Case Analysis #2
1) What sources of cost advantage does Wal-Mart rely upon to execute its business-level strategy in the US? Walmart was able to fly under the big company’s radar for a while by putting stores in rural towns. They were able to buy land for cheap and once they opened a store the town could not support another store of similar size. And everyone played a part in keeping the cost down, from owners buying cheap hotel rooms to people taking out their own trash. They wanted to drive the cost down as low as it could possibly get. With suppliers Wal-Mart presented unlimited growth potential due to its size, so Wal-Mart could easily press for a lower price and high quality and suppliers would deliver to keep their business. They also had their own fleet of trucks to control the movement of merchandise with 3,000 trucks and 12,000 trailers. Cutting costs their by not having to hire a third party. In the 1980’s, Wal-Mart also started using computers to track and analyze sales data and transmit orders to suppliers by electronic data interchange. Also pioneered the use of the bar code. They were able to connect all stores to the home office at the same time and tie everything together, stores and suppliers, within one big network. Saving money across the board. Wal-Mart was also big about keeping its employees happy. Happy employees, happy customers. So cost of monitoring employees was kept at a minimum. Economies of scale would be achieved.
2) Do those sources of cost advantage enable Wal-Mart to achieve a sustainable competitive advantage in the US? I think so. They are able to keep cost down at an all time low. They have suppliers waiting on their turn to get used and are able to control the price of the suppliers. And are able to control movement of merchandise in house and sub it out to a third party. Also, them pioneering the way in technology gave them a