Organizational Ecosystem Case Study – Wal-Mart
Wal-Mart Stores, Inc. is a leading company in its industry and a widely recognized name, both domestically and internationally. Additionally, Wal-Mart has taken steps to ensure the success of not only its company but also their business ecosystem. Wal-Mart Stores, established in 1969, is the largest retail company in the world, with over 4,000 stores in 12 countries. Wal-Mart has three types of retail stores: discount stores, supercenters, and neighborhood markets, as well as Sam’s Club warehouse stores. Between the various types of Wal-Mart and Sam’s Club stores, Wal-Mart Stores, Inc. offers merchandise and services that range for grocery goods and household supplies to tire and lube service, clothing, and vision centers. Additionally, Wal-Mart has an online music store, a private label cosmetics brand, and pre-paid debit cards for low-income US customers. Some of the company’s private-label brands are Sam’s Choice, Equate, No Boundaries, Mainstays, and Parent’s Choice. Wal-Mart also stocks several licensed brands, including General Electric, Disney, McDonalds, and Mary-Kate and Ashley. For the fiscal year ending in January 2008, Wal-Mart reported over $375 billion in revenue (Wal-Mart Stores, Inc. Company Profile, 2008).
Wal-Mart has dominated its market, in part, due to the way it approached its business ecosystem (Iansiti & Levien, 2004). There are many examples of Wal-Mart’s ecosystem approach, including their procurement system and their recent focus on more specialized stores.
Keeping its ecosystem in mind, Wal-Mart has built a procurement system that not only enhances its performance, but the performance and operation of businesses within its ecosystem. Wal-Mart Stores, Inc. requires that all of its suppliers operate the RetailLink® system (Requirements, 2008). RetailLink® is a one-of-a-kind system that allows suppliers to receive real-time data regarding their product in individual stores. Such real-time data allows suppliers to effectively plan for and execute distribution, while also personalizing their product supply by store. According to Iansiti & Levien (2004), “Wal-Mart’s procurement system offers it’s suppliers invalueable real-time information on customer demand and preferences, while providing the retailer with a significant cost advantage over its competitiors” (p. 69).
Stankevich (2002) noted the success of Wal-Mart’s system in terms of micromarketing and efficiency. Jon Ragsdale, vice president of marketing at Dickies, discussed with Stankevich the way RetailLink® brought to light the differences in demand for different sizes and colors of products in different markets. Ragsdale noted, “Before RetailLink®, we were using pretty much a cookie cutter approach to stores” (para. 10).
In recent years, Wal-Mart has begun to take a more specialized approach by offering different goods and adjusting the layout of the stores based on location demographics. Once a one shop fits all store, Wal-Mart now has several stores that cater to the needs of a specific location. One store in Plano, TX has been adapted to appeal to the higher number of affluent customers in that area. The store now offers consumer-electronic specialists, that are more versed in the specifics of electronics than a typical sales associate. Also, that particular store adapted the sporting goods section to have more of a child focus, based on the notion that more affluent individuals purchase their sporting goods from country clubs (Zimmerman, 2006).
In terms of competition, Wal-Mart plays an interesting role. While the most obvious conclusion is that Wal-Mart is the biggest competition for small businesses and retailers, it is apparent that their approach to a business ecosystem is also positive for small business owners. “For small manufacturers and small consumer-goods companies, Wal-Mart is the customer they pray for and the one that can propel their company into big-time sales. Wal-Mart is the ‘elephant’ they dream of bagging” (Campbell, 2005, para. 5).
Questions And Sample Answers
- What is a business ecosystem? Do all businesses function within an ecosystem? Why or why not?
- What potential role does the ecosystem play in Wal-Mart’s innovation efforts? Provide examples.
The ecosystem has played a great role in Walmart’s success in the market. Walmart has thus been able to study the market as an ecosystem and come up with creative ways to have a competitive advantage in the market. The ecosystem thus plays a vital role in the innovation of Walmart’s strategies like specialization according to the different market segments together with procurement of goods from suppliers. Suppliers thus have to supply goods in accordance to the information they receive from the respective supermarkets of Walmart’s. This has helped other companies catch on and succeed as a result. Studying the businesses and the various segments they are in further helps Walmart to determine various approaches it can use to ensure that its goods and services are marketed effectively in the market. Therefore, the ecosystem helps Walmart’s gather more information about the customers and the market and further helps it to determine various ways that it can attract more customers together with innovating various services provided by the suppliers in the market. the various business together with the customers are thus an important part of Walmart’s innovation processes especially in studying which goods are in high demand and in what sections of the markets (Walmart Stores Inc., 2008). Since Walmart has different markets, it can determine the various goods and the preferences of the customers at a given period.
- In terms of innovation and creativity, what are the advantages and disadvantages of functioning within an ecosystem?