For all companies, a sustainable competitive advantage ensures that they have a significant and impactful market share, which is makes it easier to for new entrants to surrender. Wal-Mart managed to create a sustainable competitive advantage for its businesses by understanding that the needs of customers across the country are being met by positioning itself as a discount store. The broad variety of products that are being sold at Wal-Marts at reasonable prices helps create a target customer profile to which the company can sustainably market itself. The customer captivity component, which emerges when companies combine the supply and demand advantage, is essential for Wal-Mart to make sure that it caters to customers’ habits and can sustain its capability to be the number one choice compared to the competition.
It is important to note that the value proposition of the company combines the lowest prices compared with competitors, and the focus on the customer allows it to lead the local market of megastores. In order for sustainable advantage to occur, Wal-Mart had to work on achieving customer captivity in terms of its economics of scale. Sustainable dominance, however, is more likely to occur in the markets of restricted size, with “many fixed costs being fixed only within the region or product market in question” (Greenwald & Kahn, 2005, p. 3).
Wal-Mart achieved sustainable dominance in the face of increased globalization in the market of megastores that is limited by several significant competitors in the discount megastore sector, such as Target, Costco, or Best Buy, as well as Amazon, which provides low-cost products online and is a significant rival to any of the mentioned companies. Overall, the large size of the company and the wide scope or its capabilities are what make it to have sustainable dominance.
Market Power in Retail
In the article for McKinsey & Company, Diaz, Magni, and Poh (2012) discuss emerging markets as challenging settings for global manufacturers to overcome when navigating modern and traditional landscapes. The authors differentiate between mainly traditional markets, primarily modern markets, and transitional markets that differ in the extent to which to which small and modern trade accounts influence the sphere of retail. Global manufacturers have shown to favor either small proprietors or large companies, and their goal is to create reliable and high-priority distributors to achieve strategic goals for various outlet types.
In addition, the strategies for approaching differently-sized firms vary among global manufacturers based on market demands. Working with small proprietors, global manufacturers usually win small proprietors’ loyalty through brand promotions, flashy displays, and outside signage. When it comes to larger retailers, international manufacturers typically prefer to invest in such things as good merchandising, displays, as well as skilled salespeople who can promote their products,
The Financial Express article by Soni (2020) discusses the major change to festive online shopping at the beginning of the 2020 sales season in the Indian market. According to the article’s findings, in the opposition between Amazon and Flipkart in the online gross merchandise value, the latter was dominating. The early access sales of Flipkart’s Big Billion Days started on October 15, and Amazon’s Great Indian Festival began on October 16, which made it possible to compare the impact of both sales in both companies. The rise of this category of customers is a significant development in the sphere of online sales.
While Amazon has shown strength in the Tier-I category and metropolitan areas, Flipkart showed its dominance in the Tier-II category, and this season, the results were highly significant. Importantly, the number of online shoppers increased by approximately 85% to 52 million during the first week of sales in 2020 compared to the same period in 2019, with 28 million (Soni, 2020).
These findings show that the reliance on online shopping is an increasing trend, possibly due to the limitations imposed on in-store shopping and the rising demand for accessing products online without the need to do out. The noticeable rise in Tier-II customers encourages e-commerce sales with 57% share in 2020, which is up 2.3 times compared to the last year while the share of Tier-I cities and metropolitans standing at 18% and 25% in 2019 and 2020, respectively (Soni, 2020). The capacity of customers to access a broad range of products online and choose what they want to buy from a large assortment.
Flipkart’s competitive advantage over Amazon in the festive season strengthened due to the strategy of the company to sell reasonably priced goods to the broad audience of middle- and lower-middle-class online customers in the smaller cities of the country. Flipkart has been successful because Tier-II customers look for value for money during the festive sales, and if a company can offer such an opportunity, it is guaranteed to have a competitive advantage in the retail industry. It is important to note that the shifting consumer trends during the pandemic increase the number of online customers from rural parts of the country who did not usually shop on the Internet.
The possibility of reaching sustainable dominance in the retail industry is rooted in companies’ capabilities in adapting to the needs and expectations of customers. Since sustainable dominance occurs in restricted markets of smaller size, the flexibility and adaptability to the shifting trends within the market may help organizations sustain such dominance. For instance, as suggested by Morgan (2020) in a Forbes article, such changes as built-in distancing or built-in drive-throughs are retail industry advancements associated with the shifting customer expectations. Only those companies that can come up with innovative ideas that facilitate a safe and pleasant shopping experience during the pandemic will survive. This will be possible for companies that think outside the box and do not only rely on lower prices as the key competitive strength. Instead, it is necessary that companies are in an ongoing conversation with their customers about their needs and demands to be the first to offer them and gain loyalty, which is essential for sustainable dominance.
In the post, the classmate discusses the major points of the assigned readings and provides a summarizing discussion regarding the topic of sustainable dominance. In the first section regarding competitive advantage, the majority of information is about competitive advantage as a whole, and only one paragraph discusses Wal-Mart. It could have been better if the writer discussed sustainable competitive advantage and sustainable dominance by providing examples from the Wal-Mart company. In the second section, the discussion about emerging markets points to the critical trends in consumer demands to forecast future changes, which are linked to high adaptability and adjusting to shifting needs.
Greenwald, B., & Kahn, J. (2005). All strategy is local. Harvard Business Review. Web.
Diaz, A., Magni, M., & Poh, F. (2012). From oxcart to Wal-Mart: Four keys to reaching emerging-market consumers. McKinsey & Company. Web.
Soni, S. (2012). Flipkart vs Amazon: Walmart firm wins first festive bout with 68% GMV share; e-shoppers jump to 52M. Financial Express. Web.
Morgan, B. (2020). 10 changes we’ll see to physical retail spaces in a post-COVID world. Forbes. Web.