Defining Wal-Mart

Essay by aaron766 January 2010

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Wal-Mart is able to deliver their customers a quality product at low prices. Wal-Mart does this by being efficient. This efficiency shows how they are able to acquire goods from all over the world, and get them to stores, which in turn, are also all over the world. Only through a flawless logistical system is this ability able to send products to any location at a moment’s notice. Wal-Mart's effective logistical system lies in the flexibility it has when choosing suppliers. Wal-Mart will only pay the most competitive prices when negotiating with suppliers, and those suppliers know that. It would be simple for Wal-Mart to find a different supplier of a particular item with a lower price. This gives Wal-Mart a great amount of leeway when handling suppliers. Should a particular supplier know Wal-Mart has found a lower price, it will lower its own price accordingly. They know that Wal-Mart's logistical system can handle transition seamlessly and therefore they gain nothing by refusing to reduce their prices.

Another factor which allows Wal-Mart such low prices is that they buy in such large quantities that transportation from one end of the supply chain to another is not as costly for additional units. Wal-Mart buys in such quantities that they have the luxury of using bigger trucks which use less fuel to move their goods back and forth. Also, if they must resort to using shipping services to transport their items from one place to another, Wal-Mart will give them so much business they earn huge discounts. Wal-Mart is able to offer items much cheaper than competitors because their logistical system is so effective, and the reason it is so stems from its flexibility (Simchi-Levi, 2008). All of these elements together give a great deal of added value to the...