CASE STUDY: Wal-Mart the discount retailer whose mantra is everyday low prices

If a companys strategies result in superior performance, it is said to have a competitive advantage. Wal-Marts strategies produced superior performance from 2003 to 2012; as a result, Wal-Mart has enjoyed competitive advantage over its rivals. It was due to the successful pursuit of a number of strategies by Wal- Marts managers, including, most notably, the companys founder, Sam Walton. These strategies enabled the company to lower its cost structure, charge low prices, gain market share, and become more profitable than its rivals. Wal-Mart was one of the first companies to apply the self-service supermarket business model developed by grocery chains to general merchandise. Unlike its rivals such as K-Mart and Target that focused on urban and suburban locations, Wal-Mart grew quickly by pricing its products lower than those of local retailers, often putting them out of business.

The company was also an innovator in information systems, logistics, and human resource practices. These strategies resulted in higher productivity and lower costs as compared to rivals, which enabled the company to earn a high profit while charging low prices. Wal-Mart led the way among U.S. retailers in developing and implementing sophisticated product tracking systems using bar-code technology and checkout scanners. This information technology enabled Wal-Mart to track what was selling and adjust its inventory accordingly so that the products found in each store matched local demand. By avoiding overstocking, Wal-Mart did not have to hold periodic sales to shift unsold inventory.

Sam Walton held a strong belief that employees should be respected and rewarded for helping to improve the profitability of the company. He referred to employees as associates. He established a profit-sharing scheme for all employees, and after the company went public in 1970, a program that allowed employees to purchase Wal-Mart stock at a discount to its market value. Wal-Mart was rewarded for this approach by high employee Productivity.

Fruits of Strategy As Wal-Mart grew larger, the sheer size and purchasing power of the company enabled it to drive down the prices that it paid suppliers, passing on those saving to customers in the form of lower prices, which enabled Wal-Mart to gain more market share and hence lower prices even further.

Downside For all its success, however, Wal-Mart is now encountering very real limits to profitable growth. The U.S. market is saturated, and growth overseas has proved more difficult than the company hoped. The company was forced to exit Germany and South Korea after losing money there. Moreover, rivals Target and Costco have continued to improve their performance.

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