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Walmart Stores Incorporation

Discuss about the Business Model of Walmart.

A business model is a blueprint, used by businesses, to identify the various ways in which it will run its services. Business models highlight the means of operations incorporated by a business to help improve service and maximize profits. Business models are part of the strategic plan of an organization. Different organizations employ different business models, as they deal with a different variety of products and target different market shares. The construction of a business model is in alignment with the value proposition of the business (Osterwalder, Pigneur, Bernarda, & Smith, 2014). The value proposition is a direct view of the benefits the business aims at providing to its clients and target population. There are multiple business models, due to increase in globalization. As companies compete to gain a competitive advantage over each other (Parnell and Lester, 2008), they employ different business models. One such organization is the Walmart Stores.

Walmart is the World’s largest retail store (McGee, 2018). The store has its headquarters in Bentonville, Arkansas. Walmart uses various methods of operations, one being the Sam’s Club. Through this, Walmart provides services to various parts of the world including the United States, Brazil, Mexico, and China. Walmart operates on an international market and serves over fifty million customers daily. The store provides inventory services to its customers. It deals with a wide variety of products among them being garden supplies, electronics, health and beauty supplies, furniture, sporting attire, and equipment, as well as children accessories and toys. With increased globalization, the store faces various benefits as well as challenges. Among the significant benefits are increased market share, use of advanced technology, and efficient workflow. The significant challenges faced by Walmart include competition from other firms, legal and regulatory laws, and myriads of cultures in the business environment. However, despite these challenges, Walmart is still the largest retail shop in the world and enjoys much of the market share. The business model it incorporates gives it its competitive advantage over other firms (Parnell and Lester, 2008).

A business model canvas is a chart that comprises of all activities undertaken by a firm. Walmart employs the Osterwalder and Pigneur’s model, which incorporates the nine building blocks. It consists of various factors affecting the business, which include the principal partners, essential activities, crucial resources, the costs and financial structure, customer relationships, channels, revenue streams, and customer segments (Osterwalder & Pigneur, 2010). These factors are incorporated into the business’ value proposition.

Walmart's Business Model Canvas

Key Partners

Key partners include the various stakeholders with whom the business is contact. They include all activities that build the bond between the suppliers and the buyers in the supply chain (Morschett, Schramm-Klein, & Zentes, 2015). The key partners for Walmart include the suppliers and buyers. Walmart stores create a conducive environment whereby the suppliers can meet and satisfy their client’s desires. Through this, suppliers gain access to a larger market, whereas the buyers have a wide variety of options to choose.

Activities

Walmart runs on several business operations including the purchasing, storage, delivery of inventory as well as the overall price control. It incorporates advanced technology to help in the movement of inventory along the supply chain. As a result, the company enjoys lower operation costs, while at the same time providing efficiency in its workflow.

Resources

Walmart seeks resources from different locations, thus attaining the cost leadership advantage. Through this advantage, Walmart stores incur low production costs, which appeals to its advantage of providing services at low costs. Other resources include the inventory stores and logistics for operations, the human resources, managers, and the organizational culture. These resources help in streamlining workflow in the organization.

The Cost Structure

The cost structure refers to a model aimed at reducing operating costs through economies of scale. Globalization played a crucial role in aiding the organization to gain the economies of scale. These economies of scale reduce operation costs mostly due to the factors associated with the use of advanced technology. Additionally, the store passes on a percentage of the operating costs to suppliers.

Customer Relations

Walmart creates an environment that is conducive to the customers. The store advocates for self-service where customers can access their desired products easily. The store seeks supplies in bulk, thus stocking them to feed the ever-increasing number of customers.

Customer segmentation

Additionally, the store controls prices of prices to meet the levels of each consumer. These levels include the brand-aspirations consumers, price-sensitive consumers, and the value-price buyers.

Distribution Channel

The company store the excess inventory, from suppliers, in its warehouses. Through this, the company can easily distribute the products, to the various stores, when the demand arises. Additionally, it uses the client segmentation technique to determine how it will distribute products and goods.

Revenue streams

Majority of the revenue of Walmart arise from the sales it makes to the different customers in the various segmentations. The company also sells its products and brand thus increasing the revenue. Moreover, the company firsts sell products from suppliers before paying.

Key Partners

Value proposition

A value proposition is the core part of operations in the industry. The company’s activities aim at achieving this objective. Walmart’s value proposition is directed towards offering Every Day Low Prices (EDLP). Additionally, Walmart aims at being a one-stop supply store where customers can access all their desired products, thus saving them time and money.

The nine building blocks of the business are integrated with each other. They all provide ways of achieving better services for the business. The critical component of the nine building blocks in the business model canvas is the value proposition for Walmart. As it aims at providing low prices and saving time for consumers’, Walmart’s supply chain relies on these factors. The company relies on the internal factors of operations to improve their external service providers. The internal factors include the key activities, resources, partnerships, and the costs structure. The external factors relate to service provision, which includes distribution channels, revenue streams, customer relations, and customer segmentation. Walmart ensures that it considers these factors simultaneously for the benefit of the company.

Walmart faces competition from other global terms. Although it maintains its top position of being a leader in the global production of retail services, the business has had to consider various success factors in its operations (Casadesus-Masanell and Ricart, 2012). One of the factors is the use of advanced technology. Walmart offers its services to a global market, and thus there is need to meet the relevant factors to ascertain efficiency. Technology ensures that the business enjoys a streamlined way of operating. It also ensures that the company keeps a clean record of its inventory and its movement along the supply chain (Stadtler, 2015). Technology saves the company the labor costs and reduces the time consumed in running operations.

Walmart needs to consider the culture of the area it is operating. To be successful, Walmart needs to emphasize on inclusion as its primary operation strategy. Inclusion refers to creating a conducive environment, where the business and the surrounding community relate harmoniously. Walmart can achieve this by respecting and adopting the community’s culture as well as participating in community-based operations. This creates a good rapport with the community, resulting in business growth (Morschett, Schramm-Klein, & Zentes, 2015). 

Although Walmart has a useful operating system leading to its overall success, the company is prone to several challenges. One of the significant risks is the changes in the laws and regulations affecting operations. As it operates in different parts of the world, the host countries can deploy unattractive laws and regulations, which limit the operations of the business (Rothaermel, 2015).

Walmart can consider several actions to improve service delivery. First, it can employ policies, which are customer focused. Additionally, the company can advocate for the need for improved innovation (Clauss, 2017). Innovation allows the business to incorporate new strategies aimed at improving service delivery, while at the same time developing a person’s abilities. The company should also consider policies that will advocate for social responsibility and sustainability (Wells, 2013). This means the provision of services in a manner that will ascertain the development of the society more sustainably (Rothaermel, 2015).

Conclusion

A business model is a blueprint that highlights the techniques employed in business to meet sustainable growth and maximize profits. Walmart, being a leading service provider for retail activities, employs the Osterwalder & Pigneur business model, which highlights nine fundamental building blocks. The nine building blocks relate with each other simultaneously to aid the store to achieve maximum output in overall service production. Walmart considers critical factors such as the culture and technology to maintain its success. However, the company faces risks in its operations, including the changing laws and regulations, which could affect its operations. To improve service delivery, the business can incorporate various strategies such as advocating for social responsibility and growth, innovation, and customer-focused strategies.

References

Casadesus-Masanell, R., & Ricart, J. E. (2012). 22 Competing through business models1. Handbook of Research on Competitive Strategy, 460.

Clauss, T. (2017). Measuring business model innovation: conceptualization, scale development, and proof of performance. R&D Management, 47(3), 385-403.

McGee, R. (2018). How large is Walmart? A Comparison of Walmart Sales to Nations GDP. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.3102735

 Morschett, D., Schramm-Klein, H., & Zentes, J. (2015). Strategic international management. Springer.

Osterwalder, A., & Pigneur, Y. (2010). Business model generation: a handbook for visionaries, game changers, and challenges. John Wiley & Sons.

Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design: How to create products and services customers want. John Wiley & Sons.

Parnell, J. A., & Lester, D. L. (2008). Competitive strategy and the Wal-Mart threat: positioning for survival and success. SAM Advanced Management Journal, 73(2), 14.

Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer, Berlin, Heidelberg.

Wells, P. E. (2013). Business models for sustainability. Edward Elgar Publishing

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