The sample was nearly evenly divided between small retailers which perceived increased levels of environmental hostility as a result of Wal-Mart’s arrival and those local retailers that felt the discount chain’s entry had no impact. Previous analysis of the data indicated that there were significant differences between these two groups so the sample was split for the purposes of this study.

Retailers Impacted by Wal-Mart

The factor analysis yielded six patterns of strategic behavior with eigenvalues greater than one (see Table 1). Factor one -- "presentation and preparation" -- represents a pattern of strategic behavior in which a significant priority is given to the presentation of high quality merchandise by well-trained employees. The factors loading on the second factor -- "specialty products and service" -- depict a strong emphasis on offering unique products and better pre-purchase service. Factor three -- "heavy discounting"-- represents a straightforward strategic behavior. Retailers emphasizing this factor use frequent sales to maintain a low price image. Small retailers emphasizing the fourth factor -- "high priced convenience"-- carry private label brands, offer superior buying convenience, and are visible in the community through their civic involvement and advertising activities. As one would expect, these retailers also carry higher priced merchandise. Retailers emphasizing the fifth factor -- "Innovative pricing" -- strive to maintain low prices by monitoring their competitor’s prices, carrying lower priced merchandise, and by using co-op advertising. The final factor -- "product variety" -- depicts a strong emphasis on carrying a wide variety of products. It also appears these retailers use computers to help monitor their sales and inventory.


Factor Analysis of Competitive Methods Used by Small Retailers in Hostile Environments


Factor Loadingsa Commun
Competitive Methods Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6  
Store layout and merchandise presentation .80           .74
Maintaining high inventories .79           .74
High quality merchandise .74           .77
Employee training .61           .70
Monitoring competitor’s promotional activities   .89         .85
Stocking unique products   .84         .84
Pre-purchase service   .53         .57
Depth of product line   .42         .50
Post-purchase service     .79       .76
Sales promotion programs     .64       .59
Pricing below competitors     .60       .65
Holding sales     .48       .58
Stocking highly recognized products     .48       .68
Stocking private label brands       .77     .64
Buying convenience       .65     .71
Civic involvement       .54     .54
Carrying higher priced products       .52     .43
Advertising       .48     .58
Concerted effort to be innovative         .68   .49
Monitoring competitor’s pricing         .68   .59
Carrying lower priced products         .58   .60
Use of co-op advertising         .55   .60
Carrying a variety of products           .77 .66
Use of computers to monitor sales and inventory           .64 .66







a These six factors accounted for 64.9 percent of the total variance.

The items comprising each of the six factors were then used in a cluster analysis. A four cluster solution (with a pseudo F statistic of 43.2 and a CCC of 4.2) was produced. Table 2 provides a narrative of the competitive profiles of each cluster. Cluster 1 -- "Innovative Pricers" -- firms rely on innovative pricing along with high priced convenience. They also feature effective merchandise presentation and preparation. Cluster 2 -- "Variety Discounters" -- firms depend heavily upon product variety with a tendency to compete on pricing. Cluster 3 -- "Target Marketers" -- firms seek to service specific niches or markets, relying on finding the right niche rather than offering low prices or variety. Finally, cluster 4 -- "Aggressive Pricers" -- firms compete within specific markets on the basis of price. Interestingly, these merchants are also willing to offer superior buying convenience.


Cluster Profiles of Merchants in Hostile Environments (N = 122)

Cluster 1: Innovative Pricers (n = 51 )

The competitive orientation of this group seeks to emphasize both innovative pricing policies and superior buying convenience.

Cluster 2: Variety Discounters(n = 28)

The competitive orientation of this group is straightforward. Merchants place a major emphasis on product variety. Conversely, they do not emphasize high priced convenience or niche marketing.

Cluster 3: Target Marketers (n = 31)

The competitive orientation of this group seeks to service specific market segments or niches. These firms are not concerned with low prices or variety.

Cluster 4: Aggressive Pricers (n = 12)

The competitive orientation of this group seeks to emphasize aggressively pricing programs to specific market niches. These merchants also strive to offer buying convenience.


The four identified strategic patterns were then compared on the three performance measures (net income after taxes, total sales growth over the past three years, and overall store success or performance). As the ANOVA results indicate (see Table 3), significant differences exist on all three performance measures. The Tukey-Kramer paired comparisons also produced identifiable patterns.

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Last Updated 4/5/97 by Cheryl Ann Lopez

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