Wal-Mart Memo - MEMORANDUM TO Isin Guler FROM Josh Kahn...

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MEMORANDUM TO: Isin Guler FROM: Josh Kahn DATE: September 16, 2008 RE: Wal-Mart Case Analysis The purpose of this memo is to apply the resource-based view to analyze Wal-Mart Stores in 2003 and identify the factors that could contribute to sustained competitive advantage. Industry Profitability The oligopolistic industry that Wal-Mart operates in is profitable. The high barriers to entry, based on brand loyalty, capital intensive entry, and exclusive contracts with suppliers, have kept the industry very concentrated. As evidence of this claim of profitability, Exhibit 8 estimates that discount stores have a positive EBIT margin and revenue growth. Of the three discount retailers identified, Wal-Mart and Target both had positive net incomes in 2003. The sum of the three discount retailers’ incomes for 2003 (which is representative of the industry) is nearly $30,000. Wal-Mart’s Strategy Wal-Mart bases their business on a cost leadership strategy, which is reflected in their marketing slogan “Always low prices.”
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