The four-box business model is used in this article to analyse Walmart’s business model. It generates the structure entailed to disclose and classify issues that must be addressed before a company can move its white space, where assumptions are high, and knowledge is low.
The four-box business model includes four factors which are customer value proposition, key resources, key processes, and profit formula.
Customer value proposition
Walmart’s value proposition is to provide its customers with a wide variety of products, at the lowest price and in the most appropriate way possible. Their customers want and value high quality products and low prices. Walmart’s value proposition is in line with their customers’ wants therefore, customers choose the retail corporation over other retailers. Walmart has been offering goods and services at highly low prices to their customers.
The average American Walmart customer is 46 years old and white and has a yearly household income of $76,000. Economic value is the foundation of Walmart’s value proposition. Price is their core factor for massive number of customers. The retail corporation is aware that many people seek low price when they shop. Walmart’s corporate strategy is to sell quality products at lowest prices. The retail corporation delivers value to its customers through its industry standing, competitive pricing and product range, its multi-channel sales network, its availability and flexibility, and its domestic and international reach.
Walmart’s largest key resources are split into three chief divisions which are its physical resources, human resources, and organisational culture. They include its own brick-and-mortar stores, its distribution and storage system, its virtual infrastructure, personnel, store managers, managers, e-commerce store and the mobile app. They also incorporate its intellectual properties, supply chain and logistics infrastructure, IT infrastructure, its international chain of physical retail outlets, its partnerships, and other online platforms.
Walmart owns and leases a large portfolio of properties involving several brick-and-mortar retail stores across the Americas, Europe, Africa, and Asia Pacific and warehouses. They own several trademarks and patents. The US Patent and Trademark Office found several patent applications filed in Walmart’s name, as well as applications entitled “Automatic blocking of bad actors across a network”, method and system for handling an electronic shopping list with gesture and merchandise event monitoring through wireless tracking.
Walmart’s operations management includes a variety of approaches that are focused on handling the supply chain, inventory, and sales performance. Efficacious performance in retail operations management is a major factor of the retail corporation’s success. Walmart’s operating models and processes that allows it to reach strategic objective is based on lowest retail price in the market, economies of scale and supplier pressure, IT investments, supplier relations, cost conscious, and excellent customer service. As mentioned before, the retail corporation focuses on offering lowest possible price amidst competition, rather than focusing on promotions. Walmart utilises its volume to lower its costs of purchase from vendors and leverages its economies to create relationships with its suppliers.
Over ninety per cent of the U.S populating lives within fifteen miles of Walmart store. This has allowed the company to accomplish high volume and sales and give rise to economies of scale. Walmart leverages IT abilities to improve its comprehension and management of its operations. They invest in satellite systems that connects all operating units with their headquarters to radio frequency technology. Walmart works closely with its suppliers and outsources its point of sales data to its suppliers. IT emphasises on systematic cost reducing practices to keep their overhead costs low. The company focuses on creating a friendly environment for its customers by showing them empathy, kindness, offering them free parking and flexible return policy.
Walmart generates revenue mainly from customers through retail sales. It also generates revenue from the sales of products of own brands. It has a major advantage which is the ability to sell before paying off its suppliers. The company had a fiscal year 2020 revenue of $524 billion. Retail sales covers nearly all of Walmart’s revenue and incorporates products distributed under its own brand and other brands, both international and national.
A little percentage of the company’s revenue from services such as financial services (money orders and transfers, check cashing, prepaid cards, bill payments), VUDU Movie Streaming (on-demand streaming service, by subscription, for watching movies and TV shows), clinical services (health checks), and health insurance.