Walmart Business-Level Strategy & Corporate-Level Strategy

Introduction

Walmart is a retail company that has been present in the market for almost two decades. Currently, the organization shows a high level of performance and customer loyalty. This paper presents an evaluation of the company’s business-level and corporate-level strategies and discusses their effectiveness from the perspective of long-term success. In addition, the report addresses Walmart’s competitive environment and Amazon, its main competitor. The paper reviews the firm’s positions from the perspectives of resource similarity, competitive behaviors, actions, and dynamics, as well as markets’ cycles. The report concludes that the companies are equally competitive, but Amazon would be more successful in a fast-cycle market.

Walmart Business-Level Strategy

Business-level strategies are designed to enhance the company’s performance. They aim at creating differences between the organization’s position and one of its competitors, helping to establish a particular competitive advantage within a certain competitive scope (Hitt, Ireland, & Hoskisson, 2013). The types of business-level strategies are cost leadership, focused cost leadership, differentiation-focused differentiation, and integrated cost leadership or integrated differentiation. The strategy that can be considered the most important to the long-term success of Walmart is the cost leadership one.

The cost-leadership strategy can be determined by the approaches taken to offer goods and services at lower prices compared to the competitors (Hitt et al., 2013). It is possible to say that currently, Walmart follows this type of strategy. The company operates in the retail industry and the consumer defensive sector; it is known for discount stores open in all fifty states of America, as well as Canada, Mexico, China, and other countries (“Our business,” 2019).

The organization serves more than 100,000,000 customers per week (“Our business,” 2019). Walmart offers various types of goods, including grocery, electronics, and sporting items. It means that the company has competitors in various segments. Walmart’s 2019 annual report states that the organization competes with department and discount stores, wholesale grocers, supermarkets, specialty stores, and eCommerce retailers (“2019 annual report,” 2019).

Walmart has implemented several strategies to compete in the market and manage the competitive pressure of the industry; they include Every Day Low Price (EDLP), Every Day Low Cost (EDLC), and omnichannel offerings. The company’s core competencies are the ability to create high-quality products at a reasonable price, as well as develop effective approaches to sell its products in the competitive market.

In addition, Walmart uses its competencies to control expenses and ensure customers that there will be no price changes due to promotional activities. These facts show that the company has selected the cost-leadership strategy and is concentrated on providing its customers with affordable goods.

The selected strategy can be considered significant for the company’s success. First, Walmart’s 2019 annual report shows that the organization’s revenue continues to grow (“2019 annual report,” 2019). For example, in 2015, it amounted to approximately $485,600, while in 2018, the revenue reached around $500,350 (“2019 annual report,” 2019). The sales of Walmart U.S. eCommerce doubled over the past two years as well (“2019 annual report,” 2019). These data allow for the conclusion that the current strategy is appropriate for the organization’s goal to provide customers with goods at a low price. It also helps Walmart to increase clients’ interest in its products. Thus, the cost-leadership strategy is a reasonable choice for the company and can ensure its long-term success.

Walmart Corporate-Level Strategy

Corporate-level strategies are designed to diversify the company’s operations into several product markets or businesses. They specify approaches that organizations should implement to gain a competitive advantage through the selection and management of various businesses competing in different markets (Hitt et al., 2013). The primary form of corporate-level strategy is diversification; it aims to decrease variability in the company’s profitability. Walmart can be identified as a firm with a low level of diversification.

The reason for such a conclusion is that as a company, Walmart cannot be considered highly diversified in terms of revenue. The organization owns three segments, including Walmart U.S., Walmart International, and Sam’s Club. It is evident that the company has a dominant business, as the majority of its revenue comes from Walmart U.S. and Walmart International (“2019 annual report,” 2019). Thus, the film follows the dominant-business diversification strategy.

It is possible to say that the current corporate-level strategy of Walmart is the most effective one from the perspective of long-term success. Hitt et al. (2013) report that a higher level of diversification can potentially decrease the firm’s value. Greater amounts of diversification may be necessary if one of the company’s businesses is unsuccessful, which is not applicable to Walmart’s case. In addition, a higher level of diversification is usually necessary when the following conditions are present.

First, an organization should show low performance, and the future revenue rate is unpredictable. Second, there should be external factors, such as tax laws and antitrust regulations (Hitt et al., 2013). In the case of Walmart, these issues do not affect the company’s productivity; the reports show high levels of revenue (“2019 annual report,” 2019). Thus, the current corporate-level strategy is effective, and the company can continue to use it.

Walmart Competitive Advantages

As mentioned above, Walmart has many competitors because it offers a wide range of goods. It is possible to say that Amazon is the company’s most significant competitor. Although Amazon currently does not have many offline retail locations compared to Walmart, its e-commerce strategies are well-developed. Like its competitor, Amazon offers a wide range of items, from books to electronics. The company’s products are easily accessible because the majority of them are sold online. However, Cheng (2018) reports that Walmart’s sizable store fleet allows the firm to be within the 10 miles reach of 90% of America’s population. It is necessary to compare the strategies these corporations use to evaluate their future success.

Market commonality refers to the number of markets in which competing organizations are jointly involved (Hitt et al., 2013). Amazon and Walmart are engaged in multimarket competition, as these companies operate in similar product markets, such as electronics and home goods. In addition, both organizations compete in the same market segment. As mentioned above, Walmart’s primary strategy in its market is to provide goods at reduced prices.

At the same time, Amazon’s primary target is to provide an excellent customer experience and offer the best selection of goods to individuals (Onyusheva & Seenalasataporn, 2018). Although the organizations’ strategies and goals are slightly different, both Amazon and Walmart strive to offer the lowest possible price (“Our business,” 2019).

Resource similarity refers to the comparability of competitors’ tangible and intangible resources from the perspectives of type and amount (Hitt et al., 2013). Walmart’s tangible resources are financial assets, physical stores, and technologies, including Walmart App; the intangible ones are its well-known brand name and innovative programs, including Store No 8 (“Our business,” 2019). Amazon also has significant financial assets and technologies, such as AmazonFresh; its products are also popular (Onyusheva & Seenalasataporn, 2018). It means that from the perspective of resource similarity, Amazon and Walmart have comparable competitive advantages.

It is possible to say that both companies show effective competitive behaviors. For instance, organizations launch similar technologies and services, such as the ones related to delivery (Cheng, 2018). Walmart’s and Amazon’s strategies show that they are highly prepared for competition. Finally, it is necessary to address competitive actions, responses, and dynamics. The firms are found to respond to each other’s actions and implementations quickly; in addition, both of them continue to incorporate new technologies and solutions to enhance customers’ loyalty (Cheng, 2018).

Both Walmart and Amazon perform as first and second movers from time to time; none of the organizations can be considered more competitive from this perspective. Competitive dynamics include the implementation of delivery services and reducing product prices. It is possible to conclude that both companies can be equally successful in the future if the dynamics remain the same.

Walmart in Market Cycles

In slow-cycle markets, the company’s competitive advantages are protected from imitation for long periods, while in fast-cycle ones, they are not protected, and imitation is inexpensive (Hitt et al., 2013). Although currently, companies show a similar level of competitive advantages, it is possible to say that Amazon will be more successful in fast-cycle markets than Walmart, as Amazon is known for its implementation of technologies and services that other companies do not offer (Onyusheva & Seenalasataporn, 2018).

In addition, Amazon is primarily an online platform, which means that its products are accessible to more individuals from a global perspective. Thus, it is possible to say that although currently, the reviewed organizations show a similar level of competitiveness, they operate in a relatively slow-cycle market. In a different case, Amazon would be more prone to long-term success.

Sources

2019 annual report: Defining the future of retail. (2019). Web.

Cheng, A. (2018). Walmart’s e-commerce tactics against Amazon look to be paying off. Web.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2013). Strategic management: Concepts and cases: Competiveness and globalization (10th ed.). Mason, OH: South-Western Cengage Learning.

Onyusheva, I., & Seenalasataporn, T. (2018). Strategic analysis of global e-commerce and diversification technology: The case of Amazon.com Inc. The EUrASEANs: Journal on Global Socio-Economic Dynamics, 1(8), 48-63.

Our business. (2019). Web.