The barrier to entry was relatively high at the time, so it seemed to be a realistic place for them to begin their business venture but it would not be as easy. Does the Industry contain markets that are ripe for Innovation or are undeserved? The retail Industry offers the opportunity to enter because the retail Industry needed a better cost leadership discount store with a variety of products and services that could be sold too mass consumer base. Are there positions in the industry that will avoid some of the negative attributes of the industry as a whole?
Yes, the retail industry offered a position that had some negative attributes within it, but these negative attributes could be avoided if a strategic plan was set in place to help deflect the negativity that comes with retailing. The Five Competitive Forces Model that determine Industry profitability. 1. Barriers To Entry. Walter was entering the retail Industry which has a high level of entry because It Is very competitive with many competing businesses trying to gain consumers business. Economies of scale, or the cost advantage of producing more output to rower the cost per unit.
Walter took advantage of this barrier by offering cheap prices of goods that it supplied to consumers in mass amounts. Government Policies, Walter needed to make sure it followed all of the policies and restrictions that come with the retail industry. Capital Requirements, Walter based its retail stores on buying cheap real estate in the middle of nowhere and building large massive stores that could hold its abundant inventory. Brand Identity, Walter used the idea of saving people money and time to help establish itself as a dominant cost leadership thin the retail Industry. 2. Supplier Power.
Importance of Volume to Supplier, for the retail industry in general this varies among that consumers could buy a high volume of supplies. Increasing Walter’s supplies also helped with reducing their prices and becoming a cost leader. Differentiation of Inputs, Walter has many products/services within the retail industry helping it to be an all-in-one retail store that offers everything. Supplier Concentration, this differs from retailer to retailer within the industry but Walter began its supply of retail odds with five main categories: food, apparel, entertainment, home goods, and pharmacy.
Threat of Forward Integration, Walter needed to establish who its supplier would be so that it could dominate the retail industry by having concentrated suppliers that offered them cheap goods that Walter would sell for low prices. Cost Relative to Total Purchases in Industry, Walter needed to make sure its costs remained relatively low so that it could establish maximum profit within the retail industry. 3. Buyer Power. Bargaining Leverage, Walter offers cheap prices in the industry to help establish hem as a cost leadership.
Buyer Volume, Walter’s stock is usually high in volume and the prices are low enough to allow buyers to purchase large quantities of products. Price Sensitivity, Walter entered the retail industry as a discount mega store offering very low prices to consumers who are highly price sensitive. Substitutes Available, any other retail store with a product or service that meets the needs and benefits of consumers. Buyers’ Incentives, Walter gives people “Roll Back Prices” which give the retail industry an option of getting products at extremely low rises. 4. Threat Of Substitutes.
Switching Costs, Walter’s needed to gain consumers from other markets within the retail industry that offer the same products or benefits sought. Buyer Inclination to Substitute, the retail industry is very competitive so Walter needed to make sure it did not have consumers finding the same products and services offered elsewhere at a better price, benefit, or any other reason for the buyer to shop elsewhere. Price- Performance Trade-off of Substitutes, certain products within the retail industry are t different prices but have different performance levels in the consumer’s eyes.
Walter offers low priced clothes within its retail stores but the quality of the clothes is relatively low as well. 5. Degree Of Rivalry. Exit Barriers, the retail industry offers easy access to exit within the industry if needed. Walter could easily stop business if profits did not meet the expectations. Industry Concentration, Walter concentrated its business by being the cost leader within the retail industry of: food, apparel, entertainment, home goods, and pharmacy.
Industry Growth, Walter knew the retail industry had room to grow because of its strategy to sell high volumes at low prices. Product Differences, Walter offered its own type of Great Value goods that could be sold cheaply. Walter also offered many discount products which was different then many Rivals, the retail industry has many rivals within the industry since retailers can offer certain goods that appeal to a smaller market. But Walter targeted the idea of being the all-in-one discount store of food, apparel, entertainment, home goods, and pharmacy retail.