The goal of Walmart is to provide customers with high-quality goods at low everyday pricing. To achieving this goal, Walmart adopted several strategies. Walmart’s winning strategy is based on low cost, which relies on a logistics technique known as cross docking. Using cross docking, Walmart is able to received goods on one side while simultaneously filling orders on the other. This strategy reduced Walmart’s costs significantly since it reduces inventory holding costs through reduced storage times and potentially eliminating the need to retain safety stock. Eventually, they passed those savings on to their customers with highly competitive pricing.
The second strategy adopted by Walmart is to avoid being dependent on any one supplier, which decreases its exposure to many risks and guarantees abundant sources of products. Having single suppliers brings a lot of disadvantages. Firstly, you will have lesser negotiating leverage if you become dependent on a single supplier who supplies your needs. And then there is the issue of complacency, the supplier may become complacent because they know that you cannot find a better supplier than them. Walmart builds strong and collaborative relationship with nearly 3000 goods suppliers, including Johnson& Johnson and Proctor&Gamble.
These suppliers provide Walmart with high-quality products. Electronic “hook ups” and latest supply chain technology like RFID improve supply chain efficiency. The third strategy is to take up large market share in the world. By 2005, it held an 8.9% retail store market share in the United States, 3700 stores in the United States and more than 1600 units in other countries of the world. In some degree, market share drives market perception of one’s business, and market perception is the prerequisites for growth of a business. A low or falling market share leads potential customers or employees to believe that there is something wrong with the business.
On the contrary, a high or growing market share lead people to believe that the business is good and they are likely to become parts of it. Walmart encourages managers to work effectively and efficiently. It required managers to fill out “best yesterday” legers, which are forms tracking daily sales performance to ensure operational efficiency.
It gives managers incentive to be accountable and creative by offering profit sharing, incentive bonus, a discount stock purchase plan, pay raise based on performance and other benefit plans. Finally, it has good communication among all stores around the world. A satellite network system allows information to be shared among these stores and suppliers. Data from over 5,300 individual stores on items are collected, analyze, and transmitted electronically on a real-time basis. This information helps company to reduce the likelihood of stock-outs, maximize inventory turnover and improve operational efficiency.