This Walmart Porter’s Five Forces analysis will reveal why the company is on top of retail industry. Check it out to learn about Walmart bargaining power of buyers and more.
Walmart Five Forces Analysis: Introduction
Having recently rebranded itself as not merely a chain of stores but an experience that customers can enjoy both online and offline, Walmart has opened itself for a range of changes in the environment of the global market (Moloney, 2017). The use of Porter’s Five Forces Analysis will help locate Walmart’s competitive potential in the specified setting. Specifically, due to the transfer to the digital environment, the use of an effective IT architecture to improve the information management process, encourage growth within its supply chain, and add strategic power to its current assets is essential (Jetha, 2018a).
Because of the irreversibility of the IT architecture system and Walmart’s current focus on the one-growth target, the integration of a profound analysis of customers’ needs and the available data management frameworks to ensure that the firm’s architectural decisions are sustainable.
Porter Walmart: Threat of Substitutes
Since Walmart currently holds the title of the most popular retail company, even in the digital market, the threat of new entrants can be deemed as relatively low. The use of the Walmart Labs GitHub technology opens opportunities for storing massive amounts of data (Petro, 2018). The application of Walmart Labs blurs the industry boundaries by allowing the company to understand its retailers and adjust to their needs.
As a result, the legacy business models used by Walmart are updated regularly to ensure proper market positioning of the firm’s services. For instance, the transfer from the traditional brick-and-mortar stores to electronic ones has made it possible to open new opportunities for strategic planning. Since the Walmart Labs technology is unique and produces results that are beyond impressive, Walmart can enjoy a crucial competitive advantage in the online market even with the introduction of new competitors into the picture. Furthermore, Walmart may eventually transfer to the culture fit concept as a legacy model.
Walmart in Porter: Nature of Supplier Power
In the digital market setting, the number of suppliers has grown significantly over the past few years, which makes their bargaining power (BPS) quite low for Walmart. The reduction in the BPS levels can also be attributed to Walmart’s smart approach toward attracting new suppliers. Specifically, the firm has launched recently an online supplier center, inviting companies to sell their merchandise on Walmart.com Marketplace (Moloney, 2017).
The technology’s DNA creates opportunities for increasing the visibility of products and enhancing brand reach. Thus, Walmart has seamlessly transferred its relationships with its key suppliers to the digital market. Furthermore, the identified framework has helped Walmart to transcend cultures and reach out to culturally diverse audiences due to the focus on their skills and potential instead of their geographic location.
While the specified approach has reduced the number of suppliers, the quality of products has risen significantly (Boyle, 2018). As a result, the BPS rates remain moderate or low for Walmart in the online market (Walmart, Inc., 2018). Thus, the company can control the expenses that it takes to attract retailers and encourage them to cooperate with Walmart. As a result, Walmart’s online supply chain is growing increasingly fast.
Walmart Bargaining Power of Buyers
When considering the factors that make Walmart exceptional and allow it to stand out among similar organizations, one needs to address the pricing strategy of the company. Walmart has set the bar for product prices incredibly low, which reduces the bargaining power of buyers (BPB) to the lowest level possible and setting competitive barriers for other organizations very high. The situation has not changed even after Walmart’s transfer of its business processes in the digital realm.
The pricing strategy that the company uses reduces the opportunities for customers to find a similar product of the same price and quality extensively. This allows maintaining the net present value high, which is crucial given the uncertainty levels (Jetha, 2018b). The expansion of the firm’s services to new geographic locations has also affected the BPB largely, with the rates of loyalty among buyers growing constantly.
The Porter Walmart’s Threat of New Entrants
The application of innovative IT technology has enabled Walmart to maintain the threat of new competitors relatively low. Because of the high competitive barriers that Walmart’s current IT framework sets for the rest of the organizations in the global market, the company makes the threat of new entrants practically indiscernible.
Walmart has pushed the industry boundaries so far with its online hub for distributors and the enhancement of communication that the company’s legacy business model is bound to withstand a surge of new entrants. Furthermore, the current business legacy model seems to be self-sustainable since it incorporates the principles of homeostasis and the promotion of innovation within the company. Thus, even though Walmart may experience certain difficulties in handling future expenses, the long-term effects of its current strategy are likely to be highly lucrative.
Walmart Porter 5 Forces: Conclusion
Due to the current alignment of Walmart’s vision and objectives with its transition to the digital market, the firm will need to consider incorporating an in-depth customer analysis with the current use of Walmart Labs as the means of arranging the available data and promoting communication with clients. The assessment has shown that, although Walmart’s transfer to the context of the digital market was rather recent, the organization has already built an impressive competitive advantage by creating a unique platform for data management.
Therefore, there are currently no massive threats to Walmart’s performance due to its IT architecture system. Connecting the company to its customers directly, the specified framework harnesses the IT potential of the available resources and elevates Walmart to the top of the market. As a result, the continuous positive change takes place within the context of the firm, which means that the future revenue margins are expected to be comparatively high.
References
Boyle, M. (2018). Walmart is getting picky about online marketplace sellers. Web.
Jetha, K. (2018a). MAN6830: Week 6 – IT strategy ch. 3. [Video file]. Web.
Jetha, K. (2018b). MAN6830: Week 7 – IT strategy ch. 4 [Video file]. Web.
Moloney, E. (2017). What retailers can learn from Walmart’s incredible e-commerce growth in 2017. Forbes. Web.
Petro, G. (2018). Build it or buy it: Will Amazon or Walmart win the retail innovation battle? Forbes. Web.
Walmart, Inc. (2018). Sell better with Walmart Marketplace. Web.