Walmart's competitive position analyzed through Porter's five forces model

Wal-Mart

Porter's 5 Force Model

In this Porter's 5 Force Model analysis, specific focus is being paid to the competition of Wal-Mart that exists within the consumer retail industry rather than the industries in which Wal-Mart competes. We will be discussing the position of Wal-Mart in the industry with respect to various industry forces (St.Hilaire, 2012).

Threat of new entrants to a market: Medium pressure

Threats of new market entrants for Wal-Mart are relatively moderate for the reason that Wal-Mart has very strong marketing, distribution and purchasing along with the fact that it has sufficient capital to hire and train their employees and purchase merchandises (St.Hilaire, 2012).

Due to the fact that the Wal-Mart has built a brand name for itself and has excellent distribution systems as well as capital to keep the competitors at bay the barriers to entry are very high in this particular sector (Bryant, 2010).

Furthermore, Wal-Mart has established a huge wholesale market and as a result it almost always has an absolute cost advantage as compared to its competition (Bryant, 2010).

Rivalry among Established Companies: Medium Pressure

Even though the hypermarkets have started competing with the national, local and international brands drug, department, specialty and discount stores. Rivalry still is moderate with regards to Wal-Mart. The reason behind this is the ability of Wal-Mart to branch-out and expand its products and operations. From among the total global revenue, Wal-Mart makes about one quarter of it (St.Hilaire, 2012).

There are 3 major companies that presently exist in the same market that Wal-Mart exists in. these are: Target, Sears and K. Mart. From among these 3 companies Target currently is the strongest due to its retail relations. In the domestic sector Target has been able to grow a lot and it has been able to define its niche in a very effective manner. Whereas, K-Mart and Sears seem to have stagnant growth for some time now and haven't really challenged Wal-Mart for a long time (Bryant, 2010).

Bargaining Power of Suppliers: Low to Medium pressure

In case of the super-centers/hypermarkets the suppliers are distributors and manufacturers both. In this industry the retailers usually have more than one supplier which builds the pressure on the supplier. Therefore the power of suppliers is moderate in this sector (St.Hilaire, 2012).

Wal-Mart has a lot of power over the supplier due to its large market share. Large supplier like Coca-Cola and Proctor & Gamble supply to Wal-Mart as well (Bryant, 2010).

Substitute Products: Low pressure

There is a moderate risk of substitutes for the hypermarkets because it is difficult for stores to provide the customers with the convenience of getting everything under one roof like hypermarkets (St.Hilaire, 2012).

Customers don't have a lot of options to choose from in this market if they are looking for low pricing and convenience. Not only will the customers have to go to specialty stores for every product that they want but they won't be able to get the low prices offered by Wal-Mart. However, online shopping is one option which allows the customers to review their options with ease (Bryant, 2010).