Walmart's Foreign Direct Investment in Canada: A Business Analysis

This report provides a comprehensive analysis of Walmart's foreign direct investment (FDI) opportunity in Canada. It begins with background information on Walmart, including its size, financial performance, organizational structure, and international operations. The report then delves into the Canadian business environment, utilizing PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors. A SWOT analysis is also included to evaluate Walmart's strengths, weaknesses, opportunities, and threats within the Canadian market. Furthermore, the report employs Porter's Five Forces framework to analyze the competitive landscape and demand-supply dynamics. The conclusion summarizes the key findings and provides recommendations for Walmart's FDI strategy in Canada.

BUSINESS ORGANISATIONS AND
ENVIRONMENTS IN A GLOBAL
CONTEXT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
BACKGROUND INFORMATION OF WALMART....................................................................3
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT IN CANADA................5
Pestle Analysis.............................................................................................................................5
ANALYSIS OF BUSINESS SCENARIO.......................................................................................8
Porter’s Five Force......................................................................................................................8
Demand- Supply Scheme..........................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business organisation refers to structured corporation which are designed to improve society
and earn profits by accomplishing specific goals. Global business environment suggests different
working condition and exogenous factors in comparison to home environment of enterprise
which influence resource capabilities, use and decision making. When expanding business
operation, the foremost consideration of firm is to seek opportunity for foreign direct investment
(FDI). FDI is form of controlled ownership in a company in one country by enterprise based in
another country (Prajogo, 2016).
The present study is based on assessing foreign direct investment opportunity for Walmart in
Canada. Walmart is American multinational retail company which operates in chain of
supermarkets, grocery stores and discount departmental outlets. The company owns 11368 stores
across globe and with 2.2 million employees worldwide. Expansion of Walmart in Canada is
focused on increasing number of stores and FDI in Canada is an opportunity as the country has
dynamic economy with market of 30 million consumers and qualified workforce.
The report will outline overview of Walmart which will help in understanding favourable
condition for expansion like financial performance, current international performance, ownership
and size. Further, it will cover information of business environment of Canada with the help of
Pestle analysis.
BACKGROUND INFORMATION OF WALMART
Size of Walmart in Canada:
Walmart is worlds largest retail company with total revenue of 514.41 billion of U.S.
Dollars in 2019. The Walmart is founded by Sameul Waltson in Bantonvile Arkansas in 1962
and its the headquarter of the Walmart retail company. However Walmart was establish in
Canada in early 90 when the company obtain 122 Woolco stores in Canada. And now 31 January
2019 company operated 411 stores of Walmart at the different location in Canada. The company
also includes Walmart discount stores, super centres and Sam's club stores (Hillary, 2017). The
Walmart stores has 80 thousand current employees in Canada and it is the largest private
company in Canada. The total Stores of Walmart in whole world are 11,386 with 2.2 million
employees ( 1.5 million in US & 700,000 at internationally).
Financial Performance of Walmart in Canada:
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That we know the Walmart is largest retail company in world and have numbers of stores
in the world. The financial performance of Walmart is increasing day by day. We can measure
the financial performance of Walmart from last five year of financial reports,. We measure the
performance of Walmart from the 2015-2019. In 2015 the total revenue of Walmart is 485,651
US dollars and the operating income was 27147 us dollars. In 2016 company total revenue was
482,130 us dollars and operating income is 24105 us dollars. In 2017 the company total revenue
was 485,873 us dollars and the operating income is 27764. 2018 has the total revenue is 500343
and the operating income is 20437 and in current scenario company dealing with 514.4 billion us
dollar total revenue and 21.96 billion is operating income (Belás and et.al., 2015). The company
net income till date is 6.67 billion and its also increasing day by day. The sales and profit
revenue of Walmart is 138.8 billion and an increase 2.5 billion us dollars. The sales growth in
Canada is 32.3 billion us dollars (Walmart, 2019).
Legal rights and organisation structure of Walmart in Canada:
The Walmart follow the Functional organisation structure in that type of structure
company employees are different segment for specific task and role. Walmart also follow the
same structure in this structure the CEO of Walmart gives the directions of the different
departments like CFO, marketing, HR, admin, ethics and compliance and the operations and
supply chain. That all department also have their sub- department who follow the order and
directions of middle management. Its provide health and safety act, for their employees, also
mange the discriminations at work place. Company is also register under New York stock
exchange (Kozubíková, Homolka and Kristalas, 2017).
International operations of Walmart :
The Walmart of Canada provide so many services to their customers not only in national
boundaries but also at internationally. The company have 11383 stores at international level.
That all stores are dealing with many kinds of products and services like electronics, movies and
music, home and furniture’s, grocery, home improvement, clothing, footwear, jewellery, health
and beauty, pet supplies, photo finishing, craft, party supplies etc. its also provides Walmart -2-
Walmart, Walmart money card, pick up today, Walmart.com, Walmart pay types of services to
their international customers (Eling and Schaper, 2017). Walmart follow some strategies for
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international operations they find out the need of stores and also evaluate the sales and profit of
the stores, the also use strategies as per practical implications, social implications etc.
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT IN
CANADA
Pestle Analysis
Political Factors:
That types of factors affect the company environment from the outside or externally.
They are generally base on rules and policies of the government. Because company not plan
political things usually but organization can also be surprised by the new rule, policies and the
tax policies of the government. Walmart firm have to accept new law of Canadian government
and norms by the government. The government tax policies directly affect the Walmart
environment hence entity has to ensure that there are stable government so that it can sustain in
this market for longer duration. If tax policies are rigid then it may cause problem for Walmart to
sustain in Canada for longer duration (Banica and Hagiu, 2015).
Economic Factors:
Economic factors also impact the organization that how the company perform their
business as well also the stability of firm in economic environment. There are some factors
which are impact the company like growth of company, inflations in market, interest rates,
exchange rate etc. if there is strong value of currency then Walmart get positively affected
because firm can raise its demand because people have adequate income sources and they will
spend money to buy retail items. But if there is high unemployment rate then it may impact
negative on Walmart because this will decrease purchasing capability of consumers which will
decrease sales of business unit (Dey, 2019).
Social Factors:
Social factors are those factors which are related with the society in which Walmart is
dealing. These factors also depend upon the belief and attitude of society. These types of
lifestyles of human beings in society open various opportunities for company. Walmart has to
ensure offering products asper Canadian culture and values otherwise consumers will not take
interest in buying such items. This helps the firm in gaining attention of buyers and increasing
sales of organisation.
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Technological Factors:
Technology are in today are is very fast growing industry. Its create a great impact on
marketing, company environment and as well as the management. Because with the help of
technology there are various ways of producing goods and services, also have the new ways of
distribution of goods and services and various of advertising the new products of the company.
Because walmart have numbers of stores in world with the help of new and advance technology
management of all firms and also gives some directions of the firms is easy task. Adoptions of
new technology is always very costly for firm. For these companies also give the training session
to their employees for better use of technology which is cost consuming (Makarova and
Polyanin, 2015).
Legal Factors:
Legal factors are also there to bind and control the legal environment of the walmart.
Various legal factors like health and safety factors is very important for consideration in firm
because it is selling food and eatable products. Legal factors some times becomes hurdle for the
company because they are imposed by the government and organization must follow them. Some
times legal factors reduce the productivity of the firm. Company also follow the rules and
directions given by the government and have to manufacture the good quality products.
Managing health and safety factors also a costly task.
Environmental Factors:
It is very important factors for the firm cause change in environment can lead to the loss
and threat and also can be profitable for company. It is very important task for company to
maintain sustainability of the environment. That is very important duty of the firm of
maintaining healthy and clean environment. If the firm not follow that criteria than the goodwill
of company goes down in the market and customers also are not interested in company products
and services. Company can give their contribution in CSR activities which is helpful for
company and also increase the profit (Breckova, 2016).
SWOT Analyses
Strengths –
 Global brand: Walmart is the largest global retailer in the world.
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 Low Product Prices - Walmart is the popular brand name which is in trend due to its
low product prices and customer orientation. They had low prices as compare to other
competitive retailers in the market.
 Strong financial performance – On 31st January the retail brand publishes its annual
report it is also the fiscal year end of Walmart. Day by day Walmart is growing
financially strong brand.
 Quality Product - Wide range of quality products and services provide by Walmart
attracts the customers. They mainly focus on customer services which help them to
increase its market share and customer base in the US retail brands (Makarova and
Polyanin, 2015)
Weakness -
Along with the great strengths, Walmart had come up with some limitations. The huge
number of law suits faces by company every year concerning issues such as discrimination,
unequal pay, and unfair promotions.
 Easily copied business model – Walmart had very easy business model to copy. The
firm doesn't have any differentiators, except for its business size and prices.
 Employee relation - Walmart had a big marts with bursting customer rush but not
enough employees to deal with them. It is lack behind due to employee turnover and
employee relation as the employee doesn't grant up with justified promotions and salaries
(Bocken, Rana and Short, 2015).
Opportunities -
 Expansions to other markets – Walmart had expanded its market among 28 countries
and for further growth they can include China, Middle east countries, and Latin America.
They could get a very good opportunities if they explore their business in such growing
countries. They can also grow their online stores and presence.
 Strategic alliances - As Walmart is a popular brand name it had an opportunity to
create strategic partnerships with major firms or merge with global retailers. It would
also be an profitable opportunity if Walmart acquire small companies .
 Improving quality standards – Low-cost products render low quality sometimes.
Walmart also follows the policy of low pricing so they had an opportunity to enhance
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their quality standards of its products to address the health concerns of consumers
(Prajogo, 2016).
Threats -
 Primary target of competition - Walmart is the prime target for competing companies
in largest grocery retail market. It is the biggest challenge in the retail industry and a
primary threat to growth. Walmart should expand more markets and enhance its online
market presence.
 Economic Factor – The up and down in the price of dollar some how adversely affect
the profits of international brands. This fluctuation leads to profit minimization which
effect the economic base of the Walmart.
ANALYSIS OF BUSINESS SCENARIO
Porter’s Five Force
Porters five force is used to evaluate out the strengths of Industry and to find out the rivals
strategy and ability to cope up with those hardships to safeguard themselves. It is effective to
analyses threats and opportunities for an industry (Hillary, 2017). This ensures the strategies and
tactics which are to be used to flourish the industry. This is used to analyse the potential of the
industry by finding its strengths and weaknesses, threats and opportunities of the industry against
their rivals. This helps in a salient operation of firm and to strategies against rivals and to bring
out a successful strategy to the company.
Industry Rivals:(strong)
Walmart is one of the finest company of retail industry which uses its own very unique
market strategy for their business to flourish. Walmart has many industrial rivals likewise ebay,
Best buy etc (Belás and et.al., 2015).
As the company has a strong rivalry base with the presence of small and large retail
market which serves their clients online as well as offline. To cope up with such strategy of the
expansion and marketing Walmart need to know the strengths and weaknesses of the industry.
Walmart needs to strategies for improved planning strategy and to increase its customer base. As
more and more rivals increases we need to change the strategy of sales and marketing. As
company has a strong hand in the their market strategy. But the increasing rivals within the retail
industry may affect the revenue generation and the strategy of the firm needs to change in a
small interval of time (Kozubíková, Homolka and Kristalas, 2017).
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Factors which affect the enhancement of the industry are:
 Emerging of small and large firms in the retail market.
 Retail firms provide a large variety of products which may directly or indirectly affect
the strategy of Walmart.
 Retail firms come up with new schemes to customers, Walmart is affected in some or the
other way.
Bargaining power of supplier:(weak)
The intensity of bargaining power in a retail industry is quiet weak as the company is
very vast with number of suppliers, and the products purchased is in a large amount there exist a
weak bargaining power from the supplier, then if a suppliers demands more they must be given a
spell check of damaged products. The suppliers are very much dependent of bigger company
like Walmart as most of their revenue is generated by retail industries. Walmart has a wide
network of suppliers. The supply needs to be in efficient amount so that the change in strategy
must not affect the supplier. If a supplier bargains a replacement must be ready (Breckova,
2016).
Which can be easily replaced therefore company has like Walmart has a low hand in
barraging power of supplier. Suppliers can easily be replaced as switching cost of it is low. Retail
market of Walmart is very much vast and the revenue generated is quite good.
Walmart has a weak hand in bargaining power of suppliers due to following factors:
 There are many industry which provide similar products
 There also exists a tough competition among the suppliers
 As there are many industries which produce a similar products so the availability
of supply is high.
Bargaining power of buyers:(weak)
The intensity of buying power of customer is very low as company has a wide range of
work base, the company and so many of its branches in many of the countries. Company has an
vast number of its customers, subtraction of some customers has a negligible affect on
company’s revenue. Weak force of small customers and small buyer diversity weakens the
bargaining powers. More of buyer diversity makes the weak impact on the company. New
schemes must be introduced so that the customers remain intact and the customer relationship is
sustained (Dey, 2019).
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The buying rates of Walmart is quiet low compared to other industries as their pricing is
very much low as compared to other retail brands. Pricing and convenience of shopping form
online shopping to offline shopping provides a convenient and easy way to the customers which
gives a satisfactory result to the customers. Introductory offers must be introduced to new clients.
Weak bargaining power of buyer is due to following reasons:
 Wide range of customers.
 Lesser small size of purchase
Threat of new rivals:(low to medium)
New rivals approaching the retail industry can easily establish but competing against a
well flourished brand like Walmart is quiet difficult as the customer base of such brands is too
high, for a smaller brands it would take a lot of time and investment to build a brand like it as the
revenue and customer relationship built should be kept by providing services to the clients. All
these things require a lot of investment and skill labour to make its functioning properly and
flourishing the organisation better (Belás and et.al., 2015). Walmart's brand name and brand
value restricts the new rivals to enter the market, their biggest challenge is the dealing with the
challenge to price form Walmart. New rivals can be reduced by
Walmart’s financial capital and resource management restricts the new challengers in the
market as it is a flourished brand new comers face a lot of challenges in establishing itself.
Factors which resists new customers are:
 High initial cost for brand development.
 Cost of earning is less as expected.
 Capital cost is moderate.
Threat of substitutes:(weak)
With respect to Walmart the threat of substitutes is very low as Walmart has a wide
variety of products. Threat of substitutes has weak intensity of Walmart. Some substitutes are
already available in the market but with a low variety of product because Walmart deals with
most of the globally trusted brands so the substitute is quiet difficult . Some substitutes which are
available must be at a higher cost than Walmart, these substitutes make it difficult for customer
to move away from that brand (Prajogo, 2016). Customers demands must be kept in mind as to
get rid of substitutes.
Factors which impose a weak substitutes against Walmart are:
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 Medium availability of substitutes.
 Quality of substitute is poor
 High price of substitutes.
Demand- Supply Scheme
Walmart is one of the finest established firm in the retail Industry. Walmart’s core
ideology was to provide their customers with lowest price as possible this strategy helped
Walmart to establish as a trusted retail brand. Company established a strategic trust with brands
with a long term partnership form their suppliers, offering a long term relationship with purchase
in bulk.
Inventory Innovation:
Company has a strong base of strategic sourcing as they ought to deliver a product in
wide range. Walmart has a wide range of Supply chain management with many of the production
companies. The stocks are purchased in a large bulk which are stored in warehouses and are
delivered at right times. Their key concept was to deliver product at a minimal rate so as to gain
a customer relationship as their bonds with customer arose they kept on extending their hands
from region to region (Bocken, Rana and Short, 2015).
Strategy and System built:
As the base of company arose, company started to built his own strategy to meet the
demands of existing customers and new schemes were introduced for new customers. Many of
the reasons behind the growth of Walmart are:
 its wide customer base and their purchase in bulk-trustworthy suppliers
 supply chain management system
 low operational cost
 lowering bargaining power
The customer demands are tracked and the supply is maintained by keeping the track of
the items which are sold in the previous days in this way the track of items are kept and the
demand is recorded which is to be fulfilled with respective to time. There is a special set of
operators which work on the track on past record to fulfil the stock and none of the things goes
out of stock. There is a separate set of works which keep an eye on demand and supply so that
products are available on right time (Makarova and Polyanin, 2015).
Transportation strategy:
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Products purchased from the supplier are directly transported to Walmart by means of
different transportation. Which are directly received by Walmart by reducing the storage cost.
Walmart has his own suppliers which keeps the stock on time they have their own set of wagons
and transportation facility which keeps stock intact and on time. They eliminate the work done
by distributors and wholesalers. Goods are transported from manufacturer to core market.
Investing in advanced technology:
Walmart with the advancement in technology started focusing on the technological
updates which helped them in tracing goods, reserving which helped them to cut the cost and
also helped in their ecommerce capabilities (Breckova, 2016). Its network forecast is so strong,
which gives précised results whether it may be keeping a record for stocks, transportation
facility, managing customer relationships, logistics.
By using third party services Walmart keeps the record clean by sharing its information.
Their way of working is quiet friendly as they keep a record of customers’ demands and to
supply those products as per the demands and not just by putting on-to shelves.
CONCLUSION
From the above study it can be concluded that it is essential for companies to analyses
internal and external environment of business. This helps business in identifying issues in the
firm and taking effective actions to resolve that problems. By these way entity would be able to
retain in the new market for longer duration and would be able to gain high profit.
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