The history of how customers find and purchase good and services has developed and redeveloped since the time of the traveling salesman. To get a greater pool of customers and expand into new markets, companies have had to change their way of thinking and not let the comfort of the "status quo" dictate their next business strategy. From the traveling salesman, to department stores, to giant warehouse outlet stores, companies have always tried to forecast new channels to get their products to the customer, faster, cheaper, and better. In 1962, a gentleman from Arkansas had an idea of how to provide goods and services to the public with that philosophy. To this day, the Wal-Mart dynasty is continuing on the course Sam Walton prescribed when he opened his first store.
But can a company that built it's empire on three simple principles; 1. Customer value and service; 2. Partnership with its associates; 3. Community involvement; survive an expansion strategy that will bring them from the world's largest discount retailer, to the world largest discount grocery store. Using Porter's five forces model, we will be able to see the difficulties Wal-Mart might encounter as it makes the supermarket industry the battleground for its new market. .
The first factor is the bargaining power suppliers have on any company. Domination by a few large suppliers is a variable any company must add into their equation for success in order to keep their prices down. Does a company have other sources to get the required goods and services? Is a company alone in buying these goods and services; which in turn lessen their ability to bargain for lower prices? In almost all of these situations, the buying industry (retailer) often faces a high pressure on margins from their suppliers, and finds it's at the mercy of their prices. The relationship retailers have with these powerful suppliers can potentially reduce strategic options for the organization.
