Introduction
The principal idea of everyday low pricing (EDLP) practice is the maintenance of the stable low prices of the offered products on a regular basis. This strategy is normally opposed to the “high-low” policy that implies the occasional introduction of various discounts and special sales (Boone & Kurtz 2014). As a rule, the prices’ sustaining is achieved with the help of the close cooperation with suppliers that agree on a “better price” (Pride & Ferrell 2014).
As a rule, among the key advantages of the following practice, one tends to point out the equal spread of savings within the store and the relatively high predictability of its outcomes (Egan 2014). Its principal drawback is represented by the fact that the strategy’s efficiency depends significantly on the character of the typical customers. Thus, the relevant practice is presumed to be most appropriate for the supermarkets that mainly have the so-called “large-basket consumers” clientele (Schroth, G & Socorro Souza da Mota, M 2014).
Literature Review
The problem of EDLP practice is widely discussed in the literature. The majority of specialists agree on the point that this strategy is highly beneficial for increasing the competitive characteristics of supermarkets. Meanwhile, they point out the it is likely to show the best results on condition that it is applied to retailing industries rather than to manufacturing fields (Kazmi 2007). Moreover, numerous analysts put a particular emphasis on the clientele considering it to be the determining factor of the relevant practice. There is an assumption that EDLP strategy mainly appeals to the low-income population; thus, the most favorable store’s location is at a distance from the access to public transport (Ellickson & Misra 2008). Furthermore, some professionals assume that EDLP practice is most appropriate for the grocery-focused retailers (Shimp 2010).
Meanwhile, the critics of the relevant practice note that the prices’ stability leads inevitably to the loss of profit, which is particularly frequent with the supermarkets operating with thin profit margins (Hamister & Suresh 2008). Moreover, there is an opinion that the high-low pricing strategy is more competitive than EDLP practice as it enables a company to promote the food’s quality and ethical shopping (Solomon et al. 2009). Among the most vivid illustrations of the successful employment of EDLP strategy, one might point out IKEA and Tesco. The following cases prove that the practice under discussion can be effectively applied both to hypermarkets and supermarkets. As a consequence, the size of the retailing industry has no significance impact on the EDLP practice’s effectiveness. However, it depends considerably on the company’s clientele.
Research Results
In the course of the relevant research, one has, first and foremost, examined the organisational design and strategy of Wal-Mart. The results of the following analysis have shown that the company currently employs three strategies: EDLP practice, rollback, and special buy. The discrepancy between the fundamental principles of the relevant strategies prevents Wal-Mart from reaching its potential. Thus, there is a necessity for choosing one strategy that the company will further pursue (Bergdahl 2004).
Basing on the literature review, one has worked out the key criteria for estimating to which extent the EDLP practice is applicable to a particular company case (see App.1“Criteria for EDLP practice’s appropriateness”). Therefore, one has evaluated the appropriateness of EDLP practice for Wal-Mart. The results of the analysis are represented in the table below.
Analysis
The results of the relevant research have shown that Wal-Mart’s conditions are highly favorable for the application of EDLP practice. First of all, the retailing type of industry and the prevalence of the “large-basket “clientele fully coincide with the principal requirements for EDLP strategy’s employment. As to the store location and the types of products, these points partially fit the requirements as the Wal-Mart’s stores have diverse locations, and they offer a variety of products including the grocery. Therefore, one might conclude, that the relevant practice can be chosen as the dominant price-determinant strategy for Wal-Mart company.
Recommendations for Implementation
One recommends that the implementation of EDLP practice is preceded by a careful planning procedure. First of all, it is crucial to determine a reasonably low price that, on the one hand, will be attractive for the clients and, on the other hand, will be reasonable enough for the retailers to maintain it on a regular basis. Secondly, the shift for the EDLP practice should not be excessively harsh as the sudden disappearance of rollback, and special buy options can have a negative influence on the customer’s loyalty. Finally, the executive board of the company will have to reorganize their cooperation with the suppliers taking into account the new rates. This collaboration might become mutually beneficial in case it is sensibly built.
Conclusion
The provided business research report is aimed at the examination of EDLP practice in the context of its appropriateness for Wal-Mart’s chain. The analysis of the relevant literature and the performed research’s results has shown that the suggested practice can be effectively employed in the quality of the price-determinant strategy. Such factors as Wal-Mart’s clientele and the retailing type of this industry make EDLP practice more preferable than rollback and special buy options. One should necessarily point out that the employment of the relevant strategy requires a thorough preparation process. Thus, one will have to carry out a series of actions in order to estimate the most reasonable prices, preserve the clients’ loyalty and define the new framework of the cooperation with the suppliers.
Reference List
Bergdahl, M 2004, What I Learned From Sam Walton: How to Compete and Thrive in a Wal-Mart World, John Wiley & Sons, Hoboken.
Boone, L & Kurtz D 2014, Contemporary Marketing, Cengage Learning, Stanford.
Egan, J 2014, Marketing Communications, SAGE, London.
Ellickson, PB & Misra, S 2008, ‘Supermarket pricing strategies’, Marketing Science, vol. 27, no. 5, pp. 811-828.
Hamister, JW & Suresh, NC 2008, ‘The impact of pricing policy on sales variability in a supermarket retail context’, International Journal of Production Economics, vol. 111, pp. 441-455.
Kazmi, SH 2007, Marketing management: Text and cases, Excel Books India, New Delhi.
Pride, W & Ferrell OC 2014, Marketing Express, Cengage Learning, Stanford.
Schroth, G & Socorro Souza da Mota, M 2014, ‘Agroforestry: Complex multistrata agriculture’, in NK Van Alfen (ed), Encyclopedia of agriculture and food systems, Academic Press, London, pp. 195-208.
Shimp, T 2010, Advertising promotion and other aspects of integrated marketing communications, South-Western Cengage Learning, Mason, Ohio.
Solomon, MR, Marshall, GW, Stuart, E, Mitchell, V & Barnes, B 2009, Marketing: Real people, real decisions, Pearson Education Limited, Harlow.
Appendices
App.1 “Criteria for EDLP practice’s appropriateness”