wal-Mart, more records have been availed to enrich the marketing scope of the high demand goods, which had earlier relied on manual documentation. Embracing IT within Wal-Mart Stores has further necessitated a high-tech networking stratagem that ensures that suppliers are maintained within the company’s system through the internet-enabled communication schemes (Huston par. 5). To comply with the rising demands in the technological market environment, Wal-Mart decided to set up its communication satellite, a system that enabled suppliers to deliver their goods to the company with preferential ease, thereby lessening the time lost in many logistics that normally characterize the supply chain.
With the advent of the IT system at Wal-Mart Stores Inc., their suppliers were further able to drop stiff pricing policy, as the IT systems enhanced the coordination between the companies. The use of IT has further benefited Wal-Mart Company in the capital market investment, such that in 1991, for example, the company reaped a magnificent net benefit in the retail link system. Accordingly, a good number of their suppliers equally invested in the retail link system, hence giving Wal-Mart Corporation an impressive advantage.
Wal-Mart’s amalgamation with the Atlas Commerce in 2001 to upgrade their IT system with the internet compatibility modes further earned the company superior appeal and efficiency in service delivery. During this period, Wal-Mart registered remarkable advancements in their approach to the popular wave of change in the IT sector and a grand plan that consisted of the use of advanced satellite communication structure that eased disaster detection, as well as the ability to recover lost inventory records. All these technological advancements impacted positively to the advantage of Wal-Mart Company by ensuring uninterrupted service delivery to mainstream the supply patterns (Walmart 2013 Annual Report 45).
Steps to sustain Wal-Mart’s supply chain advantage
Referring to Wal-Mart’s sustainability report of 1999, Lee Scott held that sustainability of Wal-Mart’s programs is a matter that is isolated and discrete from other underlying factors within the company’s structure (Scott 5). At the time, Scott insinuated that corporate social responsibility (CSR) was lacking in their marketing model, and that there were inordinate needs to emphasize these scales. Moreover, he reaffirmed that innovation was the sole prerogative for the company’s sustainability program.
Therefore, innovation is a sacrosanct phenomenon, attributable to the progress of Wal-Mart Company. However, Wal-Mart must make sustainability strategy its priority to endure the chronic technicalities that the supply chains have witnessed in the past. Additionally, the company must invest heavily in the IT sector and embrace the new marketing tools that are the products of such technological inventions. In addition, the company must strengthen its networking channels to outsource for new markets, as well as aim at extending its profit margins with the trading partners.
Wal-Mart must hunt for direct suppliers and be willing to offer stronger incentives that drive greater market appeal to the sprouting markets. However, the company must always seek to reclaim its position as the world compelling motivator to withstand the tides that comes with the ever-changing business environment. At the same time, Scott denotes that, Wal-Mart must encourage its suppliers to work on new supply chain innovations in an effort to accommodate the sustainability programs that nurture their developmental strategies (25). In addition, the company must be willing to embrace the new licensing trends, which are likely to generate additional revenues to help it realize notable and impressive yields.
Further, Wal-Mart Stores must endeavor to play a strategic role in championing the embracement of ideals that are widely accepted in the free-market economy. In line with the anticipations, the company has to step up its strategy to achieve the visibility of purpose for the complex problems and make a significant debut, especially in sectors that lack key improvements. The other significant step is to get the experts to come on board and incite suppliers with innovative approaches to problem-solving techniques. In the wake of all these, it would be imperative for the company to hire technocrats in various fields to monitor and evaluate the changes that are expected while offering a platform to establish a feedback mechanism that informs and shapes the paradigm shifts within the change management (Walmart 2013 Annual Report 15).
Sharing knowledge and critical information with vendors, suppliers and customers
By inviting its major suppliers to partake a program to mainstream its supply chain partnerships, Wal-Mart Company ideally planned to consolidate its stronger ties with its main supply chain brain house (Walmart 2013 Annual Report 38).
Bringing the suppliers on board meant much to Wal-Mart Corporation as this was a calculated business motif to extend stronger incentives to relatively smaller market suppliers. Significantly, the coming together of the companies was a drive that aimed at exploring the beauty of environmental conservation. Wal-Mart sought to rally the supply companies to invest much in the production of eco-friendly products that do not harm humanity, animals, and plants. Apart from the observable benefits, Wal-Mart Company earned unique reputational advantages that aimed to expand its market in every region that informs its marketing endeavor. Wal-Mart passed out as a compelling motivator since its products and services appealed to several new suppliers who wanted to transform the business community (Walmart 2013 Annual Report 45).
The feelings by Wal-Mart and its supply agents was a long-term business commitment that meant to re-assure the supply community that their businesses were in the interest of Wal-Mart Company. As part of its drive to reach out to many partnerships, Wal-Mart used this occasion to help suppliers to set realizable goals by providing support in key areas of production. However, sharing of critical information with the supply agents put the company’s reputational gains at risk. Critics were quick to point out that the company was under pressure from its domestic competitors, and that the invitation of key players in its market circles was a time-ticking bomb strategy. Critics opine that the meeting was part of wider failed strategies that are aimed at strengthening the market powerbase of Wal-Mart Company (Walmart 2013 Annual Report 47).
For example, in an attempt to extend better prices to its customers, the company has always reduced the purchasing costs. While there have been high expectations for price reduction to attract customers, Wal-Mart has ended up regressing on the profit margins. Again, Wal-Mart’s complacency to operate in the local and regional market has also denied it a global competitive outlook.
Wal-Mart’s pricing philosophy
Impressive pricing strategies are important management practices that a company must invest in as part of its campaign and marketing schemes. Pricing directly dictates the company’s daily dollar per capita income (Scott 25). When laying out a pricing unit, it is fundamental that companies do much of the legworks and campaigns to ensure that the product under consideration does not conflict with its price tag. On the other hand, it might give the competitors undue advantage and send the product and the company on their knees. Under tight market considerations, competition-based pricing could be applicable in order to set prices based on the company’s marketing strategies (Walmart 2013 Annual Report 35).
Suitable pricing strategy involves reading the market trends and decoding the appropriate signals for quality pricing. Pricing is a viable marketing tool that influences a buyer’s behavior and consumerism. As such, for pricing to be viable and market friendly, the company needs to penetrate the market in order to be conversant with the competitive forces that might affect the pricing modules that it sets. A good parameter to establish an effective pricing strategy would take the effort to establish and understand the costs of the factors of production, as well as the profit objectives while outlaying customers’ satisfaction with competitive operatives.
Most companies tend to adopt value-based pricing; this strategy often seeks to align customers to be comfortable with a particular product. In a way, it aims at enhancing customers’ perceptions in order to grant the company a head start in appealing to the market. Therefore, the quote in the article, “Pricing Philosophy,” implies that the multinational company lays more emphasis on the prices of its products than on the sales volume.
Works Cited
Heying, Adam, and Whitney Sanzero. “A Case Study of Wal-Mart’s “Green” Supply Chain Management.” Operations Management 6.1 (2009): 1-10. Print.
Huston, Andrew. Energy efficiency isn’t rocket science, but it could use a boost. N.p. 2010. Web.
Plambeck, Erica, and Lyn Denend. The Greening of Walmart’s Supply Chain…Revisited. N.p. 2011. Web.
Scott, Lee. Walmart: Twenty First Century Leadership. N.p. 2005. Web.
Walmart 2013 Annual Report. N.p. 2014. Web.