Wal-Mart and Porter’s 5 Forces

I chose this article because a lot of concepts are applicable to the Porter’s 5 Forces reading we did in class. due to the word limit, i covered more applicable forces like seller’s power, degree of rivalry and barriers to entry.


walmart store locations from http://grannygeek.us/?m=200704

Porter's 5 Forces Diagram taken from http://www.justice.gov/atr/public/hearings/single_firm/docs/219395.htm

The article discuss how Wal-Mart focuses more on increasing international demand due to slow domestic demand.

Some challenges would be decreasing consumer demand. This is due to careful budgeting and less trips to Wal-Mart because of lower consumer incomes and high costs of traveling to stores (higher fuel prices).  This affects the supermarket industry, as slow market growth causes firms to fight for market share.

Wal-mart is trying to reduce rivalry by seeking competitive advantages in lower prices  “lost some of the wealthier customers it gained during the recession as those customers returned to higher-price stores.” It has also recognized that its larger stores served as one-stop places, but other smaller supermarket chains would pose a threat of substitutes, rendering demand for its products more price-elastic. By improving its technology – productivity and price transparency, the degree of rivalry between Wal-mart and its competitors will be lower. It poses high barriers to entry to supermarket chains who want to enter the industry, due to its variety of stores.

Wal-mart has a reasonably high degree of seller power due to its relationship with suppliers. It plans to leverage on this by offering lower prices, which is yet another ideal competitive strategy.

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