Wal-Mart's Cost Leadership Strategy
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Case Code: BSTR096 Case Length: 17 Pages Period: 1962 - 2004 Pub Date: 2004 Teaching Note: Not Available |
Price: Rs.500 Organization: Wal-Mart Industry: Retailing Countries : USA Themes: Cost Leadership |
Abstract Case Intro 1 Case Intro 2 Excerpts
"There's nothing like Wal-Mart. They're so much bigger than any retailer has ever been that it's not possible to compare."
- Ira Kalish, Global Director of Deloitte Research.
Introduction
For the financial year ending January 31, 2003, retailing giant Wal-Mart reported revenues of $244.5 billion, making it the world's largest company. The company topped Fortune's list of the world's largest companies for the second year in succession (Refer Exhibit I). Considering the modest beginning of this company four decades ago, nobody, including the company officials expected Wal-Mart to emerge such a dominant player in the retailing industry (Refer Exhibit II). Wal-Mart's success story is a classic example of a company, which became successful by rigorously pursuing its core philosophy of cost leadership, right from the day it began operations in 1962. Wal-Mart was founded by an ambitious entrepreneur, Sam Walton (Walton), who figured out early that retailing was a volume-driven business, and his company could achieve success by offering consumers better value for their money. Wal-Mart's growth during the first two decades was propelled primarily by following the strategy of establishing discount stores in smaller towns and capturing significant market share.
The company was able to foster its growth in the 1980s by making heavy investments in information technology (IT) to manage its supply chain and by expanding business in bigger metropolitan cities. In the late 1980s, when Wal-Mart felt that the discount stores business was maturing, it ventured into food retailing by introducing Supercenters. In the late 1990s, Wal-Mart launched exclusive groceries/drug stores known as "neighborhood markets" in the US (Refer Exhibit III for the various types of Wal-Mart stores). Though Wal-Mart had achieved huge success over the decades, the company drew severe criticism from industry analysts for its strategies that aimed at killing competition. At the speed at which Wal-Mart was growing, analysts feared that the company would soon face an anti-trust suit2 for its monopolistic practices. Christopher Hoyt, president of Scottsdale, an Arizona-based supermarket store, Hoyt & Company, said, "The only thing that could stop Wal-Mart is if the government gets involved, just as it did with Microsoft."...
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