Case Study #2: Wal-Mart
Wal-Mart’s competitive environment is quite unique.
Although Wal-Mart’s primary competition
comes from general merchandise retailers, warehouse clubs and supermarket retailers also present
The discount retail industry is substantial in size and is constantly experiencing
growth and change.
The top competitors compete both nationally and internationally.
There is extensive
competition on pricing, location, store size, layout and environment, merchandise mix, technology and
innovation, and overall image.
The market is definitely characterized by economies of scale.
vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping.
scale functions such as these give the top competitors a significant cost advantage over small-scale
In general merchandise retailing, Wal-Mart’s primary competitors are Target and Kmart.
superstores such as Circuit City and Bed, Bath, and Beyond, also provide retail competition.
found that the majority of respondents favored Wal-Mart over stores like Target and Kmart.
claimed Wal-Mart offered lower prices, better variety and selection, and good quality.
The needs of
consumers is an important economic feature in all competitive environments.
What attributes (price,
variety, quality, etc.) prompt buyers to choose one retailer over another is very important in the competitive
In the warehouse segment, Wal-Mart’s Sam’s Club competes harshly with Costco.
fewer warehouses but greater sales and revenues.
Costco customers also shop at Costco more frequently
than Sam’s Club customers and, on average, spend more each visit as well.
Costco’s dominance may be
the result of better innovation.
Costco offers luxury items and was the first to sell fresh meat and produce,
This is important because innovation is a key factor in assessing competitors in an industry.
Last, Wal-Mart is also in direct competition with large supermarket retailers.
in the grocery industry is quite populated and Wal-Mart poses a serious threat to many supermarket
retailers, both large and small.
Kroger, Albertson’s, and Safeway are all finding it very difficult to compete
with Wal-Mart’s low prices.
Because the industry is so crowded, even the large supermarket retailers are
seeking to differentiate themselves in order to stay afloat.