Strategic Management
Assignment on WalMart Five Forces
Analysis
Submitted To: Submitted By:
Prof. Sanjeev Sareen Manas Chitransh
19BSP1476
Section- G
PORTER’S FIVE FORCES ANALYSIS ON WALMART
Threat of New Entrants: Strong Force
Walmart Inc. must address the strong intensity of the threat of new entrants. New entry of retail firms is
easily achieved even in the presence of giants like Walmart. Small retailers can enter the market and
compete on the basis of convenience, location, specialty, and other factors. Based on this Porter’s Five
Forces analysis, the strong force of new entry is broken down into the following component external
factors:
Moderate to high cost of brand development (Moderate force)
Low cost of doing business (Strong force)
Moderate capital costs (Strong force)
It is costly to develop a new entrant’s brand. Nonetheless, some large new entrants have the financial
resources to build a strong brand. This condition exerts a moderate force on Walmart Inc. The cost of
establishing a new retail firm and the cost of running it are low to moderate. For example, small retailers
have low costs of doing business relative to larger firms. This condition makes it possible for many
smaller retailers to compete against Walmart. Initial capital outlay varies, but it is typically high in terms
of funding for business space, human resources, and equipment, among other variables. Still, smaller
new entrants can establish their operations with low to moderate capital outlay. These external factors
in the context of the Five Forces analysis show that new entrants can keep operating and become
potential threats to firms like Walmart
Threat of Substitutes: Weak Force
The threat of substitutes or substitution has weak intensity in affecting the retail industry environment.
Walmart offers a wide variety of goods and services that have a few or no substitutes. The following
external factors impose the weak threat of substitution against Walmart:
Moderate availability of substitutes (Moderate force)
Low variety of substitutes (Weak force)
Higher cost of substitutes (Weak force)
Some substitutes to Walmart’s goods are readily available. However, the external factor of the low
variety of substitutes makes it difficult for consumers to move away from products available from
retailers like Walmart. Also, some substitutes are more expensive than the low-cost goods and services
available at the company’s stores. In Porter’s Five Forces analysis model, the combination of these
external factors lead to the weak threat of substitutes or substitution in Walmart’s industry
environment.
Bargaining Power of Buyers: Weak Force
Walmart faces the weak intensity of the bargaining power of buyers in the retail industry environment.
Based on Porter’s Five Forces analysis model, the large population of buyers makes it difficult for them
to impose significant pressure on retail firms. Walmart is subject to the following external factors
concerning the weak bargaining power of buyers or customers:
Large population of consumers (Weak force)
High diversity of consumers (Weak force)
Small size of individual purchases (Weak force)
The large population of buyers exerts a weak force on Walmart and the retail industry. Individual buyers
have negligible impact on the company’s global revenues. The weak force of buyer diversity and the
weak force of small individual purchases further weaken the bargaining power of customers. Higher
buyer diversity makes it more difficult for customers to collectively impose pressure on the company. In
effect, the bargaining power of buyers is weak in influencing Walmart and other firms in the industry.
Bargaining Power of Suppliers: Weak Force
The bargaining power of suppliers has weak intensity in the retail industry environment. There are
many suppliers in the industry. Large firms like Walmart can easily affect these suppliers. Based on this
condition, Walmart experiences the weak force of the bargaining power of suppliers, based on the
following external factors:
Large population of suppliers (Weak force)
Tough competition among suppliers (Weak force)
High availability of supply (Weak force)
This Porter’s Five Forces analysis of Walmart Inc. considers the large population of suppliers as having
weak potential to impact the company. Individual suppliers have minimal influence on large retailers like
Walmart. Also, there are many suppliers competing for limited space in retail stores. The high availability
of supply makes it difficult for suppliers to impact the strategic growth of Walmart. Thus, the company
faces the weak intensity of the bargaining power of suppliers. Walmart’s corporate social responsibility
strategy helps in managing suppliers’ influence on the business.
Competitive Rivalry: Strong Force
The intensity of competitive rivalry is strong in the retail industry. There are many firms of different sizes
competing in this industry environment. The following external factors are the most significant
considerations in Walmart’s strategic management of the strong force of competition:
Large number of firms in the retail market (Strong force)
Large variety of retail firms (Strong force)
High aggressiveness of retail firms (Strong force)
Walmart experiences the strong force of these external factors that define the competitive rivalry in the
retail industry environment. In Porter’s Five Forces analysis model, a large number of firms typically
strengthen competition. In relation, the high variety of firms imposes challenges in developing
Walmart’s competitive advantages, considering the diversity of approaches that these competitors use.
Also, higher firm aggressiveness leads to stronger competitive rivalry. Thus, the company must remain
aggressive to remain competitive. Walmart must keep growing to remain in its position as a major global
retailer.
Key Drivers for Change:
1) Need for Development of Additional Enhancements:
It is recommended that the company increase its investment in the automation of internal business processes,
including its supply chain. This recommendation aims to improve overall efficiency and, as a result, improve cost
effectiveness to satisfy Walmart’s corporate vision and mission statements.
2) Enhancement of Human Resource Management:
It is also recommended that the company further enhance its human resource management. Such improvement can
contribute to workforce competencies that support business growth.
3) Adjustment to Driving Industry Changes:
Walmart has been dominating the retail industry for quite some time now. It’s not only known for its great service
but also great and quick one as well. Its quality is something that the customers have loved. Hence, Locating itself
strategically near to its target audience and a great renting policy are some of the factors leading to the success.
