atching closely and both emulating and improving upon this system. An analysis of the five forces model will show Wal*Mart’s main competitive advantages in supplier power and barriers to entry. A look into their distribution centers and how they have been instrumental in reducing supplier power will be followed by an analysis of how effective first mover advantage has been and where they must take it next. Early in the history of the company, Walton recognized the importance of backward integration as a means to pass on lower prices to consumers. Though supplier power is high in the retail discounting industry, Wal*Mart changed the game with their two-step hub-and-spoke distribution network. Though building 1,000,000 square foot distribution centers seems costly, it allows Wal*Mart to purchase from their suppliers at a significantly reduced cost and deliver to their stores with 48 hours, sometimes even 24 hours. The network’s become so effective that 80% of their inventory comes directly from these 27 centers. In contrast, Kmart has only 50% of their products coming from distribution centers with a full half being shipped directly from suppliers into their stores, thus raising costs to Kmart and their customers. Systems such as “cross-docking” are also aiding Wal*Mart in their fight to streamline every process by reducing inventory and restocking costs.Another decision that demonstrates Wal*Mart’s commitment to the future is their unyielding emphasis on superior information technology. Beginning in 1983 and standard by 1988, electronic scanning of Uniform Product Codes was installed in Wal*Mart stores. This and similar programs were effective in ensuring accurate pricing and reducing shrinkage, yet Kmart recognized its importance as well, and by 1990, had similar systems in place in its stores as well. Secondly, a $700 million investment in satellite systems made communication between headquarter...
