Walmart Inc. (formerly Wal-Mart Stores, Inc.) applies its generic strategy to achieve competitive advantage based primarily on low cost and the correspondingly low selling prices of goods offered to consumers in the international retail industry. Michael E. Porter’s model illustrates that a company uses a generic competitive strategy as a general and basic approach to effectively compete against other firms in the industry. In this business analysis case of Walmart, competitive advantage is maintained through a variety of strategies and tactics. However, the main generic strategy applied in the business relies on minimizing cost. This condition enables the company to adjust its selling prices accordingly. As shown in the SWOT analysis of Walmart Inc., selling price minimization is a strength that makes the business competitive against other firms that operate in the global retail market. The company directly and indirectly competes against firms like Costco Wholesale, Amazon.com Inc. and its subsidiary Whole Foods Market, Home Depot, and eBay Inc. These companies influence Walmart’s strategic management and the implementation of its generic competitive strategy and related strategic objectives.
Walmart Inc. uses its intensive strategies (Ansoff Matrix) to grow the business and minimize the effects of the retail industry’s competitive forces. Considering the saturated nature of the retail market, the company experiences the strong force of competitive rivalry, as shown in the Porter’s Five Forces analysis of Walmart Inc. With multinational operations, the company uses its intensive growth strategies along with its generic strategy to counteract the negative impacts of competition, especially in the e-commerce environment.
Walmart’s Generic Strategy for Competitive Advantage (Porter’s Model)
Walmart Inc.’s generic strategy is cost leadership. Michael Porter’s model defines cost leadership as a generic competitive strategy that focuses on achieving low costs. As a low-cost producer of retail services and related business outputs, Walmart is able to compete based on low selling prices. Low prices are a fundamental strategic objective used in the company’s pricing strategy (see Walmart Inc.’s Marketing Mix or 4Ps). Low prices are a main selling point of the retail business. The company uses various approaches to maintain low costs and, consequently, low prices. For example, through automation and related technologies, and through minimized spending for human resources, the company achieves low costs in operations.
Cost leadership involves low product differentiation. With focus on low prices as a selling point, Walmart Inc.’s retail services are common and, thus, poorly differentiated from retail services from other firms in the industry. In addition, this generic strategy involves a low level of market segmentation. For example, the company offers its retail services to every consumer in all segments of its target markets. Doing so aligns with Walmart’s corporate mission and corporate vision, which aim for leadership in the global retail market. To succeed in implementing its generic competitive strategy, the company relies on process efficiency, management approaches, and other strategies, such as intensive growth strategies, that help reduce costs. With the strategic objective of keeping costs low, the corporation is known for large-scale imports of low-cost goods from countries like China.
Walmart’s Intensive Strategies for Growth (Ansoff Matrix)
Market Penetration (Primary Strategy). Walmart’s main intensive growth strategy is market penetration. In Igor Ansoff’s model, this strategy entails selling more goods or services to the company’s current markets. Current markets are those where the business has existing operations. In implementing this intensive strategy, Walmart Inc. sells more goods and services to its current consumers by giving discounts and related offers. For example, as a cost leader, the company offers discounted wholesale packages of various goods. In addition, Walmart enhances its online presence to improve customers’ access to the products it sells. This access improvement contributes to the growth of the company’s sales revenues. A strategic objective related to this intensive strategy is to increase the company’s market share, especially in the biggest retail markets, such as the United States. Walmart applies market penetration by using the selling point of low prices, which is achieved through the cost leadership generic strategy.
Market Development. This intensive strategy is of secondary significance in supporting Walmart Inc.’s business growth. Market development involves offering the company’s existing goods and services to new markets. For example, in using this intensive growth strategy, Walmart opens new stores in countries where it does not yet have operations. A related strategic objective is to continue to establish the company’s presence in new markets. This objective includes online presence for retail transactions. The cost leadership generic competitive strategy supports the market development intensive growth strategy through low prices that attract consumers to Walmart stores in these new markets.
Product Development. Walmart Inc. uses product development as a minor intensive strategy for growing the retail business. Based on the Ansoff Matrix, product development involves developing and offering new products to the markets where the company currently has operations. In this case, Walmart has minimal investment in new product development. The company focuses its investments on sales and marketing, which are at the core of the retail business. Nonetheless, using this intensive growth strategy leads to the strategic objective of investing more in research and development (R&D) to introduce new services or improve Walmart’s existing products. The cost leadership generic strategy requires that product development must focus on new products that do not impose costly processes.
Diversification. This intensive growth strategy involves providing entirely new products in new markets, which are usually industries or sectors where the company does not yet operate. For example, Walmart Inc. entered the video streaming market in 2010 upon acquiring the content delivery and media technology company Vudu Inc. A strategic objective in using this intensive growth strategy is to search for and acquire companies that can be integrated into Walmart’s existing operations, such as via the company’s e-commerce website. In following the cost leadership generic competitive strategy, such acquisitions must involve high efficiency and support low-cost operations, in line with Walmart Inc.’s operations management strategy. Despite its use in the business, diversification remains a minor intensive strategy in growing the company. Walmart Inc. has a low rate of diversification, as the business focuses on retail operations.
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