Value chain analysis refers to the evaluation of the value-generating activities that businesses or organizations engage in to improve their competitive strength. In this paper, Wal-Mart’s value chain will be analyzed. Wal-Mart’s primary value chain activities consist of an effective and efficient inbound and outbound logistic management system. The company operates a fast and responsive transportation system that consists of over seven thousand trucks that distribute goods to its stores (Wal-Mart 2014).
The company ensures efficiency in its transportation system by using the cross-docking technique. This involves picking goods from the manufacturing centers and transporting them directly to the retail outlets. As a result, the company saves warehousing costs by eliminating the role of distribution centers. Moreover, cross-docking enables the company to replenish stocks in its stores within the shortest time possible to meet existing demand for various products.
The company’s marketing and sales strategy focus on attracting and retaining customers through low prices. Wal-Mart is positioned as a low cost or a discount store that allows its consumers to pay less for more value. In this regard, the company endeavors to sell its merchandise at the lowest prices in the market. Wal-Mart’s operations focus on reducing costs while offering unique and pleasant shopping experiences to customers.
This involves operating different store models, which include super-centers, discount stores, neighborhood markets, warehouse clubs, and online stores. These types of stores offer convenience and a variety of products to suit customers’ tastes and preferences (Kazmi 2007, pp. 25-87).
The company’s procurement system focuses on reducing purchasing costs (Wal-Mart 2014). The company purchases goods directly from manufacturers, thereby reducing costs by eliminating intermediaries in its supply chain. Wal-Mart also achieves economies of scale by purchasing in bulk and operating large distribution centers that are located in strategic geographical positions. The company also uses sophisticated computer-based technology to reduce costs in its supply chain. The sales system places orders directly to the manufacturers or the distribution centers immediately when a good is sold at the retail stores. This ensures that the right stock level is maintained (Pearce & Robinson 2009, pp. 67-92).
The above analysis indicates that Wal-Mart’s core competence is in supply chain management. The company’s distribution system sets it apart in the market by ensuring that the right merchandise is stocked in the stores at the right time. It also enables the company to achieve a cost advantage in the retail industry. Today, Wal-Mart offers the lowest retail prices for various consumer goods in the US because of its ability to reduce operating costs. The cost leadership strategy allows the company to gain market share rapidly (Pride 2004, pp. 32-78). The resulting increase in sales leads to an increase in revenue and profits.
Kazmi, S 2007, Marketing management, Sage, London.
Pearce, W & Robinson, R 2009, Strategic management: formulation, implementation, and control, McGraw-Hill, New York.
Pride, W 2004, Marketing, McGraw-Hill, New York.
Wal-Mart 2014, About us. Web.