Question

describe each of Porter’s 5 forces Model. Also, indicate how and which of the forces are being used by Walmart.

1. Intensity of Rivalry with the Industry
2. Bargaining Power of Buyers
3. Bargaining Power of Suppliers
4. Threat of Substitutes
5. Threat of New Entrants

Please see the information in the following link to better understand Porter's Five Forces.

See: Evaluating the Industry: Porter's Five Forces:

Answer 1

Porter’s 5 forces Model:

The five forces model was developed by Michael E.
Porter to help companies in assessing the nature of an "
industry's competitiveness and to develop corporate a.
strategies accordingly.
Porter's model is a simple but powerful tool for nf
understanding where power lies in a business tig
situation. This is useful, because it helps you
understand both the strength of your current °
competition. .
Porters model is of competitive forces assume that °
there are five competitive forces which helps in
identifying the competitive power in a business
situation. The five competitive forces identified by the
Michael Porter are as below
1. Threat of substitute products
2. Threat of new entrants
3. Intense rivalry among existing players
4. Bargaining power of suppliers
5. Bargaining power of Buyers

1.Threat of substitute products:

Threat of substitute products means how easily your
customers can switch or move to your competitors
product. Threat of substitute is high when:
» If there are many substitute products available in the
market.
« The Customer is more brilliant he can easily find the
product or service that you're offering at the same or
less price
e If customer finds Quality of the competitors’ product is
better than your company.
» If Substitute product is by a company earning high
profits so can reduce prices to the lowest level.In this case profits of the company will be slow down if
it allows wider range of substitute products.

2.Threat of new entrants:

A new entry or a competitor into the market also
weakens the sales volume of your business. Threat of
new entry depends upon entry and exit barriers.
Threat of new entry is high when:
* If there is a less Capital requirements to start the
business are less
* If new entry provides economically good
« Customers can easily switch because they can easily
move if other company product is better than our's
« If the using technology at Your company is weak in
protection of required data Your
» If the product is not much differentiated
comparatively.

3.Industry Rivalry:

Industry rivalry means the intensity of a competition
among the existing competitors in the market. The
industry rivalry depends on the number of competitors
and their capabilities. Industry rivalry is high when:
« If there are number of small or equal competitors of
the same field.
+ If Customers have low switching costs means moving
of customer to the best product
« If Industry is growing up
« The cost of a product which is fixed cost acts as high
in resulting huge production and reduction in prices
This kind of situations make the reasons for advertising
, less price, modifications, ultimately costs increase and
it is difficult to compete.

4. Bargaining.power of suppliers:

Bargaining Power of supplier means how strongh can
seller increases sales volume by giving such a nice
competition.and how much your supplier have control
over increasing the Price of supplies.that means even
though cost is high ,customer shows same interest as before in buying certain product. Suppliers are more
powerful when
* If Suppliers are concentrated and well organized in
selling the product.
* If there are less substitutes available to supplies in the
available market.
« If the product is most effective or unique rather than
other company products.
* Switching cost, from one suppliers to another, is high

5. Bargaining power of Buyers:

The Bargaining Power of Buyers means, How much
control the buyers have to drive down your products
price, and Can they work together in ordering large
volumes. Buyers have more bargaining power when:
« If there are few buyers chasing too many goods.
+ In case of buyer purchases in bulk quantities
« Product is not differentiated
* In case of buyer’s cost of switching to a competitors’
product is low
» Another thing is Shopping cost is low
« More after buyers are price sensitive

How Wal-Mart Stores, Inc. can tackle the Threats of New Entrants

• By innovating new products and services. New products not only brings new customers to the fold but also give old customer a reason to buy Wal-Mart Stores, Inc. ‘s products.
• By building economies of scale so that it can lower the fixed cost per unit.
• Building capacities and spending money on research and development. New entrants are less likely to enter a dynamic industry where the established players such as Wal-Mart Stores, Inc. keep defining the standards regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new players in the industry.

How Wal-Mart Stores, Inc. can tackle Bargaining Power of the Suppliers

• By building efficient supply chain with multiple suppliers.
• By experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another.
• Developing dedicated suppliers whose business depends upon the firm. One of the lessons Wal-Mart Stores, Inc. can learn from Wal-Mart and Nike is how these companies developed third party manufacturers whose business solely depends on them thus creating a scenario where these third party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.

How Wal-Mart Stores, Inc. can tackle the Bargaining Power of Buyers

• By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.
• By rapidly innovating new products. Customers often seek discounts and offerings on established products so if Wal-Mart Stores, Inc. keep on coming up with new products then it can limit the bargaining power of buyers.
• New products will also reduce the defection of existing customers of Wal-Mart Stores, Inc. to its competitors.

How Wal-Mart Stores, Inc. can tackle the Treat of Substitute Products / Services

• By being service oriented rather than just product oriented.
• By understanding the core need of the customer rather than what the customer is buying.
• By increasing the switching cost for the customers.

How Wal-Mart Stores, Inc. can tackle Intense Rivalry among the Existing Competitors in Discount, Variety Stores industry

• By building a sustainable differentiation
• By building scale so that it can compete better
• Collaborating with competitors to increase the market size rather than just competing for small market.