Walmart Stores 2003 - Porter

INDUSTRY ANALYSIS

Definition of the Industry

The discount retailing industry in the USA in 2003 consisted of the usual discount stores, supercenters, bulkextreme discount stores (like Costco or SAM’s Club) and basically every retail system that defined low prices as their central value proposition for their customer. I will determine the attractiveness of the industry by using Porter’s 5 Forces Analysis.

Definition of the perspective

The industry analysis concentrates on the point of view of Wal Mart and hence describes the attractiveness of the industry for an already established retail direct sales player and not for an entrant.

Rivalry - medium to high

Wal Mart has only 3 big competitors, but they operate using basically the same business model

(entity-level or segment-level). The threat from them is medium. A new potential big competition source

could be internet retail. Although Wal Mart has an internet section it is not very much developed yet

and the thread from other internet retailing sites that might come up is high (see also Entry Barriers).

Buyers - Low

The buyers have a low bargaining power. First of all Wal Mart is just so big and has so low prices that further price negotiations from the side of the buyers are unrealistic. Additionally the case mentions that in most rural areas Wal Mart is the only big superstore in the area and hence they have no real possibility to bargain by quoting lower prices from other markets in the area.

Suppliers - low to medium

The bargaining power of the suppliers is low to medium. The suppliers of the goods sold at Wal

Mart have low bargaining power, because they are bound by hard contracts, high ITinvestments

and the overall aggressive supplier strategy operated by Wal Mart. However the IT suppliers sell one

of Wal Mart’s key sources for competitive advantage (IT process innovation) and they might increase the prices or just sell it to a competitor. In addition