Background Historical competitive advantages and its sustainability Whether its business concepts work in HK & China Recommendation to Wal*Mart to sustain its growth

Wal*Mart First established as a self-service discounting store in 1962 by Sam Walton Formats:

Wal*Mart Major competitors: TargetKmart At the end of 1993: No.1 of the top 50 Discount Department store - Market value: 57.5 billion - Sales per square foot: $300 (the industry average is $210) Phenomenal success:

Everyday-low-prices Commit to customer service Maintaining technological superiority Building loyalty among associates and suppliers

Business strategies Wal*Mart Automative Health & beauty aids Stationery Sporting goods Paint & hardware Household chemicals & consumables Food Home hardlines Product Place Price Promotion Product:

Place: -pattern of expansion: -pushing from the inside out Rural areas Small towns Product Place Price Promotion

Price: -Between : - 2.2% below Kmart - 3.7% below Target “Always low prices-Always”

Product Place Price Promotion Promotion: -few promotion: - advertising expense: 1.5% of sales (while 2.1% for direct competitors) “Everyday-low-prices”

Why Wal*Mart could succeed? High Responsiveness and Flexibility Innovative Strategy 1.Changing Customer Demand  Flexible shelf space allocation  Private label lines 2. Changing prices  “Always low prices, always” 3. Technological Change  Heavy investment in information technology  Discount stores -> Supercenters

Wal*Mart’s Strategy Low CostDifferentiation Industry-wide Cost Leadership Differentiation Single segment Focus

Key Source of Wal*Mart’s Competitive Advantages Successful Vendor Relationship Efficient Communication Network Value Employees Most Efficient Operation Management LOW PRICE Customer-Oriented

Direct Factors to Low Price  Lower Land Rent  Few Promotion Sustainable?

Successful Vendor Relationship No-nonsense negotiator Efficient Purchasing Partnership with suppliers eg P&G- -Sharing information electronically Efficient communication Vendor-managed inventory systems eg Wrangler & GE Minimize inventory cost Lower Cost Sustainable?

Efficient Communication Network “There are no superstars at Wal-Mart” Combined informal Entertainment with business Sharing the numbers Better Communication Lower Cost Sustainable? Higher Productivity

Value Employees Most “Yes We Can Sam” suggestion program “Store within a store” Shrinkage incentive plan Management Training Program Profit Sharing Scheme Lower Cost Motivation High Productivity Sustainable?

Efficient Operation Management Distribution Network -Hub-and-spoken distribution network -Owned warehouses -Cross-docking Operating system -Uniform Product Codes (UPC) -Satellite system Higher Productivity Lower Cost Sustainable?

Customer -Oriented  No. 1 Boss – the customer  People Greeter  “Satisfaction Guaranteed” policy Loyalty Sustainable?

The Applicability of Business Concepts Business strategy Work / not In HK Work /not In China low price successful vendor relationship efficient communication network value employees most efficient operation management customer oriented

Low Price in Hong Kong in China Land rent Land rent Promotion Promotion

Successful Vendor Relationship in Hong Kong in China 2 dominant supermarkets compete with established competitors

Efficient Communication Network In Hong Kong In China flat organization information sharing

Value Employees Most In Hong Kong In China payment system programming Motivation + incentive

Efficient Operation Management In Hong Kong In China operation system shrinkage distribution network In Hong Kong In China

Customer Orientation In Hong Kong In China provide subsidiary services customer = the boss

The Applicability of Business Concepts? In Hong Kong In China

Technology: - Join forces with a well-known Interactive Service Provider(e.g.AOL) to bridge the physical and virtual world. 1. Maintain and reinforce Wal-Mart ’ s core competitive advantages. 2. Growth Strategies: Advantages: (1) Global Promotion (2) Cost saving

(3) Customers Serving i) By setting up searching engine ii) By providing personal online services iii) Could listen to consumers ’ opinions promptly (4) Facilitation on operation management Culture: - Change core values in different countries. E.g. Hong Kong

Formats: - Increase the number of supercenters Conclusion: 1. Catch up the trend of e-commerce 2. Reinforce Wal*Mart ’ s core competitive advantages. 3. Adopt changes when necessary

Thank You! THE END