Understanding virtual value chains in a retail environment: a case study of Wal-Mart

Abstract

With the advent of the internet and explosion of e commerce across borders in the 21st century, global firms will adapt their value chain philosophies to capitalise on cost efficiencies and strengthen their sustainable competitive advantage. This case study illustrates the application of Rayport and Sviokla's three-stage Virtual Value Chain (VVC) philosophy to Wal-Mart, the world's largest retailer. Value chains using information technology allow managers and suppliers/vendors to track operations more effectively, with a holistic and integrated approach to managing information seamlessly. The focus of the VVC in the new economy is on information, unlike physical supply chain management where the focus was on inventory management. This paper applies the three stages of the VVC to Wal-Mart, including visibility ? entailing tracking of physical operations via information; mirroring capability ? substituting virtual activities for physical ones in the marketspace realm, and creation of new customer relationships using information. In particular, the authors focus upon the name of the game in supply chain management for the 21st century ? collaboration among channel partners, information sharing and improved efficiencies in the value chain delivery network. Finally, this paper examines Wal-Mart's physical value chain activities and the emerging VVC, as the company considers expansion globally into emerging markets.