Would we have it any other way?
Like McDonalds (who has more market share than all other fast-food restaurants combined), everyone says they don’t eat there, but they obviously do. Walmart serves 100M American shoppers.
$256B in sales accounts for 30% of all Chinese exports. Starting with 38 stores in 1970, Walmart grew 25% per year to become the biggest retailer in 1991. In 1992, Sam Walton died. Walmart stock tanked in the years that followed. Although Sam stressed supporting goods “Made In America,” consumers could not support the union machine operators that made $60k in rural towns. Ultimately, Walmart and suppliers went to Asia to reduce costs. Manufacturers found cheaper labor (50 cents per hour, $150 per month) and Walmart found substitutes that offer higher margins. Margins of 60%-80% could be gained from Asian exports rather than a typical 20% from U.S. made goods.
Wal-Mart business model :
1. profit from high volume
2. buy for lowest cost and drive price down 5%/yr
3. sell for less than competitors
Wal-Mart core competency :
1. Use Information Technology (IT) to maintain store inventories of 120,000 items.
2. Partner w/ Suppliers to give them consistent forecasts of products and feedback of consumer demand.
3. Use “cross-docking” distribution systems that minimize warehoused inventory costs and restock store shelves twice per week (instead of once every 2 weeks for the industry average).
IT has created a customer ‘pull’ system rather than the traditional inventory ‘push’ which changes both Manufacturer & Retailer and Retailer & Consumer relationships.
Where manufacturers used to have the power of what to make and at what cost, now, retailers have the power and manufacturers are the bidders.
Consumers no longer are forced to take items they don’t want (with large sales and limited consumer power). Consumers are given more choices and their voices are heard through Walmart and dictated to manufacturers. Product advertising and dumping is reduced in favor of the customer voice.
Wal-Mart has a world-class distribution system and does it better than its competitors which use traditional (outdated) accounting, ROI, and distribution methods. Other retailers could copy the formula, but are unable to coordinate such a broad strategic move. Walmart’s formula (core) is so successful that they easily break into other industries like groceries and warehousing.
Chinese opportunities :
China learns quality, scheduling, and delivery from partnerships with Walmart.
Walmart does business in China; it has 35 stores there.
Rumors say that millions of jobs are lost because of Walmart’s Chinese exports. This is untrue on two simple levels :
consumer spending saved on household items provides disposable income to spend on other products which in turn create new jobs; maybe higher end luxuries or services.
Some Big-Box retailers displace small retail proprietors that cannot compete with the convenience and cost of a large scale retailer. Does it really break your heart to eliminate a fat job that charges twice as much for items and replace it with an entire economy of employees and low prices?
High-volume, low differentiation production is being lost from the US to China. Companies now move its production to China to avoid paying the $60k salaries of non-educated, union workers from small towns. The Chinese manufacturers do not distinguish between Wal-Mart, Target, K-Mart, Sears, Carrefour, etc (they are all synonymous with Big-Box retailers). There is no difference in how the retailers operate in managing purchasing or employees; but Walmart is the association that is made, because they are the company on top.
Walmart’s power and strategy influence manufacturers to increase productivity which is the real business goal.
The root problems started long ago and unchangeable are the dynamics of :
Americans are consumers; seeking lower prices to consumer more quantities. A natural trade-imbalance occurs.
American companies seek to maximize profits and now have global resources to accomplish this. Could you ever coax Coca-Cola back from operations in Africa?
Capitalism means competition and it is everyone’s job to increase the average education and skills to become more productive.
ACCENTURE case study
Like McDonalds (who has more market share than all other fast-food restaurants combined), everyone says they don’t eat there, but they obviously do. Walmart serves 100M American shoppers.
$256B in sales accounts for 30% of all Chinese exports. Starting with 38 stores in 1970, Walmart grew 25% per year to become the biggest retailer in 1991. In 1992, Sam Walton died. Walmart stock tanked in the years that followed. Although Sam stressed supporting goods “Made In America,” consumers could not support the union machine operators that made $60k in rural towns. Ultimately, Walmart and suppliers went to Asia to reduce costs. Manufacturers found cheaper labor (50 cents per hour, $150 per month) and Walmart found substitutes that offer higher margins. Margins of 60%-80% could be gained from Asian exports rather than a typical 20% from U.S. made goods.
Wal-Mart business model :
1. profit from high volume
2. buy for lowest cost and drive price down 5%/yr
3. sell for less than competitors
Wal-Mart core competency :
1. Use Information Technology (IT) to maintain store inventories of 120,000 items.
2. Partner w/ Suppliers to give them consistent forecasts of products and feedback of consumer demand.
3. Use “cross-docking” distribution systems that minimize warehoused inventory costs and restock store shelves twice per week (instead of once every 2 weeks for the industry average).
IT has created a customer ‘pull’ system rather than the traditional inventory ‘push’ which changes both Manufacturer & Retailer and Retailer & Consumer relationships.
Where manufacturers used to have the power of what to make and at what cost, now, retailers have the power and manufacturers are the bidders.
Consumers no longer are forced to take items they don’t want (with large sales and limited consumer power). Consumers are given more choices and their voices are heard through Walmart and dictated to manufacturers. Product advertising and dumping is reduced in favor of the customer voice.
Wal-Mart has a world-class distribution system and does it better than its competitors which use traditional (outdated) accounting, ROI, and distribution methods. Other retailers could copy the formula, but are unable to coordinate such a broad strategic move. Walmart’s formula (core) is so successful that they easily break into other industries like groceries and warehousing.
Chinese opportunities :
China learns quality, scheduling, and delivery from partnerships with Walmart.
Walmart does business in China; it has 35 stores there.
Rumors say that millions of jobs are lost because of Walmart’s Chinese exports. This is untrue on two simple levels :
consumer spending saved on household items provides disposable income to spend on other products which in turn create new jobs; maybe higher end luxuries or services.
Some Big-Box retailers displace small retail proprietors that cannot compete with the convenience and cost of a large scale retailer. Does it really break your heart to eliminate a fat job that charges twice as much for items and replace it with an entire economy of employees and low prices?
High-volume, low differentiation production is being lost from the US to China. Companies now move its production to China to avoid paying the $60k salaries of non-educated, union workers from small towns. The Chinese manufacturers do not distinguish between Wal-Mart, Target, K-Mart, Sears, Carrefour, etc (they are all synonymous with Big-Box retailers). There is no difference in how the retailers operate in managing purchasing or employees; but Walmart is the association that is made, because they are the company on top.
Walmart’s power and strategy influence manufacturers to increase productivity which is the real business goal.
The root problems started long ago and unchangeable are the dynamics of :
Americans are consumers; seeking lower prices to consumer more quantities. A natural trade-imbalance occurs.
American companies seek to maximize profits and now have global resources to accomplish this. Could you ever coax Coca-Cola back from operations in Africa?
Capitalism means competition and it is everyone’s job to increase the average education and skills to become more productive.
ACCENTURE case study
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