Walmart Generic and Intensive Strategies

Walmart is the undisputed leader in the physical retail sector globally. It is a US based brand that derives a substantial part of its net sales from the United States market. However, the company has also maintained a strong presence in the international markets.

In this post, we are going to discuss the generic and intensive growth strategies adopted by Walmart for superior growth.

Walmart is a familiar brand name in several corners of the world. The retail giant has achieved its solid position in the market through a focus on product quality, pricing, marketing and its strong presence in the US and other markets.

The company is very popular among the US consumers. Its popularity mainly rests on its pricing strategy which has helped the brand maintain its leadership in the retail sector.

Michael E Porter’s three main intensive strategies include cost leadership, differentiation, and focus. He has divided the third category into two sub categories that include cost focus and differentiation focus.

Businesses adopt the cost leadership strategy when they believe they can compete on the basis of prices. When they are sure that they can offer products at lower prices compared to their competitors, they adopt the cost leadership strategy. The differentiation strategy is commonly used to create a differentiated identity from the rival brands. It is also a highly profitable strategy in several industry sectors. The third intensive strategy which includes two sub strategies – cost focus and leadership focus targets specific market segments. Companies adopt cost focus when they try to meet the needs of a specific market segment through lower priced items and differentiation focus strategy reaches specific target markets through differentiated products and services.

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Intensive strategies used by Walmart:

Cost leadership:

This is the main intensive strategy Walmart has adopted to achieve growth and maintain its leadership in a highly competitive landscape. While Walmart is not the only cost leader in the industry sector, it is still the most popular one and the one that definitely excels in the art of selling at lower prices among all the US based retailers.

Walmart’s pricing strategy is known as EDLP or everyday lower prices. It offers its customers the lowest prices in the entire market. Compared to its rivals in the physical retail sector, it offers a much larger and diverse array of merchandise at very competitive prices. This has helped the company penetrate the United states market deeper and see an unmatched level of success there. It has also entered several more markets with its promise of everyday lower prices. So, when it comes to savings, customers prefer Walmart over the others. Its large array of merchandise helps it serve the needs of a large and diverse customer segment. The competitive prices offered by Walmart do not just attract the individual consumers and families but a large segment of small and large businesses also prefers to buy from Walmart.

Walmart’s competitive pricing strategy is supported by its large and strong supply chain. It is also the most crucial factor driving the company’s strong and lasting competitive advantage since lower prices will continue to attract more and more customers.

However, a notable fact about Walmart is that lower prices do not signify lower quality. People may come across the same products by the same brand selling at lower prices at Walmart compared to another retailer.

Differentiation: –

Differentiation is the secondary intensive strategy adopted by Walmart. The key thing to note in this regard is that differentiation in the retail sector is not an easy task. There is a high level of competition in the sector and most brands sell a large array of products at competitive prices. So, even a minor level of differentiation matters a lot in terms of marketing and sales.

Walmart has differentiated its brand from the others mainly based on two factors.

The first point of differentiation which is also a core part of its business strategy is its lower pricing strategy. It sets the brand apart from the crowd of players not just in the US but also many more markets. Another point of differentiation that Walmart has adopted to set itself apart from the competition is customer experience. It has always focused on customer service inside its stores. It trains its employees to provide superior customer service. However, the company has also been investing in innovation to continuously improve its service. Its investment in modern technologies have helped it strengthen its competitive advantage and the company has experienced significant growth in sales along the digital channels. Technological innovation has also helped the company strengthen its supply chain capabilities. It has invested in data, automation, robotics and AI to enhance its supply chain capabilities1 so that the company can serve its stores and respond to consumer demand with higher efficiency.

Intensive Growth Strategies adopted by Walmart:-

The intensive growth strategies used by businesses worldwide include market penetration, market development, product development and diversification. These four strategies are commonly used by businesses worldwide to achieve superior growth and grow their market share.

The market penetration strategy involves the deeper penetration of the existing markets and selling more to a brand’s existing customer base. Businesses also enter new markets to sell to new customer segments which is known as market development. It is also a common strategy and several times even well established brands enter new markets to grow their sales and revenue.

Product development is the strategy of developing new products and services for the existing customer base. Businesses may add new products and services to their portfolio which will help increase sales and revenue.

The diversification strategy is also a great strategy for businesses that want to achieve faster and superior growth. As a part of this strategy businesses may enter new fields, many times related to their core business and many times unrelated. Diversification can sometimes also be highly effective at growing revenue but can also be risky at the same time.

Market penetration strategy:

The market penetration strategy involves deeper penetration of the existing markets or selling more to existing customers. This is the strategy that Walmart used in its early years. Its lower costs have helped the company grow sales and build customer loyalty. The company continued to expand its merchandise range to sell more to its customers. Loyal customers purchase more of what they need from the same brand. This is how its market penetration strategy turned it into a successful retail brand. However, while the company continued to improve its merchandise range, it also focused on quality and customer service to build higher loyalty and drive higher sales. As a result, it was able to penetrate the US and several more markets deeper and now it is enjoying the highest sales in the physical retail sector.

Market development strategy:

The market development strategy involves entry into new markets and expanding the customer base. While Walmart is the most successful retailer in the US, it has not remained limited to its domestic market but expanded its presence to several overseas markets. This is also the strategy that the company adopted in its early stage of evolution. However, while the rate of market development might have slowed a lot as the company evolved into being the largest physical retailer globally, it still continues and the brand continues to expand its presence in the unexplored or less explored markets through opening of new stores and acquisition of local brands there. In 2018, the company acquired a majority stake in the Indian digital commerce firm Flipkart which was a part of its market development strategy.

Product development strategy:

The product development strategy is the strategy of developing new products and services for the existing markets and customer base. Walmart has also adopted this strategy to grow sales and revenue.

Walmart’s product development strategy has involved development of private brands for sales to its consumers in the US. Sam’s Club is Walmart’s premium brand that sells a vast range of premium products to its customers.

Walmart has developed several inhouse brands that have seen lots of success. Some of these brands include Great Value, Marketside, Clear American and Sam’s choice. This strategy has also worked in the favor of Walmart since it generates a significant part of its revenue from the private brands. Moreover, the percentage of Walmart customers that prefer to buy its private label brands is more than 80%. There are more than 29,000 products that are included in the private label category of Walmart. These products come under 315 brands in 20 categories2.

The product development strategy particularly works when you have a well established brand and when you have a large base of loyal customers that rely on you. It is why the product development strategy worked in the favor of Walmart. However, its private label brands also sell because the company offers good quality products at highly competitive prices.