Companies have defined strategies geared at helping them realize their set goals and targets. This is evidenced by the diversity in the approaches adopted by Wal-Mart and Tesco. Through the act of lowering prices, Wal-Mart attained the cost advantage of increasing its stock volume showing that the strategy adopted was a success. On the other hand, Tesco boasts of its cost efficiency as the key strategic capability as shown in this study.
Businesses Competitive Strategies
Wal-Mart and Tesco
Explain why the strategies, which they have chosen, are appropriate and describe the capabilities and competencies, which would be required for each of the two business units?
Wal-Mart strategy to maintain low prices has resulted coveted success comes and the eventual use as a cost advantage of increasing its stock volume. This has resulted in low costs and increased prices. This cost-oriented focus has been logistically useful. The company is leading the path of developing sophisticated procedures that drive down the cost of logistics early enough compared to other companies. Wal-Mart has enhanced these capabilities and systems in regions all over the country to a point that it is impossible to slow down or stop the rural-based chains (Langabeer & Napiewocki, 2011). This strategy has enabled different markets to have access to products produced by Wal-Mart: they can easily create new services and products. The clear idea of distinctive brands focused on identified market segments is part of Wal-Mart's core capabilities and competencies: they can enter into the non-food and food retailing markets. With the difficulty of being imitated by competitors, the company's core competencies are competitively unique. This indicates that product differentiation is essential. For instance, the company has received recognition as the best food retailer company in the U.S. (Barrar, & Gervais, 2006).
There is a good structure at Wal-Mart, which collaborates with the systems thus empowering a strategy of low prices. The company's management structure is based on an efficient design, which enables it to engage in the elimination of regional offices and operations based at home. Wal-Mart operates on an efficient structure of management that enables them to do away with their regional offices (Rainer & Cegielski, 2011). They plan and carry out all their operations from their home office. Using this structure, Wal-Mart has saved billions of dollars every year. When the company engages in combining structure, systems, and sales, driving traffic through convenience and strategic location of store, it attains oiled and highly effective company that cuts costs to a minimum. This is then transferred to the end consumer thus fulfill the company's strategy (Hoffman, 2000).
Tesco has employed the differentiation strategy providing products and services with unique features thus adding value to the customer. The company has created brand loyalty in their products and services thus the inelastic prices to the end consumer. Volumes of technology offerings, product, customer service, and special features are the popular strategies if attaining differentiation. Tesco has pursued dual strategies of differentiation and cost leadership that has resulted in the increased attention on quality customer service. The company's dual strategy is revealed in the development of financial services, self-service outlets, aggressive direct promotions and marketing (Evans, 2010).
In most cases, key success factors, critical resources, and core competencies are essential for the attainment of a competitive advantage. Tesco boasts of its cost efficiency as the key strategic capability. Food industries depend on economies of scale in their marketing and distribution. Tesco enjoys 31% market share with a strategic impact on cost by scale economies and the experience impact (Wheelen & Hunger 2012). This has been brought about by the huge sales volumes, the company's strong power to bargain, their ability to spread overheads and specialized and divided workforce. Large volumes of sales benefits Tesco in the experience curve. This means that improvement in the efficiency of labor, technology oriented learning, specialization, enhanced application of equipment and standardization (Hill, & Jones, 2010).
Tesco is aware that it is necessary to have capabilities, which must be valued by their customers if it has to achieve a competitive advantage. For this reason, the company's core competencies are build on product range, customer service and product value. Concerning their service, Tesco has emphasized on logistics and customer oriented environment. The prevailing relationship between Tesco and their suppliers has originated from deals founded by procurement extending to integrated management of supply chain (Day, 2009). There is a change in power balance; retailers have become stronger. Tesco has developed systems that directly drive the production lines. In addition, the suppliers must transport the stocks. From the angle of the supplier, this relationship is unique (John & Allen, 2008). Concerning the customer friendly environment, all employees at Tesco have been trained to be helpful and behave courteously when dealing with customers. Tesco's checkout has earned them a plus; competitors in the industry have failed to have (Botten & McManus, 1999).
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