Wal-Mart_Essay

Wal-Mart consists of a chain of large discount department stores and a chain of membership required warehouse stores. Wal-Mart operates within a Related Diversification strategy by operating a number of business units from grocery to pharmacy to a garden centre. They also operate ‘Sam’s Club’ which specialise in supplying small businesses. Profit from each business unit then contributes to the overall profit of Wal-Mart. Related diversified firms are made up of business units that are connected to each other through operating synergies. These synergies consist of the ability to share common resources and common core competencies between business units. Wal-Mart is able to achieve success by related diversification strategy by sharing common resources such as the use of transport of goods to the stores, warehouses for storage and the use of their department stores. The business units are also linked by common core competencies such as their ability to motivate and retain employees which results in high customer service. Wal-Mart have also used vertical integration. For example instead of outsourcing for the transportation for goods and air travel for management they have invested in their own trailor trucks as well as owning 20 aircrafts. This helps to reduce costs which increases profit Wal-Mart is considered the world’s largest public corporation by revenue. They can achieve this by adopting a cost leadership strategy with excellent customer service. Their target market is mainly low to middle income families as well as small business owners for ‘Sam’s Club.’ They have a community focus to provide families with opportunities to live better through the savings they achieve. Due to the large number of individual customers the bargaining power of customers is relatively low. They achieve their competitive advantage through their use of distribution centres which are all located within a days drive of a Wal-Mart store and service 150-200 stores to increase efficiency. Another source is their ability to achive economies of scale through their sheer size and volume of transactions which proves to be barriers to entry for new entrants. This also reduces the bargaining power of any of their suppliers and even gives them the ability to influence prices set by their suppliers due to their size.