The business environment comprises of various internal and external forces under which companies or organizations operate. (Hilton & Platt, 2013). The successful companies such as Wal-Mart know the importance of constantly watching and also adapting changes in the environment of business (Pope & Pope, 2015). The business environment is categorised into macro and micro environment. The macro environmental factors have an impact on every organization at universal which are operating in a particular market such as economic environment, political environment and so on (Khan & Quaddus, 2015). On the other side, micro environment factors have an organization specific impact such as customers, suppliers and so on (Turner, 2017).
Micro environment includes consumer behaviour, public opinion, government regulation, and competitors which greatly affect performance of the company. The behaviour of consumer greatly influences Wal-Mart. The company always trying to provide best services and products to their customers but consumers has a tendency to compare their brand with others. (Banai & Antipova, 2016).
In the following context, the focus will be done on evaluating the impact of the micro business environment on the Wal-Mart based on U.S. The scope of the research has been included the forces of micro environment with the factors affecting the company.
Micro Environment Issues
Consumer Behaviour and their influences
The bargaining power of consumers has greatly affected and influences the company Wal-Mart. The company tried to do their best to satisfying their customers and keep prices at minimum of the products which they have provided to their customers. But when the products are of similar nature with the competitive companies, then customers mostly compare their price of product among the different suppliers that increase competition as well as force to reduce the price which affected the profits (Young, Russell, Robinson & Chintakayala, 2018).
There are some factors that affecting Wal-Mart which is explained in below points:
Size and Number of customers
The demand of consumer greatly affected from the larger number of consumers which influencing purchasing power over suppliers in the industry of retail. The demand of large number of consumer depends on their lifestyle, urban migration, and cultural diversity. Wa-Mart catered their products accordingly which enhance their brand image in the retail industry
Most of the consumers want to buy product with the reasonable price, they have a mentality that the local suppliers would provide them the products at reasonable price rather than the companies such as Wal-Mart. In such a situation, Wal-Mart offered discounted price to gain the focus of the customers. It attracts maximum customers at greater level.
Purchase quantity and quality
The consumer mostly prefer low price product by compromising the quality. They can buy high quality of product, if it provided with the low price. Therefore, according to the preference of consumer, Wal-Mart changes the layout of retail stores as per the demand of the consumer which increases the demand among customers for the company (Young, Russell, Robinson & Chintakayala, 2018).
There are some of direct competitors of Wal-Mart which include Tesco, Target, Costco, CVS Caremark, Kroger, and Walgreen. They are the main competitors of Wal-Mart as well as they greatly affect the market share of Wal-Mart which is significant threat for the company. The company Costco is one of the leading wholesalers; it is the main competitor for the company Wal-Mart. The low price strategy has adopted by the company Target is the similar strategy which Wal-Mart has adopted. In recent times, the Target is attaining more market share by involving more options of grocery in the stores as well as expended its store internationally (Martinez, Galvan, & Alam 2017). Such companies affected Wal-Mart at greater level such as:
The entrance of Costco and Target in the retail industry increased the competition for Wal-Mart which decreases the profit margin of the company.
Increase Cost of Marketing
In the competitive environment of retail industry, Wal-Mart improved their method of marketing which increases cost to the company.
Decrease Customer Preferences
Wal-Mart is one of the leading companies in the retail industry but the entrance of new companies such as Costco, Target greatly affected the demand of consumers. Most of the consumers attracted towards the competitive companies which decrease the demand for Wal-Mart.
There are other external factors that are the strong forces that created great impact on Wal-Mart which include huge varieties of retail firms, huge number of firms in the market of retail and high level of aggressiveness of retail firms. It defines the competitive rivalry in the environment of retail industry. The large number of firms increases and strengthens the competition. In related with the high variety of firms imposes the challenges in developing the competitive advantage of Wal-Mart in considering with the diversity of approaches that the competitors of Wal-Mart adopt. Moreover, high aggressiveness of retail firms leads to strong competitive rivalry which greatly influences the business environment of Wal-Mart (Lamb & Wheatley, 2017).
Majorly, Wal-Mart is ready to handle any hurdles, regarding with government regulation. Wal-Mart spent the big amount in issues related to political, some of the time. At the peril of becoming the monopoly, the state and federal laws control the company by imposing restrictions on the business and the activities of the Wal-Mart (Schuetz, 2015).
Wal-Mart had suffered from large number of lawsuits which are related to the Labour force. Therefore, the company has adopted as well as complying the required rules and regulation that created healthy workplace within the organizations.
The other factor of government regulation can also greatly affect sale and profit of Wal-Mart with the reason that the government can alter the regulations at any time that can influence the company Wal-Mart directly. It can be explained with the example, in February 2013 the profit and sale of Wal-Mart was lower than the expected one due to the reason of delay in refunds of income tax. The trading of Wal-Mart greatly affected from such issues at the global level (Carruthers & Lamoreaux, 2016).
There are certain factors that influenced the business environment of Wal-Mart which are explained in below points:
In the United States the retailers of brick-and-mortar are being a levied state retail tax which increase cost to the Wal-Mart that directly affected the profit margin of Wal-Mart (Pozzi & Schivardi, 2016).
Federal Trade Commission and Department of Labour
The retailers have to deal with the petitions of labour relations laws and restriction of contract with the employees. It begin with the minimum amount that employee can be paid and number of long hours they can work. The Department of Labour has also imposed the labour certification process. It influences the performance of the Wal-Mart at greater level (Pozzi & Schivardi, 2016).
The company operate in national as well as international level therefore, in Australia there are certain regulations for retail industry, the company need to know the obligation of GST and need to register with the Australian Taxation Office (ATO) (Thornthwaite, 2016).
The opinion of public plays a vital role in influencing the business environment of Wal-Mart. They have a great capacity to affect the business of company at greater level. The company need to satisfy their customers to enhance opinion of public. Every individual have different opinion towards products of the company, as some individuals have an opinion that the product of Wal-Mart is expensive by comparing with the other brands of the similar product (Elder & Greene, 2016). The digital media is one of the famous platforms especially social media to share the opinion about the company. It has armed the public opinion with the tools to spread the news at a faster pace than traditional print and the audio-visual media ever did. The big companies such as Wal-Mart can no longer hide their wrongdoing among the public. It has been analysed that in social media the users has posted, 71,622 opinions on Wal-Mart and 94,667 opinions on US supermarkets in the last 12 months, which they have shared 105,698,928 times. Among which 62 % of opinion posted on Wal-Mart were negative and 52 % of opinions which are posted on the US supermarkets on social media in the last twelve months were negative (Business Wire, 2012). It greatly affected the brand image of the company as well as the preference of consumers for Wal-Mart The large number of population highly affected the business. The opinion of one individual would affect the consumer behaviour of the company. As most of the consumers prefer to purchase from the place where high rating has been provided by the public therefore, the Wal-Mart would greatly influenced from the public opinion for their company.
Porter Five Forces of Wal-Mart
To analyse the micro environment of company, the analysis of Porter Five Forces is adopted. There are explained in below points:
The bargaining power of suppliers is low in retail industry. The industry of retail is a growing industry, in which the demand of suppliers is also increases. It increases the choice of purchase among the companies which decreases the bargaining power of suppliers (Van Alstyne, Parker & Choudary, 2016).
Bargaining Power of Customers
Customers have huge influencing power in the retail market, since they have many options while purchasing in the retail industry. In the retail market, new retail firms have entered with new variety of products, which attract consumers at greater level which affected the profit margin of Wal-Mart as well as whole retail industry (Kumar, Dass & Kumar, 2015).
There are some of the direct competitors of Wal-Mart such as Target, Costco and so on. The high level of aggressiveness increases the competition in the retail industry which forces Wal-Mart to put their price low to attract maximum customers (Chekwa, Martin & Wells, 2014).
The huge number of firm entered in the retail industry which increased competition in the market. It forced the company to strengthen their marketing strategy to survive in the competitive world.
Product and Services Substitution
There are very close substitution to all the types of products as well as services which companies currently offers in the retail industry such as clothes, the consumer has an option either to purchase from clothing stores such as TJ Maxx, Love, Rose or can buy from Wal-Mart.
- The company should make their strong base of marketing strategies to compete in the competitive market of retail industry. The company can adopt generic strategy as well as intensive strategy which would help in establishing the basic approach to grow the business as well as keep it competitive.
- Most of the customers prefer to purchase low price products, therefore Wal-Mart should provide offers as well as discounts to attract maximum customers.
- Wal-Mart should concentrate to change the public opinion towards them such as actively respond as well as post in the social media about the performance of the company which would help in improve the brand image among the public as well as offer different offers and discounts to attract them.
From the above it can be concluded that, the business environment has greatly affected the internal and external factors of the companies. Micro environment play a prominent role in influencing the business environment of the company. The Wal-Mart is one of the biggest company, it has enhanced the enormous workplace environment with full of competitions. There are certain micro environment factors which greatly affected the company Wal-Mart directly. Most of the consumers prefer low price product by neglecting the quality of the product, the company has offered the products in discounted price which enhance the profit and sale of the company. Most of the competitive companies such as Target, Casco adopt the lower pricing strategy to compete Wal-Mart, it decline the preference of consumer for Wal-Mart as well as increase competition in the retail industry. Wal-Mart is also affected from the change of regulations by the government. the low bargaining power of supplier would positively affect Wal-Mart, at the same time the company also need to focus on the influencing power of consumers as well as the competitors which would help in increase their brand image as well as profit margin.
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