Generic Strategy in Wal-Mart - Assignment Example

Part I Why did Levis consider selling their jeans at Wal-Mart? The main reason why Levis decided to sell their Jeans at Wall-Mart was to reach their new target customers, i.e. small children and their families. Mothers are the ones who mostly do shopping for their kinds and they frequently do shopping at Wall-Mart store. Levis introduced cheap signature jeans line that was specifically made for the new target customers. These Jeans for women, kids, and men are valued at $23, and they have fewer detailed finishes than the other product lines; also, they do not have trademark on the pocket (Girard, 2003). The management of the Company are deeply convinced that the new product will increase the profits of the Company by 100 of millions as 100 million shoppers buy from the Wal-Mart every week (Girard, 2003). 2. Why did Wal-Mart consider selling Levis jeans at Wal-Mart? The reason behind the Wal-Mart’s decision to sell Jeans to Wal-Mart was to target the rich customers and attracting well-off customers requires big brands, the Company, therefore, needed big brands. Levis is a famous high prestigious brand. The customers of Wal-Mart are people from all walks of life and through Levis, the company shall be able to meet the demands of all their customers, including the demands of the new affluent customers. 3. Wal-Mart is one of Levis buyers. Whose bargaining power is bigger? Wal-mart has a high bargaining power. This fact can be attributed to the fact that Levis is facing tremendous pressure on the sales front as its revenue has decreased because of the changing preferences of the customers. The Wal-Mart company, therefore, really needs to target a new customer group through its new product line so as to boost the company earnings and make profits of 100 million dollars. Walmart Company has a well-established supply chain management system that enables it to track the inventory right from the supplier factory up to the warehouse. Suppliers of Wal-Mart need to be upgraded in IT system so as to enable them to track inventory management. 4.What generic strategy (among the following four: (1) broad target / cost leadership, (2) broad target differentiation, (3) focused target / cost leadership, and (4) focused target / differentiation) is Wal-Mart following? Justify your answer. Wal-Mart is guided by the broad target and cost leadership strategy. The company targets a broad range of customers that come from all walks of life. The company distinguishes itself from its rivals on the basis of low costs. 5. Define entry barrier. Discuss how Wal-Mart uses information technology to increase entry barriers of its industry. Justify your answer. An entry barrier is defined as an advantage of established sellers in an industry over potential entrant sellers that is reflected in the extent to which established sellers can easily raise their prices above competitive levels without attracting new firms to enter the industry (Schmidt, 2010). Wal-Mart has used IT (information technology) in the form of RFID tags that allow the store to track the movement of the inventory from the supplier right from the factory and its movement up to the trucks or distribution centers. Wal-Mart’s products move out of shelves quickly, and the company aims at replenishing its stocks quickly and at low costs. The company upgrades its supply chain management system technology to ensure inventory management so as to beat its rivals in competition. 6. List 9 activities in the value chain model. For each process, provide an example of an activity in the case of Wal-Mart (ex: services: to accept product returns at Wal-Mart). As Giesler and Ludicke notes, Porter Value Chain Model encompasses the activities that a firm performs to design, produce, market, deliver, and support its products (Giesler & Lüdicke, 2007). The various activities that are included in the value chain model include the following: Primary Activities 1. Inbound Logistics 2. Operations (Manufacturing) 3. Outbound Logistics 4. Marketing and Sales 5. After Sales Services Support Activities 6. Firm Infrastructure 7. Human Resource Management 8. Technology Development 9. Procurement Figure 1 Porter Value Chain Model (Giesler & Lüdicke, 2007) Value Chain Analysis Model for Wal-Mart Company 1. Inbound Logistics: Wal-Mart has 7000 company owned trucks that service the distribution centers and ensure that the company has replenished inventory through the transportation of goods from the distribution centers to the Walmart stores (Seangkhun, 2011). Walmart also uses a technique cross docking in which the products are directly picked up from the supplier, factory, sorted and directly delivered to the customers (Seangkhun, 2011). 2. Operations (Manufacturing): The Company operates various retail formats such as super centers, discount stores and neighborhood markets that cater to various sizes and functions (Seangkhun, 2011). The company has operations in Argentina, Canada, UK, South Korea and joint venture in China. 3. Outbound Logistics: 4. Marketing and Sales: The Company promotes the everyday low price offer that attracts price sensitive customers to the stores. 5. After Sales Services: The Company offers after sales services through product returns. 6. Firm Infrastructure: Wal-Mart has an established infrastructure with trucks that collect goods from the supplier manufacturing website and ensure delivery of finished products to the customers. 7. Human Resource Management: The Company trains and hires employees for customer service at various stores. 8. Technology Development: Wal-Mart uses the latest Supply Chain Management Systems technology such as RFID tags to track the movement of the inventory. 9. Procurement: The Wal-Mart Company saves time and cost by sourcing products directly from suppliers to the customers. 7. What activity (or activities) in the value chain model do you think is most important in the case of Wal-Mart? Justify your answer. In my opinion, the inbound logistics activity is most important in the case of Wal-Mart. The Wal-Mart Company employs the advanced software for inventory management and tracks the movement of inventory from the supplier, factory to the distribution center or to the Wal-Mart warehouse so as to replenish the inventory quickly and cheaply. 8. Describe activities that Levis did or need to do in the area of Information Technology in order to do business with Wal-Mart. Include names of three information technologies in your answer. Levi’s did and need to do the following activities in the area of information technology in order to do business with Wal-Mart: 1. The company needs to upgrade from a local distribution system to a regional distribution system (Girard, 2003). Levi’s added three pool points in California, Texas and Florida that would distribute its inbound freight to Wal-Mart stores or distribution centers (Girard, 2003). Levi’s developed a scanning tool for manufacturers to check the accuracy of the cartons ready to ship (Girard, 2003). 2. Levi’s implemented AS2 technology to exchange with Wal-Mart EDI transactions that support collaborative forecasting (Girard, 2003). 3. Levi’s also implemented a set of Manugistics applications to collaborate on demand forecasting, product modifications and orders planning with Wal-Mart (Girard, 2003). 4. Levi’s is also upgrading its networks and US based applications to handle orders for Wal-Mart (Girard, 2003). Part II II. Search Internet to learn about the first-mover and fast-followers. 1. What competitive advantages can a company reap if it is the first-mover in introducing an innovative IT system? The term first mover in an industry was used by Alfred Chandler for the firms in a new industry that move first to dominate the industry (Betz, 2011). The company that introduces an innovative IT system can continue to dominate the industry for decades. A first mover firm is the first firm to complete its business system to gain competitive advantage of scale and scope (Betz, 2011). 2. What are the pros and cons of being a fast-follower? A fast follower with greater resources and capabilities can overtake the first mover as happened with the case of Microsoft when it introduced Internet Explorer against Netscape (Thompson, 2010). A fast follower can win the customers who are dissatisfied with the products of the first mover with better products (Thompson, 2010). The con of being a fast follower is that, in case fast followers are not fast in developing response to the first mover, they may fail. Part III III. Read the following article (read the first 6 pages before the section of forecasting demand in page 166) and answer the following questions. 1. The Cherokee denied Mr. Smiths room reservation request, although it has 183 unreserved rooms for that night, and gave Mr. Smith a free room at another hotel because the Cherokee’s management believes that the hotel’s RM (Revenue Management) system, which makes such decisions, contributes to the hotel’s profitability. Explain how such decision can result in higher profits. The Cherokee hotel benefits in various ways in their customers spend money at the hotel including spending money in rooms, food and gambling activities. Almost 100 percent of the rooms booked at the hotel are complementary as the hotel encourages and rewards customers that bet higher money in gambling activities through rewards and incentives that include complementary rooms. According to the customer segmentation scheme of the hotel revenue management system, it may be profitable to close room bookings for customers that have expected profit below $379.25 and instead hold 10 extra reservations for customers that have expected profit between $627.39 and $745.67 (Metters, et al., 2008). Mr. Smith must be belonging to customer segment with expected profits below $379.24 and therefore he was denied a room in the hotel. 2. Discuss at least two weaknesses of segmenting customers by restrictions. The main problems with segmenting customers by restrictions are accuracy of the segmentation, negative customer perception and loss of goodwill (Metters, et al., 2008). 3. What does RFB1 mean in the Table 1? RFB1 in table 1 refers to complementary room, food and beverage at level 1 where the best rooms and restaurants are available (Metters, et al., 2008). References Betz, F. (2011). Managing Technological Innovation: Competitive Advantage from Change. Canada: John Wiley & Sons. Giesler, M., & Lüdicke, M. (2007). A Theory of Marketing: Outline of a Social Systems Perspective. Wiesbaden: Springer Science & Business Media. Girard, K. (2003, July 15). Supply Chain Partnerships: How Levis Got Its Jeans into Wal-Mart. Retrieved from Cio.com: http://www.cio.com/article/2439956/supply-chain-management/supply-chain-partnerships--how-levi-s-got-its-jeans-into-wal-mart.html Metters, R., Queenan, C., Ferguson, M., Harrison, L., Higbie, J., & Ward, S. (2008). The “Killer Application” of Revenue Management: Harrah’s Cherokee Casino & Hotel. Interfaces, 161–175. Schmidt, B. B. (2010). The Dynamics of M&A Strategy: Mastering the Outbound M&A Wave of Chinese Banks. Frankfurt: Peter Lang. Seangkhun. (2011). Walmart’s Value chain analysis. Retrieved from Khbuddhist.blogspot.in: http://khbuddhist.blogspot.in/2011/11/walmarts-value-chain-analysis.html Thompson. (2010). Crafting and Executing Strategy. New Delhi: Tata McGraw-Hill Education. Read More