by Question:
Wal-Mart’s competitive advantage was based on a business model targeting small southern towns and suburban locations. Wal-Mart grew quickly by pricing its products lower than those of local retailers, often putting them out of business. The company also innovated in information systems, logistics, and human resource practices. These strategies resulted in higher productivity and lowered costs compared to rivals, which enabled the company to earn a high profit while charging low prices. In addition, Wal-Mart led the way among U.S. retailers in developing and implementing sophisticated product tracking systems using bar-code technology and checkout scanners. This information technology enabled Wal-Mart to track what was selling and adjust its inventory accordingly so that the products found in each store matched local demand, thereby avoiding overstocking. Concerning human resources, Sam Walton believed that employees should be respected and rewarded for helping to improve the company’s profitability. By the time the 1990s came along, Wal-Mart was already the largest seller of general merchandise in the United States.
(a) Demonstrate the role of strategic leadership in creating and sustaining a competitive advantage for superior performance in a firm.
(b) Identify and elaborate on the competitive advantage Wal-Mart pursued to generate above-average profitability and profit growth.
Answer:
(a) Strategic leadership plays a crucial role in creating and sustaining a competitive advantage for superior performance in a firm. In the case of Wal-Mart, the company’s founder, Sam Walton, was a strategic leader who understood the importance of innovation, cost efficiency, and human resource management in achieving a competitive advantage. He developed a business model that targeted small southern towns and suburban locations, where he could price products lower than local retailers, often putting them out of business.
Walton also emphasized the importance of information systems, logistics, and human resource practices to improve productivity and lower costs. He invested in sophisticated product tracking systems using bar-code technology and checkout scanners to track what was selling and adjust inventory accordingly. This enabled Wal-Mart to match products found in each store with local demand, avoiding overstocking and minimizing costs.
Moreover, Walton believed that employees should be respected and rewarded for helping to improve the company’s profitability. He developed a culture of inclusiveness and accountability, where employees were empowered to contribute ideas and suggestions to improve the business. This created a motivated workforce that was committed to delivering high-quality customer service and contributing to the company’s success.
In summary, strategic leadership played a critical role in creating and sustaining Wal-Mart’s competitive advantage. Sam Walton’s focus on innovation, cost efficiency, and human resource management allowed Wal-Mart to outperform its competitors and achieve superior performance.
(b) Wal-Mart pursued several competitive advantages to generate above-average profitability and profit growth. The company’s competitive advantage was based on a business model targeting small southern towns and suburban locations, where it could price its products lower than local retailers, often putting them out of business. Wal-Mart also invested in information systems, logistics, and human resource practices to improve productivity and lower costs, enabling the company to earn a high profit while charging low prices.
One of Wal-Mart’s most significant competitive advantages was its investment in information systems. The company was a leader in developing and implementing sophisticated product tracking systems using bar-code technology and checkout scanners. This enabled Wal-Mart to track what was selling and adjust its inventory accordingly, so the products found in each store matched local demand, thereby avoiding overstocking.
Wal-Mart also invested heavily in logistics, developing a highly efficient supply chain that minimized costs and allowed the company to pass on savings to customers. The company’s logistics system was so effective that it could transport goods from suppliers to stores in as little as 48 hours, reducing the need for costly inventory and storage space.
In addition, Wal-Mart’s human resource practices were a critical competitive advantage. The company believed in treating employees with respect and rewarding them for helping to improve profitability. Wal-Mart developed a culture of inclusiveness and accountability, where employees were empowered to contribute ideas and suggestions to improve the business. This created a motivated workforce that was committed to delivering high-quality customer service and contributing to the company’s success.
Overall, Wal-Mart pursued several competitive advantages that enabled it to generate above-average profitability and profit growth. The company’s focus on pricing, information systems, logistics, and human resource management allowed it to outperform its competitors and achieve superior performance.
