Wal-Mart's Cost Leadership Strategy
ICMR HOME | Case Studies Collection
Case Code : BSTR096
Case Length : 17 Pages
Period : 1962 - 2004
Organization : Wal - Mart
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
To download Wal-Mart's Cost Leadership Strategy case study (Case Code: BSTR096) click on the button below, and select the case from the list of available cases:
For delivery in electronic format: Rs. 500;
For delivery through courier (within India): Rs. 500 + Rs. 25 for Shipping & Handling Charges
» Business Strategy Case Studies
» Business Strategy Short Case Studies
» View Detailed Pricing Info
» How To Order This Case
» Business Case Studies
» Case Studies by Area
» Case Studies by Industry
» Case Studies by Company
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
Wal-Mart's Aggressive Pricing
On July 2, 1962, Samuel Moore Walton (Walton), a merchant with over 15 years of experience in retailing, set up his first discount store in Rogers, a small town in the state of Arkansas, US. The store offered a wide variety of branded merchandise at a competitive price.
During the initial years, Walton focused on establishing new stores in small
towns, with an average population of 5,000.
These towns were largely neglected by leading retailers like Sears Roebuck & Company, K-Mart and Woolco, which concentrated more on larger towns and big cities. In his efforts to attract people from the rural areas to his stores, Walton introduced the concept of every day low prices (EDLP).
EDLP promised Wal-Mart's customers a wide variety of high quality, branded and unbranded products at the lowest possible price, offering better value for their money. Wal-Mart's advertisement describing EDLP said, "Because you work hard for every dollar, you deserve the lowest price we can offer every time you make a purchase. You deserve our Every Day Low Price.
It's not a sale; it's a great price you can count on every day to make your dollar go further at Wal-Mart."4 From the very beginning, Walton made efforts to procure products at the lowest prices possible from manufacturers.
He always shared these savings with customers by charging them lower prices, thus giving them the maximum value for their money. Wal-Mart's products were usually priced 20% lower than those of its competitors. Walton's pricing strategy led to increased loyalty from price-conscious rural customers. It helped the company to generate more profits due to larger volumes. Explaining his pricing strategy, Walton said, "By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume."5 EDLP was extremely attractive to rural customers and emerged as the key contributor to Wal-Mart's growth over the years...