The Walmart and Amazon IT Case Study (2019) reveals how two companies with different business strategies have begun to compete with one another as their business models have evolved. The original business strategy for Walmart was to build retail locations that would offer nearly any good that consumers might want for a low price. To this end, it sells everything from clothes to groceries to electronics. The two factors that made this business strategy successful were the vast amount of products being sold at low prices, as well as the convenience of visiting a Walmart store because many customers live near a Walmart location. This was intentional, as Walmart built thousands of stores to achieve its goal.
In contrast, Amazon established itself as the world’s premier online retailer. Instead of selling products through retail locations, it sold them online. To this end, it placed a large importance on its IT infrastructure, because Amazon relies almost entirely on online transactions. These features include the ability to purchase nearly any product imaginable online, and Amazon also aims to provide low prices in order to remain competitive.
As both of these companies grew, they began to see themselves as competitors, because both are focused on a strategy of providing goods at low prices. The original distinction was that Amazon’s main area was online retail, while Walmart’s main focus was on selling retail goods at physical locations. However, Walmart has found that many consumers prefer the convenience of purchasing items online.
The role of information technology in this new competitive environment is that Walmart is rapidly trying to build an online infrastructure that can rival Amazon. The case study reveals that Walmart has started incorporating software that can track prices of competitors, and then automatically adjust prices to make Walmart more competitive. It is also trying to design software that will make selling products through its online site more convenient for the consumer, such as allowing for wish lists. At the same time, Walmart is improving its inventory channels, so that inventory is maintained between its online portal and physical stores. All of this is needed to make shopping Walmart’s online store as competitive as Amazon.
Amazon has tried to establish a supply chain and inventory system that will rival Walmart, by building more distribution centers that can ship items more quickly. In the IT space, Amazon recently released the Fire Phone, with several features that can make purchasing products through the Amazon site even more convenient. While both companies are trying to improve the ways that consumers can purchase products online, by developing their internal IT systems, both companies also appear to be identifying the strengths of their competitor and incorporating these strengths into their own business model. For Walmart, this means building a digital storefront that can compete with Amazon in regard to selection and price. For Amazon, this means building distribution centers and finding ways to promote products, such as its own phone, or the Kindle, for its own digital books, to provide as much variety as possible for the consumer. Even though the two stores began with different business models, the advent of online shopping has made both companies begin competing in the same digital space.
IT influences the organizational strategies of both companies because software and app development is how these companies will continue to attract customers. If more purchases are being made in the digital space, then both companies need IT infrastructures that make this process as convenient and competitive as possible. For instance, Walmart’s price tracking software is one example of an IT innovation that can help the company better compete with Amazon. Because online shopping is becoming more commonplace overall, IT development will remain at the forefront of both companies’ organizational strategies for the foreseeable future.
- Who’s the World’s Top Retailer? (2019). Case Study, 116-118.
