Walmart Value chain Analysis (Primary and Support Activities)

Introduction:

Walmart has changed the retailed face of the United States. However, Walmart faced a lot of criticism. Walmart is not only famous in the US but also in other countries of the world.

Walmart is famous for its cost leadership business strategy; it has expanded on the international level too fast due to this strategy.

Another cause for its rapid international level recognization and growth is the eye-catching matchless deals and services it provides to its consumers. In a very short period, it has more than 11500 operational units in 28 different countries of the world.

Due to this expansion, it also comes with the opportunity of bread for nearly more than 2.3 million people globally.

Out 11 of these 28 countries, it has an e-commerce operational system unit. The main cause of Walmart’s financial success is its value change management. This value chain management has driven an extraordinary success to Walmart on a national and international scale.

Here is the strategy of Walmarts value chain management analysis that helps to understand to know how the brand has to manage all its activities to provide a value-added service to its consumers.

Walmart value chain analyses include the complete description of services and products, and it includes all the details which are involved in the production and sales of all the brands.

It provides the analytical framework that helps identify the business strategy and activities that help generate value-added services and advantages to Walmart.

This analytical tool was introduced by Micheal E Porter, which gives an analytical picture of the whole infrastructure. This value chain analyses provide more efficient sources of competitive advantage for the Walmart business.

Support Activities:

Technology:

Walmart introduced e-commerce in more than 11 countries of the world other than the US. It gives an extensive and useful use of technology for better supply management and sales.

This gives a great advantage to its customers. Walmart introduces an e-commerce website to gain proficient efficiency.

This is a big step from smart apps to managing the chain value services. The use of technology not only gives benefit to the customers but also to managers to manage their sales and services.

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It keeps them updated and helps to manage their stores with well supply. Now technology has become necessary for proper functioning and to retain their efficiency in the retail business. 

Human Resource Management:

Walmart experiences severe kind of criticism concerning human resource management. But over time, Walmart fixed this issue, past years to now, with a lot of development, huge changes come in human history.

The main logic of criticism was its wage policy which was not satisfying for its workers. But now, Walmart has improved this factor by increasing an exponential factor.

Now minimum wage ranges from $13; it also starts investing a reasonable amount in the wage, education, training, and facilities, the investment of nearly $2.7 billion approximately Besides this, Walmart also takes the initiative to hire more than 200,000 people for jobs at higher scales with better pay.

Shopping / Supply:

One main focus area of Walmart is its shopping/ purchasing. Walmart is quite perfectly successful in maintaining the relationship with its suppliers to keep the costs of products at their lower rates.

At reasonable rates, they supply quality products and services to their customers. That’s a great job done by Walmart to satisfy their buyers.

Firm Infrastructure:

In any organization, infrastructure plays a highly crucial role in the development and growth of the organization. Good infrastructure helps the organization to manage and keep on growing.

So, keeping in view, Walmart built a very large infrastructure which includes Walmart’s management, supply chain, human resources, its product distribution and requirement, and much more.

With a successful infrastructure Walmart also perfectly manages its technology along with its financial resources. As after its criticism, it also focuses on managing its employees in a much better way.

In recent years Walmart invested a huge amount in its technology and people to grow more amazingly. 

Primary Activities:

Inbound Logistics:

According to the generally estimated figures, about 50% of Walmart products that are present and used in the United States come from other countries, while 75% of Walmart sales come from the non-store inventory. Walmart has some principles on which its chain value works. Three basic principles are as follows:

The least amount of links in the supply chain:

Since the 1980s, Walmart took a bold decision, in which they eliminated the traders from their supply chain. This gives a new turn to the organization. They started their purchases directly from the manufacturers.

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This minor change gave them the name of “Retailer” within the decade in 1989. Along with this, there was a big difference felt in the rates of sales and purchase. This helps Walmart to retain its prices very low.

This decision helped to increase the sale rate up to 1.7%, which was more than all other market competitors like Kmart and Sears. After this, it has helped Walmart to improve its supply chain practices consistently till now.

Making strategic partnerships with vendors:

Walmart especially focuses on negotiation with the suppliers. It has strict conditions while dealing with its purchase. To maintain its quality of quality products at low rates, it has to bargain at a huge level.

But when a vendor is contracted as a supplier of quality products and demanded quantity, Walmart offers a strategic plan for a long-term internship.

These internships have the perspective of quality products purchases at a huge level but at lower rates. Walmart has to maintain its advantage competition by providing low price tags to its customers. 

By using cross-docking as an inventory strategy:

Walmart uses a “cross-docking strategy,” which means that the direct transfer of the required product from inbound or outbound truck trailers without any shortcoming of supply, by unloading of the items from any source of vehicles like cars, railroad cars, trailers, etc. all the required materials and products into an outbound source of transportation like trucks, cars, trailers or railcars, without any shortage of supply or breaking the supply chain. 

Operations:

Generally, for any manufacturing company, the term operation is used for the complete process of getting the raw materials and changing them to final products.

But in the case of Walmart, here, the term operation is used as the chain supply of products from the suppliers to the stores and overseas.

As already discussed, the widespread of Walmart in other countries other than the United States, so operation is done over the globe.

One of the operating segments of Walmart, Sam’s club; this club is the retail membership-based warehouse. This club has nearly 599 members in the United States. It has 5,300 stores in the United States.

These warehouses play an important role in the supply chain; they supply the raw good from its warehouse to their stores. While the instore support, which is the important service of Walmart, which it provides to its customers and categorizing items falls under this category.

Outbound logistics:

Supply of products overseas or raw materials in stores or warehouses has an important key function. So, keeping in view, Walmart has perfect and complex outbound logistic operations.

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Walmart eCommerce websites have been launched in 11 different counties in the world. They are huge to perform large operations.

4 new United States e-commerce fulfillment centers opening in FY are approximately 1.2 million square feet. Walmart especially focuses on the cost reduction phenomena by optimizing the outbound path plans and loads.

All these activities are done in a very systematic manner to increase the efficiency of the Walmart services. Walmart optimizes the outbound loads by the implementation of ORTEC’s routing and load building solutions in the United States.

This act was taken in 2013 and has resulted in saving nearly 4 million gallons of diesel by driving 28 million fewer miles while supplying about 68 million more cases than general.

Marketing and sales:

Walmart’s marketing strategy is associated with the brand image with a wide assortment of quality products and highly competitive price tags. It also has easy asses to the stores via online channels. It has a huge marketing budget of the company equal to USD 2.4 billion.

It uses both online and offline channels for marketing, sales, and services. Walmart mainly focuses on the online channels and slowly shifting towards the online channels from offline channels.

This decision is taken because of the online communication of the target customer conveniently. This online connection with the customers is more effective and contributes to the sustainability of Walmart’s business strategy of value chain analyses. This strategy also maintains an effective business competitive strategy. 

Service:

In general speaking, Walmart was considered to have a very poor reputation regarding the provision of customer services. This is because of the paying low wage rate to its representatives or suppliers to maintain its cost leadership competitive advantage.

But now, new CEO McMillion has recently announced his pledge to improve its customer services. He offered a large amount of USD 1 billion in the United States hourly associates to provide the facility of high wages and more training for employees. 

Conclusion:

This report contains the detailed infrastructure of Walmart’s value chain analysis. This also includes applying the major strategies, which helps analyze the quantitative data of the whole value chain.

It also contains the marketing strategy, Walmart’s leadership’s strategy, and their organizational structure, and it also discusses the issues of all the social responsibilities.

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