Wal-Mart is able to sell merchandise at low prices every day. This is made possible by its large size which enables the company to take advantage of economies of scale in its operations and more so in purchasing. The large size of the company also gives it bargaining power over the suppliers ensuring they supply the company at prices that are lower than those the competition is supplied with. Technology: Wal-Mart is the industry leader in technology utilization. This ensures the highest levels of efficiency which in turn reduces the level of inventory. Technology reduces shrinkage and other forms of loss while at the same time it helps the company in forecasting, planning, replenishing and shipping applications. The technology connects the company with suppliers which enables the suppliers to keep track of the products they supply so that they are able to replenish in time.
Store formats: Introduction of supercenters was a first for the company. This is because it enables the company to meet a variety of the customers need at one-stop. A customer can go to the bank, go to the saloon, and do shopping all under the same roof. Introduction of neighborhood markets is another innovative concept and Sam's warehouse. Ability to keep employee costs at the minimum: Wal-Mart's concept of employing temporary employees who are as a policy not allowed to join trade unions ensure that the company costs on staff remain low. This is because non-unionized employees are paid less and at the same time the company does not incur expenses related to health care and pensions.
How sustainable are those advantages? The advantages are fairly sustainable though they are likely to come under intense pressure from competitors as they play the catch up and from trade unionist and governments on employment. The fundamentals for sustaining low pricing remain strong. The company will in the foreseeable future remain ahead of the competition when it comes to technology. The superstore format is also not likely to be challenged because it would require the competitors' space for expansion which they had not factored in building their current stores unless they move the location which is costly. The one advantage which is likely to come under close scrutiny is the employee policy. Many governments abroad are likely to follow in China's footsteps in demanding that the company allow its employees to join trade unions. This is likely to escalate labor related costs.
How transferrable are those advantages as Wal-Mart moves into new formats and especially into new international locations?
Wal-Mart has been quite successful in transferring its home advantages to international locations. The secret seems to lie on the fact that the company does not transfer these advantages to international locations blindly but it first carries out a thorough market research which informs what to export to the new markets, what to change to conform to the realities in the new markets and what to incorporate from the new market to ensure success.
The study shows the company does not have a uniform way of operating in all countries but rather general principles that are adapted to the market of operations. For example the employees in China are unionized while in Japan as much as 80% are temporary staff. While in Japan it adopted the name of the supermarket it acquired owing to its popularity, in Indonesia it exported everything as it is in the United States. The advantages therefore are transferable to the international locations to the extent that they can be moderated to suit the realities in the specific location.