Introduction
Businesses operate in two broad environments; the internal and the external environment. The external environment concerns threats and opportunities while the internal environment entails the strengths and weaknesses that a firm has. This paper seeks to explore the general environment in which Walmart operates, the resources and capabilities that Walmart has to deal with the competitive forces and take advantage of threats and opportunities.
There are six main elements of the general environment that businesses operate in, which are the sociocultural elements, legal, technological, economic, political and technological forces. Out of the six forces, Technological and political forces have the greatest influence on Walmart.
Technological Forces
The world has experienced unprecedented growth in technology. Technology has revolutionized the way things are done, how customers behave and express their dissatisfaction, as well as how customers shop for goods and services. The growth of the internet and the World Wide Web has made the modern consumer very enlightened, thanks to the growth of social networking sites that customer are able to ask about prices and quality of given brands out rightly. The manner of shopping has also changed as ecommerce has gained prominence. Online sellers such as amazon have continued to mount pressure on brick and mortar stores like Walmart. Customers are now demanding for convenient ways of shopping such as online ordering and home delivery. Digital means of payment have also emerged as the world is going cashless, and Walmart has not been left behind (Walmart, 2020). Walmart launched Walmart Pay to provide customers with convenience. Advances in technology affects Walmart and other retailers in that the corporation must adapt to the changing needs of customers and incorporate the technological changes in order to remain in its headship position.
Political Factors
Success of any business is largely dependent on the political climate prevailing at a given time because businesses need hospitable business environment. A good political climate fosters a good business environment as buyers and sellers will be worry free that anything might happen. Good political environment in countries where Walmart operates is necessary for the success of the corporation. In its financial reporting, Walmart (Sec.gov, 2020) notes that geopolitical risks impact its success, with specific concern to the trade tensions between the United States government and the people republic of China. One of the notable effects of this geopolitical tension is the issuance of an executive order by the United States government under trump’s administration banning the sale of Huawei products. Such political influences like the Huawei products ban on America have undesirable impacts on Walmart because it affects the bottom line. For instance, if Huawei products were fast selling and marketable; Walmart has no choice except to let go the earning potential since it must observe the government regulations.
FIVE FORCES OF COMPETITION
Michael porter advanced the five main generic forces that form part of the macro environment. These forces are the threat of substitute products, bargaining power of buyers, industry rivalry, new entrants’ threats and the supplier bargaining power. Buyer bargaining power and the rivalry among competitors are the two forces that have the most notable influence on Walmart.
Industry Rivalry among Competitors
Walmart operates in the retail industry which is characterized by intense competition and numerous players. The retail industry is characterized by perfect competition where there are many buyers who are selling near and perfect substitutes. In the retail industry, there are numerous retailers and grocery stores that are primary competitors to Walmart such as Aldi supermarkets, Carrefour, Whole Foods Inc., Target, Costco, small scale convenience shops like 7-eleven among others. Walmart is the primary target of competitors and big and small retailers are determined to capture Walmart market share at all cost. For example, Amazon which is an online competitor acquired Whole Foods Inc., which was a fierce competitor to Walmart (Timilsina, nd, p 276). Walmart has made strategic moves and efforts in a bid to deal with the mounting rivalry among existing players in the industry. While amazon is acquiring brick and mortar locations like Whole Foods Inc., Walmart is acquiring online retailers such as modcloth.com, jet.com, shoes.com among others to compete with customers in the ecommerce platform. Walmart has also adopted home delivery whereby goods are delivered to shoppers’ home in less than 2 hours to provide more convenience to customers and thwart competitors.
Buyer Bargaining Power
The retail industry is characterized by many buyers offering near and perfect substitutes. As such, the bargaining power of buyers is high because of the ready availability of substitutes with no switching costs involved. Walmart operates a customer centric culture which is guided by the old saying that “customer is king.” Walmart depends on customers who buy in large numbers to give Walmart the market leader in the retail industry. Walmart addresses the issue of buyer bargaining power by continuously providing value and convenience such as providing home delivery when customers shop to their homes in less than 2 hours, installing the Endless Aisles technology whereby customers order and pay or products that are out of stock, but Walmart arranges to deliver such products to the customer as a means of customer satisfaction and preventing customers from going to the competitors (Walmart, 2020). Walmart has also installed the Scan & Go technology that allows for aster checking out process as customers are able to scan goods as they pick them from the shelves into their baskets rather than wait to have goods scanned at the counter.
Future improvements
In the future, Walmart can engage in promotion activities, especially during festive seasons to attract more shoppers. For instance, Walmart can give several cars up for grabs that will be rewarded to customers. Customers will be entered into a draw whenever they purchase goods of a given amount. At the end of the promotion period, a draw will be made to get lucky winners. Walmart can also reward shoppers spontaneously to induce customers to shop at Walmart with hopes of winning. Walmart can also consider adding the number of supercenters in affluent neighborhoods to increase earnings because wealthy people are price insensitive.
Greatest External Threat
Walmart faces various threats, but cutthroat competition poses the greatest threat to Walmart because of its ability to reduce Walmart’s earnings. Supermarket chains like The Home Depot, target, Kroger, Carrefour, and Aldi supermarkets among others have been a thorn in Walmart’s flesh and are determined to take Walmart market share at all costs (Timilsina, nd, p 274). Walmart should continue offering goods at low prices and continue with strategies like spontaneous rewarding of shoppers to thwart off competition.
Greatest Opportunity
The greatest opportunity that the external environment provides is expansion to developing economies. Walmart has the core resources and capabilities necessary for venturing in new markets, which is likely to increase its earnings. Walmart should deal with the greatest opportunity by making the strategic move to move to Latin America, sub-Saharan Africa countries and the growing Asian economies because they are an unexploited potential.
Greatest Strengths
Walmart is a large corporations with many branches spread in more than 28 countries. Walmart operates a cost leadership model and is globally renowned as the cost leader and the cheapest retailer. The large size of the corporation makes it able to offer wide variety of products at low prices as its motto highlights. Walmart is able to buy in bulk directly from manufacturers, thereby enjoying economies of scale. The most significant weakness that Walmart faces is negative publicity. Walmart is known for poor employee treatment by paying low wages, pressing suppliers to supply at low prices and in other instances bribing municipals to obtain permits for setting up operations in certain places like Mexico, India, Brazil and China. For instance, Walmart paid $ 282 million to the United States government for violating the U.S. Foreign Corrupt Practices Act (Bose, 2019 p 1).
Strategy/Tactic
Walmart should consider forming strategic partnerships or acquiring medium sized supermarkets in developing economies to continue with its cost leadership and market share leadership in the retail industry. In regards to negative publicity, Walmart should consider rebranding its image to deal with negative publicity. For instance, Walmart can advertise its brands and its corporate responsible activities in different television channels highlighting the things it has done like helping the Bangladesh women get life skills. For instance, Walmart contributed $1.6 million to the institute of sustainable communities to support the environmental, Health and safety academy in Bangladesh that seeks to provide comprehensive training on fire safety, health and workplace safety (Walmart, 2020 p 1). In so doing, Walmart will present its positive image to consumers and the general public. Walmart also needs to address issues of human resources by streamlining its human resource policies and compensate workers in in line with other players in the industry for it to walk the talk.
Resource, Capabilities, and Core Competencies
Walmart possesses core competencies, resources and capabilities that are valuable, organization specific, rare and non-imitable. One of Walmart’s core competencies is its huge size that makes it possible to enjoy economies of scale (Hitt, Ireland & Hoskisson, 2020). Walmart huge size gives it more bargaining power on suppliers to supply goods at low prices, which is translated into low priced goods for consumers. Walmart large size also gives it much power over employees as it is able to minimize human resource costs to increase its profit margins.
Walmart huge customer base is also a source of resource. Walmart serves more than 140 customers per week, and this is a large number to be taken for granted. Walmart can use the big data analytics to analyze the customer’s shopping trends, income levels, and other important behavior that can help in marketing, promotion and pricing activities. Walmart enjoys endorsement of various private label brands, which is a core competency that enhances Walmart competitive advantage (Johnson, 2019 p1). Finally, Walmart huge size and the low cost leadership model is a core competency that gives Walmart competitive advantage in the medium term since it is costly to imitate such a model. Though the business model is imitable, copying Walmart will be expensive to competitors given the many number of branches in many countries. Therefore, Walmart has valuable resources that are rare, distinctive and valuable.
Businesses operate in two broad environments; the internal and the external environment. The external environment concerns threats and opportunities while the internal environment entails the strengths and weaknesses that a firm has. This paper seeks to explore the general environment in which Walmart operates, the resources and capabilities that Walmart has to deal with the competitive forces and take advantage of threats and opportunities.
There are six main elements of the general environment that businesses operate in, which are the sociocultural elements, legal, technological, economic, political and technological forces. Out of the six forces, Technological and political forces have the greatest influence on Walmart.
Technological Forces
The world has experienced unprecedented growth in technology. Technology has revolutionized the way things are done, how customers behave and express their dissatisfaction, as well as how customers shop for goods and services. The growth of the internet and the World Wide Web has made the modern consumer very enlightened, thanks to the growth of social networking sites that customer are able to ask about prices and quality of given brands out rightly. The manner of shopping has also changed as ecommerce has gained prominence. Online sellers such as amazon have continued to mount pressure on brick and mortar stores like Walmart. Customers are now demanding for convenient ways of shopping such as online ordering and home delivery. Digital means of payment have also emerged as the world is going cashless, and Walmart has not been left behind (Walmart, 2020). Walmart launched Walmart Pay to provide customers with convenience. Advances in technology affects Walmart and other retailers in that the corporation must adapt to the changing needs of customers and incorporate the technological changes in order to remain in its headship position.
Political Factors
Success of any business is largely dependent on the political climate prevailing at a given time because businesses need hospitable business environment. A good political climate fosters a good business environment as buyers and sellers will be worry free that anything might happen. Good political environment in countries where Walmart operates is necessary for the success of the corporation. In its financial reporting, Walmart (Sec.gov, 2020) notes that geopolitical risks impact its success, with specific concern to the trade tensions between the United States government and the people republic of China. One of the notable effects of this geopolitical tension is the issuance of an executive order by the United States government under trump’s administration banning the sale of Huawei products. Such political influences like the Huawei products ban on America have undesirable impacts on Walmart because it affects the bottom line. For instance, if Huawei products were fast selling and marketable; Walmart has no choice except to let go the earning potential since it must observe the government regulations.
FIVE FORCES OF COMPETITION
Michael porter advanced the five main generic forces that form part of the macro environment. These forces are the threat of substitute products, bargaining power of buyers, industry rivalry, new entrants’ threats and the supplier bargaining power. Buyer bargaining power and the rivalry among competitors are the two forces that have the most notable influence on Walmart.
Industry Rivalry among Competitors
Walmart operates in the retail industry which is characterized by intense competition and numerous players. The retail industry is characterized by perfect competition where there are many buyers who are selling near and perfect substitutes. In the retail industry, there are numerous retailers and grocery stores that are primary competitors to Walmart such as Aldi supermarkets, Carrefour, Whole Foods Inc., Target, Costco, small scale convenience shops like 7-eleven among others. Walmart is the primary target of competitors and big and small retailers are determined to capture Walmart market share at all cost. For example, Amazon which is an online competitor acquired Whole Foods Inc., which was a fierce competitor to Walmart (Timilsina, nd, p 276). Walmart has made strategic moves and efforts in a bid to deal with the mounting rivalry among existing players in the industry. While amazon is acquiring brick and mortar locations like Whole Foods Inc., Walmart is acquiring online retailers such as modcloth.com, jet.com, shoes.com among others to compete with customers in the ecommerce platform. Walmart has also adopted home delivery whereby goods are delivered to shoppers’ home in less than 2 hours to provide more convenience to customers and thwart competitors.
Buyer Bargaining Power
The retail industry is characterized by many buyers offering near and perfect substitutes. As such, the bargaining power of buyers is high because of the ready availability of substitutes with no switching costs involved. Walmart operates a customer centric culture which is guided by the old saying that “customer is king.” Walmart depends on customers who buy in large numbers to give Walmart the market leader in the retail industry. Walmart addresses the issue of buyer bargaining power by continuously providing value and convenience such as providing home delivery when customers shop to their homes in less than 2 hours, installing the Endless Aisles technology whereby customers order and pay or products that are out of stock, but Walmart arranges to deliver such products to the customer as a means of customer satisfaction and preventing customers from going to the competitors (Walmart, 2020). Walmart has also installed the Scan & Go technology that allows for aster checking out process as customers are able to scan goods as they pick them from the shelves into their baskets rather than wait to have goods scanned at the counter.
Future improvements
In the future, Walmart can engage in promotion activities, especially during festive seasons to attract more shoppers. For instance, Walmart can give several cars up for grabs that will be rewarded to customers. Customers will be entered into a draw whenever they purchase goods of a given amount. At the end of the promotion period, a draw will be made to get lucky winners. Walmart can also reward shoppers spontaneously to induce customers to shop at Walmart with hopes of winning. Walmart can also consider adding the number of supercenters in affluent neighborhoods to increase earnings because wealthy people are price insensitive.
Greatest External Threat
Walmart faces various threats, but cutthroat competition poses the greatest threat to Walmart because of its ability to reduce Walmart’s earnings. Supermarket chains like The Home Depot, target, Kroger, Carrefour, and Aldi supermarkets among others have been a thorn in Walmart’s flesh and are determined to take Walmart market share at all costs (Timilsina, nd, p 274). Walmart should continue offering goods at low prices and continue with strategies like spontaneous rewarding of shoppers to thwart off competition.
Greatest Opportunity
The greatest opportunity that the external environment provides is expansion to developing economies. Walmart has the core resources and capabilities necessary for venturing in new markets, which is likely to increase its earnings. Walmart should deal with the greatest opportunity by making the strategic move to move to Latin America, sub-Saharan Africa countries and the growing Asian economies because they are an unexploited potential.
Greatest Strengths
Walmart is a large corporations with many branches spread in more than 28 countries. Walmart operates a cost leadership model and is globally renowned as the cost leader and the cheapest retailer. The large size of the corporation makes it able to offer wide variety of products at low prices as its motto highlights. Walmart is able to buy in bulk directly from manufacturers, thereby enjoying economies of scale. The most significant weakness that Walmart faces is negative publicity. Walmart is known for poor employee treatment by paying low wages, pressing suppliers to supply at low prices and in other instances bribing municipals to obtain permits for setting up operations in certain places like Mexico, India, Brazil and China. For instance, Walmart paid $ 282 million to the United States government for violating the U.S. Foreign Corrupt Practices Act (Bose, 2019 p 1).
Strategy/Tactic
Walmart should consider forming strategic partnerships or acquiring medium sized supermarkets in developing economies to continue with its cost leadership and market share leadership in the retail industry. In regards to negative publicity, Walmart should consider rebranding its image to deal with negative publicity. For instance, Walmart can advertise its brands and its corporate responsible activities in different television channels highlighting the things it has done like helping the Bangladesh women get life skills. For instance, Walmart contributed $1.6 million to the institute of sustainable communities to support the environmental, Health and safety academy in Bangladesh that seeks to provide comprehensive training on fire safety, health and workplace safety (Walmart, 2020 p 1). In so doing, Walmart will present its positive image to consumers and the general public. Walmart also needs to address issues of human resources by streamlining its human resource policies and compensate workers in in line with other players in the industry for it to walk the talk.
Resource, Capabilities, and Core Competencies
Walmart possesses core competencies, resources and capabilities that are valuable, organization specific, rare and non-imitable. One of Walmart’s core competencies is its huge size that makes it possible to enjoy economies of scale (Hitt, Ireland & Hoskisson, 2020). Walmart huge size gives it more bargaining power on suppliers to supply goods at low prices, which is translated into low priced goods for consumers. Walmart large size also gives it much power over employees as it is able to minimize human resource costs to increase its profit margins.
Walmart huge customer base is also a source of resource. Walmart serves more than 140 customers per week, and this is a large number to be taken for granted. Walmart can use the big data analytics to analyze the customer’s shopping trends, income levels, and other important behavior that can help in marketing, promotion and pricing activities. Walmart enjoys endorsement of various private label brands, which is a core competency that enhances Walmart competitive advantage (Johnson, 2019 p1). Finally, Walmart huge size and the low cost leadership model is a core competency that gives Walmart competitive advantage in the medium term since it is costly to imitate such a model. Though the business model is imitable, copying Walmart will be expensive to competitors given the many number of branches in many countries. Therefore, Walmart has valuable resources that are rare, distinctive and valuable.
