Business Model Comparison
Competition within the retail sector remains a major focus globally. Operations between competing companies and market structure will be different from country to country and explains the differences in pricing. Determining factors include structure of sales formats, market concentration, the disparities in consumer preferences as well as number, and sales space of retail stores.
Sustainable Competitive Advantage
There has been recent decline in retail growth in the United States and other countries. Economic recovery is heavily dependent on consumer spending because it accounts for large percentage of total economic growth. The change in labor demand has resulted in high unemployment and a shift in consumer priorities toward savings versus spending. The recent recession has prompted caution with consumers who seek deals and are more open to comparison rather than limiting purchases. This caution has increased product supply while decreasing consumer demand.
New companies entering the industry must heed advice from past endeavors of currently successful companies, mergers, and globalization, on pricing and the sustainability of profits. Because the retail market is a hard market to survive in as there are more and larger companies merging with other retail companies. For example, there are many small town retail stores that are closing because the larger company i.e. Wal-Mart are moving into the small towns. Wal-Mart is also one of those larger companies that is global and the prices are not necessarily cheaper than or the same price of the smaller retail stores. The smaller retail stores lose the sustainability of their profits as Wal-Mart provides a larger variety in one store. Understanding what Wal-Mart and other companies has done in the past will assist new companies to be more successful; as they enter the retail industry.
Amazon.com is a corporation that is closely united with the commerce trend. The founder of the company, Jeff Bezos, broke every rule in the book of business, by using the internet rather than conventional distribution channels. Maintaining and improving operational is the means to sustainable competitive advantage of Amazon.com. The ability to offer shopping convenience, simplicity of purchase, promptness, using data warehousing technology, variety, discounted pricing, and reliability of order fulfillment. These are all tied directly to the logistical competencies of Amazon.
While both Wal-Mart and Amazon attract customers by offering a myriad of products at a low price, both face a threat from organized labor. Both companies offer competitive wages and benefits in order to dissuade workers from organizing. If the workers were to organize, it would be a significant threat to their current competitive advantage. “In the United States unions are not all that prevalent in the retail industry. Most of the retail workplaces with unionized employees are supermarkets and retail food operations. Efforts to organize employees behind unionization in other types of retail stores have not had widespread success” (Farfan, pg. 1, 2011).
With companies using globalization to cut costs and workers’ pay, the labor unions are fighting back. The trade union movement is extending beyond borders to support and protect workers. Globalization and cross-border labor solidarity has proven very difficult in the retail industry. Because garment production is labor intensive and requires low startup costs, factories can relocate quickly. “There are many developing companies competing for production orders garment companies search for the best environment for profit and set up shop. If wages increase in one country, they move to another” (Mendleson, pg. 1, 2012).
Advantages and Disadvantages of Corporations
Both Amazon and Wal-Mart are incorporated. Corporations are a limited liability to their investors and are the most effective form of