Oftentimes, a good strategy is invisible, hidden between the perfect architecture of a company’s policies and resource commitments that are coherent, working together to solve a common challenge. We’ll analyze the perfect strategic growth of Walmart in 1978.
Walmart leads the retail market share. It operates approximately 10,500 retail outlets and clubs under 48 banners in 24 countries and eCommerce websites. What was the secret to their success?
- Was it their way of breaking conventional wisdom by setting up big stores in small towns?
- Was it the efficiency of their warehouse and logistical management system?
- Was it their efficient cost management, thereby reducing expenses and being able to offer lower-priced products?
- Or perhaps Sam Wilton’s leadership in establishing a direction for the company? It was all of them.
The reasons were clear. So why Walmart managed to stay ahead of Kmart, who was the industry leader at that time. Why didn’t they copy Walmart’s successful framework and structure to gain back market share?
Both firms began to install barcode readers at the time, which is a big step ahead. But why did Walmart benefitted more than Kmart? What was missing in Kmart’s strategy?
While most retailers initiated the step to install barcode readers, they did so only to save the cost of constantly changing price stickers on items.
But Walmart didn’t stop there. They continued to develop their own satellite-based IT system. Then used the data collected to manage its inbound logistic system and traded with suppliers in return for discounts.
Even if Kmart installed one thing, it wouldn’t help. They had to establish an integrated inbound logistical system that connected suppliers, distribution centers, and stores. That was the key part that was missing — A coherent set of structure, policies, and actions.
Walmart policies complemented each other — their barcode scanner, the integrated logistics, the frequents just-in-time deliveries, their large stores holding low inventory- all worked coherently. Each policy was designed for the other and is not interchangeable.
Many competitors will have difficulty in designing each piece perfectly — mostly basing it off of “best practice”. Sometimes there is coherence, but the designs have different purposes. The coherent business strategy of Walmart makes it difficult for competitors to copy their winning structure.
During the 1970s to 1980s, Kmart continued to expand internationally, ignoring Walmart’s logistical innovations and small-town discounting. They weren’t able to cope up with Walmart and filed for bankruptcy in 2008.
Supply chain management gave Walmart an edge over Kmart. But back then, this term wasn’t even known. It was simply a change of perspective.