The business model of companies illustrates the justification of the way the organization captures, creates and delivers value. The business model of Wal-Mart follows the nine building block model of Osterwalder and Pigneur, as can be seen in Figure 1. Based on the business model of Wal-Mart as explained in Figure 1, the current business structure of the company would be discussed. This would include not only the business framework, but also the participants who work within the model.
The business model of Wal-Mart consists of nine essential points or building blocks namely, a) Key Activities, b) Partnership, c) Value Proposition, d) Resources, e) Cost Structure, f) Customer Relationship Management (CRM), g) Target customers or customers segments, h) Supply Chain, and i) Revenue.
- Key Activities: The key activities of Wal-Mart which are essential part of the business model are purchasing goods, controlling the cost and delivery of the goods. The other activities include customer satisfaction, inventory control, and managing the distribution channel Wal-Mart also has the responsibility of handling its suppliers and workforce of about 85,000. It has to manage about 147 distribution centres, over 8,000 truck drivers, and 100,000 trailers and tractors (Wal-Mart, 2009a).
- Partnership: Wal-Mart maintains a strong relationship with its suppliers and the suppliers are considered as the closest partners of the company. They also form an integral part of the value chain and assist Wal-Mart to access broad markets. The suppliers also assist in controlling the business by supporting Wal-Mart to lower the cost and adjust the price of the products.
- Value Proposition: The value proposition of Wal-Mart is mainly based on providing low priced product to the customers every day. This is also the core of the business model in Wal-Mart, and the business strategies of the companies are formulated to keep them aligned with the core value.
- Resources: The major resources of the company can be segregated into three major divisions, namely the physical resources of the company such as the stores and the distribution channel of the company, the human resource which consist of the store managers, managers, etc., and the organizational culture of Wal-Mart (Fishman, 2006).
- Cost Structure: Wal-Mart has a cost driven structure which mainly focuses on minimizing the costs. The expansion of the company allocates economies of scale at chain levels. The financial discipline of the company is well-known because they pass on their operating cost to the suppliers.
- Customer Relationship Management (CRM): Wal-Mart has established the customer relationship on the basis of self-service and technological advancement. The motive of Wal-Mart is to reach the mass, so automation of processes offers fast and easy services to large number of customers.
- Target customers: Wal-Mart targets three segments of customer groups; firstly low-income groups with aspirations to buy branded products, wealthy customers who prefer good deals and customers who wish to have affordable and good quality products (Barbaro, 2007).
- Supply Chain: In order to deliver value, the company reaches to its customers through its efficient distribution channel and this assist in generating adequate profit margin for the company. Wal-Mart utilizes mass media, which is low cost, yet effective, such as internet.
- Revenue: Revenue is generated from customers through retail sales. Wal-Mart generates revenue also from the sales of products of own brands, products produced by other retail companies, etc. It enjoys the advantage of selling before paying off to its suppliers.