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Competitive advantage through distribution

Competitive Advantage through Distribution

1) What is your opinion on the questions below?

Wal-Mart is typically characterized as offering a "distribution advantage" in comparison to other retail chains. What are the sources of that advantage? How might an independent grocer or hardware store do to establish and maintain a competitive position in a market where Wal-Mart is a dominant force?

2) What is your opinion on Amber's Answer to the above questions?

Amber's Answer: Walmart makes its money from buying direct from the manufactures; they have taken out the middle man for most of their products. They buy in bulk to accomodate all of their stores and this also varies depending of the diversity of the location. Walmart buys according to its environment and that is one of the things that keep them in business. Also, the fact that some Walmart's are a "one stop shop" has helped them build up their reputation. Everyone wants to just have to into one store to get any and everything that they need; in addition to being able to order online when needed. Plus teaming up with Sam Club (another "one stop shop" benefits both Walmart and customer). To add, Walmart has a layway, price match, they except welfare payments, and great Black Friday advertisements.

Walmart also has the reputation of opening up in very small towns where the population is low. Although this may seem like a downfall, this process helps their strategy. By Walmart doing this, they are primarily the only main shopping store within miles, but have everything you need. This also helps bring in more construction because companies like to buy land build new subdivisions and housing developments. And what better way to advertise for economic growth than to say that Walmart is within the expansion area considering that Walmart is a leading department store all over the world.

Also, depending on the loyalty of customers, Walmart can put a lot of small town business owners out of business. This can really be bad for a business owner but great for the customer because they may be able to get a better price for a certain product. Some loyal customers, though, may want to continue to support small businesses out of habit and loyalty to that business owner.

I shop at Walmart all the time and the gimmicks of putting new found products in the aisles and roll back prices always lure me. You have always heard stories such as going into Walmart to buy toilet tissue only but coming out with a 70" television and you forgot to buy the tissue all together. Or going in for one thing and coming out spending over $100 but you're not sure how it happened. Walmart definitely has an impact on one's wallet; sometimes in a good way and sometimes in a bad way.

Solution Preview

1) What is your opinion on the questions below?

Wal-Mart is typically characterized as offering a "distribution advantage" in comparison to other retail chains. What are the sources of that advantage? How might an independent grocer or hardware store do to establish and maintain a competitive position in a market where Wal-Mart is a dominant force?

For the smaller store or independent grocer/hardware store, the focus needs to remain on obtaining efficient, low-cost suppliers. The problem is that when costs drop, quality is often compromised. In the case of Wal-Mart, they are a dominant force and have power to control. Wal-Mart has created an integrated strategy that has allowed them to remain an industry leader. The main sources of Wal-Mart's advantage include a combination of supply, distribution, and marketing strategies that all work together to increase sales. Wal-Mart's goal is to continue being the low-cost leader and has structured its strategies around this philosophy. As such, they have streamlined their processes that involve distribution in order to remain optimal in each area, which includes inventory, distribution, and all other areas. This has allowed Wal-Mart to maintain continued growth in the industry.

2) What is your opinion on Amber's Answer to the above questions?

Amber's Answer: Walmart makes its money from buying ...

Solution Summary

This solution discusses the distribution advantage that Wal-Mart has created in their operations, allowing the store to maintain their dominant position.

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