I. Dominant Economic Features
A. Market Size
Businesses in the discount retail industry can earn annual sales as high as $200B up to a low of $7B.
B. Scope of Competitive Rivalry
Generally, there are two sets of competitors for Wal-Mart. Regional discount retailers such as roses, Howard's and Duckwall-ALCO. These companies will be forced into a massive marketing revolution with the entry of Wal-Mart to their region.
Also, Wal-Mart has competitors in a national basis. These retailers could be identified as K-Mart, Sears, Kohl's and Target. Wal-Mart also has located itself in the international scene with acquisitions of local companies. This could be considered as a means of fortifying their position, making it outside the United States before competitors can cope with it.
C. Market Growth and position in the product line
For the year 2000-2001, the Wal-Mart and their national competitors had gains ranging from 0.1% to a high of 22% increase in sales.
The products being marketed are mostly in the mature stage because the items are necessities. Therefore, a constant innovation in marketing techniques such as pricing and promotions should be done to gain a competitive advantage over rivals.
D. Number of companies in the industry
There are 4 major competitors in the retail industry.
Sears, Roebuck and Company - not a discount store targeting middle-market customers. Focus strategy of product lines on apparel, automotive and home materials.
K-Mart- retail and discount combination, similar to Wal-Mart minus the marketing strength. Its track record has been negative
Number of stores ranges from 4,414 stores (Wal-Mart), to 382 stores (Kohl's). This number shows the ability of Wal-Mart to expand into others states, making their number a strength of the company. For a competitor, number is not always the issue. Management skills, low prices and adherence to social responsibilities can be a source of advantage to compete. The abovementioned skills though are possessed by Wal-Mart.
Population ranges from 5,000 to 25,000 per region. Customers are attracted by the discount theme of the industry. Because items sold can be considered as necessities, buyer behavior will rely on the strength of the company's marketing and promotions skills to shift buyer attention from competitors.
F. Entry and Exit Barriers
The industry is highly profitable with limited competitors. However, competition that is centered on price wars can only be sustained if players have the capital for the innovations in the facilities and promotional campaigns. In addition, entrants should have substantial marketing resources and management know-how to support tactics to be pursued. Achieving economies of scale can also be a hindrance for competitors. Companies that can EOS quickly can lower their prices to challenge competitors.Of course this should be accompanied by consistent high quality products, which can be assured from the suppliers. Customer loyalty is also a factor. For companies that have not captured the attention of customers, it would be difficult to enter in the industry.
The industry is highly profitable, with the competition resulting from price cut wars and location issues. Despite of the everyday low prices, companies in the retail industry are still earning because they can take advantage of economies of scale.
II. Porter's 5 Forces of Competition
A. Rivalry among competing firms
The main driver for competition is centered on price-competition. Special promotions that enhance buyer appeal, such as the 'buy American' theme also contribute to the rivalry. Wal-Mart marketing strategies seem to always come ahead of competitors, and even if they lag behind, the customer loyalty will retain their customers. A competency that also causes rivalry. Although it seems that competitors have...