Case study

Walmart’s Competitive Advantage

Question 1: What do you think are the sources of Wal Mart’s sustained superior
profitablity?

The primary source for Walmart ‘s success on profitability is the target market choice. Choosing
towns that can support one supermarket but no more pre-emptively put the company in a position
unrivaled by its other competitors. Other than that, once setting up shop the company’s
pioneering innovative efforts into consolidating a business information systems and logistics
which made sure what items to keep in inventory. Overall, low price is the main drive of profit in
the retail supermarket business and choosing strategies that enable to sell products at low price to
customers and receive products at low price from suppliers in a balanced way seems to sustain
the high profitability Walmart has managed to achieve. The information sharing scheme the
company has managed to pioneer with suppliers has made a crucial contribution in how Walmart
has managed to pioneer with suppliers have made a crucial contribution in how Walmart keeps
putting low priced supplies as what suppliers lose from the low price they manage to gain from
better efficiency in their production based on the information gained from Walmart. Last but not
least, employee/HR management that is based on positive reinforcement through profit sharing
schemes seems to have enabled the company to lower overhead cost from employee turnover and
gain motivated employees that translates to better profit.

Question 2: Why do the rivals of Wal mart, Target and Costco hav continued to improve
their performance recently?

The advent of information systems at a global scale has an obvious implication that all retailers
that matter especially those with the resources to commission the best solutions from tech firms.
As such it stands to reason that Target and Costco most probably have managed to improve their
information systems and inventory management mechanisms to be state of the art. Moreover,
these companies can easily learn and borrow concepts from the book of Walmart’s successful
strategies eventually closing the gap if not catching up to the level of profit margin Walmart has
managed to get from these strategies.
Question 3: What were the reasons that cause Walmart to encounter a problem in its
profitable growth currently?

There is so much one can push prices down in a low pricing focused business model. The profit
margins of retail market are razor thin. Walmart may have reached a peak where the profits to be
gained or the difference between the buying prices from suppliers and selling prices to customers
cannot get any lower. More importantly, Walmart’s success primary market, the US, has come to
be saturated when it comes to retailer business with many competitors aggressively seeking to
pull in customers and maximize their profits. The fact that Walmart has not managed to enter
more international markets save Mexico as well as it has managed to do so in US can be why
profitability growth has been hampered.

Question 4: What strategies do you think Walmart should adopt to sustaining its winning
position in retail market or sustain its profit improvement or in general, to deal with its
current situation?

The curse of a publicly traded giant of a company is the expectation of shareholders and the
capital market seeking the company to grow even more. For Walmart growth is demanded not a
luxury. As such, to improve its current position seeking the global market penetration is key for
success. For this understanding of emerging markets is essential. When going international the
company had suffered losses and this could be attributed to the fact that strategy relevant to the
US is not necessarily applicable to other countries. The company can leverage its key resources
i.e. its exceptional buying power from giant domestic suppliers and knowledge bases and
advanced inventory management efficiency. The initial failures in entering global market can be
used as a lesson learning experience for the company. Hence, when deciding to enter new
markets a company should make to use logically sequenced approach and learn from its initial
market entry to ensure success on subsequent trials.

The characteristics of markets outside the US are different. The competitors entrenched in those
new markets are also of important considerations in how formidable and aggressive fight they
might manage to put up. For such reasons making an entry to mature markets in Europe would
be high risk given the competition potential of the top retailers there. Asian markets, especially
the advanced ones, would also be challenging in a similar fashion.
Acquisition is another option of entry to markets where there is a significant competition. As
such when entering markets similar to the US, Walmart may need to use this as it has done in
Canada.

Learning from initial experiences is also another key for success. Based on its experience in
different Latin American market operations could be of great value to insure better adaptation
and decision in acquisition when operating in similar markets.