Analysis of Wal-Mart in South Africa

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1. What are Wal-Mart’s competitive advantages? Wal-Mart’s greatest advantage is its ability to manage its supply chain and hence its suppliers by offering their vendors long term and high volume purchases in return for the lowest possible prices that is then passed on to customers. This enables the company to leverage off its competitive advantage of an efficient supply chain (Stalk, Evans, & Shulman, 1992) Their efficiency lies in consolidating stock demand levels from all their stores, through business and IT integration, directly to the supplier as single bulk orders. Wal-Mart then uses a technique called cross-docking where products are routed to Wal-Mart’s warehouses from suppliers and then quickly shipped to the stores, reducing storage costs and the saving are then passed on to the customer. 2. How sustainable are Wal-Mart’s advantages? Using the Five Forces framework analysis will show that Wal-Mart was able to exercise pressure on their suppliers, thus reducing their power but buyers are price sensitive with low switching costs. Entry barriers are low, so the threat of competitors is high and substitutability is also high as there are other local retailers that have established retail chains and good reputations. Sustaining Wal-Mart’s advantages is a very tough act to keep going indefinitely unless the various players in the business environment are constantly monitored and managed ie: suppliers, buyers, competitors and new entrants. Competitive Advantages can be said to arise from company resources or core competencies and to be sustainable, they should, first and foremost, be inimitable (Collis & Montgomery, 2008; Prahalad & Hamel, 1990). Wal-Mart’s expertise in supply chain was built up over many decades and coupled with the tight forward and backward integration is very difficult to imitate. The merchandising experience however, is very easy to

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