Chapter 5: Business-Level Strategy

Walmart uses an overall cost leadership strategy.  Walmart's transportation, logistics, and information systems lower their costs.  They also lower costs by having no-frills service and by having economies of scale.  Walmart's successful overall cost leadership strategy leads to high entry barriers for competitors.  It also makes it hard for substitute products to enter the market.  Walmart also has bargaining power with their suppliers.  They changed their competitive challenge from retailing to transportation logistics and communication industries to play to their strengths (Dess, Lumpkin, Eisner, McNamara, 2012).

Walmart has many overall cost leadership value-chain activities.  They have fewer management layers than their competitors which reduces overhead costs.  Walmart has effective inbound logistics by using just-in-time inventory.  They have cut costs from outbound logistics by creating better fuel efficiency in their trucks, getting more pallets on a load, and decreasing empty miles driven by their trucks.  Walmart also reduces costs by buying in large blocks.

Walmart is in the mature stage of the industry life cycle.  The only new competition for them is from focus businesses such as grocery, clothing, and auto parts stores.  There has been no new competitors that can offer all of the different products that Walmart can and do it with Walmart's low prices.  Some competitors have recently closed stores including Kmart, Sears, and Pamida.  Walmart has a  price competition with their bigger competitors, especially Target.  Walmart has been able to stay ahead of it's competitors in the mature stage by keeping their costs low and still be able to offer a wider variety of products than anyone else.

The Internet has helped Walmart grow their business by lowering transaction costs.  Walmart allows customers to order products online which reduces sales force expenses.  Customers can have their own account page on the Walmart website to look at prior orders and track current orders.  Their Internet site allows you to ask questions and give feedback.  Walmart's website allows customers to give product reviews.

  Dess, Lumpkin, Eisner, McNamara. Strategic Management.  6th edition. 2012.