Corporate Strategic Analysis: Walmart's External Environment Analysis

This paper provides a corporate strategic analysis focusing on Walmart, examining its external environment and the major influencing factors within its industry. The analysis concentrates on three key factors derived from Michael Porter's Five Forces and the PESTEL model. The paper identifies ec...Read More

CORPORATE STRATEGIC ANALYSIS 1
Decisions, tools and concepts of corporate strategy
Course
Instructor’s name
Institutional affiliation
City and state
Date

CORPORATE STRATEGIC ANALYSIS 2
Introduction
This paper aims to assess the corporate industry analysis. The paper specifically looks at the
external environment and the major influencing factors in a particular industry. In this analysis,
the focus is allocated towards the three major factors that are said to be the most influential
towards any business operations and activities. These three factors are chosen from two
particular concepts of external analysis. These include Michael porter’s five forces and the
PESTEL model. Therefore, for purposes of making a relevant industrial external environment,
three factors will be discussed form each of the two identified concepts. As one of the
requirements for writing this paper, the WalMart public listed company will be selected as the
firm of choice.
Discussion
Point 1: the three most influential PESTEL factors
According to the information obtained from the SEC, the three major factors that have a
significant influence on the industry include the economic factors, the legal and lastly the
technological. Among these factors, the economic factors are the most influential factors that
affect an industry at any one time. These economic factors are then followed by the technological
factors and lastly the political combined with the legal as such. Form the information provided,
the Walmart as a united states entity suffers mostly from the economic factors. This is so because
these factors are in a wide range. An entity, therefore, finds it extremely difficult to operate
without fulfilling requirements regarding the external economic demands (Birnleitner,2013).
Factors such as the constant changes in the market demand, changes in exchange rates,
inflationary tendencies, interest rates, unemployment among others have rendered it hard to for

CORPORATE STRATEGIC ANALYSIS 3
different businesses to effectively carry out transactions. For instance in situations of economic
instabilities such as inflation, the purchasing power of consumers consequently becomes eroded.
With an eroded consumer, therefore, reduced demand and subsequently low consumption.
Supply becomes higher than demand and hence resulting in material wastage. In the long run,
therefore, unprofitability comes in due to the reduced market size. It is upon such concerns and
economic forces that these factors are identified as the most influential.
Besides the economic factors, the second influential PESTEL factors that have a significant
impact on the industry are technological (Bush, 2016). According to the Walmart presentation,
the current trend of conducting business and transacting has significantly changed. Today many
businesses are carrying out transactions over the internet and other online platforms. It is for such
reasons that there is the emergence of what is known as e-commerce. This type of conducting
business has been embraced due to its numerous benefits. For instance, the Walmart company
uses an e-commerce platform to save customers time and make their purchases even much
easier. The technological advancements have as well eased customer service and outreach on
both the global and domestic scale. therefore, the failure for a company to embrace and adapt to
these changes in an industry implies loss on market share and consequently unprofitability of
such an entity. With poor or low levels of technological advancement, then customer service and
satisfaction is under very high risk. This is so because technology plays a significant role in
improving the quality of output on the market.
Lastly, the other influential factor under the PESTEL that has a significant influence on the
industries within the United States is the political factor. This factor is in certain cases combined
with the legal factors. Therefore these two form a significant influence on industrial
performance. Among such factors includes the legal requirements of operation, tax duties

CORPORATE STRATEGIC ANALYSIS 4
charged for operation, labour and safety laws, changes in the Generally Accepted Accounting
principles among other regulatory requirements (Sherman, 2019). Just like the other factors,
these political and legal requirements significantly influence the profitability of an industry. For
instance, if high taxes are imposed on a given industry producing certain commodities, then this
makes very hard for the firm's operation in such an industry to be financially strong. The high
taxes significantly lower the level of profitability thereby reducing the-would be benefits
obtained from such an industry.
Point 2: the three most influential forces by Michael porter
According to Michael Porter, a firm's competitive advantage is influenced by majorly five forces.
Among these includes the rivalry among the competitors, the level of substitutes, customer
bargaining power, suppliers bargaining power and lastly the threat of new entrants in the market.
Therefore, it is such factors that significantly influence the profitability of a firm or an entity in
any industry of operation. According to the Walmart information provided, the three most
influential factors include the rivalry among competitors, the supplier bargaining power and the
consumer strength or bargaining power.
Rivalry among competitors: Michael porter explains that the higher the level of competition
and the more the number of competitors an industry is comprised of, the more there is a need for
aggressive advertisement (Omsa et al, 2017). The point in such a statement is that with a large
number of competing firms, the average market share is reduced (Sheryl,2011). Therefore firms
must devise all the possible ways and strategies to out-compete their rivals and perhaps increase
market share. From such a point of view, the Walmart Company identifies the industry in which

CORPORATE STRATEGIC ANALYSIS 5
it operates as one that is highly competitive. This, therefore, means the Walmart Company needs
to find strategies on a more continuous basis if it is to outcompete rivals both on the domestic
and international market.
The second influential market force according to Michael porter is the level of bargaining power
of the consumer. According to this principle, the industry is highly competitive if there a few
customers and with very many supplier s or producers. The explanation here is that many
producers are fighting to control a small market size (Barstow, 2012). The presence of a wide
range of suppliers ultimately gives the customer a variety of products or service to choose form.
However, this is mostly applicable when the goods and or services are highly substitutable or
when the costs of switching from one product to another are low or insignificant. This has been
however identified as one of the most influential forces of market competitiveness by the
Walmart group.
The third force that is identified by the company is the bargaining power of suppliers. These
suppliers play an important part in determining the quality of output. However, according to the
company, the suppliers are categorized into domestic and international suppliers. However, some
of these suppliers have been subjected to several limitations such as political restrictions and
regularities. These limitations make it difficult for companies to get access to high-quality raw
materials and those that can supply the materials charge high prices. This makes the whole
process of production costly in the long run for industries and firms (Tang, 2014).
Point 3: the contrast between the company view and an independent article
According to (Nguyen and Nguyen, 2013), there is a general agreement between the perspectives
towards the external factors that influence an industry performance. The two scholars agree that

CORPORATE STRATEGIC ANALYSIS 6
technological changes and competitive market significantly influence innovation. Such an
argument strongly rhymes with that provided by the Walmart group the technological
advancements and the need for new strategies results in better market performance and
profitability (Rainer and Turban, 2009). Nguyen and Nguyen further illustrate that with new
technological changes and improvements, businesses have the duty and task to come up new
products or services if they are to be in a position to satisfy the new customer needs and wants.
When such are arguments are contrasted with what is explained on the Walmart page, one can
strongly identify and find a strong agreement between the two sources of information and
arguments about external factors and their influence on industrial performance.

CORPORATE STRATEGIC ANALYSIS 7
References
Barstow, D. 2012. "Wal-Mart Abroad". The New York Times. New York: The New York Times
Company.
Birnleitner, H. 2013. Influence Of Macro- Environmental Factors To The Process Of
Integrating A Foreign Business Entity. Retrieved from
file:///C:/Users/CLIENT/Downloads/Documents/MIC1119.pdf
Bush, T, .2016. External Factors That Affect A Business. Retrieved from
https://pestleanalysis.com/external-factors-affect-business/
Nguyen, M., Q., Nguyen, P., V.2013. The Impact Of External Environment, Technology And
Innovation Capacities, And Leadership Development On Organizational Performance In Food
Industry. A Qualitative Study of Food Enterprises in Ho Chi Minh City, Vietnam: International
Journal of Business, Humanities And Technology. Retrieved from
file:///C:/Users/CLIENT/Downloads/Documents/5.pdf
Omsa, S., Abdullah, I., H., Jamali, H. 2017. Five Competitive Forces Model and the
Implementation of Porter’s Generic Strategies to Gain Form Performances: Science Journal Of
Business And Management. Retrieved from
file:///C:/Users/CLIENT/Downloads/Documents/10.11648.j.sjbm.20170501.12.pdf
Sherman, F. 2019. What Are Internal And External Environmental Factors That Affect
Business? Retrieved from https://smallbusiness.chron.com/internal-external-environmental-
factors-affect-business-69474.html
Rainer, R.K,. and Turban, E. 2009. Introduction to Information Systems (2nd edition), Wiley, pp
36–41.

CORPORATE STRATEGIC ANALYSIS 8
Sheryl, G, S. 2011. "Walmart Shifts Strategy to Promote Healthy Foods". The New York Times.
Sorkin, A, R., Rusli, E, M. 2012. "A Yahoo Search Calls Up a Chief From Google". The New
York Times
Tang, D. 2014. "Introduction to Strategy Development and Strategy Execution". Flevy.

CORPORATE STRATEGIC ANALYSIS 9
APPENDICES
FIG. 1 an image of the independent journal used for contrast.