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Walmart Case Analysis

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  • Feb. 2006
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1. Industry Analysis
a) Brief overview of Wal-mart stores
Wal-Mart Stores, Inc. is both a domestic enterprise, as well as a national discount retailer. They operate retail stores domestically in the US and various international markets. Wal-Mart operates on an "Every Day Low Price" philosophy because they are able to maintain their low price structure through complete expense control. With this philosophy they have proven to be extremely profitable domestically. Their primary task is buying from suppliers at a low cost and then reselling the goods to customers at a low price, to achieve their company philosophy of low prices and great customer service. Being in the retail industry, Wal-Mart can choose from many suppliers that provide its various stores with inventory, general buyers, and competition; including Kmart, Sears, Target, Costco discount stores also the local mom and pop stores in various neighborhoods. b) 5- Forces framework

A good source of the industry analysis is Porter's Five Forces Model. It consists of threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute products & services, and intensity of rivalry among competitors in an industry. Let's look at Porter's five forces model; Potential entrants

Wal-Mart does not have to worry about threat to new entrants because it has economies of scale which it spreads the costs of production of the number of units produced. The cost of product per unit declines as the volume increases. It has that capacity to produce more in order to lower the cost. Wal-Mart has product differentiation with strong brand identification and customer loyalty. Wal-Mart also has access to distribution channels with secure distribution for their products. Technology plays an important role in helping Wal-Mart stay customer focused. There are high barriers of entry for companies aspiring to come into the retail industry because of the resources that Wal-Mart...

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