Case Study #2: Wal-MartI. IndustrieWal-Mart's competitive environment is very unique. Although Wal-Mart's primary competition comes from general merchandise retailers, warehouse clubs and supermarkets also provide competitive pressure. The discount retail industry is considerable in size and experiencing constant growth and change. The best competitors compete both nationally and internationally. There is intense competition in price, location, store size, layout and environment, product range, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Large retailers vertically integrate many functions, such as purchasing, manufacturing, advertising and shipping. Such large-scale features give major competitors a significant cost advantage over small-scale competition. In general merchandise retailing, Wal-Mart's main competitors are Target and Kmart. Large retail stores such as Circuit City and Bed, Bath and Beyond also provide retail competition. A survey found that the majority of respondents preferred Wal-Mart over stores like Target and Kmart. Respondents said Wal-Mart offered lower prices, better variety and selection, and good quality. Consumer needs are an important economic element in all competitive environments. The attributes (price, variety, quality, etc.) that influence shoppers to choose one retailer over another are very important in the competitive landscape. In the warehouse segment, Wal-Mart's Sam's Club competes hard with Costco. Costco has fewer warehouses but higher sales and revenue. Costco customers also shop at Costco more frequently than Sam's Club customers and, on average, also spend more on each visit. Costco's dominance may be the result of better innovation. Costco offers luxury items and was the first to sell fresh meats and produce, as well as gasoline. This is important because innovation is a key factor in evaluating competitors in an industry. Finally, Wal-Mart also competes directly with large supermarkets. The grocery industry's production capacity is very dense, and Wal-Mart poses a serious threat to many supermarkets, large and small. Kroger, Albertson's and Safeway all struggle to compete with Wal-Mart's low prices. Because the industry is so crowded, even large supermarkets are looking to differentiate themselves in order to stay afloat. Referring to the five forces model, Wal-Mart being the largest retailer in the world, the position is strong overall. Rivalry between competitors is quite weak.