There are some external factors assisting in creating competitive advantage for Wal*Mart in the discount retailing industry. These external factors create opportunities for Wal*Mart profitability. However, sustaining such competitive advantage is a result of Wal*Mart ability to deploy its internal resources and capabilities. At the beginning we will discuss what are the sources for Wal*Mart competitive advantage?
             Despite the unattractive, high threat, and low opportunities of the industry that Wal*Mart operates in, Wal*Mart could have a return on sales and net sale of 3.5% and 48,620, which is higher than the industry of 3.05% and 18,730 respectively. This would be a result of the cost leader strategy Wal*Mart is following. It lowered the overall cost and increased its profit. From the analysis of the industry we found that the net profit margin of Wal*Mart for the past 12 month in 1993 was 24.9% that is lower than the average profit margin of its direct competitors (27.2%). So, how Wal*Mart is successfully lowering its cost compared to its competitors? The Key elements of its cost leader strategy are:
             Accomplishing the superior operating efficiency, how? Through controlling input cost. Wal*Mart does not think of lowering the prices at the end value chain- its consumers –through pricing lower than competitors – this could lead to a loss in the long run – but they usually cut cost at every transaction of the retail process. First, through its vendor relationship, Wal*Mart installed the EDI with its 3,600 vendors that on the long run reduced the inventory costs and increased sales; decreasing cost to vendors decreased cost to Wal*Mart eventually. Lowering suppliers' power by not allowing them to account more than 2.4% of its purchases. As well how Wal*Mart transformed the relation with vendors from supplier – customer relation to a partnership relation. This partnership relation provided timely deliveries...