Business and Corporate-Level Strategies for Walmart | …
According to Porter, two competitive dimensions are the keys to business-level strategy. The first dimension is a firm’s source of competitive advantage. This dimension involves whether a firm tries to gain an edge on rivals by keeping costs down or by offering something unique in the market. The second dimension is firms’ scope of operations. This dimension involves whether a firm tries to target customers in general or whether it seeks to attract just a segment of customers. Four generic business-level strategies emerge from these decisions: (1) cost leadership, (2) differentiation, (3) focused cost leadership, and (4) focused differentiation. In rare cases, firms are able to offer both low prices and unique features that customers find desirable. These firms are following a best-cost strategy. Firms that are not able to offer low prices or appealing unique features are referred to as “stuck in the middle.”
Walmart's Business Level Strategy
By successfully adopting a cost leadership strategy over the decades, Wal-Mart has emerged as the largest company (in terms of revenues) in the world.
The case examines in-depth the key elements of the cost leadership strategy followed by Wal-Mart. It discusses how the cost leadership strategy generated above-average returns for the company and acted as a defense against competition in the industry.
Finally, the case discusses the plans and challenges faced by Wal-Mart in early 2004.
Business-level strategy addresses the question of how a firm will compete in a particular industry (). This seems to be a simple question on the surface, but it is actually quite complex. The reason is that there are a great many possible answers to the question. Consider, for example, the restaurants in your town or city. Chances are that you live fairly close to some combination of McDonald’s, Subway, Chili’s, Applebee’s, Panera Bread Company, dozens of other national brands, and a variety of locally based eateries that have just one location. Each of these restaurants competes using a business model that is at least somewhat unique. When an executive in the restaurant industry analyzes her company and her rivals, she needs to avoid getting distracted by all the nuances of different firm’s business-level strategies and losing sight of the big picture.