Walmart Case Analysis

745 Words3 Pages
Discount Retail Industry Analysis Outline For the Walmart Stores Inc. Harvard Case For the purpose of this analysis I have defined discount retailers as companies with 30,000 + SKUs such as Wal-mart, K-mart and Target. I have defined substitutes as supermarkets, warehouses clubs, and supercenters because they offer discounted products but not the same variety as discount retailers. QUESTION 1 Perform a 5 force analysis. Degree of Rivalry – High The industry is highly concentrated and rivals are roughly the same size which increases rivalry because it is difficult to avoid direct competition. Furthermore, all companies have capacity to compete. No switching costs and product differentiation raise the degree of competition because it is easy for them to go where the lowest prices are. This characteristic leads to price wars which is present in the industry. Industry growth is the only factor that lowers rivalry – growth is high with few stores opening so companies do not need to compete for market share. Power of Suppliers – Low There is low supplier concentration relative to the industry they sell to and a single supplier does not account for a large part of a retailer’s business. This weakens the overall power of the supplier because there are more supply options available for discount retailers. The emergence of private labels has also reduced supplier leverage. Supplier power is further weakened by low switching costs and non-differentiated products. As the retailers incur virtually no costs by changing suppliers it is easy for them to play them against each other to get better terms. This negative effect is heightened by high supplier volume. As discount retailers account for a large percentage of their revenue, suppliers don’t have strong negotiating power. Power of Buyers – Low-Medium Purchases are not a large part of total income which
Open Document