12.04.04-3 WALMART UNDER ATTACK BY SMALLER SAVVY COMPETITORS

Wal-Mart made an interesting move in response to the Thanksgiving holiday shopping trends. It was reported that Wal Mart had decided going into this important holiday season NOT to drop prices and compete directly with other discounters. Seems as if this decision cost Wal Mart dearly. The Wall Street Journal in it's Wednesday December 1, edition reported that Wal Mart acknowledged that it's competitors had more-aggressive prices on a more exciting array of merchandise which caused Wal Mart to get off to a dismal holiday start.

Wal Marts response to its competition was to drop its prices on their less exciting array of merchandise hoping to make up for their dismal start. In the same article the Journal reported on several smaller more agile competitors who are giving the big discounter a run for its holiday money. At one end of the spectrum Target continues to take share from Wal Mart with better (not lower) pricing strategies on better (not pricier) merchandise and at the other end of the spectrum many small and independent retailers have discovered that they can compete and win against the likes of Wal Mart.

As reported in the Journal the key to targeting and beating Wal Mart is taking care not to engage Wal Mart, with its enviable cost structure, in a price war. See Wal Mart and many other market share leaders who compete exclusively on price and economies of scale can be targeted and attacked by smaller competitors who discover and exploit the mismatches in other core competencies. Whats really interesting here, and it applies not only to Wal Mart but also to any category leader like Microsoft, GM, Oracle etc., is that convention wisdom fueled by Wall Street analysts is that size and scale are insurmountable competitive barriers. Not true. For those challengers willing to intelligently venture out against the larger competitor, lucrative battles for market share can be WAGED and WON. But the key is having the courage to venture out...