Background Information
Walmart is one of the leading companies in the retail sector in the United States and among the successful firms supporting global operations. The company has been competing in the market for close to two decades. Walmart has revealed a high level of performance in one of the most competitive business environments in the United States and globally. Thus, it is necessary to understand the type of strategies (business-level and corporate-level) that have impacted its success in the retail market. The strategies play a critical role in a company’s long-term success that should remain competitive. Thus, the current report presents an analysis of Walmart’s business-level and corporate-level strategies as well as its competitive environment to understand some of the ways it has operated differently to remain a market leader in the retail sector. The paper also focuses on how it has competed with one of its main competitors, Amazon, and its positions from the perspective of competitive behaviors, resource similarity, actions, and dynamics, and how it would operate differently in different market cycles. While the two companies would be equally competitive, in a fast-cycle market, amazon would be more successful than Walmart.
Business-Level Strategies
Business-level strategies are implemented to improve a firm’s performance. They are aimed at making a difference between the company and its main competitors. The strategies also determine a company’s success in competing within a given market. Companies generate their business-level strategy from the management’s decisions about their source of competitive advantage, whether based on price or differentiation, and if the scope of their operations targets a narrow or broad market (Hitt, Ireland, & Hoskisson, 2013). Some of the commonly used business-level strategies are cost leadership and differentiation. Cost leadership is the strategy that has informed the success of Walmart in the retail sector over the years. The strategy is implemented by ensuring that the company offers its products at a lower price than competitors (Hitt et al., 2013). The company is also a discount store operating in all fifty states of America and other countries such as Mexico, Canada, China, and many other nations. Walmart operates in a competitive retail market as well as a consumer-defensive industry.
Walmart sells numerous consumer goods in the retail market at the cost-leadership strategy, which has gained it a competitive advantage over its leading rivals, such as Target. The strategy has led to overall market success since the firm can now serve more than 100,000,000 customers weekly (“Our business,” 2019). The company can successfully sell a wide range of products, including groceries, electronics, and other consumer goods. As a result, the firm has to deal with competition from different sectors that sell similar or supplementary goods. According to its 2019 annual report, the firm competes with department and discount stores, supermarkets, grocery stores, specialty stores, and eCommerce retailers (“2019 annual report,” 2019). As a result, besides the omnichannel offerings, the Every Day Low Cost (EDLC) and Every Day Low Price (EDLP) have led to its ongoing success in the market. The company offers its products at prices that only a few competitors can successfully rival based on its approach.
Besides, Walmart’s core competencies have informed its success over the years. The company’s capacity to deliver to the market high-quality products at a lower price than competitors is one of its leading core competencies. Besides, the company is competent in controlling expenses and ensuring that consumers are protected from constant price changes that could affect their buying ability. The competencies work well with the cost-leadership strategy to ensure that the company sells to more consumers than its leading rivals in the ritual market. The business-level strategy has continually informed its business success over the years. First, according to Walmart’s 2019 annual report, the firm has experienced ongoing growth in revenue (“2019 annual report,” 2019). For instance, in 2015, its revenue was about $485,600, which increased to approximately $500,350 by 2018 (“2019 annual report,” 2019). The company also experienced about twice the sales growth within the eCommerce sector in the United States during the same period (“2019 annual report,” 2019). The performance leads to the conclusion that the price leadership strategy is suitable for the company’s market success. The strategy also informs the company’s long-term success in the retail sector.
Corporate-Level Strategies
Another level of strategy that Walmart uses for its long-term success in the retail sector is corporate-level strategies. The management designs strategies to diversify the firm’s operations into several product markets or segments to take advantage of the demand. They are the specific measures a company should implement to have a competitive advantage by selecting and managing different operations to compete in diverse market segments (Yuan et al., 2020). For Walmart, low diversification is the primary corporate-level strategy that informs its success in the retail market in the United States and abroad. The strategy has been effective, assisting the company in focusing on the specific market with products that add value to consumers. The company falls in the category of businesses with a low level of diversification regarding its revenue streams. Walmart operates three segments, including Walmart U.S., Walmart International, and Sam’s Club. The strategy differs from other competitors, such as Amazon, which generates revenue from a highly diverse product market and segments.
The low level of diversification helps the company focus and add value to the consumers through quality product offerings. The company generates most of its revenue and profits from Walmart U.S. and Walmart International (“2019 annual report,” 2019). Therefore, the firm uses a dominant-business diversification strategy. According to the current business success, it is possible to argue that the strategy is the most effective for the firm in terms of long-term success. According to Yuan et al. (2020), a low level of diversification can improve a company’s value in the market. In a successful brand like Walmart, a high level of diversification is unnecessary. The company has enjoyed a high level of revenue, and its future revenue is predictable, eliminating the need for a high level of diversification. Besides, the company has remained productive in the retail market over the years, and its products are famous among its consumers (“2019 annual report,” 2019). The performance also reveals that the corporate-level strategy has been successful and that there is no need for long-term changes.
Competitive Environment
Walmart operates in the retail sector, one of the United States and globally highly competitive sectors. One of its main competitors in the market is Amazon, which has most of its operations online. Although the company does not have many physical stores, it poses high competition for Walmart. The rival’s eCommerce strategy is well-developed, an essential factor in the modern world where customers seek convenience in their purchases. Customers can access and order any of its numerous products from online platforms and have them delivered conveniently. Besides, Amazon has a wide range of products, from consumer goods to electronics to books. As a result, it meets the needs of a broader client base compared to Walmart. However, Walmart offers intense competition to Amazon and other rivals because it has numerous physical stores spread within 10 miles reach of 90% of the population in the United States (Cheng, 2018). As such, customers can access its product within reach.
Various elements of comparison can be used to understand the competition between Walmart and Amazon. Market commonality is one element that refers to the common markets within which the competitors operate (Hitt et al., 2013). The two companies operate in retail, selling similar consumer goods and engaging in multimarket competition. Furthermore, the two companies target a similar market segment. Thus, to compete with customers, Walmart provides its products at a reduced price. On the other hand, Amazon seeks to provide an excellent customer experience and an assortment of products that customers can choose from. Generally, the two companies strive to meet the needs of their customers with quality products at affordable prices.
Another critical factor is resource similarity, which is the similarity of the firm’s tangible and intangible resources in terms of type and quantity. The tangible resources of Walmart are physical stores, financial assets, and technology, such as Walmart App. In contrast, its intangible resources include a famous brand name and innovative programs, such as Store No 8 (“Our business,” 2019). While Amazon has considerable financial assets and technology like AmazonFresh, it has a well-known brand and its products. As such, the two companies have familiar sources of competitive advantage.
The two rivals have common competitive tendencies, such as similar services and technologies. The firms use standard technologies to support and deliver customer orders (Cheng, 2018). Besides, the two are prepared to handle competition quite well through strategic decisions. The two are also first and second movers, meaning that none of them can be considered more competitive. Thus, the two companies remain each other’s significant rivals, which informs their current and future operations.
Market Cycles
In slow-cycle markets, a firm enjoys a protected completive advantage, indicating that its products cannot be imitated for long periods. Conversely, a company does not enjoy such protection in fast-cycle markets, and imitation is inexpensive (Hitt et al., 2013). While Amazon and Walmart have the same competitive level, it is valid to argue that Amazon will be more effective in fast-cycle markets because it has implemented innovations and services that others are yet to implement. Furthermore, Amazon has primary online operations, making its products accessible internationally. Thus, although the level of competitiveness is similar, Walmart is more successful in a relatively slow-cycle market. Thus, if things changed and the market became fast-cycle, it would be harder for Walmart to compete with Amazon unless it implemented some changes in its strategic operations. Overall, Walmart needs to establish new strategies to protect its future competitive advantage as Amazon creates a more significant physical presence.
References
2019 annual report: Defining the future of retail. (2019). Retrieved from https://s2.q4cdn.com/056532643/files/doc_financials/2019/annual/Walmart-2019-AR-Final.pdf
Cheng, A. (2018). Walmart’s e-commerce tactics against Amazon look to be paying off. Retrieved from https://www.forbes.com/sites/andriacheng/2018/08/16/walmarts-ecommerce-tactic-against-amazon-is-paying-off/
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competitiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.
Yuan, Y., Lu, L. Y., Tian, G., & Yu, Y. (2020). Business strategy and corporate social responsibility. Journal of Business Ethics, 162(2), 359-377.
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