Professional Documents
Culture Documents
Walmart is seen as a leader in the retail space, which can be merited from their
performance and how they’re positioned with their competitive advantage. The following
essay captures Walmart’s performance and determines whether this success is
sustainable, by looking closely at their competitive advantage. Walmart isn’t without
challenges. In evaluating Walmart’s competitive threats, competitive advantage is
continuously evaluated for sustainability.
Walmart’s Performance
Walmart’s Q4, 2017 financials showed a maintained profit margin of 24%, with a total
revenue of approximately $480 million across operations, for years prior to and after
Robert Grant’s case analysis of Walmart in 2015. (Grant, 2016, p.492) J. B. Barney
further presents Walmart’s growth as having “consistently earned a profit on sales over
twice the industry average”, despite challenges. (Barney, 2011, p.116) Barney’s
suggestion of challenges are the constant threats within the retail industry. Despite this,
the statement observes Walmart as profitable within the competitive market.
Marketline’s SWOT analysis of Walmart shows strength in their strong market position,
improvement in inventory turnover ratio, and customer-centric business operations.
Conversely, Walmart’s weaknesses are with their legal proceedings and weak liquidity
position. Marketline outlines Walmart’s threats as intensely competitive with
competitors, like Amazon, along with threats from increase in manpower costs, and
foreign-exchange risks. Opportunities for Walmart are in more international expansion,
specifically in countries where they have no presence, while maximizing sales in their
US and e-commerce businesses. (Marketline, 2017, pp.3,4)
Walmart’s Success
S.A. Lippman and R.P. Rumelt make reference to casual ambiguity (Lippman, Rumelt,
1982), which gives Walmart an advantage over their competitors. There is nothing
unique about Walmart as an organization. They were able to gain a short-term,
competitive advantage by building stores in rural locations. The development of
Walmart’s Distribution Centres allows for the success of these isolated stores.
Lippman and Rumelt further identify how casual ambiguity creates uncertain imitability.
This factor is important in an industry with no patentable technology or uniquely
identifiable intellectual property. A key factor that drives Walmart’s success is their
human resources and the “Walmart Associate”. This small-town, customer service-
oriented method, established in Walmart’s infancy, is still seen today.
Centralisation
In-store
Marketing
Walmart’s marketing is built on the strategy of “everyday low prices”. Walmart does not
engage in promotional price-cutting and prides in having the lowest advertising-to-sales
ratio among their competitors.
Technology
Walmart invests many resources into internalizing, rather than outsourcing Information
Technology. In 1984, Walmart launched their own $24-million satellite. By May 2015
Walmart had acquired 14 technology-based companies.
Walmart has split their IT function into two groups: Walmart Technologies and Global
eCommerce. In the 1990s, Walmart created Electronic Data Interchange (EDI) to
collaborate with their suppliers on sales and deliveries. EDI provided the capability of
monitoring point-of-sale data allowing suppliers to monitor sales and inventory levels on
a store-by-store basis and replenish inventory as needed. (Grant, 2016, p.495)
Human Resources
Human resources is seen in the employee culture and the previously mentioned
“Walmart Associate”. Employee relationships are built around respect, high
expectations, and close communications. (Grant, 2016, p.498) This has created high
levels of enthusiasm, involvement, and empowerment that is unusual for large retailers.
Management
Management style is the level of engagement. In any week, regional Vice Presidents
will spend four days visiting stores and two days visiting corporate offices. This highly-
engaged, on-the-ground, management style allows for quick decisions while containing
in-store time to two days versus the competitor’s ten days. (Grant, 2016, p.500)
Grant (2016) states, “Walmart’s competitive advantage rests upon four mutually
reinforcing capabilities: aggressive vendor management, point-of-sale data analysis,
superior logistics, and rigorous working capital management.” (Grant, 2016,
p.125) Table 1 further demonstrates Walmart’s distinctive resources and capabilities
using the VRIO framework.
Table 1 – Walmart’s VRIO Framework
Aggressive
vendor Yes Yes Yes Yes SSDC SCA
management
Exceptionally
high
Yes No No No Strength CP
bargaining
power
Superior
Yes Yes Yes Yes SSDC SCA
logistics
No-questions
Yes No No No Strength CP
asked policy
Everyday low
Yes No No No Strength CP
price slogan
Point-of-Sale
Yes Yes Yes Yes SSDC SCA
Data analysis
Employee
Yes No No No Strength CP
engagement
Rigorous
working
Yes Yes Yes Yes SSDC SCA
capital
management