Case 8: Sustaining Competitive advantage
Question 1: What are the isolating mechanisms preserving Wal-Mart’s competitive advantage in the US market? (use readings case 7)
Sam Walton was the founder of Wal-Mart. Sam had the idea of reaching small towns in rural areas where the people had to travel many miles to do their shopping. This was a big market that was initially ignored by the major players before Wal-Mart. Eventually Wal-Mart grew to become market leader among the US discount department stores. The core of their success was defined by their technological superiority and the way Wal-Mart treats her associates (customers, employees and suppliers).
According to the resource-based theory of a firm, there are two
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Wal-Mart trucks bring the merchandise to the distribution center, where it is sorted for delivery to the Wal-Mart stores. 80% of the purchases for the Wal-Mart stores were shipped from its own 27 distribution centers. Also because of their Technological superiority, Wal-Mart has access to a lot of detailed, real-time information. This way, Wal-Mart store managers have full access to real-time inventory data. Suppliers have a direct communication with Wal-Mart concerning deliveries, etc. Employees and top management are in close contact through satellite technology. Many insights and opportunities can be discovered in the aggregated customer data. This superior management of information sets Wal-Mart apart from competitors in the US and gives Wal-Mart the competitive advantage to set very low prices. 3 Market size and scale economies: In the beginning, Wal-Mart was the underdog in the market. So it surely did not benefit from economies of scale. Now Wal-Mart is market leader in the US and definitely has economies of scale. But, in my opinion, this may be explained better through other isolation mechanisms.
4 Intangible Barriers to Imitation: a Causal ambiguity: causal ambiguity can be explained in situations where the causes of a firm’s ability to create more value than its competitors are obscure and only imperfectly understood. F.e. Tacit knowledge. Employees over time develop certain skills that may be specific for a certain company. Explaining those