A Detailed Report: Wal-Mart's Competitive Advantage and Strategy

This report provides a comprehensive analysis of Wal-Mart's competitive strategy and organizational structure. It begins with an overview of Wal-Mart's performance, highlighting its revenue growth and competitive advantages, including its expansion into various sectors and its ability to maintain profitability amidst economic fluctuations. The report then delves into the principal functions and activities that contribute to Wal-Mart's competitive edge, such as its cost leadership strategy, efficient supply chain, and focus on customer service. It also examines the sustainability of Wal-Mart's competitive advantage, emphasizing its responsiveness to market changes and its ability to innovate. Finally, the report addresses current challenges faced by Wal-Mart, such as competition and evolving consumer preferences, and suggests measures for overcoming these obstacles, including strategic investments and customer-centric approaches. The report underscores Wal-Mart's commitment to providing low prices, extensive product assortments, and convenient shopping experiences as key elements of its success. The report is a study on Wal-Mart's ability to influence organizational strategy.

Running head: INFLUENCING ORGANIZATIONAL STRATEGY
Influencing Organizational Strategy
Name of the Student:
Name of the University:
Author Note:

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Table of Contents
Introduction................................................................................................................................2
1. Performance of Wal-Mart and the Extent of Competitive Advantage...................................2
2. Wal-Mart’s Principal Functions and Activities that Determine its Competitive Advantage.4
3. Sustainable Competitive Advantage of Wal-Mart.................................................................6
4. a. Current Challenges Faced By Wal-Mart............................................................................9
b. Measures for Overcoming Challenges.................................................................................11
Conclusion................................................................................................................................12
References:...............................................................................................................................13

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Introduction
The report gives an overview of Wal-Mart based on a case study. Wal-Mart Stores
has been the biggest company in comparison of revenue in the year 2015. The company
attained this position in the year 2000 and maintained it for years. Since its publicity in the
year 1972, the profitability and growth of the company has been remarkable (www.Wal-
Mart.com 2018). There is discussion about the performance of the company, functions that
leads to its competitive advantage, sustainability of the competitive advantage and the
challenges faced by Wal-Mart
1. Performance of Wal-Mart and the Extent of Competitive Advantage
The revenue of Wal-Mart have increased every year and whose return on equity is
never below 19 percent in spite of the tumult created by the war, economic recessions , rise of
the e commerce and political crisis. Wal-Mart expanded its good and services range by
venturing into fashion clothing, groceries, online prescription drugs, financial services, music
downloads and health clinics which placed it on a platform for greater competition. . Wal-
Mart faced no competition in terms of price. However, the retailer faced competition in terms
of more stylish products, increased emphasis on quality, increased service orientation and
innovative product range. In the traditional method of discount retailing, target proved to be
an enhanced formidable competitor.
The success of Wal-Mart rests solely upon the ability of combining its huge size with
responsiveness and speed. The shorter chain for command and the closeness between the top
management and the individual store managers defined the agility of Wal-Mart. Over the
years, the retailer became image conscious and portrayed enthusiasm in adopting means that

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ensured environmental and social responsibility (Hopkins 2012) The Wal-Mart store adopted
various store formats. This included the convenience stores launched in the year 2013 and
spread across a square foot area of 12000 square feet. The store had built a substantial online
business through the website www.Wal-Mart.com and at the same time extended its music
download and online pharmacy service. The primary feature of the online strategy of Wal-
Mart was the integration of web-based transactions along with its presence physically that
allowed customers in picking up items at the local Wal-Mart store.
The international expansion of Wal-Mart started in the year 1991 along with a joint
venture with the largest retailer of Mexico, Cifra SA for opening of several discount stores.
By the year 2000, the expansion of Wal-Mart extended to overall six overseas countries. The
overseas expansion of Wal-Mart did not follow any fixed pattern (Mun and Yazdanifard
2012). This is because; sometime the store entered the international market through the
Greenfield entry, sometimes through joint venture and sometimes by acquiring existing
retailer. However, the overseas operation of the Wal-Mart also remained successful.
The countries in which Wal-Mart entered had forced the store in adapting the retailing
system to the preferences and habits of the customers, competitive situation, infrastructure
and regulatory and political environment (Baines 2012). However, the management style and
strategy of Wal-Mart has been unique in defining its success. Wal-Mart based its foundation
on three basic beliefs. This included service to the customers, respect for every customer,
community member and associate and to strive for excellence.
Thus, the Wal-Mart stores ensure in helping people save money and thereby lead a
better life. The store through various innovation methods helps in creation of an experience
that is customer centric and that which integrates with the physical and digital shopping
experience. The store nearly serves around 260 million customers (Prieto, Phipps and Addae

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2014). However, the strategy adopted by Wal-Mart aims at leading on price, investing for
differentiation of access and be competitive on the assortment for delivering a greater
experience. Leading on the price designed for earning trust of the customers on a day-to-day
basis through availability of a broader assortment of the quality services and merchandise at
everyday low prices (ELDP). This also helps in fostering of a culture that embraces and
rewards diversity, integrity and mutual respect. Everyday low price is the commitment of
Wal-Mart in controlling expenses and promote savings. The physical and digital presence of
Wal-Mart gives the customers access to broad assortment of the store from anywhere at any
time. Wal-Mart strives to ensure its members and customers both with a physical and digital
shopping experience. The size of the purchases made by Wal-Mart and its ability of
negotiation made it both feared and desired by the suppliers (Ghazzawi, Palladini and
Martinelli-Lee 2014). The buying power and cost cutting by Wal-Mart ensured razor thin
margins for most of the suppliers.
2. Wal-Mart’s Principal Functions and Activities that Determines its Competitive
Advantage
The competitive strategy of Wal-Mart reflects on dominating every sector that it
wants to do business with and measures its success in terms of the dominance and sales over
its competitors. The competitive strategy of Wal-Mart represented selling goods at lowers
prices, outselling its competitors and ensuring its expansion (Collett Miles 2013). The does
every possible thing for winning over its competitors. A typical Wal-Mart model represented
building more stores, expanding the existing stores and introduction of other sectors of retail.
Through every step undertaken, Wal-Mart not only dominates its competitors but also strives
to make money by putting them out of the business. The corporate mission of the company
states that Wal-Mart continues its growth into newer mediums and newer areas and success is

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attributed to the culture of the store. Whether a client visits a Wal-Mart store in hometown or
across country or on a vacation they will be ensured lower prices and authentic customer
service. The ambience of the store makes the customers feel at home. The foundation of Wal-
Mart stands on three core philosophies that involves respecting individuals, servicing
customers and striving for the excellence. The other beliefs include exceeding customer
expectations with its aggressive hospitality. Wal-Mart also supports the efforts of the local
community via various charitable contributions. The strength of the corporate culture depends
on the pricing policy that helps in underlining the strategy of the company in selling items at
a price lower than the competitors sell.
The business strategy of Wal-Mart based on the ‘everyday low prices’ ensures a
competitive advantage to the company (Ireland, Hoskisson and Hitt 2012). The cost
leadership strategy pursued by Wal-Mart and enabled by economies of scale put the company
at a significant level. The efficiency in using the online sales channels contributes to the cost
efficiency in retail operations. Non-store inventory accounts for about 75 percent of the sales.
Wal-Mart also focuses on the constant improvements of access, price and assortment. The
store also strives in offering widest product choice at cheapest price along with ensuring the
customers with opportunity for choosing the convenient channel for facilitating the purchase.
Thus, the competitive advantage of the company depends on the cost leadership. The
strategic level for management constantly aims at associating the competitive advantage of
Wal-Mart with assortment, experience, access and price (Ellickson and Grieco 2013). The
business strategy of Wal-Mart directed towards increasing the focus on the customer services,
improving its groceries and making the shopping experience more flexible. For increasing the
focus on customer service, the company announced an investment of around USD 1billion for
providing higher wages, increased opportunities and more training. Wal-Mart also aimed at
improving its groceries due to the increase in higher level of health conscious consumers.

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Therefore, the company focuses on increasing the range of fresh produce and organic options.
Wal-Mart has also moved forward in integrating the physical stores with its digital business
through incorporating latest changes where customers can collect the online orders from the
stores and at same time receives text messages (Kumar, Eidem and Noriega Perdomo 2012).
Wal-Mart uses its financial power, immense resources and its size in dominating
retail. This helps in the effective translation of strategy whether it operates as local store,
acquires retail in some other countries. The size and power of the company helps it in
realizing the goals and ensure efficiency. Wal-Mart puts across a core message of being a
friendly store that provides effective customer service and proves to be an asset to the local
community (MacKenzie, Meyer, and Noble 2013). Wal-Mart polices of low price, employee
respect and expansion makes it stand out compared to the others. The competitive strategy of
the company made it one of the most prominent retailers of United States. The competitive
advantage of Wal-Mart is sustained on a global marketplace based on long-term perspective.
In addition, Wal-Mart also has better employees and its human resource management
is very committed (Hill, Jones and Schilling 2014). The good influence of Wal-Mart makes
everyone want to be a part of its employee pool. In other words, Wal-Mart has maintained
competitive advantage through the process of ceaseless innovation. The company also
maintained a good economic profit even in the midst of competition from the other firms.
3. Sustainable Competitive Advantage of Wal-Mart
The operational efficiency and effectiveness represents the vital elements of success
in a company (Zelbst et al. 2012). The company is able to outperform its competitors and
rivals in the market with only efficient control and superior management thereby creating a
difference that helps in eventually attracting customers. According to Porters model,
operational effectiveness refers to performing similar activities as the rivals but with a better

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perspective. Thus, as far as sustainability of competitive strategy is concerned Wal-Mart
plays an effective role by convincing the customers that they have lower price compared to
its competitors and maintains an opening price point. Opening price point refers to the lowest
prices in store, kept at higher visibility and makes the customer believe that products in store
are available at a cheaper rate. Wal-Mart represents a powerful retail brand known for its
commitment, reputation for valuing money and providing a wider range of products. The
company is growing at a brisk pace by expanding its horizon to the other parts of the world
through merger and acquisition. Wal-Mart also focuses on acquiring the market in China and
Europe through the acquisition of the smaller stores with the leaders in specific market. The
company always remains under threat for sustaining higher positions in the market either
nationally or internationally (Christensen and Raynor 2013).
The expansion of Wal-Mart has been rapid and the company employs more than 1.3
associates and owns more than 4000 stores serving around 100 million customers on a
weekly basis (Baines 2012.). The company has not only acquired international stores but has
also merged with super stores of a particular country. The far-flung network of the retail
network of Wal-Mart is that it has it impact on virtually every locality of the United States.
Wal-Mart has also expanded its wings to the European countries. The domestic retail stores
of Wal-Mart has taken over 21 Wertkauf stores in Germany, 122 Woolco stores in Canada
and 229 ASDA units of United Kingdom. The takeover strategy of the company portrays the
company in the forefront while taking an entry into the newer market and minimizes the
number of competitors. The strategies made Wal-Mart sustainable in reigning to that position
and thereby ensuring it to be the largest retailer of the world (Ackerman-Leist 2013).
Sustainable competitive advantage achieved either because of innovation or from its
responsiveness to change (Ken 2014). In this context, Wal-Mart achieved sustainable
competitive advantage due to its higher responsiveness towards the outside environment and

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the inside environment. Outside environment represented competition and demand while the
inside environment portrayed inventory management and distribution strategies along with
the company’s ability in encouraging newer initiatives. The ability of Wal-Mart in
consistently outperforming other discount retailers and Kmart is due to a business system that
effectively and quickly responds to the changes in competition and demand. By using sales
data and inventory, the local store manager takes a decision on the products displayed and
allocated a shelf space for a particular product category according to the customer demand.
Wal-Mart does not set the price centrally but in locations where it is present with one of its
competitor stores, Wal-Mart sets its price at 1 percent lower. Locations where Target, Wal-
Mart and Kmart are located, the average price of Wal-Mart is 7.6 percent and 10.4 percent
respectively. In the remote locations where no direct competition the prices remains 6 percent
higher. The flexibility of Wal-Mart in terms of pricing strategy and customer demand are the
key elements that help in sustaining the competitiveness of Wal-Mart (Nagle, Hogan and Zale
2016).
The distribution and purchase of Wal-Mart get driven by the point of sale date and
results in lower inventories, few markdowns and fewer stock outs. Making use of the point of
sale, the Wal-Mart store devoted 10 percent of the square footage to inventory compared to
the 25 percent of industry average (Pollard, Chuo, and Lee 2016). This gave cost advantage
to Wal-Mart compared to the other competitors of the industry.
The fast response capability of Wal-Mart depends on the rewarding and encouraging
initiatives at all levels. Wal-Mart also had a shrink incentive plan that provided yearly
bonuses to the associates if the shrinkage of the company was beyond the company goals.
The shrinkage cost estimated at around 1.7% of the total discount sales of Wal-Mart in the
year 1993.

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4. a. Current Challenges Faced By Wal-Mart
The CEO of Wal-Mart United States, Greg Foran, spent a huge amount of time
visiting the stores of the company. His travel across the stores has pointed out certain
challenges that the store faces in the current times. These challenges faced by the stores
include (Woods et al. 2013):
1. Lack of Cleanliness and Tidiness:
The major issues of Wal-Mart have been tidiness and cleanliness. Therefore, there
should be more focus on the improvement of the store. Wal-Mart stores expected to be tidy,
clean and well merchandized for effectively running it by the associates. However, the reality
was something different.
2. The Shelves lacked Goods:
Wal-Mart stores had ample stock of inventory in back room and the processes were
not in place. This resulted in unnecessary shrinkage and goods being out of stock. Thus, there
should be measures for implementing changes that would help in fixing the problem. For
instance, keeping a tab on the food products that neared expiry for reducing the amount of
food wasted.
3. Store Design and Layout Compromising Customer Convenience:
Compared to the neighborhood market and supercenters, Wal-Mart stores lacked
design, lighting, layout and store temperature. Wal-Mart took these challenges quite seriously
and opened up new stores with better facilities.
4. Integration of Digital Service within the Physical Stores

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There should be digital service integrated with physical stores that would allow
customers in ordering groceries online for delivery and in store pickup. However, this service
has not been applicable in all its stores.
5. Improvement of the Traffic Driving Business Side
Wal-Mart should aim at building scalable profitable business through additional
traffic drive to the stores through introduction of care clinics, gas and financial services.
Pharmacy in the neighborhood market acts as a super driver of traffic.
6. Check on the Prices
Wal-Mart have kept their prices low in competitive markets while higher prices
prevails in regional market which means that prices are not as low as the competitors. Thus, it
can be said that, Wal-Mart attains a leadership position in competitive markets but its gain is
too less.
7. Wider Assortment of Products
Wal-Mart also needs to get a wider assortment of products. With the right kind of
assortment, the company is bound to get better customer response.
8. More Focus on Customer Service
The focus of Wal-Mart rests on serving the customers. In the recent years, Wal-Mart
has deviated from its prime focus. Therefore, it is necessary for Wal-Mart to not only
simplify the stores but also empower the associates of the stores in taking additional
responsibilities.

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b. Measures for Overcoming Challenges
Wal-Mart has adopted five strategies for overcoming the challenges that it faced.
These strategies are as follows:
1. Taking over Smaller Stores
Wal-Mart took over 650 neighborhood market and small format stores in United
States that enabled it to expand and open 15 neighborhood market stores with around 38000
square feet area.
2. Making Online Investments
Wal-Mart pulled number of levers for competing with other online service company
like Amazon that helped in boosting the digital sales that accounted for 3 percent of overall
revenue (Vetrickarthick, Swarnalatha and Asha 2015). The company also formed a
partnership with messaging app Tango to enable users to make online purchases.
3. Promising better Stores
Wal-Mart took the initiative in presenting better stores through incorporation of
500,000 store associates at a wage rate of about $9 an hour. Wal-Mart has also piloted newer
training programs for the workers with further plans for expansion (Herring, Wachinger and
Wigley 2014).
4. Incorporating Fresher Stocks
Wal-Mart is incorporating fresher food stocks by focusing on improving the quality of
items on the shelves. This involves training the employees in recognizing when a fruit piece
start to rotten.

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Conclusion
The report ends with a discussion on the current challenges of Wal-Mart and the
measures taken for sustaining its performance. There is also discussion on the extent to which
the competitive advantage of Walmart is sustainable. The report also discusses about the
performance and the principal activities and functions of store that leads to its competitive
advantage.

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