Business Strategy

Which of the 3 generic business strategies is used?

An organization focusing on overall cost leadership are numerous and change almost daily, with the most well-know example being Wal-Mart. Wal-Mart's slogans of "Always Low Prices!" and "Every Day Low Prices" accurately describe the strategy overall cost leadership. For everything from women's lingerie to car batteries, Wal-Mart's Focus is on offering the same products as the competition but at a lower price. Wal-Mart relies on an IT-enable tight supply chain management system to squeeze every penny possible out of the procurement, distribution, and warehousing of its products. It uses sophisticated business intelligence systems to predict what customers will want and when.

For your industry, estimate how much power each of the forces has ( suppliers include their employees and suppliers of technology). How do they reduce the buyer and supplier power? How do they create switching costs and entry barriers?

According to the Porter's Five Forces Model:

Power of Buyers: (Low Pressure) The individual buyer has little to no pressure on Wal-Mart because of how many customers Wal-Mart attracts. Consumer advocate groups have complained about Wal-Mart’s pricing techniques. Consumer could shop at a competitor who offers comparable products at comparable prices, but the convenience is lost.

Potential Competitors: (Med. Pressure) grocers could potentially enter into the retail side. Entry barriers are relatively high, as Wal-Mart has an outstanding distribution systems, locations, brand name, and financial capital to fend off competitors. Wal-Mart has an absolute cost advantage over other competitors.

Rivalry Among Established Companies: (Med. Pressure) There are three main companies that exist in the same market as Wal-Mart: Sears, K-Mart, and Target. Target is the strongest of the three in relation to retail. Target has experienced tremendous growth in their domestic markets and has defined their niche effectively. Sears and K-Mart seem to be drifting and have not challenged K-Mart in sometime.

Power of Suppliers: (Low to Med. Pressure) Since Wal-Mart holds so much of the market share, they offer a lot of business to manufacturers and wholesalers. This gives Wal-Mart a lot of power because by Wal-Mart threatening to switch to a different supplier would create a scare tactic to the suppliers. Wal-Mart does deal with some large suppliers like Coca-Cola who have more bargaining power than small suppliers.

Substitute Products: (Low Pressure) When it comes to this market, there are not many substitutes that offer convenience and low pricing. The customer has the choice of going to many specialty stores to get their desired products but are not going to find Wal-Mart’s low pricing. To reduce buyer and supplier power, they would have to put more work into the threat of substitute products.

What major business initiatives are used or being considered? What software is used? Are they top-line or bottom-line initiatives?

Wal-Mart is using the Supply Chain Management for their major business initiative. Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service. Supply Chain Management improving the way your company finds the raw components it needs to make a product or service and deliver it to customers. Wal-Mart manages various components of the supply chain including distribution, logistics, and inventory management by using innovative IT-based supply chain management system. The system keeps tracks about inventory and information among business processes and across company. Wal-Mart makes use of bar coding and radio frequency technology to manage its inventories

Wal-Mart follow the bottom-line business strategy that helps them to keep their cost, and expenses low and reducing capital.

What type of IT organization is used? What philosophical approach do they use?

Wal-Mart became the first major retailer to demand manufactures use radio frequency identification technology (RFID). The technology uses radio frequencies to transmit data stored on small tags attached to pallets or individual products. RFID tags hold significantly more date than bar codes. During the first eight months of 2005, Wal-Mart experienced a 16 percent drop in out-of-stock merchandise at its RFID-equipped stores.

The frugal culture, established by Walton, also plays into Wal-Mart's success. The company has been criticized for the relatively meager wages and health care plans that it offers to rank-and-file employees. It has also been accused of demanding that hourly workers put in overtime without pay. Store managers often work more than 70 hours per week. They are are expected to pinch pennies wherever they can, even on things like the heating and cooling of the stores. In the winter, stores are kept at 70 degrees Fahrenheit, and in the summer, they stay at 73.