Case Study Walmart's Generic Strategy

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According to Michael E. Porter, there are four generic strategies: cost leadership, differentiation, focused low cost and focused differentiation within an industry. Various companies within a particular industry use these competitive strategies to sustain growth and maximize profitability. Walmart is the first retailer that comes to everyone’s mind when you think of “low prices”. Applying the generic strategy framework—by analyzing the Walmart’s case through value-chain/activity system framework and strategic positioning—paints a better picture of Walmart’s past success and uncertain future. In about three decades, since the opening of their first Walmart store in 1962, the net sales of the company grew to an astronomical $67 billion by 1993. None of the top 10 discount stores that were operating in 1962 survived till 1993. In 1993, discount industry sales were $124 billion, of which Walmart’s sales, as shown in Exhibit 3 of the article, accounted for the highest share at 36% ($ 44.9 billion) and the next…show more content…
Sam’s philosophy is strengthened by the study, conducted in mid-1980s, which found Walmart’s prices were on an average 1% lower than Kmart’s when located next to each other. When Walmart, Kmart and Target were separated by 4-6 miles, Walmart’s prices were 10.4 % and 7.6 % lower, respectively. Walmart gave leverage to store managers in terms of setting competitive prices. Analyzing Walmart case through Porter’s generic strategic framework reveals that Walmart employed cost competitive strategy within the retail industry. Walmart’s business strategy is to provide products/services to its customers for less than competitor’s price. The merchandise necessarily may not be the highest quality; however, for the given product, the price will be lowest in Walmart. Walmart has outperformed the competition by creating a comparable value at low cost and understood the needs of price-sensitive

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