Kmart vs Walmart case + firm strategy

what did walmart do to surpass kmart?

1. Walmart reinvented logistics

 developed a sophisticated distribution system that integrated its computer system with its distribution strategy 

• Warehouse mechanisation and information technology were adopted to enhance supply chain communication and reduce inventory levels

• Cross-docking was implemented to accelerate transportation, further reduce inventory, and shorten flow times 

2. Kmart’s employees lacked skills needed to plan and control inventory

walmart supply chain strategy

mission: provide value for customers → priority = low prices everyday

for low inventory levels: linked communications between stores

• EDI/ statellites enabling technology

for short flow times: fast trabsportation system

• cross-docking/focused locations

company strategy

a company strategy typically considers either geographic focus or broader expansion

largely can then be seen as competing on cost leadership vs differenciation

retail: mainly geographical focus, then cost leadership or differenciation

cost leader vs differenciation

cost leader

• sufficient, stable demand

• few disturbances

• repetitive jobs

• large scale processes

• more centric decision processes, so not much innovation going on within units

differenciation

• complex demand: mix of prices, choice, quality

• changing business: technology, fashion, hypes

• complex dynamic structures/networks

• flexible purchasing

• entrepreneurship in business units: autonomy and innovation within each unit

tradeoff: cost vs differentiation

you cannot achieve both in a supreme manner, because it is capped by the efficient operations frontier

efficient operations frontier

optional combinations of objectives a firm can achieve given its current resources and capabilities

• on the frontier: firm operates efficiently, improving one objective requires a tradeoff with the other

• below the frontier: resources that are underutilized can improve one objective without a tradeoff

• beyond the frontier: unattainable with the current resources and capabilities

Marketing strategy 

core decisions include

• store image (quality, pricing)

• assortment (width and depth)

• product display (package, space, location)

• A-brand and private labels

• price levels, in relation to margins (gross margin not equal to profit)

marketing strategy: cost leader

• store image: affordable

• assortment: narrow

• #SKUs: few

• product display: on pallet, in box

• private labels: dominant

• margin: low (usually cost leaders try to create their own products to improve margins)

marketing strategy: differenciation

• store image: quality

• assortment: wide + deep

• #SKUs: many

• product display: unpacked by unit on shelf

• private labels: 10-30%

• margin: high

marketing is linked with logistics

• product and category decisions involves purchasing decisions such as suppliers number and type 

• Marketing can also directly target logistics, highligjhting delivery speed, return convenience (amazon, coupang)