Sustainable Competitive Advantage of Walmart

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Case 8: Sustaining Competitive advantage

Question 1: What are the isolating mechanisms preserving Wal-Mart’s competitive advantage in the US market? (use readings case 7)

Sam Walton was the founder of Wal-Mart. Sam had the idea of reaching small towns in rural areas where the people had to travel many miles to do their shopping. This was a big market that was initially ignored by the major players before Wal-Mart. Eventually Wal-Mart grew to become market leader among the US discount department stores. The core of their success was defined by their technological superiority and the way Wal-Mart treats her associates (customers, employees and suppliers).

According to the resource-based theory of a firm, there are two characteristics that resources must have to maintain sustainability of the firm’s competitive advantage: 1 Scarcity
2 Imperfect mobility
Concerning Wal-Mart, Imperfect mobility might be more obvious: During the years, Wal-Mart developed a technological superiority that provided the company with almost real-time information about inventory, suppliers and buyers. These capabilities and resources made it possible for Wal-Mart to apply the ‘everyday low prices’ strategy. This sophisticated technology --in the sense of experience, know-how and mass investment -- made it very difficult for competitors to imitate or neutralize Wal-Mart’s competitive advantage.

Sustaining this competitive advantage, Wal-Mart made use of several isolating mechanisms:

Impediments to Imitation:
1 Legal restrictions: This implies the use patents or other IP means. This is not relevant to Wal-Mart’s story. 2 Superior Access to inputs or Customers: Firms often achieve favorable access to inputs by controlling the sources of supply through ownership or long-term exclusive contracts. Given the fact that Wal-Mart was targeting rural areas, they didn’t have distributors falling over themselves to serve them like competitors in larger towns. Their only...
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