They have a reputation for industry leadership, and are widely considered by the public to offer the lowest prices. This message has been consistently reinforced in Wal-Mart's promotions.
Of these advantages, buying power is truly sustainable. Wal-Mart's size gives them this advantage, and there are no serious threats to their size at this time. They were able to achieve their size in an era when the discount retailing business lacked concentration. Now, there is more concentration in the industry and Wal-Mart's size seems defensible over the long-run. Their ability to move volume is not something that their competitors, even large ones such as Target, can match.
Another trait that is a source of sustainable competitive advantage is the Wal-Mart brand. The ubiquity of Wal-Mart means that there are strong associations with the brand. The most important of these is the association with the lowest price. One of the most significant, defining characteristics of the discount retailing business is the low cost proposition it presents to consumers. It is considerable competitive advantage for Wal-Mart to be viewed as the home of lower prices. Yet, this association is so strong amongst consumers that Wal-Mart would need to lose its cost leadership...
Other retailers can develop a culture of cost reduction. Other retailers can develop similar it systems and satellite networks. They can replicate Wal-Mart's logistics systems as well, and organize their stores just as effectively. With enough care and money, most of the tactics Wal-Mart uses are replicable. But Wal-Mart builds its success not through excellence of one or two things, but of excellence at many things. This is where Wal-Mart has been able to find differentiation in a largely undifferentiated industry.
But while individually none of these advantages in inherently sustainable, Wal-Mart does derive sustainable competitive advantage from the package of all of them. Wal-Mart is, operationally, stronger than its competitors on almost every level. A competitor may match Wal-Mart on one or two operational aspects, but they would have difficulty matching all of them. Wal-Mart has built excellence into so many areas, that overall they do have a sustainable competitive advantage. It would be very difficult, and almost certainly cost-prohibitive, for any competitor to best Wal-Mart in all areas.
