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.