Wal Mart 's Cost Leadership Strategy

1820 Words8 Pages
1. Wal*Mart’s basic strategy to create a competitive advantage in the discount retailing industry in the United States during the 1970s-1990s was the cost leadership strategy. With this, the Company was successful in using its strategy of “everyday-low-prices” to attract customers. Wal*Mart’s strategy of “everyday-low-prices” was to offer products at a cheaper rate than its competitors on a consistent basis, rather than relying on sales. The Company was able to achieve this due to its large purchasing power and efficient distribution channel. Wal*Mart’s cost leadership strategy was successful for many reasons. First, the Company was very competitive in terms of prices. Second, combined with low prices compared to its competitors,…show more content…
Furthermore, of the top 15 discount department stores in 1993, 2 were in Chapter 11 and 2 emerged from Chapter 11. Other factors included a lack of differentiation in product offerings, low switching costs for buyers, competitors had volume driven strategies aimed at obtaining market share at the expense of profitability, creating price wars, and a high pressure to increase volume to generate cost efficiencies. Based on Porter’s Five Forces Analysis, potential entrants was high with high entry barriers. With this, competitors had access to distribution channels, were established with multiple locations, had strong brand name recognition, had financial strength to fend of competitors, and had high capital which resulted in high buying power and high economies of scales. Based on Porter’s Five Forces Analysis, buying power was low to moderate. With this, customers had a high availability of substitutes as they could shop elsewhere and had ease of switching between competitors. There was a lack of differentiation among competitors as competitors competed on price. Based on Porter’s Five Forces Analysis, substitutes was low. With this, prices and quality of substitute products were very competitive, performance of substitute products were similar, and there were low switching costs for buyers. Based on Porter’s Five Forces Analysis, suppliers was low to moderate. The top 5 competitors accounted for 71% of
Open Document