Walmart is one of the largest retailers across the United States because of the large size, and the brand image it developed that provides the significant clout. Walmart always make sure to have the unique strategies in terms of suppliers, customers, management, etc. It provides the products in low prices, which are not found in any other stores. It provides broad range of products and multiple substitutes of same products, which are not offered by any other brand in the retailing industry (Walmart, 2019). As per the analysis of five forces of Porter, Walmart has the strong competitive position. Here is the detailed analysis of the five forces analysis of the Walmart;
Bargaining Power of Buyers
Bargaining power of the buyers in Walmart’s case is not high, as individual consumers often do not make the big purchases. In addition to this, conveniences and prices of the shopping are main factors which reduces the bargaining power of the buyers. The switching cost are very low for customers irrespective to the fact they successfully find the same product in lower prices and convenience is more. The pricing strategy of the Walmart decreases the buyers’ bargaining power. Hence, individual customers exert no or little influence on brand. Customers advocate the groups on other hand can exert the influence on brand (Pratap, 2018).
Bargaining Power of Suppliers
The bargaining power of the suppliers is very insubstantial in the Walmart’s case, mainly because of the scope and size of the business. Walmart tries to secure the least possible prices from the suppliers for sustaining its cost leadership and gain the competitive advantage. Walmart usually pays $3.5 billion to its suppliers in 2015. Apart from selling the products in low prices, the suppliers of Walmart are needed to comply with the broad range of particular requirement that are related to the employee insurance, employee health, food safety, and other factors. It also maintains the supplier relationships with the help of different programs like Supplier Diversity programs which becomes the part of CSR strategy (Dudovskiy, 2016).
Threats of New Entrants
The threat of the new entrants is very low as it exerts the medium level of pressure on the Walmart. It is due to the rank of the Walmart as one of the lading retail brands and require huge amount of capitalization for building the brand like that. Walmart has one of the biggest and efficient distribution networks and the supply chain, this require huge investment and skilled labour and human resources to maintain and manage them. The other resources and financial capital of Walmart mitigate risks from new entrants. The existing firms are already facing difficult time while dealing with price from Walmart (Pratap, 2018).
Threats from the Substitute Products
Walmart is one of the leading retailers dealing in thousands of items and offer wide variety of each item. It deals in multiple categories like entertainment, groceries, hardware, health, pharmacy, hardlines, stationary, accessories, apparel, household appliances, and home furnishings. Threat of the substitute products is a weak force for the Walmart and irrelevant because of the broad range of items sold by a retailer. It offers all the substitute items of one product too. However, there are many other firms like Target also operating like Walmart, can be a threat because it might capture the consumers (Dudovskiy, 2016).
Rivalry of Existing Players
The intensity of the rivalry among the retail industry is very strong. There are several firms like Target Corporation, Sears Holdings Corporation, Costco Wholesale Corporation etc. and are of multiple sizes competing in the industry environment. There are external forces which are significant in the Walmart’s strategic decision like; many firms in retail market is the strong force, high aggressiveness of the retail companies is the strong force, and large volume of the retail firms is also the strong force. There are firms in the industry trying to impose the challenges in the development of cost advantages for Walmart. Walmart is successful enough in making its position in the global market one of the leading retailers (Greenspan, 2019).
References
Dudovskiy, J. 2016. Walmart Porter’s Five Forces Analysis. [Online], Available at: https://research-methodology.net/walmart-porters-five-forces-analysis/, [Accessed on: 8th May, 2019].
Greenspan, R. 2019. Walmart Inc. Five Forces Analysis (Porter’s Model), Recommendations. [Online], Available at: http://panmore.com/walmart-five-forces-analysis-porters-model-case-study, [Accessed on: 8th May, 2019].
Pratap, A. 2018. Walmart Five Forces Analysis. [Online], Available at: https://notesmatic.com/2017/02/walmart-five-forces-analysis/, [Accessed on: 8th May, 2019].
Walmart, 2019. Who we are? [Online], Available at: https://corporate.walmart.com/, [Accessed on: 8th May, 2019].