Argue why a superior organisation is one of the last sustainable

sources of competitive advantage.

Company: Wal-mart Stores Inc.

TABLE OF CONTENT

1. Company overview

2. Five Forces Analysis

3. Competition

4. Summary

1. Company overview

Sam Walton launched the first Wal-Mart discount city in Rogers in 1962,
in the city of Arkansas having a total of 6000 inhabitants, but now Wal-
Mart manages a big chain of stores to the tune of 971 discount shops,
2447 super malls, 591 Sam’s Clubs and 132 local shopping centres in the
US and 3020 retail shops globally (Annual Report, 2007).

The growth performance of Wal-Mart is something which is marvellous.

The retailing trade of Wal-Mart spreads over 15 nations and has over 8500
retail outlets and deals with 55 branded goods. Among the prominent
retail traders, Wal-Mart has been constantly positioned at the top rank
(Sobel and Dean, 2006).

2. Five Forces Analysis

Wal-Mart functions in the retail sector as a prominent cost -effective

service provider. The policy of Wal-Mart centres around its pricing ethics
of its products through offering “EDLP- Everyday Low Prices” (Knox and
Walker, 2003). The wide range of branded products offered by Wal-Mart
enables the customers to have access to products at one-stop buying of
products and wide range of collections gives trust to consumers that Wal-

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Mart could cater to their requirements and this apart, its long working
hours enable the consumers to buy products to their choice (Kim and
Park, 2007). These unique features of Wal-Mart enable it to have an extra
competitive edge.

It became imperative to carry out a five forces analysis so as to assess if

Wal-Mart keeps prolonged competitive edge inside the retail field as a
cost- effective trader.

Barriers To Entry (BTE)

Instant BTEs are comparatively less because 1) launching a retail shop is

comparatively less-capital oriented, 2) expenditure on assets is less, and
3) the know-how on functioning of a retail shop is practically attainable
(Goodstein et al, 2000). A proof of this can be seen in a mall in your
locality, where the retail functions are handled by the proprietor himself is
an usual practice. At the same time , when a Wal-Mart shop is launched in
a small locality, the tiny ownership retail functions are often impacted
adversely since Wal-Mart has the capacity to fix the price tag lower than
the long term regular functioning cost of a tiny ownership retail trader
(Kim and Park, 2007).

Supplier Power

The power of supplier is commonly absent. Wal-Mart being the biggest

retailer globally, commands the buyer power to a great extent which
enables it to access a greater amount of concessions from the supplier
end (Goodstein et al, 2000). In several instances, Wal-Mart’s volume of
trade indicates a greater chunk of the business transactions of an any
supplier, which again adds to Wal-Mart’s capacity to claim concessions
from its suppliers (Maruyama and Trung, 2007).

The strength of the supplier in human resources aspects is also very

feeble because majority of the posts inside the Wal-Mart can be
categorised as human resources which are not skilled (Thomas and

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Garland, 2003). Moreover, Wal-Mart does not entertain trade unions and
no union takes part in the business of Wal-Mart.

Buyer Power

The ultimate customer, the consumer of Wal-Mart, holds the top buying
capacity. The pricing policy of Wal-Mart is to give “Everyday Low Prices”
to sustain the customer support who in turn believe that Wal-Mart would
give the affordable price and at the same time prevent unethical
fluctuations in price as result of business initiatives (Omar, 2006). The
trade policy of Wal-Mart is gaining the trust of the ultimate customer and
through its sustained and cost effective retail trade.

Substitutes

The main alternative for buying at the retail shop is buying through the
internet. The latest diversions in business indicate that buying through the
internet is developing fast year by year (Thakkar and Bhatt, 2007). Wal-
Mart enables buying via internet on www.walmart.com and the adverse
impact of buying through internet on off line trade has not been a very
important aspect at this juncture. There is a possibility that when Wal-
Mart reaches the optimum business level through its retail shops, the
internet shopping could emerge as a threat to its off line shopping through
its shops (Thomas and Garland, 2003).

3. Competition

Rivalry in business is severe inside the retail trade as shown by low

margins: Ave Gross Margin (Retail Industry/ Market: 26.5%vs. 48.3%);
Ave. Operating Margin (retail Industry/Market: 8.5% vs. 12.6%); Ave. Net
Margin (Retail Industry/Market: 3.4% vs. 7.0%) 2. Wal-Mart struggles
inside several different retail sub-trades: concession, department,
medicine, general and speciality shops and super centres, most of which
are stores at the national level (Moschis et al, 2004). WalMart also
struggles with other retail traders for locations for new shops, As on 31 st
January, 2005, the Wal-Mart shops section was positioned at the premier

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place on the basis of net trades, when compare to all retail departmental
shops and to all concession department shops (Goodstein et al, 2000).

4. Summary

Wal-Mart keeps a heavy, consistent competitive edge in a great trade

which is very competitive and placed cost effective methods and adopted
the policy of one-stop-shop (Miranda et al, 2005). Wal-Mart is able to
access several benefits on pricing via its great buyer strength which is
made possible by its mere size( volume of business). Departing from the
policies adopted by other companies such as the Fortune 500 companies,
Wal-Mart was successful in getting rid of the issues arising from the labour
unions and its adverse impact on the increase in earnings through
tactfully preventing the labour unions totally (Thakkar and Bhatt, 2007).
Wal-Mart’s trade policy acts well with the ultimate customers’
expectations for sustained, cost –effective retail goods and assists to
reduce buyer power. At the same time, Wal-Mart is successful in
eradicating rivalry by applying less prices and thereby eradicating rivalry
from trade.

References

1. Goodstein, Ronald C., Julie A. Edell, and Marian Chapman Mooren

(2000), “When Are Feelings Generated? Assessing the Presence and
Reliability of Feelings Based on Storyboards and Animatics,” in
Emotion in Advertising: Theoretical and Practical Explorations Stuart
J. Agres and Tony M. Dubitsky and Julie A. Edell, eds. Westport, CT:
Questia.

2. Kim, B. and Park, K. (2007), ‘‘Studying patterns of consumer’s

grocery shopping trip’, Journal of Retailing, Vol. 73 No. 4, pp. 501-
17.

3. Knox, S. and Walker, D. (2003), ‘‘Empirical developments in the

measurement of involvement, brand loyalty and their relationship in

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 grocery markets’’, Journal of Strategic Marketing, Vol. 11, pp. 271-
86.

4. Maruyama, M. and Trung, L.V. (2007), ‘‘Traditional bazaar or

supermarkets: a probit analysis of affluent consumer perceptions in
Hanoi’’, The International Review of Retail, Distribution and
Consumer Research, Vol. 17 No. 3, July, pp. 233-52.

5. Miranda, M.J., Ko´nya, L. and Havrila, I. (2005), ‘‘Shoppers’

satisfaction levels are not the only key to store loyalty’’, Marketing
Intelligence and Planning, Vol. 23 No. 2, pp. 220-32.

6. Moschis, G., Curasi, C. and Bellenger, D. (2004), ‘‘Patronage motives

of mature consumers in the selection of food and grocery stores’’,
Journal of Consumer Marketing, Vol. 21 No. 2, pp. 123-33.

7. Omar, O. (2006), ‘‘Grocery purchase behavior for national and own-

label brands’’, The Service Industries Journal, Vol. 16 No. 1, January,
pp. 58-66.

8. Sobel, R.S. and Dean, A.M. (2006), ‘‘Has Wal-Mart buried mom and
pop?: the impact of Wal-Mart on self employment and small
establishments in the United States’’, available at:
www.be.wvu.edu/divecon/econ/sobel/WalMart/Walmart.pdf
(accessed 23 February 2007)

9. Thakkar,M. and Bhatt, M. (2007), ‘‘Mom & pop in reliance family’’,

The Economic Times, Kolkata edition, 23 February, p. 4.

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10. Thomas, A. and Garland, R. (2003), ‘‘Supermarket shopping lists:
their effect on consumer expenditure’’, International Journal of
Retail and Distribution Management, Vol. 21 No. 2, pp. 8-14.