Walmart Against Amazon
Table of Contents
Summary
Walmart and Amazon both use the competitive forces and value chain model
Amazon Value Chain
Walmart Value Chain
The commercial tactics utilized by Amazon and Walmart are different but equally successful.
How does it help them refine their business strategies?
Will Walmart be successful against Amazon?
Sources
This document provides an overview of the main points of the report. It outlines the key findings and the conclusions that can be drawn from them. It also provides a brief summary of the recommendations that are suggested.
This report contains an evaluation and analysis of:
Walmart and Amazon have used the value chain and competitive forces to achieve success.
Compare the business models of Walmart vs. Amazon.
What are the roles that Information Technology plays in these companies? What is the role of Information Technology in these companies?
Will Walmart compete successfully with Amazon?
The case studies highlights that the two ecommerce titans are competing fiercely for market dominance.
Walmart, the world’s largest retailer, has more than 11,500 retail stores in the United States and over 2.3 million workers worldwide. Amazon is its biggest competitor, offering a wide range of products at the lowest prices, and the fastest shipping. It is now the world’s largest online retailer. Amazon’s business strategy of ‘pull,’ which is a real-time response to customer requests, has caused a major disruption in the traditional “push” business model, which was adopted by Walmart and many other retailers. In order to maintain their competitive advantage, they need to adapt. They must adapt in order to keep the competitive edge.
Walmart and Amazon are using the same competitive forces and value chains model. Walmart, as one of world’s biggest retailers operating in 27 different countries hasn’t faced competition yet until Amazon showed its strength. Amazon was dubbed ‘Walmart Of The Web.’ This is due to the fact that it sells almost anything you’d find at a Walmart, or even something you need. Amazon’s online sales strategy focuses on customer needs in real time. Also, Prime members get “free” two day shipping ($99/month) and the inventory is competitive. These factors resulted in $113 billion of revenue in 2015. Amazon purchased Whole Foods back in August 2017 as part of its strategy to compete against Walmart on the grocery market. The strategy hasn’t been completely proven yet, since the profits from each segment are combined into a combined operational profit. Amazon has become more of a retail presence with physical locations.
Amazon’s Value ChainInbound Logistics
Fulfilled by Amazon is responsible for the logistics, service to customers, and return policies.
Tasks
Amazon Web Services (43%) 2017
Outbound Logistics
Amazon Prime Air (independent logistical operation and delivery)
Marketing and Sales
In 2017, Amazon invested more than 10 billion dollars in this segment. This includes marketing tools, promotional materials, and advertising. It is one of Amazon’s major revenue sources.
Assistance
Customer service is a key component in creating value, both for cloud computing and e-commerce.
Walmart, on the other hand, is known for its lowest prices. Its size allows it to do so. Although the high prices of hot products may cause losses, selling larger quantities of other items can boost income. Walmart’s physical presence is important in the competition. 70% of US residents live within 5 miles of its location. It is easier for the customer to purchase the product and have it delivered immediately than to wait for the package to arrive if they order online. Walmart invested an additional 1.5 billion dollars into its online development in 2015, which included fulfillment centers and new technology. For customers to better compete with Amazon, the company offers ‘free shipping’ for two days with orders of at least $35. It also continues to search for an alternative that is more successful than Amazon Prime. Pick-up and free shipping has proven to be a successful way for them to keep customers. It was important to buy Jet.com in addition to a couple of other retail ecommerce companies. The company was able to accelerate its growth and build a stronger foundation for e-commerce.
Walmart Value ChainInbound Logistics
Walmart’s Online Sales are 75% from non-store Inventory. Three principles apply:
Minimum number of links required in a supply chain
Strategic partnerships with vendors
Cross-docking Inventory Techniques
The activities of running a business
Walmart US is the largest segment in terms of sales, accounting for about 60%.
Walmart International; growth is primarily due to acquisitions of other businesses.
Sam’s Club – 12% of revenue.
Outbound Logistics
Systematically rounding and building loads to reduce cost and improve efficiency.
Marketing and Sales
The shift from offline to online channels and integrated marketing in order to increase sales. Online channels proved cost-effective at targeting and communicating with a particular segment of customers. This also helps Walmart to sustain its cost-leadership strategy.
Assistance
The low wages in the customer service department have caused a reputational problem. However, since Feb 2015, a 1 B investment has been made by a newly appointed CEO to invest in a higher wage and better training programs.
Amazon uses the value chain it has built to compete for large-scale shipping. The company also offers excellent customer service. Walmart is a vendor of Amazon and targets its third-party market which contributes to a significant amount of revenue.
Walmart and Amazon Business StrategiesWalmart has committed to not copying Amazon’s model. It is instead designing an omnichannel retailing approach. The vision is to not be a full-fledged ecommerce retailer but rather to provide a comprehensive experience whether the customer is interacting in store or shopping online. Walmart will continue to sell online and at physical locations, maintaining the low prices and wide range of products. It will use its vast network of stores as distribution. It is a strategy to combine online and in-store shopping. This will give customers as many options and choices to shop using modern technology, or even in-person. Walmart aims to be the largest retailer with a multichannel approach.
Amazon’s plan is to increase the number of products available to compete with Walmart. Amazon’s strategy is to expand its product range by using third-party suppliers. The company has built new fulfillment centers and expanded its options for same-day deliveries. They are also focused on diversifying their business, improving customer service and increasing sales.
What Role does is It Helping Them Refine Their Business StrategiesInformation technology plays an important role in both companies. Amazon is the world’s largest ecommerce platform and also a cloud-computing platform with a strong understanding of AI. Amazon’s e-commerce platform was able to take a model that had been in existence for a long time to a totally new level. In addition, the platform allowed the 3rd Party Provider to have optimum support by creating new markets and overseeing them. Amazon has been able to provide a comprehensive data analysis, as well an immediate response. It is possible for the consumer to place an order at anytime virtually on any device. Information Technology made it possible for Amazon to become independent in the Inbound/Outbound logistics. Amazon’s services allow customers to enjoy reliable shipping throughout the United States. Integration of IT allows the company to develop and experiment with drones as well as developing the grocery market.
Walmart’s online sales have grown tremendously. It would not have been possible without the use of Information Technologies. Information Technology provides the main support for the strong systems in place to perform globally and analyze consumer data, as well as provide competitive analysis. Walmart is now able to succeed in online sales thanks to the appropriate IT tools. Walmart has now all the resources it needs to run physical stores and serve their customers online. Amazon is also testing drone delivery, while Walmart focuses on customer analytics and service improvements to become an online and in-store leader. IT systems are a key factor in success and growth.
Will Walmart Be a Success Against Amazon? Walmart is a retail company, using technology for online sale, while Amazon is the tech company that designs and supports the market’s trends. Walmart’s background will make it unlikely for them to be more successful at e-commerce in the near future. Amazon Prime offers many benefits (free shipping and entertainment services such as video streaming, Whole Foods Discounts) that are hard to match. Walmart has not yet achieved a comparable level of expertise and services. It needs support from the tech side. Walmart has made progress in its online sales with the acquisition of Jet.com, and Microsoft’s agreement to develop Walmart’s website. However, Amazon has taken a big step by purchasing Whole Foods. Amazon is expected to remain a leader for a long time in the ecommerce industry based on current developments.
Sources
Laudon Kenneth C. (2018). Administration of Information Systems. New York: Pearson.
Amazon Business Strategy and Competitive Edge: Cost Leadership & Customer-centricity. Retrieved from: https://research-methodology.net/amazon-business-strategy-competitive-advantage-benefiting-cost-leadership-diversification/
Walmart value chain Analysis. Retrieved from: https://research-methodology.net/walmart-value-chain-analysis/
Amazon value-chain Analysis. Retrieved from: https://research-methodology.net/amazon-value-chain-analysis/
