Introduction
Walmart leads the retail industry in the United States and worldwide. 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 the long-term success of a company 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 how it has operated differently to remain a market leader in the retail sector. While the focus is on the company’s competitive environment, including its leading rivals, Amazon, and the position it holds regarding competitive behavior, the similarity of resources, business operations, and potential for success in diverse market cycles, the two firms are almost equally competitive. Still, Amazon would be more effective in a fast-cycle market.
Business-Level Strategies
Business-level strategies are implemented to improve a firm’s performance. They aim to make 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). Walmart is a discount store and operates in every state in America, and some other nations outside the U.S. 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 various 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. The company’s 2019 annual report reveals some of Walmart’s main competitors, including discount and department stores, supermarkets and hypermarkets, and online platforms like Amazon. Thus, the firm’s management decided strategically to implement low-cost products to become more competitive nationally and internationally. 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 revenue growth (“2019 annual report,” 2019). For example, according to the “2019 annual report” (2019), its revenue for 2015 was about $485,600. The revenue continued to grow to around $500,350 in 2018. 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 concludes 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 capitalize on 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. Notably, Walmart United States, Walmart International, and Sam’s Club are some of the company’s segments that generate its revenue and profits. The strategy differs from other competitors, such as Amazon, generating 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 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 not necessary. 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 this aspect, Amazon’s product diversity, including consumer products, groceries, books, and electronic products, makes it highly competitive. 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. The market commonality is one element that refers to the standard markets within which the competitors operate (Hitt et al., 2013). Besides, they sell their products in the retail industry, with the same consumer goods, and contending with multimarket rivalry. 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, the similarity of the firm’s tangible and intangible resources in terms of type and quantity. For instance, the tangible resources level of Walmart has physical operations, financial capability, and technology (for example, Walmart App). Notably, at the intangible resources level, the company has an internationally known brand and innovative operations like Store No 8. On the other hand, Amazon has significant financial assets and technological applications such as AmazonFresh, a strong brand name, and well-known products that it sells globally. 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 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
As is evident from the analysis, a firm enjoys a protected completive advantage in slow-cycle markets, 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. Hence, while the competitiveness level is the same, Walmart would be more effective in relatively slow-cycle markets. Thus, if things changed and the market became a fast-cycle one, 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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