The competitive advantage


In fact, the competitive environment in Wal-Mart which has been available throughout its history is the best example in the retailing world. Wal-Mart's management has required to reach to the competitive advantage and they have been achieving that effectively. Wal-Mart management was aware that its business operations on a national and international level were subject to a number of factors outside of its control. Any one , or a combination of these factors could materially affect the financial performance of the firm. These factors included the costs of goods, the cost of electricity and other energy requirements, competitive pressure, inflation, consumer debt levels, interest rate levels, and unemployment levels they also included currency exchange fluctuations, trade restrictions, changes in tariff rates, and other capital market and economic conditions. There are many topics and areas which are connected to the competitive advantage, for example the five competitive forces as D. Passemard and Brian H. Kleiner mentioned to them. They affirm that the competitive strategy should be based on a deep analysis of the structure of the industry and its evolution. In every industry (taken nationally or worldwide), the competitive game can be described through five forces as the following:

In addition, there are other relevant literature like innovation, creation, competition, cooperation, co-option and competitive advantage. Wal-Mart has been becoming national where the management of it has created a competitive advantage task, and it still preserves this competitive advantage. All that are clear for every one when Wal-Mart at the beginning of 1991 had 1,573 stores in 35 state and with expansion planned for adjacent states. Wal-Mart had become the largest retailer and largest discount department store in the united states. By 2006, Wal-Mart had 1,200 discount stores, 1,980 supercenters, 567 Sam's Clubs, and 100 neighbourhood markets throughout all 50 states. Indeed, Wal-Mart prepared several of programs to achieve the competitive advantage for instance embracing the concept of ''green'' marketing. That program offered shoppers the option of purchasing products that were better for the environment in three respects: manufacturing, use, and disposal. Because of a competitive advantage.

Main body:

Wal-Mart have some domestic strategies and programs which were based on a set of two priorities that had guided the firm through its growth years. In the first priority, the customer was featured: ''Customers would be provided with what they want it, all at a value''. The second priority is team spirit that was emphasized: '' treating each other as we would hope to be treated, acknowledging our total dependency on our Associate-partners to sustain our success''. In 2000, according to DSR Marketing System, Wal-Mart become the largest retailer of groceries in the united states, surpassing traditional grocery retailers such as Cincinnati, Ohio-based Kroger. Boise, Idaho-based Albertson's, and Pleasanton, California-based Safeway. Wal-Mart has been competing many firms throughout its long history, according to Jeffrey Klinefelter, retail analyst at Piper Jaffray, estimated about 45% of Target's merchandise, compared to only 30% for Wal-Mart. Wal-Mart was Known as the relentless cost-cutter, but Target was the trendier place to shop and save. This upscale image coupled with management's traditional excellence in running quality department stores gave Target a competitive advantage when competing against Wal-Mart in urban areas. In rural communities Wal-Mart's success often came at the expense of established local merchants and units of regional discount store chains. In many cases, stores such as Coat-to-Coast an Ben Franklin closed on a Wal-Mart announcement that it was planning to build in a specific community. ''Just the word that Wal-Mart was coming made some stores close up'', indicated one local newspaper editor. Wal-Mart has realised the determinants of the competitive advantage in global competition and been understanding of the nature and causes of global competitive advantage. Wal-Mart engaged strategic manoeuvrings in to gain global competitive advantage. According to Hao and Ma, they reveal four major groups of determinants of competitive advantage in the global arena, as following (Figure 2):

Overall, there are many examples of different situations and circumstances of Wal-Mart with others firms which show everyone clearly the competitive advantage. In 1994, Wal-Mart entered the Canadian market with the acquisition of 122 Woolco discount stores from Woolworth Corporation. When acquired, the Woolco stores were losing millions of dollars annually, but operation become profitable within three years. By the end of 2001, the company had 196 Wal-Mart discount stores in Canada. The company's operation in Canada were considered as a model for Wal-Mart's expansion into other international markets. By 2006, the number had grown to 272 discount stores and six Sam's Clubs. With a 35% share of the Canadian discount and department store market, Wal-Mart was the largest retailer in that country. The competitive advantage makes development of Wal-Mart is continuing with the high quality where they follow and apply the principles of quality management which are customer focus, leadership, involvement of people, process approach, system approach to management, continual improvement, factual approach to decision making and mutually beneficial supplier relationships. Wal-Mart entered the European market by acquiring three retail chains. Because of complex local regulations, management felt it would be easier for Wal-Mart to buy existing stores in Europe than to build new ones. The response in Europe to Wal-Mart's entry was immediate and dramatic. Competitors scrambled to mach Wal-Mart's low prices, long hours, and friendly service. Some firms combined to strengthen their operations. For example, France's Carrefour SA chain of hypermarkets combined forces with competitor Promodes in a $16.5 Billion deal. Wal-Mart oved into Germany at the end of 1997 by acquiring 21 stores from hypermarket operator Werlkauf. Also as part of its expansion efforts in Germany, Wal-Mart acquired 74 stores that were a part of the Interspar chain. In China, Wal-Mart decided to consolidate its operations with five stores as joint venture. Analysts concluded that the company was taking a low-profile approach because of possible competitive response and government restrictions. Wal-Mart operated 15 Supercenters , three Sam's Clubs, and one Neighbourhood Market. Wal-Mart created and preserve the competitive advantage where they understood the largest meaning of the innovation, and implement sources of innovation. According to D. Passemard and Brian H. Kleiner, they state that defining the source of innovation is equivalent to describing the ways to create competitive advantages. It is in fact possible to distinguish five main sources of innovation as following:

  • The new technologies;
  • The modification of the demand or a new demand;
  • The occurrence of a new segment;
  • The changes in the costs or the availability of means of production;
  • The changes in the regulation.

As a matter of fact, the creation of a competitive advantage is a tough task, but preserving it is much harder.

The preservation of a competitive advantage depends on three conditions. One depends on the sources of the advantage. There is a hierarchy among the advantages, which can be minor (costs reduction of the work force), or major (possession of a special technology whose obtaining requires a higher skill level. The second determining factor is the number of sources of competitive advantage (the more, the better). The third factor of preservation is related to the continuous effort of modernising and perfecting, every advantage is virtually susceptible of being copied. Then the preservation of the competitive advantage requires the firm to adopt an anti natural behaviour consisting of keeping changing their strategies. Thus, Wal-Mart during its history there are variety of strategies which are applied depending on the period or the situation with the company. In February 2006, after the continuous and huge effort, Wal-Mart acquired majority control of the Centeral Amarican Retail Holding Company, Known as CARHCO. With purchase, Wal-Mart obtained more than 360 supermarkets and other stores in Costa Rica, EI Salvador, Guatemala, Honduras, and Nicaragua. CARHCO's 2005 sales were about $2.2 Billion.

Conclusion ( summary ):

The competitive advantage is constantly one of purposes of any organization. Therefore, BS EN ISO (BRITISH STANDARDS) and others organisations of ISO aim to indentify and meet the needs and expectations of its customers and other interested parties ( people in the organization, suppliers, owners, society ) to achieve competitive advantage, and to do this in effective and efficient manner. According to D. Passemard and Brian H. Kleiner, they point out the evolution of the competitive advantage is a function of the way the firm organises and manages the activities. The functioning of an enterprise may be divided into various activities: Solicitation of the customers by the sellers, maintenance, conception, realisation of new products by the R&D department. Each of these activities creates value to the customers. Then, the final value created is sized by the price the customers accept to pay to get the product or the service. The enterprise is profitable if this value is greater than the global cost. To get a competitive advantage against its competitors, the firm should supply its customers with the same value than the competitors and be more efficient in the production (domination by the cost), or elaborate specific activities that generate a greatest final value and authorise higher purchase prices (differentiation). The developments of the competitive advantage support Wal-Mart stores, Inc., on January 31, 2006, to be structured into three business units, Wal-Mart stores USA, Sam's Club, and Wal-Mart International. The Wal-Mart Stores unit had 3,289 locations and included the company's supercenters, discount stores, and Neighbourhood Markets in the United States, as well as The Sam's Club unit had 567 locations and included the warehouse membership clubs in the United States plus Wal-Mart International had 2,285 locations in 10 countries. The International total was increased through 2006 purchase of majority control of CARHCO with 360locations in five Central America countries. Realising that Target was its strongest U.S. competitor in discount mass merchandising, Wal-Mart's management felt in 2005 that it needed to overhaul its merchandise mix, stores, and image to go after higher-margin, discretionary sales. According to Richard D. Wilding and J. Michael Newton, the y said about the competitive advantage ''It is first necessary to look at the nature of competitive advantage (Figure 1). The objective of a business is to make a profit by delivering more value to a customer at a similar cost to the competition, or the same value as the competition at a lower cost.Value is based on customer perception and is a mixture of tangible and intangible benefits, specific product features and also image, reputation and responsiveness''. As the old marketing saying puts it: "Customers don't buy products, they buy benefits". If a business is very effective it might be possible to achieve differentiation (more value) and cost leadership (lower cost) at the same time.


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