Walmart’s main competitive advantage is that they focus on being the industry leader in several key areas. Walmart focused on maintaining high employee morale, judging exactly how far they can push suppliers to force discounts, cutting edge management information systems, and masterfully planning their logistics chain to minimize cost by maximizing volume shipping are key competencies.
Maintaining high morale while keeping compensation at low levels is a great benefit in managing costs. Walmart strong corporate culture recognizes employees for achievement, is honest about compensation and has a strong tendency to promote to management from the associate rank and file. Walmart does have a high turn-over rate with associates. However, in my opinion the personnel react in similar ways as do personnel inducted into the military. Most soldiers receive low pay, but are enmeshed in the military’s “espirit de corp”, slow but steady pay increase, and job security. I believe Walmart follows the same philosophy, and its recruitment base demographics is very similar to the militaries. A key advantage is that Walmart employees are not sent into life threatening situations (except for the possible exception of black Friday).
Walmart is not afraid to send clear messages to their workers about forming worker’s unions. When Walmart’s meat cutters agreed to form a union Walmart immediately out sourced meat selection. Likewise any store that voted to unionize would likely be closed immediately.
Their distribution centers are strategically located to cover large areas and can service from central distribution centers strategically located to service large areas. Walmart basically invented the concept of using automated systems to integrate their suppliers, warehouses, and retail stores to enable just-in-time ordering which reduces the amount of stock on hand significantly lowering money tied up in inventory and material handling charges
Sustainable advantage
Walmart’s competitors have attempted to duplicate Walmart’s business model and have nibbled away at Walmart’s large lead in competitive advantages to varying degrees of success. Other large retailers have open large discount center, create efficient supply chains, located stores in similar demographic areas. However, I believe that Walmart’s growth has been slowed more by its sheer size than by their competitor’s efforts. Corporation may have an upper limit in size where they become unwieldy and can’t respond effectively to the market.
I believe that Walmart’s competitive advantages will substantially remain unchallenged by their current competitors. Walmart large lead will remain even as their historic competitors gain ground-their lead is too great. Where I think their main business danger will develop in the medium to long term is in the emerging markets. These markets still have government protection for domestic markets. Implementation of overly protective measures usually hobble native sources and reduce a country’s standard of living relative to the rest of the world and often hobbles domestics markets. Protectionism in Argentina reduced their economy from 8th largest in the world during the late forties to not even making the top 50 in 2013,
Where there seems to have been a paradigm shift is nations are encouraging local and regional competition in order to develop their own versions of the developed world heavyweights. China 10-15 years ago did not have giant retailers and transnational corporations as have now developed or are in the process of developing
