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... aged on the internet will depend heavily on how parallel the online cost structure turns out to be, with key areas of concern likely to be distribution and shipping costs. With respect to the business-to-business (B 2 B) online environment, many companies are using the Internet as an inexpensive medium over which to efficiently link entities in their respective value chains. Suppliers, distributors, wholesalers can relatively easily be connected. Exchanges can be created for the buying and selling of commodities, supplies, and other goods or services. The list of applications goes on.
Wal-Mart clearly has a competency in the management of information and communication among all upstream parties in its value chain. Currently, this expertise is played out in a set of interwoven proprietary systems and networks. It is possible that value could be garnered by Wal-Mart in the B 2 B environment should the Internet be used as a logical migration destination for current systems, or via the generation of enhanced systems which improve upon their proprietary predecessors. However, the entrenchment of current systems could prove as much a hindrance to Wal-Mart in a transition to the Internet as it is a competency in their current operations. Again, the degree to which this competency is transferable is highly dependent on the strategy Wal-Mart elects to pursue Thus far, we have attempted to outline Wal-Mart's position and value proposition, as well as the set of competencies that have made it successful. We have noted the opportunities and challenges those competencies present relative to a transition to the Internet.
We now look at Wal-Mart's motivation and strategy for moving to the Internet and then we examine Wal-Mart's real actions and Internet operations to date. Finally we close with a summary of key issues Wal-Mart must considered going forward. The Strategy for Walmart. com Wal-Mart looked to venture on-line as a means to continue delivering on its promise to customers, "a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience. " While the Internet can be used to achieve many of these objectives, initially Wal-Mart hastily overlooked two key things: the value of the Internet as it relates to Wal-Mart's traditional business and the ability of the Internet to leverage Wal-Mart's core strengths.
These factors have become increasingly evident over the past three years. Wal-Mart's traditional business was based on bringing "contemporary retail shopping advantages to small-town America. " Since the beginning of Wal-Mart. com, people have asked how Wal-Mart would successfully transition its customer base to e-commerce. The paradox being that many present customers may not use the Internet while savvy Internet users may not be Wal-Mart shoppers.
In line with its mantra, Wal-Mart sought to bridge the digital divide by extending reasonably priced Internet access to rural communities. Consequently, Wal-Mart forged a deal with America Online to distribute AOL CD ROM's and disks in the Wal-Mart stores. This would enable the majority of current customers to get on-line and ultimately shop at Wal-Mart. com. Unfortunately, AOL and Wal-Mart have not been able to roll-this program out in the targeted timeframe.
Further, while this effort serves to extend Internet access to a broader population it does not help those individuals / families who do not own computers. As mentioned in the first section, Wal-Mart has enjoyed technological leadership as one of its core strengths and sources of competitive advantage. In 1996, it seemed logical for Wal-Mart to establish an early presence on the Web, the next new technological advancement. With that, Wal-Mart also developed the most secure technology for managing on-line payments and forged a partnership with MasterCard to offer digital certificates to cardholders. Unfortunately, as mentioned earlier, the web site was poorly designed, difficult to use, and did not take advantage of the information-value of the Internet and the ability to have a one-to-one customer relationship.
Likewise, Wal-Mart saw the Internet as a means to conveniently deliver a wide assortment of goods at low prices. The complexity arose when Wal-Mart recognized the difficulty of translating assortment, convenience, and low prices to the Internet. On-line shoppers perceive convenience as the ease and speed with which one can find what they are looking for. Assortment is only valuable to on-line shoppers if it is easily navigable and accessible. To-date the Wal-Mart. com web site has been neither.
Moving to the Internet Wal-Mart began its love-hate relationship with the Internet in July of 1996 when it launched a bare bones site targeted at the online B 2 C retail market. At that time, the company did little with the site, as they waited for more of their customers to get on-line. The site operations were conducted from the corporate headquarters in Bentonville, Arkansas. Competitive pressures to beef-up the site didn't arise until 1999, when they began reworking the site to prepare for the holiday season. However, when the holiday season arrived, the company had trouble delivering items on time. As early as December 10 th, Wal-Mart couldn't guarantee that purchases from the web site would be delivered by Christmas.
Thus, in January of 2000, Wal-Mart announced yet another makeover of their site. The new site would include everyday household items as well as special features such as a travel center, which offered airline tickets and hotel reservations. Reviews of Wal-Mart's new site were lack-luster, siting difficult navigation and search capabilities. In September of 2000, the site was ranked fourth among department stores in the number of unique visitors, behind J. C.
Penny, Sears and Target. [ 2 ] It appears Wal-Mart knew all along that the website was filled with problems which is why Wal-Mart and Accel announced the break-out of Wal-Mart. com just days after the site re-launched for the third time in early 2000. This division would operate as a co-owned independent company located in Silicon Valley, isolated from Wal-Mart's headquarters in Arkansas. This entity would have a separate board and management team, which would be hired in the following months. Additionally, two outside fulfillment centers would handle shipping. While full details of the financing and ownership arrangement haven't been disclosed, it is known that Wal-Mart owns at least an 80 % stake, with Accel making up the remainder.
Fortunately Wal-Mart's pockets have been deep enough to afford experimentation with the right mix of bricks-and-clicks. The company failed to achieve success with a fully integrated structure, and therefore made the decision to separate operations. Reports indicated that Wal-Mart had been contemplating a partnership for some time before deciding to partner with Accel. Wal-Mart had strategically waited to find a partner that could bring key relationships to help them thrive in the Internet community, and lend expertise in how to operate and recruit in a talent-drained industry. Accel also demonstrated a history of longer-term business relationships, which was attractive to Wal-Mart.
The benefit to earlier failed attempts at the Internet was the acknowledgement of the need to have a separate culture in order to get business done in the warp-speed of Silicon Valley. In anticipation of a culture-clash, Accel addressed key points, like going public and offering employees stock options, well in advance of the deal being announced. The ability to attract high-quality management was essential to Wal-Mart. Wal-Mart's "good-old-boy" executives understood the importance of luring talent with oodles of stock options and found that by separating the companies an incentive structure could be formed that included stock options, with the intent to take the company public at some point. Another overlooked reason for spinning off Internet operations into a separate company was the avoidance of sales tax -- a key factor for price-sensitive on-line shoppers. Because Wal-Mart had physical presence in all 50 states, all Internet customers would have to pay sales tax.
By spinning off the Internet operations, Wal-Mart. com could avoid sales tax...
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Research essay sample on B 2 B Wal Mart