Business: External Impacts of Walmart Incorporation

External Impacts of Walmart Incorporation

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Introduction

            Walmart Stores Incorporation is one of the leading retailers in the world concerning the company’s number of employees and revenue. Studies report that by 2015, the firm had more than 2.4 million personnel globally. Established in 1962 in Arkansas, the organization has developed into the world’s cutting-edge retail company. With the current top rank in retail commerce, Walmart’s yearly income surpassed $525 billion at the end of the 2017 fiscal year. This success is founded on the efficient execution of the firm’s strategy to realize its mission and vision. The organization’s intensive strategy and generic strategy are both aligned and based on its mission statement and vision statement. Hence, Walmart’s vision statement, mission statement, intensive growth strategy as well and generic strategy for competitive advantage are the causal dynamics to the corporation’s success. This article provides an exploration of the organization's external environment as it captures various aspects of the retail industry concerning the PESTEL Analysis, Porter’s Five Forces, and SWOT analysis, as well as their relation to Walmart Corporation.

Walmart PESTEL Analysis

            Walmart’s macro-environment includes elements that contribute to the firm’s success. The PESTEL analysis approach adequately presents these aspects. Since Walmart Group is the retail industry frontrunner, the company continues to face numerous potential challenges and threats in the sociocultural, economic, legal, technological and political factors of its commerce.

Conversely, the firm’s success relies on a continuous assessment of the retail business environment. The PESTEL aspects transform over time hence imposing profound challenges to Walmart Corporation. The company must, therefore, exploit the existing opportunities and safeguard itself from external threats. Through the application of PESTEL analysis, the company leaders and executives can determine which aspects need to be prioritized in the firm’s strategy development (Mullerbeck, 2015).

            The external dynamics in Walmart’s macro-environment, based on the PESTEL analysis approach, reveal the necessity for a strategy that is directed toward solving sociocultural, economic, and ecological concerns. For instance, the company considers some of the political aspects of the retail industry commonly related to government regulations. Some of the external political elements that influence the company’s success are the political backing towards globalization and the high solidity of politics in different regions of the world which both act as the firm’s opportunities. Other political factors include the political pressure for improved employee salaries, which act as a threat to the company. The macro-environmental aspects of the firm are essential as they can be applied in the development of the company’s business strategies (Mullerbeck, 2015). The external environmental analysis, for example, can be used to address the current threat of higher personnel salaries. The pay increase is a threat to the organization since it contradicts the company’s principle of cost reduction, which is vital in Walmart’s generic cost management approach.

            Secondly, the organization currently faces substantial pressure from economic transformations since any such changes dramatically impact the firm’s revenues. Some of the external financial aspects in the company’s macro-environment include the continued growth of third-world countries, which is an opportunity for the corporation, and the decreasing unemployment rate in the U.S., which serves as a threat to Walmart. The PESTEL analysis model allows the company to acknowledge the need to exploit more global opportunities (Mullerbeck, 2015). Hence, Walmart emphasizes its market penetration in the rapidly developing economies of third-world nations, which have an enhanced demand for the commodities from retail companies.

            Additionally, the sociocultural aspects of the retail business environment of Walmart Corporation influence customer preferences and perceptions. Some of the socio-cultural factors indicated through PESTEL analysis include cultural dynamism trends (firm’s opportunity) and urban migration (Walmart’s threats). These factors have a substantial influence on the company’s growth; for instance, through the use of the corporation’s opportunities, a variety of products can be increased to the current cultural preferences, such as health products. The company can also modify its business strategy to exploit the growing customer demand in towns and their surrounding zone (Mullerbeck, 2015).

Application of Porter’s Five Forces Analysis on the External Environment of Walmart Corporation

            Walmart Group is the leading retail business industry in the United States. Its brand image and large size provide it with significant influence. Walmart Corporation has a unique advantage concerning the industry's consumers and suppliers due to its unique corporate strategy (Arline, 2015). The company has an extensive range of products as well as affordable, low-priced goods compared to its competitors. This gives the firm a steady competitive position in retail commerce. The following factors incorporate Porter’s Five Force analysis to explain the current external environment of Walmart Company.

Low to moderate Bargaining Power of Suppliers

            The company’s bargaining power is considered to be low due to various reasons. For instance, since the firm is a renowned and large retailer, consumers’ expectations of what the company should offer are high. Therefore, the company buys its commodities in bulk, which denotes a critical business for its dealers (Arline, 2015). Secondly, since it is the most extensive retailer, the firm has a massive market share. The company has to consequently make huge purchases that give it significant power over its competitors.

Medium Competitive rivalry amongst the present Companies

            Competitiveness between the prevailing companies is high in retail commerce. However, Walmart Corporation has a high competitive advantage compared to its rival firms due to its efficient pricing strategy. For example, whereas Costco Firm and Target Inc. are essential contenders, the other retail brands, such as Sears and Kmart, only pose an insignificant competitive risk before Walmart Company, leading to a medium competitive rivalry in the retail business (Rachapila & Jansirisak 2013).

Low new Competitors Threat

            New entrants into the retail industry exert medium pressure on Walmart Corporation because the company is one of the largest and most renowned retail brands, which requires substantial capital investment to start. The new entrants face the enormous challenge of establishing an efficient supply chain and distribution similar to that of Walmart Group, which may take several years to build. Furthermore, the new entrants also have difficulties dealing with the consumer-preferred prices of Walmart goods in the market (Rachapila & Jansirisak 2013). Walmart Inc.’s resources, as well as the financial capital hence, alleviates the risk from the new competitors.

Low Threat from Substitute Products

            There exist several other retail brands in the business. However, very few retail brands offer low commodity prices similar to Walmart Inc's. The only brand with reduced commodity prices is Costco Company, but it is membership-based retail chain brand firm. However, online retail brands pose a severe threat to Walmart since they reach out to a large number of consumers in the market. Therefore, they provide the convenience where the delivery of consumer goods is done any place as per the customer requirements. However, since the online retailer’s prices do not match those of Walmart Inc. makes it has a significant competitive advantage over these online shopping brands (Rachapila & Jansirisak 2013). These aspects maintain the challenge from the substitute brands to the least.

Low Buyer Bargaining Power

            The buyer’s bargaining power in the retail industry is high mainly because the individual consumers do not make massive purchases. Furthermore, the convenience and price of shopping are the essential effects that significantly, restrict the buyer's bargaining power. Shifting costs are not high for the consumers except that they may not find similar conveniences and affordable charges with other contenders as they see with Walmart Group (Rachapila & Jansirisak 2013). Walmart’s lowest price tactic hence decreases the buyers' bargaining power, making the individual consumers exert minimal influence on the brand.

Walmart Strategic Group Analysis

Figure 1: Walmart Strategic Market Position

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            Studies indicate that the retail business in the United States is a mammoth $1.4 trillion per annum industry with stiff rivalry among the top five contenders. In 2012, more than 50 percent of the revenue, which was about $610 billion, was produced by twelve wholesalers and retail brands, with Walmart Inc. being the leading as it generated approximately $272 billion (Strategic group mapping, 2010). As a retail store, Walmart Group is exceptionally placed as the chief participant of the strategic group itself since the obstacles for admission are incredibly high. Even though highly fractioned, the rest of the retail commerce is categorized through the following main strategic groups, which include artisans, hyper-local, non-traditional grocery sellers such as dollar stores and Costco, as well as the grocery chains (Strategic group mapping, 2010).

            Walmart Corporation’s most significant contender, firms such as Costco and Kroger Whole contribute to the subsequent massive share of the yearly revenues as they generated approximately $72.4 billion and $78 billion in 2016, respectively (Strategic group mapping, 2010). Walmart Inc.’s business strategy plays a significant role in its current market position, as indicated above. For instance, the company’s immense bargaining power with its dealers adds to the firm’s value by permitting consumers to shop a wide range of commodities, from clothing to electronics, at an affordable price. Furthermore, the company pursues an advanced differentiation tactic that redefines the encounter of grocery shopping for customers who are willing to trade the price with exceptional service (Strategic Group mapping, 2010). All these strategies allow the company customers to purchase items in bulk as well as at steep discounts.

SWOT Analysis

            The organization’s high-growth economic state influences Walmart's chance to expand in third world nations. The opportunities for human resource exercises are directly associated with the criticisms of the firm’s employment methods, while the opportunities to enhance the quality standard address the customer’s demands on the health benefits of exploiting low-cost products (Mullerbeck, 2015).

            The healthy way of life acts as an opportunity but also as a threat to the corporation. This trend serves as a threat to the organization since most of Walmart’s Inc. products are not natural or organic and are considered unhealthful by a significant fraction of the consumers. On the contrary, this aspect also acts as an opportunity for the firm to improve its quality standards (Mullerbeck, 2015).

            Researchers, however, reveal that it is more of a threat since the company does not focus on the production of natural or organic products. Another danger is the existence of small-scale online retail shops. Through exploitation of the internet, these online retailers are capable of bypassing Walmart Corporation as they use their websites to reach a massive number of customers than Walmart. Lastly, the current aggressive rivalry also serves as a threat since large retailers such as Costco can use a dynamic marketing technique to capture a substantial number of Walmart’s consumers (Mullerbeck, 2015).

            The above examples of SWOT analysis were chosen due to their appropriateness in the applicability of the general external environment of Walmart Company regarding the current threats and opportunities facing the organization. The examples consist of the dimensions of the high society that influence Walmart’s brand expansion in the retail industry. Walmart Group, therefore, has to keep responding to and monitoring these opportunities and threats to maintain its current market position as the leading retail store globally (Evaluating the General Environment, 2012). With respect to the organization’s strategy, which is the maintenance of low operating costs, the above SWOT analysis of the organization permits the empowerment of its shareholders. Empowerment involves the company’s suppliers and customers through the construction of opportunities and value services that profit and minimize the threats that may hinder the advancement of the firm’s progress.

            Therefore, the low-price strategy of Walmart Corporation acts as an essential gift that affords consumers an opportunity to select from the vast collection of diverse items at an affordable price.

Evaluation of Walmart’s Retail Store Current Business Strategy

            The current business-level tactic that Walmart Company demonstrates its competitive approach, which has permitted the firm to establish a competitive advantage by leveraging its core competencies, assets as well as the organization’s capabilities. From the assessment of the corporation’s business-level technique, it is indisputable that Walmart Firm’s use of its generic business approach of assimilated cost leadership is practical as it has guided the company towards making suitable how it addresses its strategic issues as well as how to compete in the aggressive market. The company’s business strategy should, however, be improved through the incorporation of the entire shareholders in the firm’s value chain (Mapping strategic groups, 2012).

Conclusion

            From the above strategic issues and external environmental analysis, it is clear that Walmart Stores Incorporation is one of the leading retailers in the world concerning the company’s number of employees and revenue. The organization has an advantage concerning the industry's consumers and suppliers due to its unique corporate strategy. It is also exceptionally placed as the chief participant of the strategic group itself since other obstacles to admission are incredibly high. Therefore, since Walmart Retail Company is the retail industry frontrunner, the firm continues to face numerous potential challenges and threats in the sociocultural, economic, and political factors of its commerce, as discussed above. However, the organization's success within the retail industry as the leading retailer is highly attributed to the effectiveness of Walmart’s generic business-level approach to low-cost leadership framework. 

Reference List

Mapping strategic groups. (2012). In Mastering strategic management. Washington, DC: Saylor Academy. Retrieved from https://saylordotorg.github.io/text_mastering-strategic-management/s07-04-mapping-strategic-groups.html

Strategic group mapping. (2010, October 5). MBA lectures. Retrieved from http://mba-lectures.com/management/strategic-management/1000/strategic-group-mapping.html

Arline, K. (2015). Porter's Five Forces: Analyzing the Competition. Business News Daily. Retrieved from https://www.businessnewsdaily.com/5446-porters-five-forces.html

Mullerbeck, E. (2015). SWOT and PESTEL. New York: UNICEF. Retrieved from http://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf

Evaluating the general environment. (2012). In Mastering strategic management. Washington, DC: Saylor Academy. Retrieved from https://saylordotorg.github.io/text_mastering-strategic-management/s07-02-evaluating-the-general-environ.html

The PESTEL and SCP frameworks. (2016, 26 May). In Boundless control. Retrieved from https://www.boundless.com/management/textbooks/boundless-management-textbook/strategic-management-12/external-inputs-to-strategy-87/the-pestel-and-scp-frameworks-422-4020/

Rachapila, T., & Jansirisak, S. (2013). Using Porter’s Five Forces model for analyzing the competitive environment of Thailand’s sweet corn industry. International Journal of Business and Social Research, 3(3). Retrieved from http://thejournalofbusiness.org/index.php/site/article/view/67 (case study)