Analyze a current event that relates to the value chain-Strategy Solution Sample

QUESTION

 

 

ANSWER

 

Introduction

Walmart has recently hit the market with a new service with which it aims enter the e-commerce segment and take on technology giants like Amazon [1]. A new service called Jetblack has hit the market of New York where the users can order products via text messages. The service is currently targeting wealthy customers as one would have to pay $600 a year to avail this service. The major segment which the service serves to in the wealthy group is mothers for the moment. The only category of products that cannot be currently ordered with this service is fresh foods. When it takes off the service is bound to change the value chain of the company completely.

Use of Artificial Intelligence

The rational of Walmart behind this investment is to develop artificial intelligence. Jetblack is a money losing service currently and has to me operated manually by hundreds of customer service agents. Walmart is using it to train an artificial intelligence software which in the future can compete against the likes of Amazon by completely automating the purchase process from the end of Walmart. Text messaging was chosen instead of speech control as the company thinks that text messaging is a much more convenient solution than voice control.

The service also recommends products and help in planning. The success of the service lies in the fact that 80% of the recommendations made by the service are finally purchased. These recommendations are now assisted by the artificial intelligence software which is continuously learning.

Integrated Value Chain Analysis

The current value chain of Walmart is centered around the brick and mortar stores is operates but that is not where the company is heading in the future [2]. A service like Jetblack will drive the communication and value chains towards the online platforms which are currently dominated by Amazon and the likes. Right from sourcing to the final delivery all the aspects of the value chain will change. The following are the major aspects of the value chain and an analysis of how Jetblack will affect them:

Suppliers

Currently the suppliers of Walmart deliver to the local warehouse from where the company sources the products to its brick and mortar store [4]. With the new service the concept a local warehouse goes away. A supplier will have its products accessed nationwide and an order can be placed from anywhere. The suppliers will also have to adjust the quantities they supply with the new increased national demand in many cases.

Source, Make and Deliver

The complete concept of Source, Make and Deliver will change. Currently a customer visits a Walmart Store and handpicks the products they need. Walmart has to source the products for the store via its warehouses. Make and deliver are not necessarily the part of the value-chain itself. With Jetblack the company will see an additional step in source where couriers will have to fetch the required items to the central delivery hubs from the stores or warehouses. The complete order will have to be packaged into one which will entail the make portion. The costliest addition to the value chain will however be to deliver the products which currently is non-existent for Walmart. The products will have to be delivered on time and the complete concept of delivery logistics and bet route mapping will have to be added in.

Customers

The customers themselves will change from just people to entities [5]. Currently they walk in a store and Walmart has an advantage of them looking at the products before purchase. Now the customers will be online and thus, it will have to put in extra marketing to make the customers purchase them.

The above three constitute the transfer of products, but there are additional parts of the value chain that will be affected just as much as the products.

Information

Currently Walmart can only receive the information of a customer when they make a purchase. But with the value-chain shifting online the complete paradigm of information processing changes. Every click on the website, every text message and every customer which does not purchase anything is data. This is probably the best part of the new service for Walmart where it will have access to a much larger portion of data than before. The company will also be in a position to act on the data more prudently and faster.

Money

Money is a segment that might improve or get worse. From the side of the suppliers there will not be much change in the value chain. Currently the complete transactions from the side of the customers is in the brick and mortar stores. With Jetblack when the customers purchase online they might either pay online which will make the process easier, or they might choose cash on delivery which will complicate the process. The process also opens the option of EMIs in case of large orders which will be an added opportunity and an extra overhead to the company.

Porter’s five force

Following is the five-force analysis [3]:

• Competitors: The company will be moving into a much more competitive market where margins run lower and profits are hard to find
• Substitutes: The brick and mortar stores of Walmart itself are a substitute for the service
• New entrants: The threat is low as this is a capital-intensive market and will take large investments
• Suppliers: There should be no change in this aspect and even if there is that should help Walmart with supply chains now running nationwide
• Buyers: here the power of the buyers increases as they can switch to a different online store anytime is they get a better deal or product there.

Conclusion

Walmart just moved into a much more labor-intensive aspect of the product sale business than it was in before. It is continuously burning money. But many is not the goal of the company here. The company aims to develop a system which will be the technology of the future. The supply chain in the future will not necessarily lie in the brick and mortar stores and that is what the company is preparing itself for.

REFERENCES

1. Nassauer, S. (2019, March 21). Walmart Builds a Secret Weapon to Battle Amazon for Retail’s Future. Retrieved from The Wall Street Journal: https://www.wsj.com/articles/walmart-builds-a-secret-weapon-to-battle-amazon-for-retails-future-11553181810
2. Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York.: Simon and Schuster. Retrieved 29 March, 2019
3. Porter, Michael E. (1979). “How competitive forces shape strategy” (PDF). Harvard Business Review. Archived from the original (PDF) on 29 October 2013. Retrieved 29 March, 2019
4. “Form 8K – Walmart Inc”. U.S. Securities and Exchange Commission. February 1, 2018. Retrieved 29 March, 2019
5. Kenton, Will. “Value Chain”. Investopedia. Retrieved 29 March, 2019