FELM4026 : Financial and Economic Literacy for Managers

FINANCIAL & ECONOMIC
LITERACY
STUDENT ID:
[Pick the date]

Contents
Question 1..................................................................................................................................1
Question 2..................................................................................................................................6
Question 3..................................................................................................................................7
References..................................................................................................................................9

Question 1
(a) With regards to any business, both the internal and external environment tend to be
pivotal. The internal factors primarily relate to those factors which are specific to the
company and not necessarily to the industry as a whole. Further, the internal factors are to a
large extent within the control of the firm. This is in stark contrast with the external factors
which are outside the control of the firm and tend to be applicable to the industry as a whole
may be to varying degree depending on their ability to cope (Mintzberg, Ahlstrand and
Lampel, 2014).
Consider for an instance a supermarket chain. The internal environment would relate to the
staff, process particularly related to supply chain and backend integration, suppliers,
organisational culture along with the management. These are the key factors which are under
the control of the firm to a large extent and play a crucial role in the organisational failure or
success. As a result, within the strategic framework named SWOT, strengths and weaknesses
essentially refer to the internal environment. For instance, if the staff is trained and motivated
then exemplary customer service would be delivered which would be a strength for the
business. Additionally, a well-developed relationship with suppliers coupled with complete
backend integration and inventory management system would be a big strength for the
company. Similarly, unethical management or a poor organisational culture would be a
weakness for the company and would adversely impact the performance of the firm. Clearly,
these factors would not impact the performance of other firms in any direct manner
(Haberberg and Rieple, 2015).
Additionally, there are external factors, which may be captured by the acronym PESTEL
which tend to indicate the political, economic, social, technological, environmental and legal
factors that can potentially impact the business. An example of social cultural factors is the
shifting preference of the consumers towards online shopping owing to the underlying
convenience. Further, economic factors would include the economic performance of the
economy which also can have significant impact in the business especially in case of retail
business where consumer spending is clearly driven by the underlying economic
performance. Additionally, legal factors may also be important owing to the change in the
laws (Mintzberg, Ahlstrand and Lampel, 2014).

An example could be tightening of immigration laws which can tighten the supply of
immigrants which would result in higher wage cost. Additionally, political factors may also
impact the business considering the policy change that government may make with regards to
restrictions on foreign companies entering the domestic market. It is pivotal to note that the
impact of these factors would not be limited to a particular firm but would be felt by the
industry as a whole. Also, these factors are outside the control of the firm and hence are
denoted by opportunities and threats which the firm has to adapt for maximising the wealth of
the shareholders (Haberberg and Rieple, 2015).
(b) One of the global retail companies is Walmart which is based in US but has operations
globally. The landscape of retail is changing as the online retailors tend to enhance their
penetration not only in the developed countries but also in the developing countries. Also, in
case of developing nations, the penetration of organised retail is on the increase which
provides an exciting opportunity to a global giant such as Walmart. In the current year,
Walmart has reported a strong performance with best sales figure in the last decade which are
fuelled by the growth in the US economy backed by the tax cut introduced by the Trump
administration. As a result, the consumer confidence is quite high in the US and therefore the
sales have swelled (Domm, 2018).
Also, a significant reason for stellar show in the company’s sales and earnings is the e-
commerce push which traditional retailers such as Walmart are taking in order to successfully
compete with changing retail landscape and the proliferation of e-retailers. The company was
able to increase the e-commerce based sales by 33% in the current year (Hirsch and Rogers,
2018). Further, the performance of the company over the last five years in terms of sales is
indicated below.