Five Forces Analysis of Walmart and its Internal Strength

The assignment focuses on the external and internal consistency of Walmart, different departments within the organization, and how these departments help expand its customer base and reduce cost. It includes a Five Forces Analysis of Walmart using Porter's Model, discussing bargaining power of suppliers, buyers, threat from substitute products, new entrants, and competitive rivalry among existing players. Additionally, it highlights various departments such as logistics, R&D, human resource, marketing, and international operations and their roles in maintaining the company's efficiency.

BUSINESS AND
STRATEGY
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INTRODUCTION.........................................................................................................................................3
TASK 1..........................................................................................................................................................3
1.1 Five Forces Analysis of Walmart........................................................................................................3
TASK 2..........................................................................................................................................................5
2.1 Different departments within Walmart and how they contribute in expanding customer base and
cost reduction.............................................................................................................................................5
CONCLUSION:.............................................................................................................................................6
REFERENCES:.............................................................................................................................................7
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INTRODUCTION
Strategy refers to the plan developed and implemented by a company to achieve long term goals
of the firm. It is necessary to gain competitive edge in this dynamic business environment (Hill, Jones
and Schilling, 2015). The assignment below is based on the case study of Walmart Inc., a multinational
retail corporation situated in Bentonville, Arkansas. It focuses on external and internal consistency of
Walmart, different departments within the organization and how these departments help the firm expand
its customer base and reduce cost.
TASK 1
1.1 Five Forces Analysis of Walmart
Walmart is one of the largest retail organizations in US with huge size and impressive
brand image. It focuses on developing new strategies overtime to sustain in the market. Michael
E. Porter developed the Five Forces Model which focuses on a thorough analysis of forces
influencing competition (Walmart Inc. Five Forces Analysis (Porter’s Model), 2018). The Five
Forces analysis of Walmart is mentioned below:
 Bargaining Power of Suppliers: In the retail industry, intensity of bargaining power of
suppliers is weak. Suppliers in this industry are large and could easily get affected by
Walmart. In addition to this, the firm buys products in bulk from these suppliers, which
denotes a major business for them.
 Bargaining Power of Buyers: For Walmart, the bargaining power of buyers is low.
Individual buyers have no impact on global revenues of the firm. Since buyers’ diversity
is high, it makes it even difficult to exert pressure on the firm. The firm ensures that
customers get the most suitable price and convenience with Walmart. Since the pricing
strategy of the company is towards setting the lowest prices, it significantly reduces the
bargaining power of its buyers (de Wit, 2015).
 Threat from Substitute Products: Huge variety of products and services are offered at
Walmart which generally have few or no substitutes in the market. These substitutes are
generally priced higher than the firm’s products which reduce their intensity of posing as
a threat.
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 Threat of New Entrants: There is constant threat of new entrants for Walmart. Small
retailers can easily enter the market due to low cost of establishing the business and can
effectively compete with the firm over location, convenience, price, etc. Moreover, some
large organizations too have financial resources strong enough to enter the market. This
makes this threat high for Walmart.
 Competitive Rivalry among Existing Players: In retail industry, competitive rivalry’s
intensity is strong. Existing firms with different sizes compete in this industry. Due to
large number of similar firms in the market it gets tough for the firm to stay ahead of
competitive advantages of other firms. Moreover, it is very complex for the firm to
overtake each approach used by these firms. Therefore, the firm must adopt aggressive
strategies to sustain the heavy competition (Scholes, 2015).
PESTEL Analysis of Walmart: Political: This consists of all the Political factors affecting the company. For instance, if
the firm wants to in a new country, for instance UK, the political uncertainty can affect
the firm majorly. Economical: Sales model of Walmart depends upon low profit margins and high sales
volume. This model can easily be changed during economic depression in a country.
Thus, it would affect their strategy and could be a threat to their sales (Chorn, 2014). Social: Social forces of a country can cripple a business if left unchecked. Walmart must
focus on the culture and social aspects that are accepted and followed by the population
of the country to successfully conduct its business operations. Technological: Changes in technology can contribute to a firm;s success as well as its
failure. Walmart has been a leader in technological advancements. However, it must keep
a track on the fast changes in technology in other countries where it operates. Environmental: As per the case study, the firm was subjected to environmental issues by
use of wood as a material for production. Walmart must focus on implementing strategies
that are environment friendly.
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 Legal: Walmart must consistently follow the legal rules and norms of the country it
operates in to ensure ethical practices within the firm while serving its customers
worldwide.
TASK 2
2.1 Different departments within Walmart and how they contribute in expanding customer base
and cost reduction
Walmart Inc. has a strong internal environment and the firm has always focused on
strengthening its various departments by ensuring effective coordination between each of them.
The various departments of Walmart and their functions are described below:
 Logistics: Logistics department of Walmart is one of the most efficient departments of
the company. The firm has an effective system of receiving inventory. The firm ensures
effective communication of data. Sales information and stock status are communicated in
ways which help the stock to replenish in time. The firm has an orchestral way of timing,
slotting and planning the shipments. This helps the firm to reduce unwanted cost
additions to its operations.
 R&D: This department of Walmart consists of effective research of the business
environment which helps the firm in implementing new tools and techniques that cut to
the cost of production without decreasing the quality of products. These departments are
majorly focused on developing effective technological strategies that ensure smooth
running of business operations.
 Human Resource: This department consists of all the employees, managers and
workforce of Walmart that acts as a support system for the company (Karabag and
Berggren, 2014). The firm implements effective training and development programmes
for its employees that makes them more competent than employees of other companies. It
helps them to serve customer in a better and in a more professional way which increases
their satisfaction and helps in building long customer relationships.
 Marketing: Marketing department of Walmart is focused on communicating the firm’s
wide range of products and salaries to its customers. They use efficient promotional and
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advertising strategies to better serve the purpose. The aim, however, is to influence
customers to buy more company’s products.
 International Operations: As per the case study, the firm is enhancing its operations
internationally and this department focuses on conducting these operations in an
appropriate and profitable manner. This department focuses on developing good relations
with international stores to facilitate firm’s products in top quality. Moreover, it also
provides information about the cultural aspects of the nation the firm wishes to sell its
products to. This helps in increasing the local customers of the country which results in
establishing of a strong market share internationally (Chang, 2016).
CONCLUSION:
Thus, we conclude that external factors affect the firm’s strategies and organizations must
focus on these factors to efficiently carry out their management functions. Organizations must
stay internally strong so that stronger and flexible strategies are implemented easily to gain a
competitive edge in the marketplace and increase profitability of the firm.
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REFERENCES:
Books and Journals:
Chang, J.F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
Chorn, N.H., 2014. The relationship between business-level strategy and organisational
culture (Doctoral dissertation).
de Wit, B., 2015. Strategy Content. Wiley Encyclopedia of Management, pp.1-2.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2015. Strategic management theory. Cengage
Learning,.
Karabag, S.F. and Berggren, C., 2014. Antecedents of firm performance in emerging economies:
Business groups, strategy, industry structure, and state support. Journal of Business
Research. 67(10). pp.2212-2223.
Scholes, M.S., 2015. Taxes and business strategy. Prentice Hall.
Online
Walmart Inc. Five Forces Analysis (Porter’s Model). 2018. [Online]. Available Through: <
http://panmore.com/walmart-five-forces-analysis-porters-model-case-study/>.
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