Walmart Porters Five Force

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Porter’s Five Forces Model, Wal-Mart

Suppliers

Wal-Mart is an important and dominant customer to its suppliers, for some of them it’s also the largest one. Wal-Mart isn’t dependent on one supplier, but rather obtains its goods from a lot of different suppliers. For this reason, suppliers need to satisfy Wal-Mart in order to keep it as a long term customer. This is realized by special payment terms, delivery dates and discounts. The success of these relationships is proved by the increasing growth of Wal-Mart.

Buyers

Wal-Mart comes out on top against its competitors, not least because of the big size of the stores and the widely spread offer of goods. Wal-Mart also matches its prices to those of the competitors accompanied by qualitative merchandise and advantageous locations of their buildings.

Potential Entrants (Threat of new Entrants)

It is always possible, that new Entrants enter the market, but with Wal-Mart as a competitor, they would need huge capital. Wal-Mart is growing very fast and has a big interdependent network of stores, suppliers and logistics, which make it almost impossible for new entrants to fight against it. In 2012 alone, Wal-Mart added 52.2 million square feet through 1,160 additional units and increased its sales by 5.9 percent. Competing entrants will need to have a really good business model and a large amount of suppliers with special contracts to enter the market.

Substitutes

Wal-Mart’s substitutes are specialized dealers and stores, which have higher prices but maybe are better located and more comfortable to reach.

Competitors

The competition in this market is very high. Wal-Mart has several well-established competitors like Target, Costco, Home Depot and K-mart and so on. But theses competitors are not really a threat for Wal-Mart, because the company is way larger and more profitable, which means that Wal-Mart is the leader in this industry and ahead of its competitors.
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