How did Wal-Mart develop their advantages?
We can explain how Walmart develop their advantages by using the strategy diamond. In terms of Arena, they entered into remote locations with 3000 people. The Vehicle is to build large stores and distribution centers; this allows them to offer economies of scale and a wider choice of merchandise. The differentiator for Walmart is that they were the first retailer to add groceries to their merchandise, they also believe in low costs and prices. They use good logistical and supply chain system and manage excellent relationship with suppliers.
In negotiating, they act as the middle man by eliminating manufacturer’s representative from negotiating with their suppliers. Another differentiator is their strong information system i.e. EDI and vendor management inventory system. Their good inventory system allows them to have higher quick turnover and fewer inventories leftover when compared to their competitors. They also value their staff by recognizing them as a stakeholder in the business; they refer to their frontline staff as ‘associates’.
In terms of staging, they only build a store in a town with a certain population size with a day’s drive to the warehouse. They prefer small town markets that no other competitor wanted build a warehouse and in strategic locations.
The financial statement is a testament of their success and that is where the economic logic is, they have been successful and profitable using exhibit 3 of the case. To maintain their financial status, they also encourage a culture which enforced frugality.