Analyzing Walmart's Business Environment

The assignment focuses on analyzing Walmart's business environment using the PESTLE (Political, Economic, Social, Technological, Legal, Environmental) framework. It utilizes information from Walmart's annual report to assess various external factors influencing the company's operations. The analysis highlights the importance of responding effectively to changing business environments and emphasizes Walmart's use of tools and techniques for environmental analysis to inform its strategies and action plans.

Business Strategy
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TABLE OF CONTENTS
Introduction .....................................................................................................................................3
Impact of PESTEL factors and competitors behaviour on Walmart ..............................................3
Introduction .................................................................................................................................3
Conclusion ..................................................................................................................................4
Recommendation.........................................................................................................................4
Strategic tool to explain Walmart....................................................................................................4
Critical analysis of the use of Pestle framework..........................................................................5
Research into Walmart's annual report .......................................................................................6
How Walmart should response back to changing business environment........................................6
Recommendations........................................................................................................................7
Conclusion ......................................................................................................................................7
References........................................................................................................................................8
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INTRODUCTION
In the current scenario, business strategies play very important role in growth and success
of any organization. Further it can be defined as the action plan developed by companies to
achieve their aim and objectives (Casadesus-Masanell and Ricart, 2010). The present report is
based on Walmart which is among the fortune 500 organizations that are operating in UK.
Established in the year 1962, Walmart is an American based multinational retail corporation
which consist of chain of grocery stores, hypermarkets and discount departmental stores
(Walmart UK, 2016). This report explains impact of government regulations, interest rates and
demographics factors on Walmart. Other than this, it covers various aspects of business
strategies associated with the organization.
IMPACT OF PESTEL FACTORS AND COMPETITORS BEHAVIOUR ON
WALMART
Introduction
Business enterprise gets affected by various kind of changes which happen in the
business environment where it operates (Richardson, 2008). Being a global retailer, Walmart is
required to identify various factors that are affecting its operations and activities. Further on the
basis of this identification, appropriate strategies are required to be developed by the retailer.
This will help Walmart to lower down the negative impact of environmental changes.
PESTEL factors consist of various environmental factors such as political, social,
economical, technological, environmental and legal which affects the operations of an
organization. Any kind of change in the regulations of government encourages Walmart to
change its existing plans and policies. In the last three years, UK government has become more
strict in terms of labour and employment related law. The interest rates of 0.5% has helped
Walmart to carry out all its operations smoothly. Along with this, the changing rates of income
tax has also affected the sales and profits of Walmart. In the year 2014, the economy of UK grew
with the rate of 2.6% which has increased sales of the organization (UK Economic Outlook
March 2015: Summary report, 2015). Social factors such as increasing income level and healthy
lifestyle has provided Walmart with adequate opportunities with regards to growth and
development. In last three years, technological up-gradations has helped the organization in
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various aspects. Walmart's IT driven supply chain is considered as one of the most effective and
efficient chain in the world. The company is able to build long terms and healthy relationship
with all its suppliers only because of its standard technology. Walmart has been forced to lower
down the negative impact on its operations on environment. This has increased the overall cost
of the organization (Chuang and et. al., 2011). Walmart has been affected by legal factors such as
food safety regulations and tax reforms. If these regulations are not followed then the retailer
may required to pat heavy fines and penalties.
Conclusion
It can be concluded that Walmart is required to take care of all the environmental factors
such as political social, economical etc. It can be also concluded that some factors have affected
the retailer in positive manner whereas some has made positive impact on Walmart. It can be
evaluated that the growing economy of UK has helped the retailer to increase its sales and
profitability (Casadesus-Masanell and Ricart, 2010). Other than this, it can be concluded that the
organization has been also forced to lower down the impact of its operations on environment.
Recommendation
 It can be recommended that Walmart is required to respond quickly to the changing need
and demand of all people in the market. This will help the retailer to maintain its current
market share.
 It can be also recommended that the organization needs to adopted more sustainable
practices so that it operations do not cause any kind of harm to environment.
STRATEGIC TOOL TO EXPLAIN WALMART
Porter five force model for Walmart is mentioned below as:
 Competition among rivalry- Walmart is facing high degree of competition as there are
many market players in the industry. In addition to this, all the retail firms are very
aggressive which has also increased the competition level.
 Bargaining power of supplier- Suppliers of Walmart have low power as there are many
suppliers in UK. This means that any kind of operations of the organization has direct
affects on all its suppliers (Levy and Newell, 2005).
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 Bargaining power of customers- Customers of Walmart have very low bargaining power
because of the large population of buyers. Therefore, customers are not able to put
pressures of organizations such as Walmart.
 Threat of substitutes- The threat of substitute is also very low for Walmart. The
organization offers wide range of quality products and services that have no or few
substitute.
 Threat of new entry- new firms can easily enter the retail market which means that Threat
of new entry is very high. The cost of doing business in this sector is not high and cost of
capital required is also moderate (Wood, Lowe and Wrigley, 2006).
Critical analysis of the use of Pestle framework
Pestle analysis is an important framework which is used to carry out environment audit
for any organization. Every business enterprise needs to become aware of various kind of
environmental factors which directly or indirectly affects it (Casadesus-Masanell and Ricart,
2010). It can be stated that with the help of of Pestle framework companies can become aware of
key environmental factors that make impact on various aspects. Political factors such as changes
in tax and rate of interest determines the purchasing power of people in country. Further stable
political environment helps organizations to grow and expand their operations. On the other
hand, growing economies increases demand and profits of organization. Businesses are also
needs to be aware of social factors such as demographics, income level, taste and preferences
(Wood, Lowe and Wrigley, 2006). Further companies are required to meet the changing needs of
customers in order to survive in long run. Along with this, high rate of technological
advancements helps organizations to lower down their cost of productions and become more
efficient. Business are also required to follow the legal laws and legislations determined by
government or other regulatory bodies. At last companies needs to take care of the environment
under which they operates. Changes in environmental laws and regulations increases the overall
cost of operations.
After carrying out the Pestle framework analysis, it can be stated that it is very simple
and easy framework to carry out assessment of environmental factors. Along with this, Pestle
analysis also make companies aware of various factors which are affecting them. On the other
side of this, the users of this model can oversimplify the information gathered which can affect
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decision making process of a company. Other than this, it is also required by organizations to
conducts analysis on regular intervals (Levy and Newell, 2005). The benefit of Pestle framework
is that it help in reducing the impact of environmental forces on businesses. However it can be
argued that because of time and cost, the assess of quality information with regards to external
environment gets restricted. The vanadate of Pestle framework is that it helps businesses to
identify their opportunities and work upon the same. On the other side, it can be argued that the
frameworks can be based on assumptions that can be proved unreliable.
Research into Walmart's annual report
The information form Walmart's annual report explains its aim and objectives for the
future. Further it is well aware of the fact that all its customers want to have enjoyable shopping
experience along with saving their time and money. Walmart has started to make its employees
more effective in order to achieve the same. In the year 2015, the revenue of Walmart grew by
more than $9 billion as compared to 2014 (Walmart annual report, 2015). The key information
which can be driven form annual report of Walmart is its financial performance and company's
overall performance in one particular financial year. Other than this, information regarding
growth or decline of the retailer can be also find out from its annual report. It can be also stated
that the data taken from company's annual report is more accurate and reliable as compared to
other sources as it has been provided by itself by the organization. Further these reports can be
very useful in carrying out organization audit. All those elements which are required to carry out
effective audit are mentioned in its annual report.
HOW WALMART SHOULD RESPONSE BACK TO CHANGING
BUSINESS ENVIRONMENT
Business environment indicators such as Government monetary policy, social cultural
analysis and demographics changes are very important part of any organization. Further it can be
stated that any kind of variations in monetary policy make its impact on Walmart. High rate of
interest results in lowering down purchasing power of customers and borrowing power of
Walmart. In the year 1999-2000 the rate on interest were high at 6% in order to restrict the
demand of products in market (Monetary policy, 2016). In the year 2015, the base rate grew
from 0.50% to 0.75% which means that people in market were left will less money. The socio-
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cultural factors has also affected the retailer to a great extent. The changing lifestyle of customers
has affected the operations of Walmart. Now customers have started to seek for more healthier
products and the organization is required to deliver products that are healthy and safe (King and
Brown, 2012). Other than this, Walmart also made changes in advertisement and marketing
practises to make people aware about the products and services it is offering. In order to respond
quickly to the changing business environment, the organization will be required to carry out
environmental audit at frequent intervals. It also needs to develop effective plans and strategies
on the basis of those audits and environmental analysis. This will help Walmart to maintain its
current market share and customer base.
Recommendations
 One of the best strategy which can be recommended to Walmart is the strategy of
expansion. In its existing markets, the retailer is facing intense competition. It can be
recommended that Walmart can expand its operations to other emerging economies of the
world. This will results in increase its sales and market share.
 It can be recommended that the brand can also adopt the strategy for differentiation. In
order to gain competitive advantage, Walmart can offer unique and different products
which no other market player is offering. Further it can also charge premium prices for
those different products.
CONCLUSION
From the above report it can be concluded that Pestle framework is a very effective tool
which can be used to analyse the environment factors that are affecting business. Further it can
be concluded that annual report can provided a variety of useful and reliable information related
to an organization. It can be asserted that the company is required to respond back to changing
business environment in effective manner. Walmart us tools and techniques to analyse changing
environment at regular intervals. Further it can develop all its strategies and action plan on the
basis of those analysis.
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REFERENCES
Books and journals
Casadesus-Masanell, R. and Ricart, J.E., 2010. From strategy to business models and onto
tactics. Long range planning. 43(2). pp.195-215.
Chuang, M.L and et. al., 2011. Walmart and Carrefour experiences in China: resolving the
structural paradox. Cross Cultural Management: An International Journal. 18(4).
pp.443-463.
King, L.J. and Brown, A.L., 2012. Black History, Inc! Investigating the Production of Black
History Through Walmart's Corporate Web Site.Multicultural Perspectives. 14(1). pp.4-
10.
Levy, D.L. and Newell, P.J., 2005. The business of global environmental governance. MIT
press.
Richardson, J., 2008. The business model: an integrative framework for strategy execution.
Strategic Change. 17(5‐6). pp.133-144.
Wood, S., Lowe, M. and Wrigley, N., 2006. Life after PPG6—recent UK food retailer responses
to planning regulation tightening.International Review of Retail, Distribution and
Consumer Research. 16(1). pp.23-41.
Online
Monetary policy. 2016. [Online]. Available through:
<http://www.economicsonline.co.uk/Managing_the_economy/Monetary-policy.html>.
[Accessed on 28th January 2016].
UK Economic Outlook March 2015: Summary report. 2015. [Online]. Available through:
<http://www.pwc.co.uk/services/economics-policy/insights/uk-economic-outlook/ukeo-
summary-mar-15.html>. [Accessed on 28th January 2016].
Walmart annual report. 2015. [Online]. Available through:
<http://www.corporatereport.com/walmart/2015/ar/_downloads/walmart_2015_ar.pdf>.
[Accessed on 28th January 2016].
Walmart UK. 2016. [Online]. Available through:
<http://corporate.walmart.com/our-story/locations/united-kingdom>. [Accessed on 28th
January 2016].
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