Walmart Inc. is an international multinational retail company which operates in a chain of discount department stores, grocery stores and hyper markets. The company is headquartered in Arkansas and was found by Sam Walton back in 1962. The company is an American company and has branches in different countries as well. The founders have been increasing the size of the company considerably and as of January 2018, there are 11718 clubs and stores of Walmart spread around 28 countries and operating under different names.
The company is one of the largest companies by revenue and has earned a revenue of US$480 Billion back in 2016. The company employs around 2 million people which is the largest at present. The company was labelled the largest Unites States retailer in grocery back in 2016. The company is registered under the New York Stock exchange since 1972. Although the company has attained immense success in North America, it has not been able to attain the same level of success in other countries like South Korea and Germany. On the other hand it has performed considerably well back in United Kingdom and China (Walmart.com, 2018).
The given report will be conducting a strategic management analysis of the company Walmart in United States. With technological advancement and globalization the business scenario has been changing considerably and for this reason, analyzing the business environment becomes considerably important in order to understand the performance in the long run (Rothaermel, 2015). The strategic tools of PESTLE Analysis and Porter`s Five Forces will be used. Certain recommendations based on the same will also be provided.
The PESTLE Analysis of Walmart is based on the different factors of the business which are economic, sociocultural and ecological components.
The political factors which tend to have a huge impact on the retail industry usually in relation to the governmental policies and procedures of registration sales. There are several politically active groups which tend to affect the operations of Walmart. The factors are the stability of politics (Meyer, Neck & Meeks, 2017). The politics of a company tends to affect the company severely, if the government is not stable it might lead to problems in daily operations. Currently the company has been performing well with respect to the fact that Trump`s government is in lead. Secondly the plans which the government has for the expansion of the company also tends to affect Walmart. Lastly, the policy pertaining to wages also tends to have an impact on the company. This means that if the government led by Trump changes certain policies then Walmart may be affected in a negative light (Wheelen et al., 2017). Currently, the visa of other nationals and the problem related to the current government scenario has had an impact on Walmart.
The economic factors which tend to have an impact on the operations of Walmart are the condition of the economics of the given country. This means that the income of the people in the country, the rate of taxes, the rate of interest and the inflation prevalent in the country. This is a determinant of the purchasing power of the different customers. The employment level in the country is also a factor in this (Lasserre, 2017). If the unemployment is on rise then this tends to have a negative impact on the company and its operations.
The socio cultural factors are the factors tend to have the largest impact on the working of the company in these sense it has an impact on the positioning of the company in the minds of the company. In the United States, the company is affected by a large number of socio cultural factors which comprise of cultural diversity trend (Stead & Stead, 2014). The initiatives taken by the government towards the development of various members in the society tends to determine the sales. The lifestyle of the people in the States which is considerably good also impacts their operations. Lastly, the urban migration factor also has an impact and serves opportunity for the firm, Walmart in the long run.
The technological factors which have an impact on the performance of the company, Walmart are the technological developments which take place in the retail landscape. The increase in Business automation in the States has had a huge impact on the working of Walmart (Ginter, 2018). These days’ business analytics is popularly used for opportunities in the business domain and Walmart has to update itself with this facility in order to remain updated with the competitors. Secondly the increase in the usage of mobile devices among the different users is also an opportunity which Walmart can harness.
The environmental factors which tend to have an impact on the working of the business are factors like the trend of business sustainability. Business sustainability has become a fairly popular concept which needs to be harnessed by the firm and it should be seen to it that the business is able to take full advantage of the opportunity in order to become popular among the business environment. Secondly another trend which has been observed is the environmental friendly products (Moutinho & Vargas-Sanchez, 2018). Walmart needs to ensure that it stalks enough environmental friendly products in order to see to it that the company is successful in its business in the States and continues to be a market leader.
There are various laws and regulations which a business needs to abide by. There are several food safety regulations which need to be incorporated in the organization. There also exists various employment regulations which tend to have a severe impact on the firm and lastly the tax law reform in the United States acts as a disadvantage for the company in the long run.
Porters Five Forces
The five forces analysis is generally performed in order to understand the different industry dynamics which tend to have a huge impact on the business enterprise (Eden & Ackermann, 2013). The retail industry in the United States is highly competitive and there are various components present. These are as follows:
- Competitive Rivalry present in the industry
- Bargaining power of the buyers (Morschett, Schramm-Klein & Zentes, 2015).
- Bargaining power of the suppliers
- Threat of Substitutes
- Threat of new entrants
Rivalry in the industry
The competitive rivalry present in the American retail industry is very high. There are various retail firms operating in the industry which make the competition a cut throat matter. The large number of firms make the factor a strong one because due to this the customer purchase will be divided accordingly.
Secondly the variety which the retail firms tend to offer also have a huge impact on the organization and its operations. As other competitors tend to offer goods which are unique, Walmart suffers. Thirdly, there exists many situations of price wars in the given country.
Bargaining Power of Buyers
The bargaining power of the buyers with respect to Walmart is considerably weak. As the number of workers who are present in the given industry are considerably large, the loss of a few customers shall not have a negative impact on Walmart (Hubbard, Rice & Galvin, 2014). However, there exists a huge diversity amongst the different buyers and all their needs have to be abided by. This tends to form a potential threat for the long run of the company. Lastly, the individual purchases are small in size which poses as a threat to the firm.
Bargaining Power of Suppliers
The bargaining power of the suppliers in the given industry is also very weak. As the size of Walmart is considerably very large, it tends to have a huge impact on the suppliers and they are intimidated by this (Frynas & Mellahi, 2015). However, there exists certain factors which tend to have an impact on Walmart like the diverse offerings made by the different suppliers in Australia. The company needs to ensure that it maintains strong and successful relationships with its suppliers to ensure that it achieves success in the long run.
Threat of Substitutes or Substitution
The threat of substitution in the given scenario is very weak. This is because, Walmart follows the format of a hyper market and offers a huge variety in terms of the products which it tends to order (Harrison & John, 2013). In such a scenario, the availability of substitutes has a moderate impact on Walmart. Walmart tends to stock up its products adequately and this thus leads to lower impact of substitutes on the given company.
As the substitutes which are not available in any other firm tend to have a strong case of the customers because they cannot move away from the firm easily. Secondly, it may also be a case that the company offers considerably lower price than substitutes which further improves the situation. Hence, the substitutes tend to have a weak impact on the company.
Threat of New Entrant
The given industry is considerably a very potential one. For this reason, there are many retailers who are interested in entering the company. However Walmart has a considerably strong presence which makes this difficult (Barney, 2014). The capital cost and brand development costs tend to act as a barrier for the given organization looking to enter into the industry.
After analyzing the industry environment of Walmart and conducting the Pestle Analysis the following recommendations have been made:
The wages rate prevalent in the American market tends to form a huge problem for Walmart group of companies. Wage problem causes various operational as well as cost barriers in the given industry which then causes the firm to not be able to perform that well in the external environment (Bettis et al., 2014). For this reason, it has been recommended that the given firm should take considerable steps to ensure that it follows a well set system to intake labor and it has strong ties with the unions to ensure efficiency.
Improvement in Operational Efficiency
Walmart also needs to take considerable steps to improve the operational efficiency of the organization. This can be done by using the advanced technology to improve the efficiency in different procedures and usage of policies on the products which will ensure success (Alkhafaji & Nelson, 2013). If the firm is able to input efficiency in the operations then it will be able to save its costs which will ensure higher profits for the organization.
Adoption of safety food regulations and policies
The environmental factors also tend to play a major role in the business domain as the health of the society tends to play a key role in the long term success of the business. For this reason it becomes extremely important for the business to ensure that it is being able to consider food regulations crucial to the consumers and engaging in policies which make the environment a better place.
- Lastly, the company needs to ensure successful relationships with the suppliers. The suppliers play a huge role in the success of the business and their wellbeing needs to a priority of the business (Hill, Jones & Schilling, 2014). Ensuring stronger relationships with the supplier and inculcating automation in the supply chain process shall ensure that the firm goes a long way in maintaining its strong position in the market.
Therefore, from the given analysis on the business environment of Walmart in the home country of United States, it can be stated that due to its competitive advantage and efficiency the company has been successful in incorporating success in its different operations. The firm has been working well in the States and has also expanded its operations in various other countries around the globe. However, as stated earlier, it has not been able to perform that well in all other countries in which it operates.
As observed from the pestle analysis, the firm needs to be aware of the political and economic environment to ensure success and it needs to stay updated with the technology to incorporate operational efficiency. Lastly, the Porter`s Five forces showed that successful relationships with its suppliers would assist the company in its long term. Certain recommendations for the same have also been provided.
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