Wall Markt Strategy

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Question 3: Which industry features have been driving Wal-Mart’s pursuit of a cost advantage strategy? What has been Wal-Mart's strategic positioning in terms of market segmentation? (use Besanko, 5th ed., pages 379-397 in your answer). Wal-Mart can be described as the company that took discount retailing to the next level. In the wake of the second world war consumers’ preferences had changed significantly. Having tasted the benefits of self-service, and more confident thanks to new government standards, consumers were ready to try cheaper, self-service retailers. Wal Mart developed a cost leadership strategy, by cutting expenses at all levels, unique for the retailing industry. Wal-Mart has lower operating expenses than the industry average. The primary cost advantage is Wal-Mart’s superior distribution capability (location of stores, inside-out growth patterns, cross-docking, superior information management). Wal-Mart’s prices are low by the industry standard, which, combined with its lower costs, indicates a strategy that aims at growth in volume through grabbing increased market share. Low prices, advanced data management and extremely motivated employees (“10 ft rule”, “sundown rule”) means a better customer experience than at other discount retailers, even though Wal-Mart remains a self-service retailer. In addition, the large size of the traditional Wal-Mart stores adds convenience by offering a one-stop solution by offering a wide range of products. It’s worth mentioning that Wal-Mart acquired volume through a careful consideration of locations, away from competition. During its early years, Wal-Mart build large discount stores in small rural towns. In contrast, competitors such as Kmart focused on large towns with populations greater than 50,000. Wal-Mart’s marketing strategy was to guarantee “everyday low prices” as a way to drag in customers. Among

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