Competitive Environment of Walmart: A Porter's Two Forces Analysis

This report provides a comprehensive analysis of Walmart's competitive environment using Porter's Two Forces framework. The analysis focuses on two key forces: competitive rivalry and the threat of new entrants. The report begins with an executive summary, followed by an overview of Walmart's operations. It then delves into the competitive landscape, discussing the intensity of competition from rivals such as Amazon, Target, and Kroger, as well as the challenges posed by labor unions and employee management. The report also examines the threat of new entrants, considering factors such as brand development costs, business expenses, and capital requirements. The conclusion emphasizes the importance of environmental analysis in business management and highlights Walmart's competitive challenges. The report references several academic sources to support its analysis.

Running head: PORTER’S 2 FORCES ANALYSIS
Porter’s 2 Forces Analysis in Walmart
Name of the Student
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Table of Contents
1. Executive Summary...............................................................................................................2
2. Analysis..................................................................................................................................2
2.1 Operations of Walmart.....................................................................................................2
2.2 Competitive Environment of Walmart with Porter’s 2 Forces........................................3
3. Conclusion..............................................................................................................................5
References..................................................................................................................................6

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1. Executive Summary
An environmental analysis can be referred to as a strategic tool that is being utilized
to identify all types of internal and external elements that could eventually impact the overall
performance of a company (Rothaermel, 2016). This type of analysis entails a proper
assessment of the opportunity or threat level that the factors are presenting. Such evaluations
are being translated into the core procedure of decision making, so that proper alignment of
strategies is possible with the environment of the organization. The business gets influenced
by the environment, and hence all types of situational factors help in the determination of the
normal circumstances affecting the company. The following report outlines a brief discussion
on competitive environmental analysis of a popular organization, called Walmart with
Porter’s forces analysis.
2. Analysis
2.1 Operations of Walmart
Walmart Inc. is a significant multinational retail organization, which is functioning a
chain of several hypermarkets, grocery store and departmental store. Currently, they have
11503 clubs and stores in 27 countries all over the world and have been operating under fifty-
five different names (Walmart.com. 2020). This particular organization is operating under the
name of Walmart within Canada and the United States of America. The major products of
this organization include electronics, home improvement, footwear, home and furniture,
movies and music, jewellery, toys, beauty and health products, craft supply, sporting good
and fitness, clothing, grocery items and many more. Moreover, the primary services of this
organization include Walmart 2 Walmart, Pickup Today, Walmart Pay, Financial Services,
Walmart Money card as well as Walmart.com (Walmart.com. 2020). Due to the variety of

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their products, it has become extremely significant for them to gain maximum success and
effectiveness without much complexity or issue.
2.2 Competitive Environment of Walmart with Porter’s 2 Forces
The competitive environment of Walmart of the organization of Walmart can be
easily analysed with Porter's two forces (Banerjee, 2015). They are facing high competition
in the existing market. The description of these two forces is provided below:
i) Competitive Rivalry: The first essential force of Porter's model is the competitive
rivalry. This particular force is strong for Walmart as well as for the entire retail industry. The
main and the most significant reason for such strong competitive rivalry is that there exist
several firms of various sizes that are competing in the respective environment (Mussa & Zhi
Zhang, 2016). A specific external factor that is the significant consideration within overall
strategic management for the stronger force of competition include a more considerable
number of organizations within the respective retail market, a more substantial diversity of
various retail businesses as well as higher aggressiveness of the retail firms. Walmart has
been experiencing the stronger force of such external forces, which eventually define the
overall competitive rivalry within the subsequent environment of retail industry. Different
organizations can make the competition stronger, and Walmart has been facing high
competition with these firms (Kumar, Dass & Kumar, 2015).
Moreover, the large number of organizations are also imposing maximum challenges
in the development of the competitive advantages of Walmart, after consideration of the
diversity in approaches, which the competitors are utilizing. The intensity of this rivalry
mainly includes Sears Holdings Corporation, Target Corporation, Costco Wholesale
Corporation and many more. Another popular competitor of Walmart is Amazon. They are
generating around 53% of the total revenue of Walmart (Owler.com. 2020). The third rival of

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Walmart is Kroger, and it competes in the food processing industry with Walmart. One of the
significant issues that Walmart is facing in their business due to such high competition is the
presence of labour unions and matters related to employee management. The employees are
getting better payment from other companies, and hence they are moving towards that
particular company.
These organizations are eventually trying to impose significant challenges within the
subsequent development of various cost benefits for the organization of Walmart (Brockhaus
et al., 2017). The high aggressiveness of the organizations is also leading to strong
competitive rivalry, and hence; as a result, Walmart should remain aggressive for remaining
competitive as well as for maintaining their position as the leading global retailer in their
business.
ii) The Threat of New Entrant: The next essential and significant force of Porter's
model for the organization of Walmart is the risk of new entrant (Elder & Dauvergne, 2015).
The organization should address the stronger strength of the risk of new entrant, and the new
entrance of different retail businesses could be eventually obtained even within the presence
of a market leader, such as Walmart. The smaller retailers could quickly get into the market
and then compete, according to convenience, speciality, location as well as any other factor.
This particular force is strong for Walmart. It can be eventually broken down into different
external factors, such as moderate to higher expense of the brand development, lower costs of
conducting business and even reasonable capital cost (Pope & Pope, 2015).
It is quite costly to improve the brand of the new entrant, and few of the significant
new entrants comprise of different financial resources for the core purpose of building a
stronger brand. As a result, it eventually applies a moderate force over the organization of
Walmart (Kumar, Dass & Kumar, 2015). The overall expense to establish an entirely new

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retail business or the expense to run it is lower towards moderate. The smaller firms comprise
of the little costs to do business relative to the large organizations, and the condition makes it
potential for several small firms to enter as a competition against the organization. The initial
capital diverges eventually and is quite high for funding business spaces, HR, as well as any
other variable (Banerjee, 2015). The main reason for such an issue is that Walmart requires
high capitalization, which can become extremely problematic for its business and include
updated resources or labour in the industry.
3. Conclusion
Therefore, a conclusion could be drawn that proper environmental analysis eventually
plays a vital role within business management after providing several significant
opportunities and threats that are dwelling outside the organization in its external
environment. The most significant purpose of such analysis is to help out for the successful
development of a plan after keeping different decision-makers in a company. As a result, it
affects its sales, costs and market. Walmart is a popular and noteworthy organization in the
world, have been facing high competition in their business, concerning products, services and
expenses. The above-provided report has adequately demonstrated a detailed analysis of
environmental analysis of Walmart with a relevant description with Porter's forces analysis.

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References
Banerjee, D. (2015). Walmart Stores Inc.-A Strategic Analysis. International Journal in
Management & Social Science, 3(12), 202-225.
Brockhaus, S., Fawcett, S. E., Knemeyer, A. M., & Fawcett, A. M. (2017). Motivations for
environmental and social consciousness: Reevaluating the sustainability-based
view. Journal of Cleaner Production, 143, 933-947.
Elder, S. D., & Dauvergne, P. (2015). Farming for Walmart: the politics of corporate control
and responsibility in the global South. The Journal of Peasant Studies, 42(5), 1029-
1046.
Kumar, P., Dass, M., & Kumar, S. (2015). From competitive advantage to nodal advantage:
Ecosystem structure and the new five forces that affect prosperity. Business
Horizons, 58(4), 469-481.
Mussa, H. I., & Zhi Zhang, W. (2016). The Secret behind Strategic Information Management
over the Success of Agro-Processing and Retail Industries-Case Study Wal-Mart. J
Glob Econ, 4(204), 2.
Owler.com. (2020). [online]. Accessed from https://www.owler.com/company/walmart
[Accessed on 24 February 2020].
Pope, D. G., & Pope, J. C. (2015). When Walmart comes to town: Always low housing
prices? Always?. Journal of Urban Economics, 87, 1-13.
Rothaermel, F. T. (2016). Strategic management: concepts (Vol. 2). McGraw-Hill Education.
Walmart.com. (2020). [online]. Accessed from https://www.walmart.com/ [Accessed on 24
February 2020].

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