Walmart Case Exercise
- Positioning Analysis
How was Walmart positioned in the retailing business? The case gives information about Walmart's positioning along several dimensions, and for some aspects you can compare its positioning to rivals Target and Kmart. Use tables as well as the case itself to answer the following:
- Using information from Exhibit 8, draw a positioning map showing Walmart, Target and Kmarts' different positions with respect to geographic positioning (X axis) and the number of stores by format (Y axis). In your map, geography should range from rural to urban, with suburban in between. To simplify your map, you can show this as a continuous axis, combining some segments, such as adding together stores in "Small town living" with "Rural". Note that you can assume that "Affluent/Elite" are positioned somewhere between suburban and urban locations. Your map should resemble those we reviewed in class, showing 4 quadrants, with the Y axis intersecting at the middle of the X axis. Each company may appear more than once on this map, since they have different types of stores in different locations. Rather than using dots to mark positions, show each position as a bubble whose size corresponds to the percentage of total stores for that company that corresponds to that position. For example, if Walmart has 1000 stores, and there are 100 discount stores in location A, the position of A should be at 100 on Y axis, and the size of the bubble should correspond to 10%; if it has 200 discount stores in location B the size of the bubble should be twice as large as that of location A. You can use colors to make your graph visually clear. The legend should indicate the scale of the bubbles and any other information needed to read the graph effectively. (see ex. 4 for a model of a bubble chart).
- In which segment(s) of the market is Walmart's strongest position? Where is there room for expansion? In your discussion, you may discuss other segments of the market besides geography and format, e.g. customer demographics, Internet, etc. Your answer should not exceed the space below on this page.
- Competitive advantage and activities
- Value creation: Compared to other companies, how does Walmart create value? Below is a bar showing willingness to pay and costs for the discount retailing industry in the USA in the mid-1990s. To the right of it, draw a bar for Walmart, showing willingness to pay and cost relative to the industry average. To add to your diagram, indicate hypothetical prices for a similar product, showing the three buyer value and the firm's share. Then, give a written explanation for your diagram. What kind of competitive advantage, if any, did you draw (cost leadership, differentiated, dual?). In your answer, be sure to address the factors that you think are most important in any differences in WtP and Cost that you drew, as well as value capture by buyers, and the firm? You do not have to put any numbers in your graph.
Industry Average,
Discount Retailing
Explanation (about 400 words):
b. Activity Analysis. How did Walmart manage its activities to create the competitive advantage you describe in a? The case describes a number of important activities that help create competitive advantage at Walmart. For this exercise, describe 5 activities to fill in the table. In column 1, describe how Walmart manages each activity. There may be several different aspects to the management of the activity; show the most important for value creation. In column 2 and 3, indicate how Walmart's management of these activities changed its costs and customer willingness to pay, respectively. In column 4, assess the sustainability of this resource: to what extent could its value decline due to obsolescence or imitation and/or substitution by rivals? You may refer to the "What is Strategy?" article as well as the Barney article on sustainability in answering this.
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Activity
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1. How managed?
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2. Impact on cost (quantify if possible) (↑,↓,no change)
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3. Contribution to Wtp (↑,↓,no change)
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4. How Sustainable?
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1. Distribution (inbound and outbound logistics)
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2. Procurement (purchasing, sourcing, supplier relations)
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3. Information technology
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4. Human resource management
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5. Marketing and merchandising
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Give two examples of second order fit at Walmart, and one example of third order fit.
- Your answers in a and b explained value creation at Walmart overall. In which position/market segment is Walmart's value creation maximized? Your answer should take into account geographic positioning, as well any other aspect of the core position that you think is relevant (e.g. customer demographics). In your answer, explain why Wtp is maximized and Costs are minimized in the position you identify. The segment you identify is Walmarts core position: the market in which it earns maximum profits.
- Growth at Walmart
Should Walmart enter online retailing? Re-draw the value bar for Walmart that you drew in Q 2a. To the right of it, draw a value diagram showing Walmart's value creation in the online segment. Your diagram should take into account your ideas about any needed changes in Walmarts activities from their current configuration as described in 2b. Does the price you drew in the first case deliver comparable value to buyers in the online segment? How about for Walmart? Explain your graph, and discuss whether you think Walmart should enter this segment of the market, it's likely competitive advantage in that position, and what adjustments would need to be made to its activity system. Your written answer should not exceed 500 words.