Walmart Competitive Advantage
The Triple A strategy (172)
Figure 3
Pankaj Ghemawat (2007) introduced the triple A strategy to help better analyze the competitive advantage of a firm outside the home country. As shown in figure 2, the framework focus on the adoption of local responsiveness, aggregation of economies of scale and arbitrage of absolute economies under the globalization of markets. He argued that company must allocate one or more factors as to compete globally. Walmart is achieving the three competitive advantages simultaneously. As discussed above of the Walmart China, the company is taking the local responsiveness as through CSR event. Secondly, Walmart also realized economies of scale by selling bulks of commodities right off pallets, through its Sam’s Club under membership. Walmart also captured the benefits of arbitrage by constantly improving its logistics to lower the transportation costs and improve the efficiency.
Porter (1985) also identified two basic types of competitive advantage: lower cost and differentiation (Figure 1). And these two types of competitive advantage led to three competitive advantage strategies: cost leadership, differentiation and focuses (Porter, 1985). Cost leadership is defined as the lowest cost producer in that industry (Porter, 1985). Differentiation, on the other hand, is a firm which seeks to become unique from its industry in the eyes of buyers (Porter, 1985).
Figure 1: Three generic Strategies (Porter ,1985)
According to Porter’s analysis on competitive advantage, Wal-Mart has a cost advantage more than a differentiation advantage in the retail industry. The main Walmart vision is “Saving people money so they can live better”. It shows that Walmart tried their best to offer the lowest prices for their customers and the best way to lower the prices is to lower the cost for Walmart.
Figure 2: Share of Walmart US Sales of Total US Retail Sales (Supply chain digest, 2012)
First of all, it is important to have a glance of
Figure 3
Pankaj Ghemawat (2007) introduced the triple A strategy to help better analyze the competitive advantage of a firm outside the home country. As shown in figure 2, the framework focus on the adoption of local responsiveness, aggregation of economies of scale and arbitrage of absolute economies under the globalization of markets. He argued that company must allocate one or more factors as to compete globally. Walmart is achieving the three competitive advantages simultaneously. As discussed above of the Walmart China, the company is taking the local responsiveness as through CSR event. Secondly, Walmart also realized economies of scale by selling bulks of commodities right off pallets, through its Sam’s Club under membership. Walmart also captured the benefits of arbitrage by constantly improving its logistics to lower the transportation costs and improve the efficiency.
Porter (1985) also identified two basic types of competitive advantage: lower cost and differentiation (Figure 1). And these two types of competitive advantage led to three competitive advantage strategies: cost leadership, differentiation and focuses (Porter, 1985). Cost leadership is defined as the lowest cost producer in that industry (Porter, 1985). Differentiation, on the other hand, is a firm which seeks to become unique from its industry in the eyes of buyers (Porter, 1985).
Figure 1: Three generic Strategies (Porter ,1985)
According to Porter’s analysis on competitive advantage, Wal-Mart has a cost advantage more than a differentiation advantage in the retail industry. The main Walmart vision is “Saving people money so they can live better”. It shows that Walmart tried their best to offer the lowest prices for their customers and the best way to lower the prices is to lower the cost for Walmart.
Figure 2: Share of Walmart US Sales of Total US Retail Sales (Supply chain digest, 2012)
First of all, it is important to have a glance of