Walmart And Industry Attractivenss

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1. HOW ATTRACTIVE WAS THE DISCOUNTING RETAILING INDUSTRY IN THE USA WHEN WAL-MART FIRST BEGAN ITS OPERATIONS IN THE 1950S. To identify the attractiveness of the retailing industry in the 1950’s it would be appropriate to use Michael E Porters “Five Forces” framework for Industry Analysis. THE DEGREE OF RIVALRY – HIGH The degree of rivalry is the most obvious of the “Five Forces” in an industry – and the one which strategists generally focussed historically. It influences the extent to which the value created by an industry will be dispersed through direct competition. There were several signs of industry growth at the time as was USA’s economy; this led to a number of newly emerging discount stores trying to exploit the potential of high profit. This led to intense competition at the time and increasing rivalry for market share. Due to this industry concentration was low at the time. There was not one dominant player within the industry; they were more equally balanced thus increasing rivalry. The High fixed cost for running a discount store resulted in an economies of scale effect, this can be seen when Wal-Mart decided to gain economies of scale by building their own distribution centres to add value. Going public in order to finance the extra storage was important for Wal-Mart to utilise capacity as efficiently as possible, they did this by creating distribution hub around 15-20 stores. The increased rivalry continues, this was due to the low levels of product differentiation and little in the way of own branding, products were standard in nature through all discount stores. Also the low switching cost and consumer awareness of shopping around to find the best bargains increased competition around stores to capture customers. Corporate stakes were high for Wal-Mart, this can be seen in its earlier years (Ben Franklin stores) where they were losing
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