Wal-Mart Stores Inc., the world’s biggest retailer, is spending a lot
of money on lowering prices to beat competitors such as Target Corp., Amazon.com, and Kroger Co. In fact, Wal-Mart’s
effort to defend its low-cost reputation is helping extend one of the longest
food-price declines in decades in the United States.
The company’s objective is to
set strategic price drops on food and household goods in its U.S. stores to
overcome its rivals. Although Wal-Mart’s strategy is eating into its own
profit, the company keeps stealing market share. Yet, Wal-Mart’s renewed
focus on lowering prices is hurting the nation’s biggest supermarkets.
Supermarket chains such as Kroger and Target are trying to turn around the struggling grocery
business. In fact, they keep on investing millions of dollars in online sales
and price cuts to get rid of the problem, but they have not been successful at
all.
Relevance to Marketing:
Wal-Mart’s strategy of
lowering prices is hurting the country’s biggest supermarket chains. In effect,
operating profits for Wal-Mart’s competitors declined about 5% last year. This
situation helps Wal-Mart into beating competitors to attract more customers and
keep increasing the company’s sales after its tremendous price cuts. The
company’s strategy is a good example of the marketing concept as Wal-Mart keeps
on investing to get rid of its rivals and make the company more profitable in
the near future. In fact, Wal-Mart has been fighting its competitors on price
since its founding in the 60s. The company believes in the idea that by cutting
prices, their market share will certainly increase as well as their sales. Actually,
this has been the case as Wal-Mart’s profit fell 18% in the most recent
quarter, but in existing stores, Wal-Mart’s sales have risen for 10 consecutive
quarters.
Name: Javier León
Class: MKTG 3343
By cutting prices, Walmart is able to gain a competitive advantage over its competitors. Although cutting prices might reduce profit per item, in the long run, this strategy definitely bring in more customers, resulting in higher profits which makes Walmart more successful than its competitors.
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