Introduction

Walmart is seen as a leader in the retail space, which can be merited from their
performance and how they’re positioned with their competitive advantage. The following
essay captures Walmart’s performance and determines whether this success is
sustainable, by looking closely at their competitive advantage. Walmart isn’t without
challenges. In evaluating Walmart’s competitive threats, competitive advantage is
continuously evaluated for sustainability.

Walmart’s Performance

Walmart’s Q4, 2017 financials showed a maintained profit margin of 24%, with a total
revenue of approximately $480 million across operations, for years prior to and after
Robert Grant’s case analysis of Walmart in 2015. (Grant, 2016, p.492) J. B. Barney
further presents Walmart’s growth as having “consistently earned a profit on sales over
twice the industry average”, despite challenges. (Barney, 2011, p.116) Barney’s
suggestion of challenges are the constant threats within the retail industry. Despite this,
the statement observes Walmart as profitable within the competitive market.

Marketline’s SWOT analysis of Walmart shows strength in their strong market position,
improvement in inventory turnover ratio, and customer-centric business operations.
Conversely, Walmart’s weaknesses are with their legal proceedings and weak liquidity
position. Marketline outlines Walmart’s threats as intensely competitive with
competitors, like Amazon, along with threats from increase in manpower costs, and
foreign-exchange risks. Opportunities for Walmart are in more international expansion,
specifically in countries where they have no presence, while maximizing sales in their
US and e-commerce businesses. (Marketline, 2017, pp.3,4)

In Grant’s performance comparison, Walmart is positioned with positive results as a

publicly-traded company, compared to competitors such as Costco and Target. Walmart
has had outstanding performance with consecutive growth; however, with companies
exiting the market, like Sears, and online shopping conglomerates entering the market,
like Amazon, Walmart’s future will require further observation. (Grant, 2015, p.495)

Walmart’s Success

Walmart’s success is attributed to both industry attractiveness and competitive

advantage. One of the success factors is business agility, or reacting to turbulence in a
swift manner, which can help sustain competitive advantage beyond the short term.

When reviewing industry attractiveness, Walmart initially capitalized on the lack of

competitors in the discount retail space. They continue to distinguish themselves from
new entrants, by evolving the Walmart retail experience, such as the Walmart
Supercenter and Distribution Centres. The latter allows them to establish a significant
pricing advantage, in addition to being able to settle in rural locations. However, this
only leads to short-term, competitive advantage, as these are easily imitable.

S.A. Lippman and R.P. Rumelt make reference to casual ambiguity (Lippman, Rumelt,
1982), which gives Walmart an advantage over their competitors. There is nothing
unique about Walmart as an organization. They were able to gain a short-term,
competitive advantage by building stores in rural locations. The development of
Walmart’s Distribution Centres allows for the success of these isolated stores.

Lippman and Rumelt further identify how casual ambiguity creates uncertain imitability.
This factor is important in an industry with no patentable technology or uniquely
identifiable intellectual property. A key factor that drives Walmart’s success is their
human resources and the “Walmart Associate”. This small-town, customer service-
oriented method, established in Walmart’s infancy, is still seen today.

Walmart’s Competitive Advantage

Walmart’s competitive advantage can be defined by their distinctive resources and

capabilities. These are outlined as centralisation, in-store, marketing, technology,
human resources and management.

Centralisation

Centralising is demonstrated with employee involvement in supplier management.

Suppliers negotiate deals with buyers at Walmart’s headquarters. Walmart’s massive
buying power allows them to bargain suppliers down to razor-thin margins.

Walmart’s efficient hub-and-spoke system has established the organization as the

world’s leader in distribution and warehousing logistics (Grant, 2016, p.496). Coupling
the distribution system with their logistical, superior transportation and back-hauling
freight capabilities gives Walmart speed and efficiency.

In-store

In-store includes: organizational culture, brand value, RFID systems, and

inventory. Walmart’s distinctive capability is their strong customer service focus. The
culture is built on a customer is always right, no-questions asked policy. This maintains
a pleasing shopping experience. (Grant, 2016, p.496-497)

Marketing

Walmart’s marketing is built on the strategy of “everyday low prices”. Walmart does not
engage in promotional price-cutting and prides in having the lowest advertising-to-sales
ratio among their competitors.

Technology
Walmart invests many resources into internalizing, rather than outsourcing Information
Technology. In 1984, Walmart launched their own $24-million satellite. By May 2015
Walmart had acquired 14 technology-based companies.

Walmart has split their IT function into two groups: Walmart Technologies and Global
eCommerce. In the 1990s, Walmart created Electronic Data Interchange (EDI) to
collaborate with their suppliers on sales and deliveries. EDI provided the capability of
monitoring point-of-sale data allowing suppliers to monitor sales and inventory levels on
a store-by-store basis and replenish inventory as needed. (Grant, 2016, p.495)

Human Resources

Human resources is seen in the employee culture and the previously mentioned
“Walmart Associate”. Employee relationships are built around respect, high
expectations, and close communications. (Grant, 2016, p.498) This has created high
levels of enthusiasm, involvement, and empowerment that is unusual for large retailers.

Management

Management style is the level of engagement. In any week, regional Vice Presidents
will spend four days visiting stores and two days visiting corporate offices. This highly-
engaged, on-the-ground, management style allows for quick decisions while containing
in-store time to two days versus the competitor’s ten days. (Grant, 2016, p.500)

Grant (2016) states, “Walmart’s competitive advantage rests upon four mutually
reinforcing capabilities: aggressive vendor management, point-of-sale data analysis,
superior logistics, and rigorous working capital management.” (Grant, 2016,
p.125) Table 1 further demonstrates Walmart’s distinctive resources and capabilities
using the VRIO framework.
Table 1 – Walmart’s VRIO Framework

Resource_/ Strength_/ Competitive

Valuable Rare Imitable Organization
Capability Weakness* Implications*

Aggressive
vendor Yes Yes Yes Yes SSDC SCA
management

Exceptionally
high
Yes No No No Strength CP
bargaining
power

Superior
Yes Yes Yes Yes SSDC SCA
logistics

No-questions
Yes No No No Strength CP
asked policy

Everyday low
Yes No No No Strength CP
price slogan

Point-of-Sale
Yes Yes Yes Yes SSDC SCA
Data analysis

Employee
Yes No No No Strength CP
engagement

Rigorous
working
Yes Yes Yes Yes SSDC SCA
capital
management

*_SSDC: Strength and sustainable distinctive competence

*_SCA: Sustained competitive advantage
*_CP: Competitive parity