How Walmart Achieved This Low Cost Competitive Advantage
Competitive advantage can be defined as a means by which a firm manages to keep making money, add value by providing distinct products and sustain its position against its competitors. Wal-Mart Stores Inc. is one of such companies in the retail sector that has achieved sustainable competitive advantage over a period of time. ¬This report focuses on how Wal-Mart has achieved competitive advantage by adopting cost leadership strategy and providing consumer goods at lower prices. The report also discusses how Wal-Mart is taking lead on environmental sustainability by investing in solar power plants, offering environment friendly products in its various stores and encouraging recycling of different products.
Competition among retailers is aggressive, as the demand side of the industry is driven by consumers who expect to get the best value for their money. “Competitive advantage is anything a company has, or does better, that customers value but the competition cannot match” (Romero, 2005). Walmart has a sustainable competitive advantage over other retailers, largely due to their centralized focus of cost leadership and differentiation strategies. Walmart uses the backward expansion strategy to extend their geographical reach. The company is known for entering small, rural towns and saturates the area before entering the larger metropolitan areas. The international plan included new construction of buildings and acquisitions of existing buildings. In the foreign market Walmart attempts to match the culture and taste of local tradition. They employ locals in the area to manage the stores, so that local barriers can be reduced. Wal-Mart maintains their strategy of low-cost leadership, which appeals to a larger market than competitors.
The company has been able to succeed in an industry that is characterized by a high level of competition (Keller & Price, 2011). There are factors that have been unique to Walmart, which have given the company a competitive advantage over its rivals. The company has been able to effectively and efficiently utilize its competitive attributes to achieve a sustainable competitive advantage. First, Walmart has vast resources, which have helped it attain a step further compared to its competitors (Kneer, 2009). Its resources can be categorized as financial resources, human resources, knowledge resources, as well as physical resources. As mentioned earlier, the company is ranked among the largest in the world in terms of financial strength. This has been the primary resource that has helped Walmart remain top of the competition and sustain its competitiveness over the years.
In short, Wal-Mart has three competitive advantages like they have developed a hub-and-spoke distribution network which is very efficient and low cost and increased its delivery schedule. It also has a god market position where it has placed itself as a market leader. Its Policy everyday low prices enabled them to have two main competitors like Target and Kmart. Wal-Mart also has a good Human Resource Management and employees of Wal-Mart are very committed. Because of its good impact on the market, everybody feels proud of being a Wal-Mart employee. Wal-Mart has maintained a competitive advantage through its ceaseless innovation. It was able to maintain its economic profit even though it has competition from other firms.
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