It is actually quite the opposite, Wal-Mart’s supply chain is very customer focused, which is what gives them an advantage over their competitors. Wal-Mart focus’s on the customer and employs a pull strategy, where the demand from customers is the basis for production for Wal-Mart suppliers. This gives them a unique production method, in that they do not produce based on traditional methods rather it is based on short-term forecasts of demand generated by their customers. This allows them to not only keep stock costs low, it also allows them to track demand of individual products. This results in lowered costs of advertising and promoting products because they are able to accurately track demand and can adjust their advertising based on what is selling and what is not resulting in more accurate marketing efforts.
James Le The Wal-Mart Effect By Charles Fishman As consumers, most of us go to Wal-Mart because we know it is cheaper than anywhere else. And on top of that it has the convenience of having almost every category of consumer good we want on a day to day basis. How has that came to be and how has that impacted people globally? The Wal-Mart effect explains how in detail. This book is not biased for or against Wal-Mart and only delivers the facts, good or bad.
Respondents claimed Wal-Mart offered lower prices, better variety and selection, and good quality. The needs of consumers is an important economic feature in all competitive environments. What attributes (price, variety, quality, etc.) prompt buyers to choose one retailer over another is very important in the competitive landscape. In the warehouse segment, Wal-Mart’s Sam’s Club competes harshly with Costco.
Wal-Mart is driving prices down through its competitive bargaining strategy for its manufacturing costs. By holding prices at a low level, inflationary pressures are relieved and the economy is a lot steadier. By selling items for less than average, Wal-Mart allows its customers to acquire more than normal when shopping in the store. Lower prices also mean more money is left in the pockets of consumers. This allows opportunities for businesses of all types.
Cost focus is a low cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others (Hunger, Wheelen, 2011). Some examples of companies that have employed a cost focus strategy are Checkers restaurants, Redbox video rental, and Mercedes Benz. These companies avoid head to head competition with larger firms such as McDonald’s, Blockbuster, or General Motors. By valuing a narrow focus that enables them to better serve their narrow strategic markets, these companies have been able to target their customers more effectively than their competitors. Checkers utilizes buildings that are cheaper to construct, Red Box video rental uses vending machines inside large box stores such as Wal-Mart, and Mercedes Benz utilizes cutting edge manufacturing technology, styling, and safety features to appeal to its customers.
However, Wal- Mart is able to sell its goods at a low rate through a “ highly efficient distribution system and retailing expertise give Wal-Mart a cost advantage that enables it to price its products below the competition and still make a profit”(Dukes, 2003). Since Wal- Mart is not blatantly engaging in predatory pricing and is still making a profit, Wal -Mart is considered to be engaged in normal market competition. Wal -Mart still needs to make a profit on the goods it sells at extremely low prices so it must obtain its goods at a lower cost. Wal-Mart is a mega retailer and with its buying power is able to have an influence that relatively smaller stores may not have. According to the Mexico’s Federal Competition Commission, Wal-Mart is able to use its power of large
Following is an analysis of Wal-Mart's competitive strategy. Pricing Wal-Mart's marketing strategy was to guarantee "everyday low prices" as a way to attract customers. The traditional discount retailer, which relies on "sales," not only has to do more advertising and promotions but also has to rely more on catalog mailing, buildup of inventory before a sale, markdowns on the unsold inventory, etc. Wal-Mart stores operate according to their "Everyday Low Price" philosophy. Wal-Mart has emerged as the industry leader because it has been better at containing its costs, which has allowed it to pass on the savings to its customers.
While some retailers such as Dollar General offering a low price initiative with comparable low price offerings as Wal-Mart, Wal-Mart is still the leader in the retail market. 8. Bargaining power of Buyers The bargaining power of buyers highly influences Wal-Mart. Company is trying its best to keeps its prices low for the products and services they are providing. When the products are similar then the buyer will compare the price among suppliers which increases the competition and lead to lower prices and profits.
What are the best ways for businesses to maximize profits? Businesses in the U.S. have answered this question with a very simple answer: make products overseas. This business tactic of using labor services from a third party is known as international outsourcing (Brecher 996). Within U.S. borders, there are certain regulations and restrictions on many aspects of the manufacturing process (Stephanie para 2). However, production is cheaper if they are made countries where regulations are less strict (Wood 25; Stephanie para 1).
Wal-Mart is known for their Everyday Low Prices (EDLP); their guarantee that instead of big sales, their customers can come in and get what they need for less. According to Kathleen Seiders and Glenn B. Voss, authors of From Price to Purchase, “Advocates claim that everyday pricing increases customer loyalty, improves inventory management, and reduces labor and advertising expenses.” However, that reassuring EDLP might not be as helpful as it seems. It turns out Wal-Mart doesn’t necessarily guarantee the lowest price on all items, simply the ones at the end of the aisles and in center displays, the other models are often more expensive than other st... ... middle of paper ... ...ol Your Inventory.” Nov. 2000. Harvard Business Review. Bloom, Paul N. and Perry, Vanessa G. “Retailer Power and Supplier Welfare: The Case of Wal-Mart.” 2001.