Walmart: How They Achieve Their Competitive Advantage

1. INTRODUCTION

Wal-Mart Stores Incorporated is an American multinational retail corporation that operates a chain of discount department stores and warehouse stores. The company, founded by Sam Walton, started as a single store in Rogers, Arkansas in 1962. Since then, Wal-Mart has blossomed into an 11,500 store chain with stores in 28 countries (Appendix A) and has established itself as the world’s leading retailer. According to the 2014 Fortune Global 500 list, Wal-Mart is the largest company by revenue as well as the biggest private employer in the world with 2.2 million employees.

The company aims to provide customers with the goods they want, whenever and wherever they wanted them. According to Supply Chain Digest, Wal-Mart stocks products made in more than 70 countries and manages an average of $32 billion in inventory. They offer a wide variety of merchandise and each store is operated with the same philosophy: provide ‘everyday low prices’ and superior customer service (Refer to Appendix B & C for more information).

1. GENERIC STRATEGY USED BY WAL-MART

Wal-Mart uses the Cost Leadership Strategy to gain a competitive advantage. The company is well known for being a cost leader and it has used this strategy to become the world’s largest retailer. Wal-Mart’s slogan, ‘Everyday Low Prices’, serves as an important foundation  for their successful implementation of this strategy because it causes the entire organisation to focus on keeping costs down and continually lower their prices so competitors cannot catch up.

The reason why Wal-Mart is able to enhance its competitive advantage and assume market leader position is due to its ability to keep the costs between manufacturers and customers down. This is possible due to several factors: (1) High volume of sales, (2) Minimization of overhead and operational costs, and (3) Leveraging of its bargaining power to suppliers.

High Volume of Sales

Wal-Mart’s high volume of sales is due to its spread of operations and its wide customer base. They were able to capture a huge market share by selling almost everything, anywhere. In addition, the company has a multiple – store format that extends its market reach (Appendix D). This shows that the company is aware that even if their margins are slimmer than their competitors, they could still make up for that through volumes of sales. This is why they are selling their goods at prices way lower than their competitors, because its large volume of sales enables it to make substantial profits.