Low Cost Strategy

Walmart Functional Strategies Implement the Overall “Low Cost” Strategy

When a company has a clear strategy regarding how it plans to offer unique value, or “win” with customers, this helps guide the imple- mentation of the overall strategy within each of the different busi- ness functions. As we’ve discussed, Walmart’s strategy is to win by being a cost leader in its markets. Walmart’s functional areas sup- port that strategy in a number of ways:25

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• Walmart’s human resource management strategy focuses on keeping labor costs as low as possible.  Walmart pays relatively low wages and has few layers of management, which minimizes labor costs. Walmart also has a nonunion stance and once even closed a store in Canada when the workers tried to unionize.26 Managers have small offices with inexpensive furniture, and

when they travel, they stay at inexpensive hotels and frequently share a room.

• Walmart’s information technology and operations areas also focus attention on cost reduction.  Walmart has invested in information technology to lower the costs of communicating with thousands of suppliers and to provide suppliers with real-time data on what products are selling, at what price, in what store.

• Walmart purchasing department negotiates aggressively with suppliers. Walmart uses its tremendous buying power to get the lowest prices on products from its suppliers. It also offers a prod- uct mix that appeals to price-sensitive customers.

• Marketing does price checks at competitors.  The goal of the marketing staff is to ensure that Walmart’s prices are always as low, if not lower, than competitors.