Value Chain Activities – Book Report/Review Example
Wal-Mart Value Chain Activities The strategy of Wal-Mart has been a success through simpli and innovative practices in value chain activities such as purchasing, logistics, and information management, which resulted in offering lower price value offers everyday (Magretta 2002, p.7). In Michael Porter’s (1985) value chain approach, Wal-Mart’s positioning strategy is overall cost leadership. The value chain activities of Wal-Mart encompass its investments on infrastructure, distribution technology, and operations as aggregator, distributor, and retailer of consumer goods (Lawless, 2001). For infrastructure, Lawless detailed that Wal-Mart has a satellite system connecting all stores linked directly to the suppliers so that the volume of stock replacements to the nearest distribution hubs are monitored. This strategy allows speedy inventory movement and operating cost cuts. For distribution technology, Wal-Mart established hub networks using cross docking to accommodate just needed inventory so that trucks are utilized in inbound and outbound deliveries and minimize distribution center inventory pile up. As aggregator, distributor, and retailer of consumer goods, Wal-Mart’s suppliers take advantage its innovative infrastructure and distribution technology system. After supplies are delivered by the trucks in distribution centers, they are sorted and placed to urban and rural outlets/stores immediately for stock replacement on sales (Fieman, 2009). The products then are available for sale on stores at very low prices.
Rebot (2009, p.11) summed up the value creating activities of Wal-Mart as: Inbound Logistics (3.4%), Building Rentals in Operations (1.9%), Licensing (0.2%), Marketing (1.1%), Shrinkage (1.3%), Salary/Wages (10.8%), and Cost of Goods Sold (74%). Another Wal-Mart value chain activity is presented in a diagram form by Nick Gysberg (n.d., p.17) using Poter’s approach with primary and support activities that make up the value chain (see Figure 1).
Figure 1: Diagram showing Wal-Mart value chain activities (Gysberg, n.d., p.17)
Fieman, B 2009, Walmart value chain, SlideShare, Inc., viewed 11 November 2009, .
Gysberg, N n.d., Wal-Mart competitive analysis, p. 17, viewed 11 November 2009, .
Lawless, M 2001, Managing technical transitions, Wal-Mart.com, viewed 12 November 2009, .
Magretta, J 2002, ‘Why business models matter’, Harvard Business Review, p.7, viewed 11 November 2009, .
Porter, ME 1985, Competitive Advantage: Creating and Sustaining Superior Performance, New York, Free Press.
Rebot, NR 2009, Walmart case analysis… value chain, p. 11, viewed 11 November 2009 .