Walmart

Conduct a brief Porter Five Forces analysis of the industry (limit yourselves to 3 - 4 bullet points per element). How would you describe the dynamics of the industry?

The bargaining power of buyers is weak. Wal-Mart is a big retailer that has the low price. Customers usually make small purchases, and most of them are individuals. Moreover, as the article mentioned, Wal-Mart stores were relatively concentrated in small towns and rural areas where it was more likely to be the only "big box". As a result, there are no other firms for them to contrast so that they have a low bargaining power.

The bargaining power of suppliers is weak. There are large populations of suppliers so that the competition among them is tough. Besides, products have a lot of substitutes. Almost all the products are not critical for Wal-Mart so that Wal-Mart have many choices. Otherwise, Wal-Mart built partnerships with suppliers by sharing information electronically. All of the suppliers are required to use Retail Link.

The intensity of rivalry among competitors is weak. Although there are many competitors of different sizes firm in the market, like K-Mart, Target and some convenient stores, Wal-Mart offered more variety than competitors and reduced stock-outs by managing product assortment by store rather than region. Besides, the biggest advantage of Wal-Mart is the low price. Wal-Mart’s store managers were allowed to match the lowest competing price on an item in their trading are by as much as 5%. It is a big threat to the competitors. As a Target executive said “If we’re in the business of selling the same stuff that guy down the street [Wal-Mart] has, we’re not going to be able to sell if for more.” It also represents that Wal-Mart is hard to competitive for the other firms.

The threat of substitute products and services are weak. Although the most products of Wal-Mart are commodities which are easily substituted, people would still choose Wal-Mart because of their price.

The threat of new entrants is weak. Set up a discount retailing is not difficult. But, as previously noted, customers usually look for the products by the price when the products are the same or similar. Wal-Mart holds big advantage in this field. Even though new entrants have the lower price with the same products, Wal-Mart still can adjust their price and strategy. In addition, the brand recognition is also a key point. Under the same product with the same price, people would prefer to choose the brand they known. This is a common problem for the new entrants.