Walmart: Descriptive Research Paper
Walmart, according to Porters Five Forces is the largest retailer in the world. Its strength is based in the fact that walmart is not a manufacturer, the firm is a distributor. Basically, its task is to buy at a low price and sell it at a high price, its value chain is pretty simple.
The value chain model :
Walmart is selling its products at a very low margin, the firm expect to ensure its profitability by selling huge quantity of products. One of its force is its logistical chain in order to ensure the stocks : as soon as an object is bought at the counter, the inventory system makes sure that another one will be available soon. walmart strength is also to be able to have a physical presence. With more than 11.000 stores over the United States and many other countries, they have the ability to grant the satisfaction to have the pleasure of instant gratification of buying an item and go home with it.
Let’s analyse the firm through the scope of Porter’s Five forces.
Threat of new entrants :
Economy of scale : Walmart sells a lot of products, and so has the ability to reduce its costs, it has a very huge buyer power.
Product differentiation : Walmart sells everything : books, electronics, travel, music, movies, pharmacy, the firm has a huge range of product.
Capital requirements : The amount of money to start a company and to afford the technology to grow and reach the size of Walmart is considerable.
Switching cost to buyers : The switching cost to buyers is very low. In order to do it, you just have to open an account on another website.
Access to distribution channel : Any firm can access to distribution channels, such as UPS, FedEx for example as well as Amazon. But Walmart has the advantage to have over 11.000 physical stores and so is able to allow shipping in its stores.
Overhead advantage : Walmart has huge costs coming from its stores, higher than Amazon.
In addition, Walmart has a huge technological gap with Amazon but has a bigger experience in physical retailing.
The market of online retail has enormous entry barriers.
Determinants of buyer power :
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