Porter's "Five Forces" Model
Threat of New Entrants - It is very difficult to compete on the same scale as Walmart. They have economies of scale and a great logistics system. Walmart has stores around the world with many distribution channels. They have large financial capital that no start-up business can match. Walmart has their own brand names which gives them even more market share. Departments stores and specialty stores can enter the market, but on a smaller scale.
The Bargaining Power of Buyers - The bargaining power of Walmart buyers is low since Walmart relies on sales from individuals and not large buyers. Buyers can't switch competitors for lower prices since typically Walmart has the lowest prices.
The Bargaining Power of Suppliers - Small suppliers have no or very low bargaining power against since Walmart is so large. Large companies like Proctor and Gamble, may have some bargaining power.
Threat of Substitute Products - The threat of substitute products is low because it is hard for other companies to offer such a wide variety of products at such a low price. Both department stores and specialty stores have struggled to compete with Walmart's low prices.
Intensity of Rivalry - Target has become Walmart's biggest rival. Target has made the competition even closer by adding more grocery items and lowering their prices. Shopko and Kmart have fallen behind and have closed stores in recent years. The rivalry among the businesses is intense since the industry is in the mature stage.
The General Environment
Demographic - Walmart targets people of all ages and both sexes. They tailor stores specifically for: Hispanics, African Americans, the affluent, empty-nesters, rural residents, and suburban residents (Wikipedia, 2013). Walmart target people who have low incomes.
Sociocultural - Walmart has shown greater concern for the environment. The 2011 Walmart Global Responsibility Report says their 3 main environmental goals are: (1) to be supplied by 100% renewable energy, (2) to create zero waste, (3) to sell products that sustain people and the environment. They have reduced greenhouse gases from their stores 10.61% from 2005 levels. Walmart reduced their plastic bag waste by 3.5 billion bags in 2011 (Walmart 2011 Global Responsibility Report, 2012). With a greater concern for health and fitness, Walmart needs to add more healthy food options and exercise equipment.
Political/Legal - Walmart has to worry about the increase in minimum wage because they pay low wages to their employees. They will have to adapt to the recent increase in taxes for individuals as the payroll tax went up on all U.S. citizens. Federal taxes and capital gain taxes went up on higher income individuals. Congress is also thinking about changing the corporate tax code.
Technological - Walmart uses new technology for their logistics system. They use ID tags to manage their inventory. Walmart uses the latest technology to improve the fuel efficiency of their trucks. Walmart uses the Internet technology to sell their products and give people information about their products.
Economic - The stock price of Walmart has recently went down because sales have been down for the first two months of the year. Walmart says the loss of sales is due to the increase in the payroll tax. If the unemployment rate goes up, their low income customers will have less money to spend. They could gain some new customers if some people have to give up shopping at upscale stores.
Global - Walmart is a global retailer as they have stores in 15 different countries. With being a global retailer, they have to deal with exchange rates. Smaller currencies have more volatile exchange rates than larger currencies.
Walmart 2011 Global Responsibility Report. (2012). Retrieved from http://walmartstores.com/sites/responsibikityreport/2011/executive_summary.aspx
Wikipedia. 2013. Retrieved from http://en.wikipedia.org/wiki/Walmart
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