|[Wal-mart case analysis] | |Competitive advantage and competitive dynamics |
What might explain Wal-Mart’s performance over time in discount retailing? Is it the industry or company specific factors?
|Post Second World War, the style of style of retailing in the US evolved into discount merchandizing. At the time, Wal-Mart was quick enough to ride the tide and develop an overall cost leadership model that | |allowed it to emerge as a leader in the market in the discount retailing space. |
Wal-Mart’s performance driven by overall cost leadership
Wal-Mart’s strategy over time helped it establish leadership position in discount retailing. It used rural underserved markets to announce its arrival. It also used innovation levers, customer centricity, positioning as a low cost player, and effective stakeholder management including employees, suppliers, and stockholders to achieve distinctive competitive advantage. It successfully outperformed other firms in the industry leveraging its strategy to achieve overall cost leadership.
The experience curve concept and was successfully adopted by Wal-Mart. The various levers it used to achieve cost leadership included,
|Achieving economies of scale |Rapidly expand geographical footprint as well as number of stores, variety of stores, and store sizes | |Vigorous pursuit of cost reductions |Aggressively deploy buyer’s negotiating power saving as estimated additional 3-4% | | |Use effective proportion of leased vs. owned properties | | |Leverage IT and technology including EDIs | | |to keep minimal inventory (roughly 10% of its square footage) | | |Optimized distribution and logistics management | |Tight cost and overhead control |Integrated supply chain with complete control over the vendors | | |Reduced advertising expenditure compared to industry advantages | | |Strict travel and internal expenses management policies |
Having a strong low cost proposition yielded Wal-Mart above-average returns in the discount retailing industry despite the presence of competitive forces.
Analysing the correlation between company vs. industry performance
Post Second World War, the style of style of retailing in...