Wal-Mart Stores: Wal-Mart's strategy

Essay by Dave999 November 2007

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Wal-Mart's first strategy was to set stores in rural areas as the other retailers have ignored them. This helped Wal-Mart to be the first one to enter this market and that was its major competitive advantage. It always priced its goods lower than the local retailers and hence this helped them to drive other small companies out of this market. They were always trying to decrease their costs and were able to achieve this by having high buyer power over the suppliers in the market and also utilizing the economies of scale. However, Wal-Mart's competitive advantage and hence its strategy changed over time. Though Wal-Mart positioned itself in the rural areas, they reduced their costs by utilizing efficient processes. Mainly they continuously focused on improving & using IT to their advantage and nurturing good vendor relationships . They grew their information collection networks, the ability to collect information in real time, and their ability to process information.

This enabled them to streamline their inventory delivery and inventory decision making system to produce lower prices and higher volumes. They continued to leverage their information advantage by sharing their information with suppliers to further leverage this advantage. Wal-Mart then leveraged the economies of scope contained in the synergy between mass merchandise and food.

Wal-Mart was huge and hence their competitive advantage was sustainable. It produced in high volume & hence had the resources to utilize economies of scale to its advantage. Wal-Mart also invested a lot to improve its information and distribution which is not very easily imitable by its competitors.

Wal-Mart wanted to expand internationally as the growth in the United States have been slowing. So they started setting new stores across many countries hoping they would be able to gain profits the same way they did in the...