Walmart Inc. applies its generic strategy to achieve competitive advantage based on low costs and correspondingly low selling prices. Porter’s model illustrates that a generic competitive strategy is an approach to competing in an industry or market. In this case of Walmart, competitive advantage is maintained through a variety of strategies and tactics. The main generic strategy applied in the business relies on minimizing cost. This strategy enables the company to offer attractive selling prices. As shown in the SWOT analysis of Walmart Inc., selling price minimization is a strength that makes the business competitive in the global retail market. The company directly and indirectly competes with Target, Costco, Kroger, Amazon and its subsidiary, Whole Foods, as well as eBay, Best Buy, Home Depot, and Lowe’s. These companies influence Walmart’s strategic management and the implementation of its generic competitive strategy and related objectives.
Walmart uses its intensive growth strategies (Ansoff Matrix) to grow the business and minimize the effects of competitive forces. Considering the saturation of the retail market, the company experiences the strong force of competitive rivalry, as shown in the Five Forces analysis of Walmart Inc. With multinational operations, the retail company uses its intensive growth strategies and generic strategy to counteract the negative impacts of competition.
Walmart’s Generic Strategy for Competitive Advantage (Porter’s Model)
Walmart’s generic competitive strategy is cost leadership. Michael Porter defines cost leadership as a generic competitive strategy that focuses on achieving low costs. As a low-cost producer of retail services and related products, Walmart competes based on low selling prices. With this generic strategy, low prices are a fundamental strategic objective used in the pricing strategy in Walmart’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-cost operations for this generic competitive strategy.
This case of cost leadership involves limited product differentiation. With focus on low costs and prices, Walmart’s retail services are common and poorly differentiated from the services of other retailers. Also, this generic strategy involves a low level of market segmentation. The company offers its goods and services to every customer in all segments of the retail market. Doing so aligns with Walmart’s corporate mission statement and corporate vision statement and their aim for leadership in the global retail market. To succeed in implementing its generic competitive strategy, the company reduces costs through process efficiency, management approaches, and other strategies, such as intensive growth strategies. With the objective of keeping costs low, based on this generic strategy, the corporation imports low-cost goods from China and other countries.
Walmart’s Intensive Growth Strategies (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. In implementing this intensive growth strategy, Walmart Inc. sells more goods and services to its current customers. For example, as a cost leader, the company offers discounted wholesale packages of goods. Also, Walmart enhances its online presence to improve customers’ access to its products. This access improvement contributes to the growth of the company’s sales revenues. A strategic objective related to this intensive growth 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 growth strategy is of secondary significance in supporting Walmart’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 Inc. opens new stores in countries where it does not yet have operations. Thus, the strategic objective is to establish the company’s presence in new markets. This objective encompasses e-commerce for online retail transactions. The cost leadership generic competitive strategy supports the market development intensive growth strategy through low prices that attract shoppers to the company’s stores in these new markets.
Product Development. Walmart Inc. uses product development as a minor intensive growth strategy. Based on the Ansoff Matrix, product development involves developing and offering new products to the company’s existing markets. Despite the benefits of this intensive growth strategy, 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. This intensive growth strategy comes with the strategic objective of investing more in research and development (R&D) to introduce new services or goods. For this growth strategy, the cost leadership generic strategy requires that the new products do not entail high costs.
Diversification. This intensive growth strategy involves providing new products in markets, industries, or sectors where the company does not yet operate. For example, Walmart Inc. diversified its business when it acquired and owned the digital video streaming firm, Vudu, from 2010 to 2020. A strategic objective in using this intensive growth strategy is to acquire companies that can be integrated into Walmart’s existing operations, including e-commerce. In following the cost leadership generic competitive strategy, such acquisitions must involve high efficiency and support low-cost operations, in line with Walmart’s operations management strategy. Despite its use in the business, diversification remains a minor intensive growth strategy in growing the company. The company has a low rate of diversification, as the business focuses on retail operations.
References
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- U.S. Department of Commerce – International Trade Administration – Retail Trade Industry.
- Volpe, R., & Boland, M. A. (2022). The Economic Impacts of Walmart Supercenters. Annual Review of Resource Economics, 14, 43-62.
- Walmart Inc. – Form 10-K.
- Walmart Outlines Growth Strategy, Unveils Next Generation Supply Chain at 2023 Investment Community Meeting.
- Walmart Releases 2023 Annual Report and Proxy Statement.
- Walmart’s E-commerce Website.