The paper "Strategic Management in Wal-Mart Stores Inc" a good example of the management case study. These days, the firm's profitability according to Biase (2015, p. 40) is determined by the industry attractiveness wherein it operates. Although the industry can have profitability that is below-average, a company that is positioned optimally may get superior returns. In view of this, companies’ utilizing cost leadership strategy as well as those using the differentiation strategy has one thing in common: both groups seek to attract customers. Such efforts to become attractive to broad markets may be compared to strategies, which entail targeting potential customers from a fairly narrow niche.
In cost leadership, Wanjuki and Ombui (2013, p. 12) posits that the goal is to become the industry’ s lowest-cost producer, and this was traditionally achieved through large scale production that facilitated companies to exploit economies of scale. Differentiation strategy, on the other hand, is considered as a broad scope strategy for the reason that the company anticipates that it's business differentiation strategy will attract a wider market portion. Novel concepts allowing for differentiation may be protected by means of intellectual property rights such as patents; still, patents are temporarily making the organisation’ s idea that provides them with the sought-after competitive advantage to be in danger of being copied by the competitors.
Using Wal-Mart as an example the essay explores the possibility of a firm to pursue both cost leadership and differentiation strategies and be successful. Furthermore, the essay will discuss the implications of Porter's (1980) stuck-in-the-middle hypothesis. Discussion For years, Wal-Mart Stores Inc. has been successful thanks to its everyday strategy of lowering the prices so as to attract customers.
Basically, this strategy was espoused with the intention of offering products consistently at a lower price as compared to the competitors, instead of depending on sales. The success of both cost leadership and differentiation strategies is attributed mainly to Wal-Mart’ s efficient as well as a large scale supply chain. In essence, Wal-Mart sources its products from low-priced local suppliers as well as from cheap foreign markets. This has enabled the company to sell its items cheaply and to make a profit from its high volume sales. Wal-Mart’ s supply chain is incredibly managed, and the company utilised the most consistent supply chain management system that is exceedingly effective since nearly all product data are tracked to and from the producer, warehouse, as well as the store shelves.
Wal-Mart’ s supply chain system efficiency has helped the company to save a lot of money, and importantly, it prevents losses brought about by unreliable product management. Through the strategies, Wal-Mart has successfully generated surplus, which is always reinvested in constructing facilities, procuring contemporary business-related equipment as well as integrating the existing systems with the state-of-the-art technology (Awade, 2014, p. 700).
Such reinvestments have enabled Wal-Mart to maintain its position of cost leadership. According to Baroto et al. (2012, p. 122), the strategy of cost leadership is a set of action taken with the intention of producing products or services with characteristics, which satisfy the needs of the customers at a cheap price, as compared to competitors’ products. In this case, Wal-Mart through cost leadership tried to achieve competitive advantage through realising the industry’ s lowest cost. The focus during the implementation of the cost leadership strategy according to Porter (1980) is on the stringent efficiency as well as cost control in every field of operation.
As mentioned by Baroto et al. (2012, p. 122), a firm seeking to pursue the cost leadership strategy intends to achieve its offer at a cost that is possibly lowest. In view of this, the cost leadership competitive advantage is realised by carrying out crucial value chain activities at a cheaper price as compared to the competitors. Basically, the strategy of cost-leadership, as stated by Baroto et al. (2012, p. 122), tries to supply a high-volume, standard product at a price that is more competitive to the customers.
That is the reason why cost leadership strategies are desired in developing economies like China, Malaysia, Indonesia, and India where labour cost is low and, therefore, the cost of production is lower.