Michael Porter developed two generic competitive strategies for outperforming

corporations in a particular industry: lower cost and differentiation. Lower cost

strategy is the ability of a company or business to design, produce and market a
comparable product more efficiently than its competitors.
Differentiation strategy is the ability of a company to provide unique and superior
value to the buyer in terms of product quality, special features, or after-sale service.
(Wheelan & Hunger, 2008)

Wal-Mart follows the lower cost competitive strategy of cost leadership. According to
Wheelen and Hunger, (2008)
Cost leadership aims at the broad mass market and requires aggressive
construction of efficient scale facilities, vigorous pursuit of cost reductions from
experience, tight cost and overhead control. Avoidance of marginal customer
accounts, and cost minimization in areas like R&D, service, sales force, and
advertising. Because of its lower costs, the cost leader is able to charge a lower
price for its products than its competitors and still make a satisfactory profit.
Having a lower-cost position allows the company to continue to earn profits during
times of heavy competition. Its higher market share means that it will have high
bargaining power relative to its suppliers.

Wal-Mart also used the differentiation focus strategy by placing its stores in rural
and suburban areas. It focused on a particular group and geographic market. In
using differentiation focus, a company or business unit seeks differentiation in a
targeted market segment.

Target and Kohl’s also used differentiation strategy by differentiating itself in a

different way. Wal-mart is the low price leader, but Target and Kohl’s uses a value
proposition. Target is successful because it adapted a low-price, high quality
experience in terms of its products and stores that is geared toward young urban
markets.

I think a combination of low cost leadership/focus and differentiation is the most

effective. Wal-mart uses both and they are a leading company in retail. Wal-marts
lows prices serves as an entry barrier to few new entrants because of the inability to
match the leader’s cost advantage. Using differentiation focus allowed Wal-mart to
focus its efforts on the special needs of a narrow strategic market more effectively
than its competition. (Wheelan & Hunger, 2008)

Works Cited
Wheelan, T., & Hunger, J. D. (2008). Concepts in Strategic Management and
Business Policy. Upper Saddle River: Pearson Education.

I would recommend cost and differentiation focus. Cost focus is a strategy

that focuses on a particular buyer group or geographic market and attempt
to serve only that niche, to the exclusion of others. When looking at cost
factors, there are very few options available to K-Mart in developing a pricing
strategy to compete with Target or Wal-Mart. Therefore, Kmart does not have
many price strategy options. By using a cost focus strategy, matching the
quality of well known brands but keeping cost low by eliminating advertising
and promotional expenses saves the company money.

Differentiation focus concentrates on a particular buyer group, product line

segment, or geographic area. This strategy is valued by those who believe
that a company that focuses its efforts is better able to serve the special
needs of a narrow strategic target more effectively than its competition. ()
Kmart must clearly define itself, its target customer and stick to its strategy.
From the standpoint of differentiations, once Kmart has identified its target
market, it should increase emphasis on designer-branded lines targeted to
that audience. For example, using strategic brand alliances and licensing
agreements that were culturally specific to a target market such as African
Americans, Hispanics, Asians, etc. As Kmart did with Martha Stewart, it
needs to partner with African-American and Latino celebrities to develop
those branded product lines. Since its product offerings will differ from Wal-
Mart and Target, it will be able to rise prices slightly not only on its cultural
offerings but on other everyday items as well.

Kmart and Sears should be combined with a new overall corporate

competitive strategy using as I stated in the previous question cost focus and
differention. Also using strategies such as:
• Changing locations of stores: Unlike Wal-mart and Target providing
shoppers with appealing shopping destinations, both Kmart and Sears
were mostly located in mall areas.
• Developing a Sears/Kmart brand that is new and robust and fills a need
of the target market. One that is not only low cost but higher quality
than what was known before.
According to Dougherty, the solution for Sears/Kmart would be to
challenge everything they have done in the past and present to create a
 brand that causes the customer to covet it as a powerful beacon of self-
expression. "New management needs to commit to forming a new brand
that the customer needs and literally feels incomplete unless they have it.
When the customer thinks of the new brand, they need to affirm
emphatically that `yes, I need to be that.' Only then will the marriage
work."

Works Cited
Brandweek:Sears and Kmart. (n.d.). Retrieved May 31, 2009, from Stealing Share:
http://www.stealingshare.com/pages/Brandweek%20-%20Sears%20&%20K-
Mart.htm

Wheelan, T., & Hunger, J. D. (2008). Concepts in Strategic Management and

Business Policy. Upper Saddle River: Pearson Education.