Walmart Strategy

The key factors to Wal-Mart’s success hinge on its ability to establish and maintain power in the competitive forces that are most advantageous to its business model.  In reference to Michael Porter’s Five Forces framework, Wal-Mart has incredible Buyer Power, operates using tenets that keep the Degree of Rivalry controlled, and exercises certain principles which create barriers to the Threat of New Entrants. The prudent use of these strategic forces allows Wal-Mart to continue its success.  The firm has used several competitive moves to gain a foothold over its rivals, including price adjustments and controlling its suppliers.  Likewise, Wal-Mart has stayed true to the doctrine set forth by its founder, Sam Walton, focusing on low costs and expanding through the proliferation of Wal-Mart stores and diversification into Sam’s Club and Supercenters.

Sam Walton’s plan for Wal-Mart’s expansion by opening stores in isolated rural areas and small towns (1/3 were not served by competitors in the mid-1980s) marks a targeted strategy for marketing to consumers with previously limited options.  Wal-Mart’s ability to tailor its merchandising response to individual markets is also a key factor to its success, as this technique allows the local store manager to choose which products to highlight based on customer preferences, as well as to price products to meet local market conditions.  Such “traiting” is a characteristic more common to independent retailers than mass-market retailers.

In addition, Wal-Mart is able to streamline operations through its investment in and the use of information systems and electronic scanning, which it implemented before its competitors.  The use of technology ensures accurate pricing, improves efficiency, and streamlines vendor management.

Walton’s belief that low prices are the basis of Wal-Mart’s business model is advanced by the retailer’s power in utilizing supplier relationships to dictate what and how suppliers produce, as well as the...