Wal-Mart: Porters Five Forces - Term Paper Example

substitutes of products and services impose constrain the ability of the firm to adjust its prices to achieve its target profit margin.
In this case, Walmart has a wide range of products with substitutes, for instance, when a customer wants to buy groceries, they can go to Safeway or Albertson's. However, there are substitutes for electronic products such as Frys, and Circuit City. On the other hand, the substitutes for clothing are Target, Costco, and JC Penny (Slater & Olson, 2002). Nevertheless, numerous competitors are not able to provide their customers with convenient and low prices for services and products. Therefore, customers have the choice of fetching their products and services from numerous specialty stores, thereby decreasing the chances of finding the low pricing offered by Walmart.

In this case, the free market offers buyers a chance to choose among numerous alternatives; thus, the source of substitutes attribute to the same product or service being sourced by two or more distributors (Porter, 1985). Moreover, full substitutes of products and services are attributed to having different manufacturers but serving the same purpose. For instance, there is a product such as Kellogg’s cornflakes offered by Wal-Mart while other competitors may offer a generic brand of cornflakes. On the other hand, there are partial substitutes of products and services, whereby service and products are not directly related but they can serve the same purpose in the market.

The threat of substitutes has a typical impact on the industry through price competition. However, there are other concerns in assessing the concern raised by the threat of a substitute to a company like Wal-Mart. In this case, given that Walmart provides customers with cheap products from rivals, this can result in a high chance of meeting the customers’ satisfaction; thus, protecting the company from the adverse effects of this threat. In this case, Walmart has been credited for their excellent customer service, whereby they have focused on ensuring that their customers are enjoying a friendly experience.

Therefore, Walmart tries to protect itself against the threat of substitution through exclusive distribution measures, whereby the may focus on utilizing its strong brand to protect its services and products. This involves the use of patents, trademarks, branding, and psychological and legal barriers imposed against substitutes (McKay & Marshall, 2004). On the other hand, Wal-Mart has protected products from substitution by ensuring that their products are incompatible with the competing products in the market. Read More