What makes Wal-Mart successful??
Wal-Mart Stores have stood at #1 position on Fortune's 500 and Global 500 lists for the year 2011 as CNN reports. What makes Wal-Mart such a high revenue generating company?? Read this hub to know.
In today’s world the competition is very tough among the brands and the organizations. Consumers can choose from numerous brands and then purchase a product to satisfy their need.
For instance, in buying a luxury watch the consumer can choose among the brands such as Rolex, Rado, Cartier, and Omega making the competition among the brands fierce and difficult for any one brand to dominate the market.
Organizations can achieve market leadership by following either of the three value disciplines namely operational excellence, customer intimacy and product leadership and being at industry standards at other two(Treacy & Wiersema, 1993).
If companies follow operational excellence they aim at providing their customers with products or services at low prices. Organizations like Dell and Wal-Mart have succeeded in doing that and it has become their core competency. When organizations pursue a particular discipline they align their operating model that is the company’s processes, management systems and culture work together to serve that one discipline.
Wal-Mart is successful and is a multi billion dollar company due to the following :-
Massive buying power
Wal-Mart is providing its customers with everyday low prices hence giving them value for their money. Wal-Mart is able to provide low prices as it has massive buying power. Furthermore, there are tough negotiations with buyers helping it drive down costs.
The philosophy behind operational excellence is high expectations. High expectations lead to high productivity, high productivity means efficient processes, efficient processes means lower costs. These lower costs mean more profits and savings which enable it to open more stores making it more financially stable and enabling it to achieve economies of scale. Greater scale in turn means lower prices which are then passed on to the consumers.
Strong logistics & distribution network
Besides the low prices, the products are made available to consumers with minimal inconvenience. Wal-Mart has developed a strong logistics and distribution network and following the hurricane Katrina it was able to supply its stores with products quickly when other stores were out of stock for many items.
It uses an inventory management technique called cross-docking of products in its distribution centers which helps in reducing the inventory costs as the time inventory is piled up in warehouses is reduced. Wal-Mart has its own tractors and trailers which enables it to keep its shelves full and drive sales. Out of stock can mean havoc for Wal-Mart.
Excellent customer service
It has developed a culture where employees are expected to think out of the box and provide customers with excellent service. Therefore it is just not following operational excellence but building relations with customers which today is the key to any organization’s success.
Cutting costs and saving expenses
Wal-Mart tries to cut costs out of their operations such as distribution centers, home office, fleet etc. When the sales are not high, expenses are also controlled and managers are not hesitant to even cut their own hours. The culture is driven from the top and the top management sets example for others to follow.
The philosophy of saving expenses is very much embedded in employees and they realize that a dollar foolishly spent drives the money out of the customer’s pocket. Thus operations are handled in a way to save every possible penny which leads to saving dollars and ultimately results in providing items at low cost to consumers.
Treacy,M.,Wiersema,F.(January-February1993).Customer Intimacy and other value disciplines. Harvard Business Review.
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