Walmart Inc. has been successful in the retail industry due to its overall low-cost provider strategy. According to Gamble (2019), cost leadership is one of the five generic strategies defined by Michael Porter. Walmart’s low-cost provider strategy is the main selling point of its retail business. Greiner and Julian (2020) argued that companies that follow a cost-leadership approach focus on reducing costs to offer their product at the lowest possible price. Thus, Walmart employs various approaches to maintain the overall low prices of the products that it sells to its customers. For instance, Walmart relies on process efficiency and management approaches such as reduced human resource spending. Also, the company has embraced automation and related technologies. While pursuing an overall low-cost strategy is good for Walmart, it is also associated with low product differentiation. Walmart's retail services are common and poorly differentiated from other competitors in the retail services industry. Also, the low-cost provider strategy adopted by Walmart involved minimal market segmentation. For instance, Walmart serves every customer in all segments of its target markets, which aligns with the company's corporate mission and vision of striving to be a leader in the world retail market.
Walmart's overall low-cost provider strategy is guided by its slogan, which says "Save Money. Live Better." A company that follows an overall low-cost strategy appeals to its customers by underpricing its competitors (Gamble, 2019, p. 89). As such, Walmart has been underselling its rivals in the retail industry to appeal to retain its global share of the retail market. Greiner and Julian (2020) stated that consumers tend to become cautious in their spending when the economy is slow and it makes a certain sense to offer products at a reduced price to retain more customers. Therefore, Walmart's overall low-cost strategy is appealing to more consumers in the current COVID-19 times as more people have been rendered jobless and the economy is currently slow. Millennial customers are interested in convenience and buying low-cost products that give them value for their money. With its large assortment of products, Walmart meets the needs of millennial customers from the grocery to entertainment as well as other items. The idea behind the company's low-cost strategy is to attract and retain customers by keeping them engaged with shopping convenience and product discounts.
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Walmart's obsession with lower prices has greatly grown with time and the company is currently looking for a larger market share through more growth in America and abroad. As a result, the company has started investing in improved customer experience. Nevertheless, how Walmart has managed to maintain lower prices for its products has been the biggest challenge for its main competitors in the retail industry. The low-cost strategy has become Walmart's main competitive advantage over its competitors as it has shown a greater capability of reducing prices while at the same time generating significant revenues consistently over a long period. For instance, the company generated net revenue of $514 billion in 2019 (Walmart Releases Q1 FY20 Earnings, 2020). Walmart has grown its distribution network to bring more convenience to online shoppers. According to Greiner and Julian (2020), firms seek to cut costs to survive in the market and reduce product prices to appeal to cost-conscious consumers during periods of an economic slowdown. Companies with a cost leadership strategy such as Walmart have an advantage over others in the current times since they are structured for an overall low-price approach ( Greiner & Julian, 2020). Therefore, Walmart’s overall low-cost provider strategy is expected to see the company survive through the COVID-19 pandemic and post good financial results compared to its main competitors in the retail industry.
References
Gamble, J., Peteraf, M., & Thompson, A. (2021). Essentials of Strategic Management (7th ed.). NY, NY: McGraw-Hill.
Greiner, M. & Julian, S. (2020, July 13). “Avoid Making this Strategic Mistake in a Recession.” Harvard Business Review . https://hbr.org/2020/07/avoid-making-this-strategic-mistake- in-a-recession
Walmart Releases Q1 FY20 Earnings. (2020). Walmart . https://corporate.walmart.com/newsroom/2019/05/16/walmart-releases-q1-fy20-earnings
