Porter`s Five forces Model

This document discusses the application of Porter's Five forces Model to analyze the competition and forces shaping Walmart's position in the market. It examines the bargaining power of suppliers and buyers, the threat of substitution and new entrants, and the competitive rivalry among existing players. The document also includes an Excel sheet for reference.

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Porter`s Five forces Model
Walmart is one of the largest US retailer by its size and its brand reputation. The model is
used to shape the competition and analyse several forces so that a favourable condition can be
found.
Bargaining power of suppliers- the intensity of power of Walmart’s suppliers is low. As
company buys in bulk so existing suppliers are major suppliers for the business. Since, it
purchases huge amount then the Walmart has significant buying power (Jurevicius, 2013).
The switching cost of the company is less as the company can shift from one supplier to
another without incurring extra costs. It has become easy for the Walmart to try back
integration rather than forward integration. Some of the suppliers are huge companies who
give them a certain amount of bargaining power. Overall bargaining power is low to
moderate. The company has a position to impose the demand, which asks for lower prices
and ethical guidelines. However, when the supplier does not monitor the guidelines issued by
the company, it has the power to remove it from the supplier`s list.
Bargaining power of buyers- the bargaining power of customers is not very high; it is either
moderate or low. As the customers do not purchase huge bulks whereas company keep
offering discounts. Price and convenient shopping are two important factors that has limited
bargaining power of buyers. As after offering discounts, this last pricing strategy decreases
the bargaining power of buyers. Apart from this, consumer advocate groups exert influence
on this brand.
Threat of substitution- the threat of substitution is low but there are many other retailers too.
The reason for low threat is due to number of retailers that offers the prices as low as the
Walmart are not many. Comparable brand such as “Costco” who is a membership-based
retail chain. Although, there are other retail shops from where the customers can buy such as

target and best buy. However, but when it comes to price advantages, there is no brand who
provides same advantage (Jurevicius, 2013). Moreover, other substitutes such as online
shopping offers convenient so that customers will not have to pick the products from the
retail stores. However, customers prefer to purchase online only for convenience still the low
prices of Walmart is not compatible.
Threat of new entrants- the potential threat of entrants is low as Walmart is US largest
retailer and threat of entrants exerts low or middle pressure on the company. New entrants
will take time to establish its brand name as it is not easy to build a strong distribution system
and efficient supply chain. As even the existing retailer faces piercing price challenges from
the Walmart. Its price helped it to gain the competitive advantage and larger market share.
Competitive rivalry- the rivalry among the existing players is high. For instance- when
Walmart maintains an upper hand pricing strategy then other competitors such as target, Wes
farmers, super retail group, and Woolworth poses a competitive challenge and threat. On the
other hand, Kmart, best buy, and sears are not very strong and do not pose a competitive
advantage like Walmart.
Part-2
Please see the Excel sheet

(Source: Walmart, 2018)

(Source: Walmart, 2018)

References
Walmart, (2018) Annual report, 2018. Retrieved from:
https://s2.q4cdn.com/056532643/files/doc_financials/2018/annual/WMT-2018_Annual-
Report.pdf
Jurevicius, O. (2013). Porter's Five Forces. Retrieved from:
https://www.strategicmanagementinsight.com/tools/porters-five-forces.html