Table of Content
Description of the sources of Wal-Mart’s Competitive Advantage in discount retailing
The future sustainability of Wal-Mart’s position in discount retailing
Diversification into the food industry
Appendix 1 – 'Cross- docking technique'
List of Literature
Please describe the sources of Wal-Mart’s Competitive Advantage in discount
In 1962 the first Wal*Mart store founded by Sam Walton opened in Rogers, Arkansas. Over the following years Wal*Mart became very successful in the United States and later on the largest retail chain, with a market value of 214 billion US$ and the largest company by sales worldwide in the year 2007. Nowadays Wal*Mart employs more than 2.000.000 people (balanced 2008) and each week about 100 million customers visit Wal-Mart's US stores. This success story is based on several strategical aspects which will be explained in detail below. Sam Walton developed an unusual but effective strategy, which leads to a competitive advantage in discounting against the other discounters; for example Kwart or Target. First of all it is important to know that Wal*Mart owns different types of stores who facilitate distribution and appeal to various consumer groups. Among those divisions are the Wal*Mart 'discount stores', offering convenience and low-priced goods. Wal*Mart 'Supercenters' are the biggest stores, being open 24/7 hours and selling all kinds of groceries and general merchandise. Wal*Mart 'neighborhood markets' are specified in providing pharmaceuticals and fresh produce groceries such as diaries and meat. The fifth category, the so called 'Sam's club stores' are the biggest members-only stores, offering goods in large volumes. The first innovative step taken by Walton was the selection of the locations. Wal*Mart stores are opened in smaller cities where hardly no competitors can be found. The second criteria was the possibility to expand further which means to have the opportunity to build stores in near distance or expand the existing once (“pushing from inside out”). Right from the start the whole company was orientated to set prices always under the average. So that competitors can be trumped any time. In order to guarantee these small prices Wal*Mart had to reduce costs in other sectors such as distribution or advertising. In addition prices are tailored to particular needs by allowing the store manager latitude in the price setting process. Instead of running expensive advertising campaigns, Wal*Mart concentrates mainly on a good after-sales service. For example the “satisfaction guarantee” which implies that every customer can return a product in case of dissatisfaction without giving reasons. This service leads to a trustful and durable relationship between Wal*Mart and the customers since there is no risk in buying a certain product. In addition a “People Greeter” can be found in the entrance of every store and hands out shopping carts in order to relieve the purchasing. Due to the fact that most Wal-Mart stores send out only 13 circulars per year, compared with 53 or more for their competitors, the turnovers display that this strategy is more successful. One further competitive advantage is the “American brand strategy” which contains that Wal*Mart trades only with American suppliers and thus offers mainly American products. The American population is renowned as patriotic and land-based so these kind of products may have more value for the customers and they are proud to buy products manufactured by their compatriots. In combination, Wal*Mart is famous for its national brand products and their private label apparel. By virtue of these self-made products Wal*Mart is able to put them up for sale for 26% lower prices than comparable branded products. An other advantage emerges in the distribution sector of Wal*Mart. 2500 truckers with more than 2000 trucks are able to deliver goods within 24 hours of the original request. So...
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