Wal-Mart's Cost Leadership Strategy

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

Wal-Mart's Aggressive Pricing

On July 2, 1962, Samuel Moore Walton (Walton), a merchant with over 15 years of experience in retailing, set up his first discount store in Rogers, a small town in the state of Arkansas, US. The store offered a wide variety of branded merchandise at a competitive price. During the initial years, Walton focused on establishing new stores in small towns, with an average population of 5,000. These towns were largely neglected by leading retailers like Sears Roebuck & Company, K-Mart and Woolco, which concentrated more on larger towns and big cities. In his efforts to attract people from the rural areas to his stores, Walton introduced the concept of every day low prices (EDLP). EDLP promised Wal-Mart's customers a wide variety of high quality, branded and unbranded products at the lowest possible price, offering better value for their money. Wal-Mart's advertisement describing EDLP said, "Because you work hard for every dollar, you deserve the lowest price we can offer every time you make a purchase. You deserve our Every Day Low Price.

It's not a sale; it's a great price you can count on every day to make your dollar go further at Wal-Mart." From the very beginning, Walton made efforts to procure products at the lowest prices possible from manufacturers. He always shared these savings with customers by charging them lower prices, thus giving them the maximum value for their money. Wal-Mart's products were usually priced 20% lower than those of its competitors. Walton's pricing strategy led to increased loyalty from price-conscious rural customers. It helped the company to generate more profits due to larger volumes. Explaining his pricing strategy, Walton said, "By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume." EDLP was extremely attractive to rural customers and emerged as the key contributor to Wal-Mart's growth over the years...

Buy this case study (Please select any one of the payment options)

Price: Rs.500 Instant Download

Price: Rs.500 Express Checkout

PayPal (11 USD)