Case Study of Walmart

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Professor: Dr. Mary Flannery Teaching Assistant: Jia-Yuh Chen ECON 136 – Business Strategy February 27, 2006

The retail industry is dominated by few retail giants, with Wal-Mart competing in several retail categories. Wal-Mart competes against Kmart and Target in the general merchandise retailing; against Costco in the warehouse club segment; and against Kroger, Albertson’s and Safeway in the supermarket retailing. Competition among retailers centers on pricing, store location, variations in store format and merchandise mix, store size, shopping atmosphere, and image with shoppers. Further analysis provided by the following figure diagnoses the

competitive environment of the retail industry.

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Sales Profits Number of Stores

1970 $31 million $1.2 million 32

2004 $256 billion $9.0 billion 4,906

CAGR 30.38% 30.00% 15.95%






success, Wal-Mart’s sales since it became a public company in 1970 to 2004

grew at a compound average growth rate (CAGR) of 30.38%, which is unprecedented growth. The company’s profit growth rate of 30% is exceptionally attractive and clearly shows the profitability and sustainability of its strategies. The increase in the number of stores is quite lagging and this is an indication of Wal-Mart’s expansion potential. Overall, Wal-Mart’s financial results indicate that the company is doing exceptionally well.

Strengths ♦ Cost advantages over rivals. Costeffective supply chain management practices. Weaknesses ♦ A strategy that does not have proprietary protection and therefore can be copied by competing retailers who “wal-martificates” their supply chain. (Lack of sustainable competitive advantage).

♦ Distinctive competence in distribution systems; automated and efficient distribution of goods into its stores, from manufacturers to its fleet of delivery trucks that made daily deliveries to surrounding stores.

♦ Weak presence in major metropolitan areas. ♦ Company’s strong “We Sell for Less” brand image and reputation that
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