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WalMart assignment 1

WalMart assignment 1 - compete with the low prices The...

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Andrew Lazarow SHR 247 2/22/10 After studying Wal-Mart’s external environment I have found that two of Porter’s five forces stand out to me when looking for the reasons why they had a high profit and growth. The first of the forces is the bargaining power of the suppliers. Wal-Mart purchases its goods in bulk from its suppliers. They are such a large part of the supplier’s sales that Wal-Mart is able to influence the prices of what they are purchasing. At the same time, Wal-Mart has the ability to change suppliers if the supplier does not agree with any changes Wal-Mart demands because so many companies want Wal-Mart’s large business. No switching cost also aid in Wal-Mart’s ability to change suppliers. Although Wal-Mart has many suppliers that produce their products, there isn’t a strong threat of them integrating into Wal-Mart’s industry because it is too hard to
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Unformatted text preview: compete with the low prices. The second force that caught my attention was threats of new entrants into the industry. Wal-Mart is a large company that strives off low prices. They were able to keep their prices unbeatably low by having a strong economy of scale. This makes it so that any company trying to enter the industry and compete with Wal-Mart will have to start off with much higher prices than Wal-Mart. That or take a hit on large loss by trying to keep the prices the same or lower than Wal-Mart. This alone keeps companies from entering Wal-Mart’s industry. The combination of a weak bargaining power of suppliers and a weak threat of new entrants helps Wal-Mart achieve high profits and growth....
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