Marketing Strategy of Wal-Mart

1475 Words Feb 5th, 2011 6 Pages
This is a case analysis of Wal-Mart, the largest retailer in Mexico and North America. Wal-Mart controls a large portion of the markets in which its products are sold, enabling Wal-Mart to maintain its core value of delivering low prices through eliminating the bargaining power of suppliers and buyers, developing innovative technology to maintain competitive advantage, and thus creating incredibly high barriers for new entrants.

Wal-Mart’s core value - delivering low prices - has proved successful in creating the largest and most powerful company in history. From 2001-2006, Wal-Mart opened an average of sixteen new supercenters per month, one every business day in 2005 (Fishman, 2006). Ghemawat (2004, cited by Lichtenstein, (2006))
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This system enables immediate feedback on the tracking of inventory and automatic restoring of stock throughout the company (Hoopes, 2006). This increases the rate of inventory turnover, reducing the cost of assets in stock. Chandler (1977, cited by Hoopes, (2006)) describes the optimal size of a firm as one balanced by “technology’s effect on the efficiency of management versus technology’s effect on the efficiency of the market” (p.86). Wal-Mart’s advanced technology has expanded the company’s optimal size by decreasing management costs more quickly than transaction costs.

Individual consumers have no power since their decisions hardly cause a dent in Wal-Mart’s sales (Levy, 2005). This advantage is a consequence of operational effectiveness, since competitive rivals fail to perform similar tasks with the same productiveness (Porter, 1996). Substitute products are also not a threat, due to the convenience and low prices available at Wal-Mart. The recent increase in negative backlash by the media regarding the treatment of employees could create a reduction in Wal-Mart’s sales as more people actively fight the power that Wal-Mart has over the global economy. However, low wages and benefits for employees can be explained by Wal-Mart’s immutable motto of always low prices, which saves consumers millions of dollars

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