Walmart Risk and Opportunity Analysis using Porter’s Five Model

            Walmart Position in the Industry

Walmart strategic approach is primarily grounded on the firm’s external environment forces. The firm is the leading retailer in the global context which is mainly fueled by its market share, resources as well as products variety. The company has acquired success in possessing the leading position in the retail sector but its external forces present both opportunities and threats which should be addressed in order to acquire efficiency and the capability to sustain the competitive benefits. Walmart’s primary competitors are Tesco and Carrefour who are also well-established firms in the global sector (Chekwa, Martin & Wells, 2015). Being the largest domestic and global retailer the company’s size as well as a positive brand reputation that it has generated provide it with a significant advantage over its rivals. In regard to handling suppliers, consumers, workers or investors Walmart has been known for having customized and effective strategies. The affordable pricing approach at the firm are not present in other firms and its products range is larger when equated with that of the competitors which lead to consumer satisfaction based on the wide selection options (Chekwa, Martin & Wells, 2015). Based on porter’s analysis it is apparent that Walmart has already occupied a competitive position which it must strive to maintain and enhance globally.

Walmart’s buyers are individuals in both the lower and the middle classes in the society. The firm’s economic opportunity lies on the ground that it has lots of buyers. This is because the company’s target population is characterized by more consumers who are additionally fueled by affordability, convenience and products variety which are the company’s main values. The company has acquired significant success given that it is particularly focused on the cost leading and differentiation approaches, unlike its competitors who are oriented on market shares and revenue maximization. Its lots of buyers are acquired from the ground that the firm is specifically centered on the needs of the consumer (Chekwa, Martin & Wells, 2015). Walmart acknowledges that consumers are the primary determinants of organizational success and thus they need should be a priority. This is the strategic approach that the firm has utilized in acquiring a significant share in the international market. In addition, the retail sector is developing rather fast and the projected growth in the industry within the next three years is 27 percent which will increase the opportunities further (Chekwa, Martin & Wells, 2015).

            Walmart Porter’s Five Forces Analysis

            Rivalry among the Operating Firms

The existing rivalry in the retail industry globally is intense. In that Walmart engages in close competition with well-established firms in the domestic and global market such as Tesco, Trader Joe’s, Carrefour and many others (Blackwell & Eppler, 2014). These firms offer both groceries as well as supermarket retailing business which is similar to its operations. The grocery sector industrial saturation has experienced several changes in the last few years which favors the well-established retailers such as Costco, Walmart, and Tesco (Blackwell & Eppler, 2014). The market share of the well-established firms has experienced steady increase when being equated to the grocery firms that are much smaller which is fueled by the cost benefit that has been acquired past scales economies. The rivalry intensity is, therefore, made even more authoritative by the fact that the firms that are engaged in competition within the industry are characterized by distinct sizes. These firms are additionally involved in aggressive competition given that they all offer variety (Blackwell & Eppler, 2014). In this context, Walmart is required to retain its aggressiveness in order to sustain its competitive benefits. Despite the fact that Walmart is the forerunner in the retail industry its growth speed should be maintained in the quest of retaining the position. However, despite the rivalry, Walmart has the advantage because of its pricing strategy which cannot be matched by the competitors given that its establishment is firm and more authority is given by its large size. It is worth noting that the increasing rivalry in the market is consistently affecting the firm’s operation while lowering its revenue base due to the highly shared consumer market which might alter the strategic operation and development of the retailer (Blackwell & Eppler, 2014).

            Substitute’s Threats

It is highly argued that products or services substitute danger is immaterial for Walmart based on its diverse product range. Walmart is the only retailer that is involved in selling goods that are from an enormous range of sectors. The firm offers products ranges as well as the relevant substitutes for the products in general (Timilsina, 2015). This implies that the threat is immaterial and it only provides more opportunities for the company in attracting more consumers. Despite the fact that other retailers provide products ranges even though not large as that of Walmart, those that offer these products at minimal prices same as Walmart are few (Timilsina, 2015). The competitors provide similar brands as well as opportunities for the consumers to acquire the products but in regard to pricing, there is no other retailer that offers pricing benefits same as that of Walmart.  There are threats that are posed by the online retailers but they fail given that they are unable to offer products prices that match that of Walmart. It is true that online retailers offer many conveniences given that the consumers are not forced to search for the products physically from the stores and their products are delivered directly to their homes. However, given that there are more shoppers who would be willing to make online purchases in order to acquire convenience, the cheap prices that are offered by Walmart can never be matched. It is such forces that ensure that the substitution threats of products are kept minimal (Timilsina, 2015).

            Walmart’s Suppliers Bargaining Power

The firm’s suppliers bargaining authority is low to medium. To begin with, Walmart is the huge retailer. In this, context, it has so much to offer to the relevant suppliers. The Company is mainly involved in bulk purchases which generally implies that it is a major contributor to all its suppliers (Timilsina, 2015). As the largest retailer firm, it owns a significantly extensive market share globally and on the ground that it makes huge buying it holds significant purchasing authority. The general switching expenses for the corporation are minimal and based on its capabilities it holds the potential for switching from a supplier to the other without incurring major expenses.  More so, it is much simpler for the firm to attempt to operate under backward incorporation (Timilsina, 2015). Most of the firm’s suppliers are large companies which creates more authority to bargain. In general, the bargaining authority of the suppliers in this context is low to medium.

The firm is therefore in a suitable position for imposing customized demands while they ask for more reduced prices while they are being guided by the ethical directions via which the traders are normally willing to comply (Lamb, Hair & McDaniel, 2012). In that, if the trader fails to adhere to the set directions then the Company holds more authority and therefore it eliminates it directly from the list. In this context, it is apparent that Walmart holds authoritative control over the traders. The authoritative power of bargaining is held by the firm because its purchases normally create even higher opportunities for the respective traders. Based on its size in general, Walmart is able to acquire products at minimal prices which is useful in lowering its operating expenses while maintaining the cost leading approach (Lamb, Hair & McDaniel, 2012). Despite the fact that the suppliers are pressured by its size to offer cheaper sales the traders are also necessitated to comply with the set requirements in order to create quality and safety which in turn results in consumer satisfaction (Lamb, Hair & McDaniel, 2012). This strategy is mainly focused on creating positive consumer relationships with the company.

            Buyer’s Bargaining Power

The purchasing authority by the buyers is quite minimal. This is because the buyers do not particularly make huge purchases personally. In addition, convenience, variety, and affordability of shopping are the primary essential forces that to the utmost degree result in limited buyers bargaining authority (Lamb, Hair & McDaniel, 2012). There switching expenses for them are however minimal but it is factual that they cannot acquire the products at similar prices, variety as well as convenience.  In that, the least pricing strategy that is developed by Walmart ensures that the bargaining authority of the consumers is reduced. In this context, the buyers present minimal or zero influence on the products. In general, the bargaining authority for the consumers is a weak external force for Walmart based on the fact that its values create more benefits. However, advocate consumer groups possess more threats based on their higher bargaining authority and thus in order to sustain its position, Walmart should be focused more on maximizing consumer satisfaction (Lamb, Hair & McDaniel, 2012).

            New Entrants Threats

The threats subjected by the new market entry is low. This is mainly because Walmart is currently the largest firm in the retail sector and therefore, there is much investment that is necessary in order to create a similar firm (Grieves, 2010). Based on its long operation the firm has not only worked on building a positive image and a significant share but it has also created an authoritative establishment in the industry. To won, a supply and distribution system that is similar with that of the firm is even challenging and this might even take longer to create. All the operations that are aimed at outweighing the firm’s influence necessitate higher investments as well as an experienced workforce that is necessary for creating and maintaining strategic ventures. The large financial base, as well as additional resources, offers it the guard that is necessary for defeating all the threats posed by fresh entrants (Grieves, 2010). The retailers that are already in existence have already experienced challenges in dealing with the pricing competition. The pricing advantage has assisted Walmart in gaining a larger market and this is also an additional aspect that challenges the fresh entrants. In general, the cost strategy has given Walmart an authoritative ground and new entrants do not create any authoritative forces (Grieves, 2010).

            Technology Trends and Government Influences

Today, Walmart is the leading revenue generator and employer in the United States domestic market. In this context, the administration’s regulations are rather very fair given that restrictions would affect the government and the economy directly (Grieves, 2010). This is a major force that gives the firm the authority of being highly productive and focused on consumer satisfaction. The firm has also made adequate investment in technology particularly in the supply and production sector which is involved in the management of products movement and sales. Technology has not only created efficiency for the company but has also ensured that the company is more focused on the long run goals. Unlike the competitors, its efficiency in communicating with the traders has played part in offering variety at convenient and reduced prices which consistently increase its market share (Grieves, 2010).

            Strategy Implications and Recommendations

Walmart’s competitive strength is fueled by is a large size, efficient international supply, increased efficiency due to technology application and increased resources. The company has been able to retain the competitive position based on the cost leading approach which none of its competitors has much (Blackwell & Eppler, 2014). This has resulted in a higher market share as well as more revenue generation. Walmart must focus on aggressive competition using its large size and resources in order to exploit the existing development opportunities in the market. The company should, therefore, focus on developing its Human resource management level as well as goods quality which will result in an overall performance development (Blackwell & Eppler, 2014). In addition, the company must consistently engage in market expansion and exploitation in the emerging sectors globally.

            Conclusion

Walmart’s strategy is grounded on low costs, convenience, variety and high products capacity. The company has been able to retain the competitive strategy via ensuring that its costs of operations are minimal. In that, it acquires products from the suppliers at reduced prices and yet of quality standards based on its purchasing authority. The company can utilize the cost advantage as the market penetration approach in general. This is because the company places value on convenience, variety, and affordability and with these benefits, the consumers have more options to select from which results in consumer satisfaction. As the retail leader, the firm cannot ignore the competition acquired from other firms because this is particularly relevant in designing its strategic moves.

References

Blackwell, R., & Eppler, D. (2014). An Approach to Strategic Situation Analysis: Using Models as Analytical Tools. Journal of Global Business Management, 10(1), 80.

Chekwa, E., Martin, J., & Wells, K. (2015). Riding On the Waves of Sustained Competitive Advantage: Consumers' Perspectives on Walmart Corporation. International Journal of the Academic Business World, 9(1), 61-73.

Grieves, J. (2010). Organizational change: Themes & issues. New York: Oxford University         Press.

Lamb, C. W., Hair, J. F., & McDaniel, C. D. (2012). Essentials of marketing. Mason, Ohio:         South-Western. Cengage Learning.

Timilsina, B. (2015). Competitively Distinct Operations as a Key for Superior and Sustainable Business Performance: An Example from Walmart. Management (18544223), 10(3), 273-292.