Wal-Mart Case Study
As of 2005, Wal-Mart was one of the largest companies worldwide in terms of sales, stores, and the number of people employed. At the time, it recorded approximately $260 billion in sales while managing and employing 5,000 stores and 1.5 million people respectively. The company has since undergone significant expansion and growth with presence in the U.S., the Americas, Europe, and Asia. Although it remains a household name both in the local and global discount retailing sector, it continues to face increasing competition from companies seeking a share of the sector’s market. Wal-Mart enjoys a significant competitive advantage although questions continue to be raised on the sustainability of the competitive advantage and whether strategies such as the Supercenter format can help achieve the same.
Sources of Wal-Mart’s Competitive Advantage
One of the sources of Wal-Mart’s competitive advantage is store formats. As of 2003, the giant retail chain’s had discount stores averaging 95,000 square feet with 3,400 locations across the U.S. Sensing a significant rise in competition and most retail organizations having almost similar store formats, Wal-Mart went ahead to introduce supercenters. The supercenters helped in achieving competitive advantage as they helped to meet the rising demand for one-stop, round-the-clock family shopping (Yoffie & Mack, 2005). Technology deployment is another source of Wal-Mart’s competitive advantage. The company’s strategic use of IT systems is considered its operational strength placing it ahead of its competitors. The use of IT systems at the company started in the 1980s through the use of bar coding and electronic data interchange (EDI) tools that were critical in information sharing within and across stores and with suppliers. Between 2004 and 2005, the company introduced radio frequency identification (RFID) that was projected to reduce shrinkage and other forms of loss by almost 6 percent. Wal-Mart’s human capital was also initially considered a source of competitive advantage as employees were considered associates (Yoffie & Mack, 2005). However, concerns arose over time regarding low pay and overreliance on part-time and temporary labor.
Sustainability of Wal-Mart’s Competitive Advantage
Sustainability of Wal-Mart’s competitive advantage since 1994 cannot be doubted. First is the aspect of low pricing. Many customers of Wal-Mart value the fact that they are able to purchase various brand names at low discount prices. Thus, many customers are likely to prefer Wal-Mart to other retail chains. An example is Wal-Mart’s Sam American Choice detergent that retails at almost half the price of other retail chains such as P&G tide. Wal-Mart’s primary focus is on keeping prices lower than everybody else’s in the discount retailing sector (Hayden, Lee, McMahon, & Pereira, 2002). Sustainability of Wal-Mart’s competitive advantage is also evident in its transferability. The company has managed to expand to and succeed in overseas markets. Since it established its stores in the Chinese market, Wal-Mart has largely been successful becoming one of the largest single U.S. importers from China by mid 1990s. Moreover, the fact that Wal-Mart’s strategies cannot be easily replicated by competitors highlights how sustainable its competitive advantage is. The retail giant has integrated the use of technology in operations. It has also used cross-docking to minimize labor and cost storage. Other competitors lag behind in these perspectives.
Competitive Advantage with the Supercenter Format
Wal-Mart’s decision to introduce Supercenters in 1998 was a good move, which could help to achieve competitive advantage. Over the years, there has been an increase in the demand for one-stop, round-the-clock family shopping (Yoffie & Mack, 2005). Discount stores have not helped to meet this demand, implying that customers are likely to move to supercenters. Supercenters are bigger than discount stores averaging 185,000 square feet, while employing up to 500 associates and offering a variety of products. They also come with extra features and services such as vision centers, Radio Drill restaurants, banks, hair salons, and employment agencies (Yoffie & Mack, 2005). With these services, supercenters are likely to attract more customers thus giving Wal-Mart an advantage over competitors.
Walmart is a household name in the global discount retailing sector. The primary sources of Wal-Mart’s competitive advantage are store formats, technology deployment, and human capital. The sustainability of Wal-Mart’s competitive advantage since 1994 are evident in its low pricing strategy and transferability. Wal-Mart is also poised to achieve competitive advantage with the Supercenter format.
Hayden, P., Lee, S., McMahon, K., & Pereira, M. (2002). Wal-Mart: Staying on Top of the Fortune 500. Washington DC: The Graduate School of Political Management, George Washington University. Retrieved from http://allman.rhon.itam.mx/~oromero/Wal_Mart_CaseStudy.pdf
Yoffie, D. B., & Mack, B. J. (2005). Wal-Mart, 2005. Harvard Business School.