Walmart's Success
There are several critical factors that have lead to Wal-Mart's impressive success through the years. To unveil (at least partly) the secret of its success, we must examine Wal-Mart's cost advantage relative to a more typical discount retailer. To do this we will study table A derived blow.
Exhibit A: Wal-Mart vs. Industry Economics of Discounting Comparison in 1984 (% of net sales)
Line ItemsWAL-MARTIndustry Average
Net Sales100%100%
License fees and Other income.811.1
Cost of Goods Sold73.8071.9
…
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…than that of the industry average, demonstrating the superiority of there strategy and cost structure. By pursuing a volume strategy, Wal-Mart is able to enjoy a higher operating income per sale than their competitors. Similarly, Wal-Mart's net income is significantly higher than that of the industry average due to their strategic cost advantage and volume emphasis. This analysis allows us to begin to see and understand the economics of Wal-Mart's impressive growth and continued success.
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