Custom Written Essay on Walmart
Wal-Mart is a household name in the retailing industry. It is one of the few companies that have revolutionized the retailing industry allowing it to set standards and become a market leader in its field. Wal mart spans over several decades; where it began as a single retail outlet in the 1940s in Arkansas and has since grown to become a Fortune 500 company with stores in over twenty-seven countries. Over time, many competitors have joined the market, posing a possible threat to Wal mart’s operations. Although this retail industry household name has established a substantial foothold in the retailing industry, there is a need to carry out continuous environmental analysis to assess how the retailer outlet giant is performing in the changing dynamic business world to allow it to exploit potential opportunities and address possible future threats that might affect the company’s sustainability (Thompson et al., 2010).
The environmental analysis involves carrying out a PEST and SWOT analysis; PEST analysis helps evaluate the external environment in which a business operates. This entails analyzing the political, economic, social, technological, and environmental factors that have or are likely to have an impact on the business. SWOT analysis helps analyze the business’ internal environment by identifying its strengths, weaknesses, opportunities that can be exploited and potential threats that are likely to affect business operations. An external and an internal analysis of the business environment is vital in formulating the corporate and business level strategies that will lend an organization a competitive edge over its competitors by allowing it to fully exploits its opportunities and find a way of turning its weaknesses and threats to its advantage (Hill, Charles, Jones &Gareth,2010).
A Custom written essay on Walmart’s External Environment
Consumer income level is a critical demographic factor that affects most business operations. Initially, Wal Mart’s primary target market was low-income households. Its low prices were very attractive to people in the low-income bracket; the organization thrived on profits from large volumes and low prices, with the overlying foundation being cost-cutting principles. Wal-Mart continues to position itself as a low-priced retailer outlet both in domestic and foreign markets. This is very favourable for the company’s operations when the economy is characterized by high unemployment levels and decreasing personal disposable incomes. This is mainly because most consumers are looking into ways to buy more for less and cut costs. It is, however, important to consider the fact that most customers are now technology savvy; most customers are now resulting from purchasing practices that are convenient, less entailing, tiring or cumbersome. This is mainly attributable to the busy lifestyles that most people are leading; online shopping is therefore offering better options, with companies such as Amazon taking up a sizeable market share as it also offers low prices and quality products.
Age is also another important demographic factor affecting Walmart’s operations. Wal-Mart’s market share consists of both foreign and domestic markets. Each market is characterized by its changing population, with some markets having a high number of young populations and other markets being characterized by an ageing population or a shrinking young population. The purchasing patterns of the consumers will be greatly influenced by their age brackets which creates the need to match the consumption patterns of the various consumers with the nature of goods stocked in the retail outlets.
Get a Custom Written Essay
How technology has significantly impacted Walmart Operations: A Custom written essay on Walmart’s external environment
Technology has significantly impacted the retailing industry. It has paved the way for ecommerce and completely changed the way people make purchases and gather information. Online shopping is allowing consumers to transcend boundaries or even shop in the comfort of their homes. Technology has also opened up global markets, facilitating international retailing. This has created the need for Wal mart to invest heavily in an online presence if it’s to remain competitive and exploit opportunities to interact with its customers and enhance its brand awareness and image. Technology has also allowed the entry of new competitors into the market as the costs of doing business on an online platform is relatively cheaper than managing physical stores and outlets. This is clearly envisaged by the success of the Amazon Company. Wal mart has used technology as an effective tool in gaining competitive advantage through facilitating efficiency. Technology has enabled Walmart to link up all its warehouses and stores. It has also helped reduce the planning costs and helped it in carrying out a value chain analysis where non-value-adding operations have been weeded out and efficiently replaced by technological methods which are more cost-effective such as checking the inventory and maintaining the stock levels at the required levels.
An Analysis of Walmart using Michael Porter’s five forces
Wal mart is facing intense competition from other retailing companies such as Target, Costco, Best Buy, Home Depot and Amazon. The intensity of competition that the company is facing can be evaluated using Michael Porter’s five forces; Relative power of customers, the relative power of suppliers, the threat of new entrants and the threat of substitutes. Wal-Mart is the leading retailing company in the world; the extent of its size is reflected by the fact that it is nearly four times the size of Home Depot, which is the second leading retailing industry in the US, and twice the size of Target, Costco and Best buy combined. Therefore, Wal mart enjoys huge economies of scale and has a huge financial base that allows it to diversify through joint ventures, takeovers and acquisitions of other companies. This means that the threat of new entrants and the threat of substitutes are of little relevance to the Wal mart operations for now on account of the strategic advantages enjoyed by Walmart . Low average costs stemming from significant economies of scale allow it to maintain low prices, therefore, allowing Walmart to use pricing as a competitive strategy. Wal-Mart has huge bargaining power owing to its size, and it also has the ability to vertically integrate its operations and the; therefore, the relative power of suppliers is highly diminished.
However, Walmart cannot fail to acknowledge that other companies are also slowly closing in on the existing gap and gradually taking up its market shares. An example is Costco; this is a member-only warehouse that targets the affluent consumers. It, however, offers low prices, and its financial performance is better than Walmart’s Sam’s Club, which is also a membership-only warehouse.
Wal mart’s greatest strength lies in the fact that it has a substantial financial base. It is, therefore, able to invest in the state of the art technology such as a private satellite network that allows point-of-sale transmissions in all networks. It can also venture into new foreign markets that are yet to be tapped by other retailer companies. Wal mart is also a household name that has been able to secure its position in the market as a company that offers high-quality products at low prices. The company is not a weakness or threat. Consumers are becoming more and more conscious of the company they get their products from. The lawsuit against Wal mart for its unfair trade practices, low wages and sexual discrimination of its workers may finally catch up with the company in the form of dwindling sales.
Wal mart has a global strategic advantage in that it has dominated the domestic markets and penetrated various foreign markets such as Germany and Mexico. This has greatly increased its financial base, therefore, lending it the financial power it needs to penetrate and dominate other foreign markets through licensing, takeovers, strategic alliances, acquisitions or forming new wholly-owned subsidiaries that have not yet been tapped into (Brandley,2005& Hitt et al. 2008).
Wal mart also has an advantage over its competitors in that it enjoys large economies of scale and can use its volume buying resources to influence competition and position it as a low-priced, high-quality product retailer outlet. In a time where sustainable development is deemed vital for any business, Wal mart has the strategic advantage of being a renowned household name and high brand equity and can therefore afford to invest in environmentally friendly practices and products with its financial base cushioning the company against risks that may arise from such diversification. The company is also positioned to invest in technological advancements from the supplier base to the customer, which helps reduce costs. (Dess,et al2008& Wheelen et al,2008).
References
Brandley,D(2005).Wal-Mart’s learning curve in the German market. Journal of international business.vol 1
Dess,Gregory;Lumpkin,G and Eisner,Alan(2008).Strategic Management;Creating competitive advantage.New York:McGrwaw Hill.
Hill,Charles and Jones &Gareth(2010). Strategic management.An integrated approach.South Western Cengage learning
Hitt, Michael;Ireland, Duane and Hoskisson, Robert(2008).Strategic management; Competetiveness and Globalization-Concepts and cases. South Western Cengage learnin.
Thompson, Aurthu;Peteraf, Margaret and Strickland,A(2010). Crafting and executing strategy;concepts and reading,New York:Mc Graw Hill.
Wheelen, Thomas and Hunger, David(2008).Strategic Management and Business policy.Upper Saddle River, New Jersey; Pearson Prentice hall.