Harvard Case - The Rise and Rise (?) of Walmart (A): Battling Kmart
"The Rise and Rise (?) of Walmart (A): Battling Kmart" Harvard business case study is written by Ramon Casadesus-Masanell, Eric Van Den Steen, Karen Elterman. It deals with the challenges in the field of Strategy. The case study is 23 page(s) long and it was first published on : Jan 2, 2018
At Fern Fort University, we recommend Walmart adopt a multi-pronged strategy to solidify its dominance in the retail landscape, focusing on leveraging its existing strengths while adapting to the evolving market dynamics. This strategy will involve a combination of competitive advantage, disruptive innovation, digital transformation, and corporate social responsibility initiatives, all aimed at achieving sustainable competitive advantage and long-term growth.
2. Background
This case study focuses on the fierce rivalry between Walmart and Kmart in the 1980s and 1990s. Sam Walton, Walmart's founder, revolutionized the retail industry with his focus on low prices, efficient operations, and customer-centricity. Kmart, initially a formidable competitor, struggled to adapt to Walmart's relentless pursuit of cost leadership and innovation. The case highlights the importance of strategic planning, competitive strategy, and organizational culture in achieving success in a rapidly changing industry.
3. Analysis of the Case Study
Porter's Five Forces analysis reveals the intense competitive forces within the retail industry, including:
- Threat of new entrants: High, due to the relatively low barriers to entry.
- Bargaining power of buyers: High, as consumers have numerous choices and can easily switch retailers.
- Bargaining power of suppliers: Moderate, as retailers have some leverage due to their size and volume, but suppliers can also exert pressure.
- Threat of substitute products: High, as consumers can choose from various alternative shopping channels, including online retailers and convenience stores.
- Rivalry among existing competitors: Extremely high, as the industry is characterized by intense price competition and a focus on market share.
SWOT analysis of Walmart reveals its strengths:
- Strong brand recognition
- Extensive distribution network
- Efficient supply chain management
- Cost leadership strategy
- Focus on customer satisfaction
However, Walmart also faces weaknesses:
- Perception of low-quality products
- Limited focus on customer experience
- Limited online presence
- Challenges in attracting and retaining skilled employees
Opportunities for Walmart include:
- Growing e-commerce market
- Expansion into new markets
- Developing private label brands
- Investing in technology and analytics
Threats to Walmart include:
- Increased competition from online retailers
- Economic downturns
- Changing consumer preferences
- Growing pressure for corporate social responsibility
Value chain analysis reveals Walmart's key value drivers:
- Efficient procurement: Leveraging its size to negotiate lower prices from suppliers.
- Streamlined logistics: Optimizing its distribution network for speed and cost-effectiveness.
- Low-cost operations: Minimizing overhead expenses and maximizing operational efficiency.
- Customer-centric pricing: Offering competitive prices and value for money.
Business model innovation is crucial for Walmart to maintain its competitive edge. This includes:
- Developing a robust online presence: Investing in e-commerce platforms and delivery infrastructure.
- Personalizing the customer experience: Utilizing data analytics to tailor product offerings and promotions.
- Expanding into new product categories: Offering a wider range of products and services to meet evolving customer needs.
- Embracing technology: Integrating AI and machine learning to optimize operations and enhance customer experience.
4. Recommendations
Digital Transformation: Walmart must aggressively invest in digital transformation to compete effectively in the evolving retail landscape. This includes:
- Strengthening its online presence: Building a user-friendly e-commerce platform with seamless integration of online and offline shopping experiences.
- Investing in mobile technology: Developing mobile apps for online shopping, order tracking, and in-store navigation.
- Leveraging data analytics: Utilizing customer data to personalize product recommendations, optimize pricing strategies, and improve customer service.
Innovation and Product Development: Walmart should focus on product differentiation and disruptive innovation to attract a wider customer base and create new revenue streams. This involves:
- Developing private label brands: Offering high-quality products at competitive prices to differentiate itself from competitors.
- Investing in sustainable products: Expanding its offerings of eco-friendly and ethically sourced products to appeal to environmentally conscious consumers.
- Exploring new product categories: Expanding into new markets, such as healthcare and financial services, to diversify its revenue streams.
Strategic Alliances and Acquisitions: Walmart should pursue strategic alliances and mergers and acquisitions to expand its reach, enhance its capabilities, and gain access to new technologies. This could include:
- Partnering with technology companies: Collaborating with startups and established tech players to enhance its digital capabilities.
- Acquiring smaller retailers: Expanding its geographic reach and acquiring valuable customer bases.
- Investing in logistics and delivery companies: Strengthening its supply chain and delivery infrastructure to support its e-commerce growth.
Corporate Social Responsibility: Walmart should prioritize corporate social responsibility to enhance its brand image, attract talent, and build stronger relationships with stakeholders. This includes:
- Investing in employee development: Providing training and development opportunities to improve employee skills and retention.
- Promoting sustainability: Implementing environmentally friendly practices across its operations and supply chain.
- Supporting local communities: Investing in community initiatives and promoting economic development in the regions it operates.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Walmart's current strengths, weaknesses, opportunities, and threats. They are consistent with Walmart's mission to provide low prices and value for money while adapting to the evolving needs of its customers. The recommendations also consider the competitive landscape, technological advancements, and emerging consumer trends.
The recommendations are expected to deliver significant value by:
- Increasing market share: Attracting new customers and retaining existing ones.
- Improving profitability: Optimizing operations, reducing costs, and generating new revenue streams.
- Enhancing brand image: Building a positive reputation for innovation, sustainability, and social responsibility.
- Securing long-term growth: Adapting to changing market dynamics and positioning Walmart for future success.
6. Conclusion
Walmart's success in the past was built on its relentless pursuit of cost leadership and operational efficiency. However, the retail landscape is rapidly evolving, and Walmart must embrace innovation, digital transformation, and corporate social responsibility to maintain its competitive edge. By implementing the recommendations outlined above, Walmart can solidify its position as a leader in the retail industry and achieve sustainable growth in the years to come.
7. Discussion
Other alternatives not selected include:
- Focusing solely on cost leadership: This approach could lead to a decline in brand image and customer loyalty.
- Ignoring digital transformation: This would result in a significant loss of market share to online retailers.
- Neglecting corporate social responsibility: This could damage Walmart's reputation and alienate customers and stakeholders.
The recommendations outlined above carry some risks, including:
- High investment costs: Implementing digital transformation and innovation initiatives requires significant financial resources.
- Technological disruptions: Rapid advancements in technology could render current investments obsolete.
- Competitive response: Competitors may adopt similar strategies, leading to increased rivalry.
Key assumptions underlying these recommendations include:
- Continued growth of the e-commerce market: This assumption is based on current trends and projections.
- Consumer acceptance of new technologies: Consumers are expected to embrace digital technologies and online shopping experiences.
- Walmart's ability to adapt and innovate: Walmart has a history of successfully adapting to changing market conditions.
8. Next Steps
Walmart should implement these recommendations through a phased approach, starting with the most critical initiatives. A timeline with key milestones could include:
- Year 1: Develop a comprehensive digital transformation strategy, invest in e-commerce platform upgrades, and launch a mobile app.
- Year 2: Invest in data analytics capabilities, develop private label brands, and expand into new product categories.
- Year 3: Pursue strategic alliances and acquisitions, enhance sustainability initiatives, and invest in employee development programs.
By following this roadmap, Walmart can navigate the challenges and opportunities of the evolving retail landscape and secure its position as a dominant force in the industry.
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Case Description
This case, set in 1990, describes the history of Walmart and asks what competitive strategies Kmart might adopt in response to Walmart's success. It discusses the strategy and organization of both companies in terms of HR practices, store location, distribution, information technology, procurement, pricing, and company culture. This (A) case is the first in a multi-part series that goes on to describe the results of Kmart's competition with Walmart, as well as Walmart's later grappling with ecommerce and Amazon.
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