Response to Discussion Questions: Wal-Mart
Wal-Mart could have potentially viewed the bargaining power of buyers in the retail industry as weak and not influential in their design and implementation of the low-cost-business-level strategy. Apparently, despite the weak bargaining power, buyers are large in volume or population which is the determining factor for offering low costs or the cheapest price strategy. With economic conditions continue to be challenging, buyers have been observed to be looking for products with the least cost. As such, Wal-Mart capitalized on this aspect to ensure that they would appeal to the greatest number of clientele and capture a large market share in the retail business. As learned, “Wal-Mart learns everything they have to about their customers so that they could market items correctly. Low prices are the primary attraction for Wal-Mart target customers, the 45 million mostly low income Americans who shop at these stores” .
What has kept Wal-Mart from raising their prices and increasing their gross margins as they have gotten so big?
The availability of substitutes as well as the threat of new entrants keep Wal-Mart from raising their prices . As emphasized, “with the current technology, new competitors could easily open an online store without really laying out a penny. There is no need for brick and mortar stores anymore. Wal-Mart had to develop a strategy that kept them above any of these possible competitors” . Raising their prices would mean moving away from the business model that they had been known for (offering the lowest price). As such, the movement would confuse their clientele and price conscious buyers could easily find other alternative sellers which offer products at the least cost to the detriment of Wal-Mart.
Work Cited
Bla Bla Writing. "How Walmart is affected by Porters Five forces and technology." 2016. blablawriting.com. Web. 5 June 2016.
