Walmart

First Order Fit–Consistency: activity (function)-the overall strategy–value adding activities (1) Wal-Mart’s promotional strategy of “everyday-low-prices” meant offering customers brand name merchandise for less than department and specialty store prices. (2) Discount Retailing: fixtures were distinctly luxurious, in-store selling was limited, and ancillary services, such as delivery and credit, were scarce. 3) Management style-“management by walking and flying around”. Wal-Mart partnership with its associates meant sharing the numbers-Walton ran the business as an open book and maintained an open-door policy. Wal-Mart aimed to excel by empowering associates, maintaining technological superiority, and building loyalty among associates, customers, and suppliers. (3) National brand strategy, and the majority of its sales consisted of nationally advertised branded products. (4) The company leased about 70% of Wal-Mart stores and owned the rest.

In 1993, Wal-Mart’s rental expense was 3% of discount store sales, compared to an average 3. 3% for direct competitors. 2. Second order fit—when activities are reinforcing each other Walton’s plan for growing Wal-Mart: (1) Locating stores in isolated rural areas and small towns, usually with populations of 5000 to 25000. “Our key strategy was to put good-sized stores into little one-horse towns which everybody else was ignoring. ” (2) The pattern of expansion. “We are always pushing from the inside our. We never jump and then backfill. ” (3) Wal-Mart’s advertising expense was 1. % of discount store sales, compared to 2. 1% for direct competitors. (4) Wal-Mart offered a “satisfaction guaranteed” policy, which meant that merchandise could be returned to any Wal-Mart store with no question asked. (5) Store managers priced products to meet local market conditions, in order to maximize sales volume and inventory turnover, while minimizing expenses. 3. Third order fit—Complexity and History History (1) Sam Walton had built Wal-Mart into a phenomenal success, with a 20- year average return on equity of 33%, and compound average sales growth of 5%. (2) Competitive changes in discount retailing were reflected in Wal-Mart’s decision to change its marketing slogan from “Always the low price–Always” to “Always low prices–Always”. (3) In an effort to replace foreign- sourced goods sold at Wal-Mart stores with American-made ones, Wal-Mart developed its “Buy American” program. By 1989, the company estimated it had converted or retained over $1. 7 billion in retail purchases that would have been placed or produced offshore, and created or retained over 41,000 jobs for the American work force. 4) Complexity Tacit knowledge (1) Walton had a philosophy that drove everything in the business: he believed in the value of the dollar and was obsessed with keeping prices below everybody else’s. (2) Walton instilled in his employees (called associates) the idea that Wal-Mart had its own way of doing things, and tried to make life at the company unpredictable, interesting, and fun. (3) The most important ingredient in Wal-Mart success was the way it treated its associates.

He believed that if you wanted the people in the stores to take care of the customers, you had to make sure that you were taking care of the people in the stores. Based on the business performance of Wal-Mart, their strategies are sustainable. They started their business in rural places, which are ignored by other companies, so they can develop their stores successfully and quickly. Also they insisted in their promotional strategy—low price, and they adjust their prices with their competitors and maintain the lowest price compared with their competitors in certain area.

There is no doubt that people want to choose the same product with lowest price, so people prefer to purchase in Wal-Mart. In addition, one of the important reasons why Wal-Mart is successful is their customer service, especially the “satisfaction guaranteed” policy. And the founder of Wal-Mart, Walton, know that the relationship with associates is also really important and he believed that if you want more customers, you should pay more attention to customer services.