“In the past two decades, a massive restructuring of the American retailing environment has occurred. Bankruptcies, downsizings, mergers, and acquisitions, as well as growth and expansions, have permanently altered the landscape of American retailing. ”(Thomas O. Graff, 2006, pg 54)In retail industry, no other company offers such variety of products at minimum prices which Wal Mart is doing from decades. Wal-Mart super centers are providing largest collection of items from all walks of life and providing an experience of one window shopping to the customers.
Even in this holistic situation, Wal-Mart has maintained No #1 position among Fortune 500 companies. Wal-Mart is having 16% share in pharmacy retail industry while its share in food retail business is about 19% of total US food retailer sales. Competition in US retail industry has intensified during last 15 years. Retail industry is revolutionized through massive use of online mediums. Retail industry comprise of small family owned business, specialized stores like pharmacies, grocery stores, toys stores etc and one shop retailers with huge super stores.
One window shop concept got popularity among masses and giant super centers have taken place of relationship oriented family owned businesses. “It’s been estimated that for each Wal-Mart store in existence, one hundred family owned businesses have gone under. ”(Bill Quinn, 2000, Page xii) This phenomenon was reached its boom in “1995 till 1999 when largest retailers like Wal-Mart, Kroger, Albertson’s, Safeway, and Royal Ahold increased their share of the grocery market from 26 percent to 37 percent (Turcsik 2001).
” (Thomas O. Graff, 2006, pg 54) US retail industry is having total sales volume of $ 3 trillion. ( ) In retail business distribution channel and vendor management are the most important areas of consideration. Most of retailers have acquired interest in vertically and horizontally related industries. To maintain cost goods from international suppliers are purchased. “Global sourcing as well as private warehouse and distribution systems is becoming the norm for such huge retailers. ” (Thomas O. Graff, 2006, pg 55)
Barriers to entry in the industry are quite high because Wal-mart operates in multiple consumer segments from grocery to clothes and electronics. It offers lowest possible prices and requires quite large amount of fixed cost to start a competitive retail store like Wal-Mart. It is also related with vertical and horizontal industry segments which makes it difficult for new entrant to meet its both ends at such low prices. Competitive& Competitor Analysis Wal-mart faces two types of competitors due to its corporate strategy and brand building efforts.
On national level it faces competition from companies like Sears, Kmart, Kohls and Target. “Target has focused on a middle-class clientele, Wal-Mart has catered to the blue-collar segment, and Kmart has focused on a clientele between the Wal-Mart and Target income segments (Turner 2003, 47). (Thomas O. Graff, 2006, pg 54) These retailers are having presence on nationwide level and offer virtually identical products to Wal-mart. Simultaneously regional retailers offer similar products to particular region.
Among them most prominent are Roses, Howard and Duckwell. Strategically Wal-mart is facing intense competition than other companies in its industry due to its strategy of opening stores in remote areas as well. Wal-mart presence at remote geographical locations and to small towns brings all sort of small or large competitors in front of it. The biggest competitive advantage of Wal-mart over its competitors is advanced supply chain management and adoption of latest IT infrastructure.
Wal-mart does not use any intermediary for its vendor management activities due to operations in multiple locations with numerous stores offering similar products. Instead it purchases directly from vendors which help Wal-Mart in keeping its cost at minimum and profits at maximum. Wal-mart is having its own distribution channel which makes it possible for the company to attain on time deliveries of goods at their stores. Wal mart distribution is its strategic advantage over its competitors.
In retail industry almost 50% of distribution for stores is done through their own distribution channels while in Wal mart this ratio is 80%. Most of the vendors are keeping intact with Wal-mart due to its volume of orders in bulk quantities. Being on board with Wal-mart as vendor opens doors of opportunity and profitability for vendors because it will make it possible for them to reach maximum possible clientele in US and around the Globe.
Another strategic advantage of Wal-mart over its competition is the fact that it uses latest technology to maintain its business process. Economies of scale are the core corporate strategy. With the help of digital means and IT infrastructure, Wal-mart can effectively manage its inventory and keep its cost of production at lowest. Wal-mart competitive advantage over its competitors is also the fact that it operates across international boundaries. It has taken step to enter into Chinese and UK market.