What are Wal-Mart’s competitive advantages?

What are Wal-Mart’s competitive advantages?

The company has been able to wither competition through ceaseless innovation. More so, its hub-and-spoke distribution network which is low cost and efficient has enabled the company to increase its delivery schedule. Walmart also derives its competitive advantage from its market position in which it is the market leader.  Additionally, its pricing strategy of everyday low prices has enabled to place barriers to entry for competitors as it is able to make economic profits. Finally, Walmart has a customer-oriented workforce that has maintained the company’s culture in all the outlets.

How sustainable are these advantages (why and why not)?

The company’s cost leadership and ultimate customer satisfaction have been sustained through superior returns over a long period of time. On the other hand, the company has been able to achieve efficiency in its distribution network by owning the distribution centers as well as the ability to deal directly with the suppliers. The company’s innovativeness through research and development and information on customers’ behavior has helped maintain a strong customer loyalty.

How transferable are these advantages as Wal-Mart moves into new formats and especially, international markets?

With the company considering new formats such as the ‘neighborhood stores’, its advanced data mining advantage is easily transferable even in international markets. The company will therefore be able to anticipate the customers’ needs in advance in all its stores. The workforce culture is also easy to transfer in the new formats. However, the transferability of the workforce culture in international markets relies on the firm’s entry strategy with partnerships posing a threat due to the varying workplace cultures. With the firm owning the distribution centers as well as creating better relationships with the suppliers, the advantages gained are easily transferable in the new formats and international markets.

How should Wal-Mart respond to Dollar Stores and to Amazon.com and their success in recent years?

Dollar Stores and Amazon.com successes in the recent years has been achieved through reinventing the retail business with cheap and efficient delivery strategies. Responding to these competitors recent success involves innovation and utilization of the firm’s competitive advantages. Walmart should therefore integrate its low price everyday with online retail. Taking advantage of its efficient distribution network, reaching out to the customers at the comfort of their homes will enable the firm maintain its market leadership.

In general, what recommendations would you make for Wal-Mart to continue their growth?

  • New quality services and products
  • Conversion of discount formats into supercenters
  • The company should also focus on new formats such as neighborhood stores thereby being able to target different market segments
  • With the firms competitive advantages being easier to transfer, the company should focus on going global

 

Walmart 2016 – Porter’s 5 Forces            

 

Substitute Products f (Price & Performance)

    ·       Low consumer switching costs

·       Competitive quality and prices of substitutes

·       Similar performance of substitute products and services

   

 

 

 

Power of Suppliers

   

Competition

   

Power of Customers

·       There are low switching costs from one supplier to another

·       Availability of many substitutes

·       Company purchases large quantities of products from suppliers

 

 

è

 

 

·        High exit barriers

·       Large and similar competitors

·       Slow industry growth

·       Large production capacity

 

 

ç

 

 

·        Customers are mainly individuals

·       Customers often purchase small quantities

·       The company has a large customer base

    Threat of New Entrants  

 

 

Entry Barriers

    ·        Company enjoys economies of scale

·        Large and efficient distribution network required

·       High initial capital requirements

 

 

 

 

 

 

 

 

 

 

 

Walmart – Porter’s 5 Forces

Competition

Although Walmart enjoys 25% of the supermarket business, the high number of similar large competitors has led to a high rivalry level in the industry. The emergence of online purchasing for example is likely to reduce the firm’s revenues due to loss of customers to the competitors.

Substitute Products (Viability of Substitute Products f(Price & Performance)

The degree of substitution is also high in this industry due to the competitive nature of the products and services. The substitutes also perform similarly to those supplied by the company in the market thus increasing substitution in the event of lowering prices by the competitors.

Power of Suppliers

The power of suppliers is moderate since most of the products are not critical for Walmart. With the availability of many substitutes and ability to purchase large quantities from one supplier the company is able to maintain control over the suppliers.

Power of Customers

Walmart has a large number of customers who also purchase small quantities. Additionally, the ability to stock a wide variety of products and services increases its customer base. The company therefore enjoys a low customer power.

Threat of New Entrants

Threats of new entrants is low for Walmart in this industry due to the high initial start-up costs. Additionally, the firm’s large economics of scale and efficient distribution network throughout the country discourages new competitors

Summation of Industry Analysis

Walmart has succeeded in being the market leader but faces stiff competition from similar retailers such as Dollar stores. Whereas threats to entry are low, the low costs of operations are likely to sway new competitors. However the company should take advantage of its low supplier and buyer power to maximize its profits. The threats of substitutes on the other hand requires the company to innovate and offer differentiation for long term viability.

Key Success Factors for Wal-Mart:

  1. Everyday low prices
  2. Large economies of scale
  3. Efficient distribution network
  4. A unique and strong culture among the US citizens
  5. Innovativeness through research and development
  6. Integrated technology such as customer data mining
  7. Motivated workforce

Overall Recommendation(s) for Wal-Mart

Being a market leader, Walmart enjoys unique and unrivalled competitive advantages. However, understanding the industry in terms of customers, suppliers, competitors, potential entrants, and substitutes will enable the firm to maintain its market position. The company should also venture into e-commerce in order to wither stiff competition.  

Specific Recommendations for Wal-Mart:

  1. The company should invest more on e-commerce
  2. The company should also offer differentiated products that adhere to the customers culture
  3. Changes in its formats to include diversity and to capture new market segments
  4. Venture into international markets

Related Essay Examples

Add a Comment

Your email address will not be published. Required fields are marked *