By Abhijeet Pratap / June 27, 2017
Generic and Intensive Strategies used by Walmart
For any firm to win and lead in the 21st century, it is important to build a source of sustainable competitive advantage. There can be several sources of competitive advantage. For example one firm gains competitive advantage through technological innovation and the other through skilled human resources.
In this regard Michael E Porter laid out three generic strategies that could help any firm gain a competitive advantage. These generic strategies are cost leadership, differentiation and focus. The focus strategy he subdivided into two – cost focus and differentiation focus. Firms have kept using these strategies for winning and to lead the game. There are several such firms which have generated a source of sustainable advantage by means of one of these strategies.
However, that is generally not enough because growth in the long term depends on other factors too and firms need to expand their market and sales by focusing on strategy. In this regard the Ansoff matrix provides some practical responses for growing a brand and its market. These strategies which are a part of the Ansoff matrix are also known as intensive growth strategies. This is a discussion of the Generic and Intensive growth strategies adopted by Walmart to develop a sustainable competitive advantage and grow its brand and market.
Generic Strategy:
The primary generic strategy that Walmart has used to build sustainable competitive advantage is the cost leadership strategy. A firm using this strategy mainly focuses on keeping the prices of its goods and services lower than the competitors. Walmart is mainly known for its everyday lower prices. How Walmart has kept the everyday prices low is through economies of scale. It has built strong long term relationships with the vendors from whom it buys in bulk. It helps the brand obtain the best deals on the purchases it makes from its suppliers. Long term relationships with the suppliers are mutually beneficial for both the parties.
Apart from these things it has also maintained low operational and production costs. Coupled with them, excellent supply chain management and logistics management have helped it reduce costs of operation. In the past Walmart was known for paying very low wages to its employees. However, owing to prolonged protests and criticism the brand has raised the minimum wages for its employees.
Now, the situation at Walmart is much better. However, the brand has sustained its advantage and that’s why it is a leader among the retailers. This has not just helped it sustain the image of a brand obsessed with low prices but also generate huge sales and revenue.
Intensive Strategies used by Walmart:
Market Penetration:
Market penetration involves selling more of the existing products and services to the existing customer base. Walmart started as a small discount retailer in Rogers Ark. Since then it has opened thousands of stores in US. It has kept the prices of products it sells lower than its competitors since always. This does not just give it an edge over the competitors and help it grow its sales over these years but also helps it grow its brand name and attract more and more customers.
The benefit has been double for Walmart whose lowest prices and best deals are famous Many also call it US’ most friendly retailer because you can find the best deals and discounts and least prices at Walmart. As a result its customer base has is very large and has kept growing rapidly over time. To grow its popularity and customer base, Walmart has also introduced app and websites so customers can shop with ease and convenience. When customers find more convenience and better prices they will shop for more and this is the primary growth strategy Walmart has utilized.
Market development:
This is another important strategy that Walmart has continued to employ to develop its markets and grow its customer base. Apart from US, Walmart has also expanded its presence internationally. Today, it operates in 28 countries and has more than 11,700 retail units running under 59 banners. Through these 11,700 retail stores, Walmart employs more that 2.3 million globally. Out of them, 1.5 million are employed across US alone. This international expansion has helped the brand and its sales grow vastly. In all these areas Walmart is popular owing to its low pricing scheme. Out of the 28, its e-commerce units are operational in 11 countries. In this way, Walmart continues to bring value to its customers and communities globally. It also uses various store formats like super centers, discount stores and neighborhood markets that it utilizes based on the need of the communities in which it operates.
These are the two main intensive strategies utilized by Walmart for creating growth and profits globally. Its focus on product development or diversification has remained relatively minimal. Overall, Walmart has grown to become a celebrity retail brand and even sorted out its HR issues nearly. In past it has been accused of paying its employees less and making them do more. However, there have been positive developments during the recent years and the company has increased the minimum wages to nearly the same level as its competitors. However, its competitive advantage and long term strategy both have played an important role in helping the brand find supple growth.
- Sources:
- https://corporate.walmart.com/our-story/our-locations
