External Environment Analysis of Walmart †Myassignmenthelp.Com

Question: Do External Environment Analysis of Walmart? Answer: Introduction Wal-Mart is one of the largest retailing chains in the worlds supermarkets industry. This biggest chain of retailing stores is of 54 years old. It is founded by Sam Walton and His family is the current owner of the company (Wal-Mart, 2017). Walmart is headquartered in Bentonville, Alaska, United states. It has captured the worldwide area of the retailing china market. Furthermore, the company has approximately 11,695 stores and 2.3 million employees working under them in the whole world. There are four divisions of Walmart that is Global ecommerce, Walmart international, Sams club and Walmart U.S. (Wal-Mart, 2017). Along with this, company has various subsidiaries that offers many products and services plus expanded its business in several countries with different names such as Walmart Canada, Walmart Mexico, Walmart Chile, Walmart de Mxico y Centroamrica, @WalmartLabs, Walmart Neighborhood Market, Asda, Amigo Supermarkets, Vudu, Massmart, Seiyu Group, Bompreo, Lder, Jet.com, Hayneed le, Moosejaw, ModCloth. The earnings before interest and tax in 2016 were US$22.76Billion and total revenues as US $ 13.64Billion (Wal-Mart, 2017). In this present case, internal and external environment of the Walmart has been analyzed using different tools and techniques such as 7 S McKinseys model, Porters value china strategy, Porters generic model for competitive advantage and Porters five force model along with SWOT analysis and PESTEL analysis (Harrison and St. John, 2009). This study will explore the entire strategic management of Walmart stores with the view on the culture and structure of the organization. External and internal factors that influence the Walmarts position in the retaining industry and local markets of US are also being investigated in the current research. Thus, this research is very imperative in analyzing the overall concept of management and related strategies which has provided a wide success to Walmart. Internal Environment Analysis of Walmart This section is examining the objective and goals of Walmart with the help of McKinsey analysis to detail about the capabilities and competencies of an organization that entails the investigation of Share value Strategy, Structure, System, Style, Staff and Skill (Furrer, 2010). Moreover, the value china analysis and companies culture will be illustrated in this study. In addition to this, section will explore strength and weaknesses and strategies that helped the company in attaining competitive advantage of the company as below: 7S McKinseys Model This model enables a user to determine and analyze the capabilities and competencies of the organization. It analyzes improvement areas where the top management can focus on the desire of the customers and manufacturing products accordingly. Along with this, it helps in increase in the performance and profitability of the company (Filho, et. al., 2010). It also aids company in change of management such as acquisition and merger. Furthermore, 7S McKinsey model gives information about the near changes in the future and explores the opportunity to execute the apt strategies according to the situation. In case of Walmart, 7S McKinsey Model is described to analyze the internal environment of the organization as follows: Share value: Values and mission of the organization is one of the most important aspects that provides the target goal to the company and create base for all other six Ss (Davies and Ellison, 2003). It embraces organizational culture, team culture, and work culture of Walmart which is foundation of strength of the organization. It involves work ethics and corporate culture (Wal-Mart, 2017). The vision statement of Walmart is To be the best retailer in the heart and heart of consumers and employees. The companys objective is providing various qualitative services to the customer with a low budget. Walmart has a shared value in the areas like local community, opportunity and sustainability. Strategy: the company has pertinent focus on reducing the cost of the products and services offered to customers. Walmart has a tendency to facilitate all the products in a single roof to buyers and with a lowest price from other retailers (Janet, et. al., 2015). It also caters flexible and advanced way of shopping. The company has a vision to grow and expand in every countrys retail industry as a strategy. Structure: the company performs its management of system and entire control and monitoring of the organization from headquarter at Bentonville (Wal-Mart, 2017). Walmart doesnt have any regional office and has a geographic structure. The company has a formal structure with specialized tasks. The approach for structure of company is mechanistic. System: Low prices strategy is the basis and mission of Walmart to achieve in day to day operations. To make the operations flexible integration of information technology helps the company at the time of point of sale (Janet, et. al., 2015). For the purpose of speed delivery and reduce the wastage and inventories, the company has incorporated information technology network and computers in the store. The system of organization also controls and monitors the standards and policies incorporated with the HRM system and RFID system which should be executed effectively. Style: a strong leadership style and management style is essential for the company like Walmart because its business is expanded and has various department to operate (Filho, et. al., 2010). The company should also consider creating and maintaining its style by reviewing and changing styles. Moreover, for convenient functioning of operations, the company should consider to take care of staff gaps. Staff: Walmart has enormous employees around the world and management with employee satisfaction is a need of the company. Along with this, their jobs and responsibilities are clearly defined by the management which is competent with the current requirements (Filho, et. al., 2010). Training programs and development programs also facilitated for each division. Performance measurement with the regular feedbacks is also necessary to review staff management and their work pattern. Company also encourages womens empowerment at a global level. Skill: One of the most common skill challenges is job allocation to the suitable employee. Thus, Walmart has also this issue and recommended to curtail this issue to match the individual skills with the profile of the job (Janet, et. al., 2015). Additionally, to motivate employees as a strong leader, strategies like appreciation, rewards and encouraging activities should be taken for effective and efficient team work. Company considers high technical skilled employees for their operations and functions. Porters Value Chain Analysis Value chain analysis provides analytical framework to achieve competitive advantage and analysis of value creation in the business activities (Mason and Evans, 2015). Porters value chain analysis is divided into two parts that is primary and support activity and associated department within these activities are logistics, operations, marketing, sales and service as well as firm infrastructure, human resources, technology development and procurement that gives a reasonable margin (Mason and Evans, 2015). Walmart value chain is very effective and efficient that manages the lowest cost price of the company ensures the competitive edge to the company as cost leader in the retailing market of U.S. detailed examination of the value chain of Wal-Mart is as follows: Primary Activities Inbound logistics: Suppliers of about 50% Wal-Mart products are from Overseas and non-store inventory of Wal-Mart.com has 75% of the product sales (Wal-Mart, 2017). The inbound logistic are based on the three fundamentals that is minimum use of links associated with the supply chain, development of new partnership with various vendors and using inventory strategies like cross docking. The company prefers to manage it supply chain operation with directly to the manufacturers rather than any local supplier (Jolibert, et al. 2012). It has facilitated optimistic results to the company as t is reviewed in many of the past articles and journals which proves this claim. The company is persistently improving its supply chain management and holding the market position as a very effective cost management in value chain strategy. In addition to this, the negotiation of the company is very strong and not at all flexible with business partners. The bargaining power of vendors is very strong in Wa l-Mart which ensures its competitive advantage over other firms (Mason and Evans, 2015). The company always forms a strategic partnership considering sustainability prospect and high volume buying of products in a lower cost from the suppliers. Moreover, the loading and unloading procedures are very flexible for the truck drivers. Railroad cars and semi-trailer trucks are used to move material from one place to another and there is no other storage center in between the transfer from inbound and outbound truck. Operations: Wal-Mart operates in more than 27 countries in the world and has around 11250 stores around the world. More than 2.3 Million customers are being offered its products and services each week (Wal-Mart, 2017). Company has wide range of operational divisions such as supercenters, supermarkets, hypermarkets, warehouse clubs, including specialty electronics, Sams Clubs, restaurants, home improvement, digital retail, apparel stores, cash carry, convenience stores and drug stores. Mainly company has notable three divisions that contribute maximum earning to the company including Wal-Mart U.S., Wal-Mart international and Sams Club (Wal-Mart, 2017). The company functions around 50 states in US and all the stores are connected with the digital retailing facility. Additionally, Porto Rica and Washington D.C. are also included in this segment. More than 60% of sales are being recorded from Wal-Mart U.S. in previous years. Estimate of 28% sales is from Wal-Mart international that oper ates as retailer as well as wholesaler outside of the U.S (Wal-Mart, 2017). This company has also established its business globally by acquisition and mergers. Additionally, Sams club has 48 states in its range operated with digital retailing and contributes more than 11% in the revenue segment of the Wal-Mart group. Outbound logistics: the company has complex and multipart outbound logistics. 11 out of 27 countries are operating in digital retailing as well. The size of the stores are also varies and Wal-Mart operates in wide size such as 1.2 million square ft. The company uses its recourses optimally and in a very systematic manner (Wal-Mart, 2017). Cost reduction and operation efficiency are the main motive of his resource. The effective strategy implement in loading building solution has saved the extra cost of the company plus fully utilized the diesel fuel expenses in an appropriate manner. Marketing and Sales: the company emphasized and hypes the convenient access of customers via carious channels, brand image of the company and highly competitive prices (Jolibert, et al. 2012). The company also has assortment of product in its store in a single roof experience. The company has online and an offline benefit that attracts the potential customers plus sustainability is motive of Wal-Mart as a cost leadership business strategy internationally. Along with this, Wal-Mart is focused to the target customers and facilitates marketing messages to the potential segment (Wal-Mart, 2017). Services: The service of the company is very superior but has issues in representation such as customers service problems. This problem arises in order to attain competitive edge company pays sets low wage rate to the employees (Mason and Evans, 2015). On the other hand, company is constantly trying to improve its customer services and issues related to low wage report. 1.3.2 Support Activities: it involves major structures of the company such as firm infrastructure, human resource management, technological development and procurement (Jolibert, et al. 2012). Support activities help the primary activities in operating the functions of the company with more clarity along with it encourages the improvement in value chain.; Porters Generic Model of Competitive Advantage Porters model of generic strategy is based on the attainment of competition advantage which sustains and creates the better performance of organization (Thompson, 2001). Walmart has also implemented the generic strategy of cost leadership to capture the wide market and achieve competitive edge of lowest cost in the retailing market. There are three types of scopes a company have to capture market with suitable strategy. First, cost leadership that helps in reducing the cost of the product/services and raising the profits of the organization by choosing average price strategy in the industry (Tanwar, 2013). With the fall in the cost of product, market share also increases per share and company charges less prices for shares but still able to make a good profit. When a company accomplishes cost leadership strategy basic factors that help in successful attainment involves effective value chain and logistics, capital invested in technology to abate the cost price of products and low capital base for labor, facilities and materials (Thompson, 2001). Second is differentiation strategy that offers unique and innovative products/services to the customers than other competitors (Crosson and Needles, 2007). The factors that influences it includes nature of industry, product/service offered to customers and its related functionality, support services, durability, features and brand image. High quality and innovative product and services with the aggressive marketing and sales techniques provide assistance to the organization to embrace cost differentiation (Tanwar, 2013). Third is focus where a company chooses any of the one strategy to capture the niche market. The companys emphasized on the brand loyalty of customers with these two strategies that is cost leadership or differentiation. Lastly is hybrid strategy that implies when company applies both the strategies simultaneously. In the present scenario, Walmart focuses on delivering its goods and attaining competitive advantage with the cost leadership according to the porters generic theory. It maintains its lowest price of product and services at the point of sale (Wal-Mart, 2017). Incorporation of information technology in operation and reduced wages of employees helps the company in achieving lowest cost of products and services. The company determines the operation cost lowest as compared to other retiling organizations. The capital investment is very selective by the company and each operation is considered equally important in saving the money like low down of employees salary (Thompson, 2001). Furthermore, large scale of production of products with high sales volume is also procured by the company. An economy of scale is also realized to help of the cost leadership strategies. In addition to this, in some cases besides the cost leadership company also uses differentiation strategy by offering new and innovative products integrating advanced technology (Wal-Mart, 2017). The own brand products of the company are based on this strategy to make different impression and strong brand in the market. Strengths and Weaknesses SWOT analysis if a very famous tool to analyze and audit strategic position of a company associated with its internal and external environment. It determines a view on the organizations resources and capabilities that aids the company in its operation and functions (50MINUTES.COM., 2015). Walmart has some internal elements that influence the companys strength and weaknesses. These factors can be easily controlled and monitored by the company. Thus, in the internal environment strength and weakness of the Walmart is overviewed as follows: Strength: Walmart has a strong bargaining power over supplies and renowned brand name in the retailing market all over the world. The company focuses on the supply chain management and manages it very effectively and efficiently (Avlonitis and Papastathopoulou, 2006). The organizational culture of Walmart is very flexible for the employees as well as based on values and ethics which make it stronger and subtle. The company has a strong team of trained and skillful associates that manages the company and corporate affairs significantly. Furthermore, Walmart is very famous and has a strong presence in U.S. especially Latin America and Canada (Wal-Mart, 2017). The strategies of Walmart are focused on achieving lowest price of the products/services along with the development of customer oriented products. The company implements the expansion strategy for its growth and development in international markets. Integration of information system is very helpful for the company because of cogen t it resources and financial support. The company also emphasis on the betterment of each customers experience example free parking lots which helps in pleasant experience of customer services. Weakness: The internal weakness of Walmart comprises the relative low country expansion as compared to other giant retailing companies of the world. The company entices customers with price sensitivity only (Wal-Mart, 2017). Moreover, Walmart has a high rate of turnover in inventories and high turnover rate of employees because of poor job paid to employees and hiring of new employees cost training and skilled program expenses in the company. The company only expands internationally and in the domestic markets with the help of financial resources and no innovative strategy to capture the global market. The expansion of the company is so large that it may lose the strategy and control over the company after some time (Hutt and Speh, 2012). The company also deals in products/services where some of the most focused competitors are already covered and topped in the market sector. Wal-Mart has so many lawsuits because of extra hour, gender discrimination and low wages in U.S. which cause so much money loss. External Environment Analysis of Walmart This section analyses the status of Wal-Mart relevant to the external environment with the apt theories to present valid research data (Avlonitis and Papastathopoulou, 2006). It includes opportunities and weaknesses of the company along with Porters Five Force and PESTLE analysis of Wal-Mart as follows: Opportunities and Threats Opportunities: As a future prospect the company can capture potential market of Asia and Europe market in the upcoming years along with this there are various countries left for the expansion. The website and application sale has been increased in the past few years, which is also creating new opportunities for the company. Alliances and mergers can help Walmart in acquiring the market places where local and rival competitors have stronger position than its market position (Wal-Mart, 2017). Along with this, the feature in the websites and application can be improved with time and creative ideas can also be attached to try new experiences. Joint venture and collaboration can be done to expand new countries and international markets. Company can offer everyday low price to the customers. Existing foreign markets like UK, Porto Rico, Taiwan, Canada, Korea and Mexico can be further expanded in local markets with the increasing sales outcome. Threats: It has been investigated that Wal-Mart is now has a sustainable market leader position that can be conveniently captured by other competitors by analyzing the organization precisely. There are various strong participants in the retailing sector such as Tesco and Carrer-Four in the U.S. Rate of taxes and tariff is additional hurdle which is different in every country that incurs extra finance threat for Wal-Mart (Wal-Mart, 2017). Furthermore, Walmart is well studied organization from internal factors to external elements are exposed in the market which can be a threat associated with market positioning. Each country has different cultural, practices and political challenges, thus it makes difficult for the company to cope up with each and every countries tradition and values (Hutt and Speh, 2012). Porters Five Forces Analysis This model analyzes productivity of the organization influenced by the external forces. It particularly provides the theory of Porter related to the competition in the industry that impacts the ultimate profitability of the Walmart. Thus, this essential analysis has been given in five parameters as below: Threats of New Potential Entrance: The degree of new entrant threat is very strong. Due to lowest cost is offered to the customers, the company has moderate capital cost and brand development is also at moderate cost (Cravens). Other factors that affects the entry is location, convenience of customers, market entry, specialty and other factors which can be easily attained by new entrants. Threats of Substitute Product/Services: Weak force has been found in case of threat of substitute products and services because there is considerable availability of substitute which provides moderate force (Crosson and Needles, 2007). Along with this, law variety and higher cost of substitute confine this threat. Bargaining Power of Suppliers: This degree of force is weak because of enormous suppliers for the same product (Cravens). Therefore, the competition between the suppliers is also very intense and supply has a high availability in the market. Bargaining Power of Buyers: In case of bargaining from buyers, the force is weak because there are various buyers of the same product and high density of buyers. Moreover, every customer purchases small quantity of the product in general (Crosson and Needles, 2007). Rivalry among Current Competitors: strong competition has been seen in the competitive market regarding retailing sector. Several big and small firms are catering the same retailing and supermarket services. There are many varieties in the retail firms and use aggressive approach to capture the whole market (Leahy, 2012). The competitors of Walmart are in many shapes and size due to high competition intensive market policies and approach. PESTEL Analysis PESTEL refers to seven factors that affect the external environment of whole the firm which are political, economical, social/cultural, environmental, legal and technological (Yksel, et al., 2012). It is very effective in analyzing the apparent challenges faced by any particular industry and its creative as well as regular solution. The PESTEL framework has a theory of external environment analysis theory that provides great help to the organization to maintain its standards and at the time of initiating business at a particular industry (Marketing Management, 2000). In this case, Walmarts PESTEL framework is give below: Political: the political factor is highly influenced with the government policies and rules in the retailing industry. Opportunities are high when there is stability in the politics in a particular geographical area (Yksel, et al., 2012). Along with this, globalization should also be supported by the government to cater better service and make opportunities for multinational companies like Walmart. The threat is only pressure of government to set the standards and increasing rates of wages to the employees. Economical: if the majority of economies are stable then it will be an economical opportunity for the Walmart. Consistent development and growth of any country is also profitable for the company as it increases purchasing power of the customers (Reading, 2004). Reduction in unemployment is also favorable for the company due to large money flow will start in the economy. Thus these chances should be grabbed by the organization and grow its business in apt situation under these conditions. Social/Cultural: the company is being highly influenced by the factors that entail high quality and healthy lifestyle trend, cultural diversity and urban migration in a very positive manner. Besides that, the current trend is more emphasized by the healthy products consumption (Reading, 2004). Therefore, company can increase it health oriented product lines and addition of culture related products will help the company to exploit increasing consumer demand and adjustments of apt strategies. Technological: Technological trend is the most vulnerable factor in this industry. However, it brings various prospects that help the company to grow such as augmentation in business automation; it helps in analysis of business or large number of data (Jin and Lin, 2012). Furthermore, the technological advancement also enables extra platform which brings convenience and expansion of business as mobile applications and stores that is used by maximum customers. Environmental: As a profitable influence to the business of Walmart sustainable trends in business can be affirmative. Apart from this, environment friendly products are also setting trend in the retailing industry that can be very helpful for organization as well as environment (Jin and Lin, 2012). Operational efficiency is the most concern part in the sustainability of business. Likewise, technological improvement and betterment of policies and standards in the retailing market is also an opportunity for the company. Legal: the food safety regulation gives the chance of amelioration of quality of food to the organization than its competitors and setting an international standard. The employment regulation is also an opportunity in U.S. market through human resource management to increase the employment rate of the country (Leahy, 2012). On the other hand, tax law reform is a threat to the financial conditions and accounting department of the firm. Conclusion It can be depicted from the above discussion that Wal-Mart has a very respective position in the market and management skills of top management is very skillful to achieve success in a huge geographical area. Wal-Mart focuses on giving best services and experiences to the customers with the low cost theory in as market leadership. With the good reputation and providing variety of services, company is continuously growing and expanding internationally. References Wal-Mart. 2017. Global Compliance Program Report 2017. Retrieved on May 12, 2017, from https://corporate.walmart.com/global-responsibility/global-compliance-program-report-on-fiscal-year-2017 Tanwar, R. 2013. Porters Generic Competitive Strategies. Journal of Business and Management 15(1), pp 11-17. Thompson, J. L. 2001. Understanding Corporate Strategy. Cengage Learning EMEA. Yksel, I. et al. 2012. Developing a Multi-Criteria Decision Making Model for PESTEL. 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