External Environment Analysis for Wal-Mart

Introduction Wal-Mart is an American Public listed corporations that has chains of large discount departmental stores and warehouses. The company was branded as Walmart in 2008. The company was ranked as the worlds largest public corporation by revenue in 2010. (Forbes Global, 2010).The company operates 8500 stores in 15 different countries under 55 different names (Daniel, 2010).

SWOT Analysis The SWOT analysis of Wal-Mart is as follows: Strengths y y y y y Biggest Employer Diversification Company Policies Retailership Well established IT system Weaknesses y y y y y Inexperienced crew to manage IT issues Limited Focus Lack of innovation Unhappy employees Pricing issues

Opportunities y y y y y Global Expansion Up to date strategies Internet shopping Economies of Scale Employee Retention

Threats y y y y y Emerging competitors Pricing strategies of the company Political influence Economic conditions Employee Unions

Strengths

The company enjoys the reputation of biggest employer network in United States (UFCW, 2010). The company provides employment not only in US; it is regarded as the largest employer in Mexico and one of the largest in Canada (Walmart, 2010). It provides number of benefits to its employers from time to time. The company offers number of product under the single roof in different states in US and other countries. There are different divisions of the company like SAMs club that attract concentrable amount of customers.The companys policies are in coherence with the community advancements and initiatives. The company always welcomes people to promote the business and spreading it worldwide. It has well established IT system in the stores to see the prices offered by markets worldwide (Stolberg, 2011). Weaknesses Walmart is the worlds largest grocery retailer and maintains control on its operations via IT advantage but the crew is untrained to use the information technology related gadgets properly which can leave the mark on the image of the company. It focuses only on America and Europe and holds few stores in other continents. The policies adopted by the company to facilitate the employees are not up to date and lacks innovation. This results in the number of unhappy employees which can harm the corporate and social image of the company. To maintain the constant price at stores, the company buys products in bulk which can affect the business of the company if the product prices drops or get kicked out of the markets (Byrnes &Eidam, 2004) Opportunities The number of opportunities lies in the emerging markets of Asia. The company can expand its global operations and shift its limited focus from US and Europe to the other continents as well. This can be achieved by devising new strategies that are innovative and up to date to the current requirements of the markets and the need of the time. The company can excel the customer shopping experience by revamping the current stores and maintaining long term relationship with the current employees.The company can also start internet shopping facilities to attract those customers who find it difficult to go physically to the shopping malls and buy items for themselves. Walmart can utilize its market strengths to increase the customer base and revenues during the recessions. Threats There are number of emerging competitors that can adopt the policies and strategies that are lacked by Walmart and can adversely affect the business of the company. Walmart operates at low cost strategy in the markets, the competitors are also imitating this strategy to weak the market position of the company. There is profound number of competitors in the international and national markets that can give hard time to the company. The economic conditions of US can also divert the customers from buying expensive products and switch to the cheap

substitutes. The unsatisfied employees can also spread bad word of mount against the company which can harm the market image of Walmart to many folds. Walmart is the worldwide retailer this means the company is not protected from the political troubles from the companies it operates. The political interference can affect the profitability of the company. Likewise, the unhappy employees tend to establish employee unions against the company that can limit the functionality of the company.

Porters Five Forces Analysis Bargaining Power of Suppliers The company has more than 60,000 suppliers worldwide. Wal-Mart holds lot of market share and it offers business to manufacturers and wholesalers this gives Walmart the power against its suppliers; threatening them to switch to different suppliers (Treehugger, 2009).It also manages business with the large suppliers like P&G; this makes the bargaining power of these suppliers higher than the others. The threat of supplier bargain power faced by Walmart ranges from low to medium. Walmart can engage into vertical integration to deal with the supplier power issues. The Bargaining Power of Buyers Walmart focuses on low cost leadership strategy in its business operations. Its main focus is the lower middle class customers who seek best quality at economical pricing. The individual buyers have no pressure on the Walmart. The buyers have options available but they seek continence of shopping which is provided by Walmart only. In the case of bargaining power of buyers, Walmart has very low level threat. The threat of the entry of new competitors The chances of entry in the markets are low in the various markets due to the economic conditions of the countries. Walmart maintains huge business empire that cannot be impacted by the new entrants in the markets. For this they will require subsequent amount of capital which are lacked by many of the companies in the beginning. Walmart has outstanding distribution system all over the globe this means that entry barriers are high. It also maintains cost advantage against its competitors which can be difficult to outbreak.

Rivalry among Established Competitions Walmart faces cut throat competition with the four rivals competing in the same market. These rivals are Sears, K-mart, Amazon and Target. Some of them can impose considerable amount of challenge to the Walmart, like Target, which is the strongest of others in retail (dailyfinance, 2011). There is also customer related issues faced by Walmart like low levels of loyalty. This can

impact the business and operations of Walmart in case they switched to the immediate competitors of Walmart. The level of rivalry among established competitors and Walmart is quite high.

The threat of substitute products or services Walmart offers wide range of variety to its customer base. There are very few companies or substitutes that offer the same level of goods and convenience at low pricing to the customers. The suppliers or substitutes would have to have something innovative and different from the Walmart in order to attract the customers. The complementary products or services also have no significant impact on the business operations of Walmart. The threat of substitutes is low for Walmart.

PESTEL Analysis Political Wal-Mart was considered as local hero during the Katrina disaster. According to the study presented by Steven Horwitz, the disaster relief initiatives can be successful only if the relief parties have proper knowledge about the local areas. The Wal-Marts response during the hurricane was lauded by everyone. The company donated lot of merchandize and promised jobs to the people who suffered during this disaster. Wal-Marts knowledge about the local areas helped the company to provide emergency supplies and enabled it to make plans ahead of storm (msn, 2011). Wal-Mart stores face number of criticizes from the people that have affected the face of the company. Regardless of these critics and reputation of the company, Walmart is here to stay. Retailing is a major sector of the economy of the United States; indeed, it is often credited with "leading" the economy. Consumer goods are commonly obtained through international trade, but many consumer products are available that are "made in America (ABC news, 2011). Economic The American economy is facing various ups and downs lately. In such an instance, Walmart is providing large number of employments to the citizens of United States and across the globe. As

of 2009, the company awarded financial incentives like bonuses, profit sharing and million dollars merchandize to its US. Hourly associates (corporate fact sheet, 2010). It also planned million dollars contributions in merchandize discounts and stock purchase plans. Walmart is the worlds largest retailer with $405 billion in sales for the fiscal year ending Jan. 31, 2010. There are large number of Walmart stores in US and has earned the growth of 11% in its sales (Walmart, 2011) Socio-Cultural Walmart focuses on the low income segment customers to provide them quality products and services at low prices. The culture at Walmart stores is highly flexible. Employees are given benefits and other incentives for working in the company. The policy makers are continuously developing policies to facilitate the employees further in Walmart stores and warehouses.The company takes its cultures to other countries as well to maintain the homogeneity across the globe in its operations (Walmart, 2011) Technological Wal-Mart is the pioneer IT driven supply Chain Company. It ruled the world with its approach towards the technology. It was the first company in the industry that used RFID technology for its products and services. The radio frequency information (RFID) tags provide automatic tracking of pallets and cases of goods. Walmart also managed much of its own logistics through a central hub-and-spoke system of warehouses and distribution centers. It was estimated that the corporate logistics handled over million loads each year. The company has a core competence involving its use of information technology to support its international logistics system. The world caught up and now Web 2.0 technologies are forcing retailers to pay more attention to customers. No longer is a leader, Wal-Marts IT at a crossroads. The company has even suffered in its sweet spot, with serious setbacks to its deployment of radio-frequency identification (RFID) tags throughout its supply chain.

Legal There are so many law suits associated with Wal-Mart. The company is said to be discriminating its women employees, there are incidences of forced overtimes in the workplace, workers are often locked in the bathrooms by their supervisors, offers low wage rates, takes pregnancy tests of its female employees just to make sure no one is pregnant, forced overtime and workers are fired and back listed for fighting back with the company. All this happens in its foreign factories

that produce goods for Wal-Mart. It was removed from KLD& Co.s Domini 400 Social Index because of these sweatshop conditions. Wal-Mart is trying to ensure that its vendors meet the adequate labor and human rights standards. Another common complaint that is file against WalMart is that it discriminates against women employees. It has been reported that the 65% of the women employees complained that the corporate culture at Wal-Mart infuses the thoughts that women are less aggressive therefore they are not likely to be the right choice for managerial jobs.(UFCW, 2010). Environmental There are several environmental issues linked with Wal-Mart. The company has paid lot of amount to the American government against the allegations put on its practices. The company is trying to minimize the pollution and other factors that are creating environmental disruption in the country.

Recommendations This study provided brief overview on the external environment analysis of Wal-Mart. The findings of the study suggested that Wal-Mart should focus on the following factors in order to excel its business and social image in the world: 1. Maintain long term employee relationship to minimize the issues related to the employees. For this regard Wal-Mart can establish proper communications channel in its business units to let the employees speak of themselves to the organization. This will change the typical employee and employer relationship between the Wal-Mart and its people. Also it should take reasonable steps to change the culture centered on the male dominance and bring balance in the organization 2. Shift its business perspective from the narrow one to the broader one. Wal-Mart should focus on the emerging markets of Asia like China, India etc. to obtain maximum customer base and global reach. This shift of perspective is not only beneficial to the company in terms of profit but also it will increase its global market share. 3. Take reasonable steps to improve the corporate image of the company with respect to the social and cultural responsibility. Engage in the activities that can enhance the corporate social image of the company so that the people will know that Wal-Mart values them and takes pain for them.

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Walmart 60000 suppliers, 2009 Walmart to 60,000 Suppliers: We've Got 15 Really Important Questions for You, Tree Hugger Website, Retreived on June 15, 2011 from http://www.treehugger.com/files/2009/07/15-questions-walmart-asks-suppliers.php WAL MART STORES INC Top Competitors, Daily Finance Website, Retrieved on June 15, 2011 from http://www.dailyfinance.com/company/wal-mart-stores-inc/wmt/nys/top-competitors Wal-Mart making first use of smart label technology, 2004. USA Today Website, Retrieved on June 15, 2011 from http://www.usatoday.com/tech/news/techinnovations/2004-04-30wallyworld-rfid_x.htm United Food and Commercial Workers International Union, AFL-CIO/CLC website:www.ufcw.org, Retrieved on June 16, 2011 from http://www.wisconsin.edu/tfunds/walmart1204a.htm