1. Wal-Mart has successfully employed the cost leadership strategy throughout its existence. The strategy utilizes low prices every day to attract and retain customers. The premise underlying this strategy is offering products at cheaper prices compared to the company’s competitors on a consistent basis. This method of consistently offering lower prices has proven to be more effective when compared to periodic sales. The company is able to achieve offering goods at such low prices because of its economies of scale. The company also purchases its products from relatively cheap suppliers in both domestic and foreign markets. The company makes high profits off thin margins at a high volume. The bargaining power of its suppliers is very low and the company is able to pass the savings onto its customers. In addition, Wal-Mart is very effective at managing its supply chain. The company ensures that it can track all of its products’ data including its manufacturer, and store shelf (Walton, 2014).
2. The Boston Consulting Matrix
The Boston Consulting Matrix is specifically designed to increase the chances and opportunities of a multi-divisional firm to formulate strategies. The matrix allows the company to manage its business portfolio by assessing its market share position and the growth of each division relative to the industry’s growth rate. The model is also very simple to understand and apply. If a company is able to advantageously utilize the experience curve then it will be able to manufacture products at a low price. This low price will enable the company to get an early market share.
However, there are some disadvantages to this matrix. The matrix ignores the small competitors who have the potential for fast growing market shares. The matrix also ignores the synergies or connections between different business units. There is also a problem with getting data on market share and growth.
Walton, S. (2014). Wal-Mart’s Cost Leadership Strategy. Retrieved on 20/10/2015 from http://www.slideshare.net/ashamsvk/walmarts-cost-leadership-strategy