Strategic Management: PESTLE & Porter's Analysis of Walmart in USA

This report provides a strategic management analysis of Walmart in the United States, focusing on its operations within the US market. It employs strategic management tools such as PESTLE analysis and Porter's Five Forces to evaluate both the external and internal environments influencing Walmart's performance. The PESTLE analysis examines political, economic, sociocultural, technological, environmental, and legal factors, while Porter's Five Forces assesses competitive rivalry, buyer power, supplier power, the threat of substitutes, and the threat of new entrants. The analysis identifies key challenges and opportunities, leading to specific recommendations aimed at addressing issues like wage problems, improving operational efficiency, and adopting stringent food safety regulations. The report concludes by emphasizing the importance of adapting to the changing business landscape to ensure Walmart's continued success and market leadership.

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STRATEGIC MANAGEMENT
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Author Note

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Executive Summary
The given report throws light on the strategic management of a chosen company. The company
chosen for the given assignment is the Walmart and the country of analysis was chosen to be the
United States. The Walmart Corporation is one of the largest corporations present around the
globe with operations present in various countries. The report examines the internal and external
environment of Walmart thereby using the Strategic Management tools like PESTLE and Five
forces. Based on the analysis of the external and industrial environment, certain
recommendations for the same have also been provided.

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Table of Contents
Introduction......................................................................................................................................4
PESTLE Analysis............................................................................................................................5
Political Factors...........................................................................................................................5
Economic Factors........................................................................................................................5
Sociocultural Factors...................................................................................................................6
Technological Factors..................................................................................................................6
Environmental Factors.................................................................................................................6
Legal Factors...............................................................................................................................7
Porters Five Forces..........................................................................................................................7
Rivalry in the industry.................................................................................................................8
Bargaining Power of Buyers........................................................................................................8
Bargaining Power of Suppliers....................................................................................................8
Threat of Substitutes or Substitution...........................................................................................9
Threat of New Entrant.................................................................................................................9
Recommendations..........................................................................................................................10
1. Wages problem...................................................................................................................10
2. Improvement in Operational Efficiency.............................................................................10
3. Adoption of safety food regulations and policies...............................................................10
Conclusion.....................................................................................................................................11

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References......................................................................................................................................12

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Introduction
Walmart Inc. is an international multinational retail company which operates in a chain of
discount department stores, grocery stores and hyper markets. The company is headquartered in
Arkansas and was found by Sam Walton back in 1962. The company is an American company
and has branches in different countries as well. The founders have been increasing the size of the
company considerably and as of January 2018, there are 11718 clubs and stores of Walmart
spread around 28 countries and operating under different names.
The company is one of the largest companies by revenue and has earned a revenue of
US$480 Billion back in 2016. The company employs around 2 million people which is the
largest at present. The company was labelled the largest Unites States retailer in grocery back in
2016. The company is registered under the New York Stock exchange since 1972. Although the
company has attained immense success in North America, it has not been able to attain the same
level of success in other countries like South Korea and Germany. On the other hand it has
performed considerably well back in United Kingdom and China (Walmart.com, 2018).
The given report will be conducting a strategic management analysis of the company
Walmart in United States. With technological advancement and globalization the business
scenario has been changing considerably and for this reason, analyzing the business environment
becomes considerably important in order to understand the performance in the long run
(Rothaermel, 2015). The strategic tools of PESTLE Analysis and Porter`s Five Forces will be
used. Certain recommendations based on the same will also be provided.

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PESTLE Analysis
The PESTLE Analysis of Walmart is based on the different factors of the business which
are economic, sociocultural and ecological components.
Political Factors
The political factors which tend to have a huge impact on the retail industry usually in
relation to the governmental policies and procedures of registration sales. There are several
politically active groups which tend to affect the operations of Walmart. The factors are the
stability of politics (Meyer, Neck & Meeks, 2017). The politics of a company tends to affect the
company severely, if the government is not stable it might lead to problems in daily operations.
Currently the company has been performing well with respect to the fact that Trump`s
government is in lead. Secondly the plans which the government has for the expansion of the
company also tends to affect Walmart. Lastly, the policy pertaining to wages also tends to have
an impact on the company. This means that if the government led by Trump changes certain
policies then Walmart may be affected in a negative light (Wheelen et al., 2017). Currently, the
visa of other nationals and the problem related to the current government scenario has had an
impact on Walmart.
Economic Factors
The economic factors which tend to have an impact on the operations of Walmart are the
condition of the economics of the given country. This means that the income of the people in the

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country, the rate of taxes, the rate of interest and the inflation prevalent in the country. This is a
determinant of the purchasing power of the different customers. The employment level in the
country is also a factor in this (Lasserre, 2017). If the unemployment is on rise then this tends to
have a negative impact on the company and its operations.
Sociocultural Factors
The socio cultural factors are the factors tend to have the largest impact on the working of
the company in these sense it has an impact on the positioning of the company in the minds of
the company. In the United States, the company is affected by a large number of socio cultural
factors which comprise of cultural diversity trend (Stead & Stead, 2014). The initiatives taken
by the government towards the development of various members in the society tends to
determine the sales. The lifestyle of the people in the States which is considerably good also
impacts their operations. Lastly, the urban migration factor also has an impact and serves
opportunity for the firm, Walmart in the long run.
Technological Factors
The technological factors which have an impact on the performance of the company,
Walmart are the technological developments which take place in the retail landscape. The
increase in Business automation in the States has had a huge impact on the working of Walmart
(Ginter, 2018). These days’ business analytics is popularly used for opportunities in the business
domain and Walmart has to update itself with this facility in order to remain updated with the
competitors. Secondly the increase in the usage of mobile devices among the different users is
also an opportunity which Walmart can harness.

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Environmental Factors
The environmental factors which tend to have an impact on the working of the business
are factors like the trend of business sustainability. Business sustainability has become a fairly
popular concept which needs to be harnessed by the firm and it should be seen to it that the
business is able to take full advantage of the opportunity in order to become popular among the
business environment. Secondly another trend which has been observed is the environmental
friendly products (Moutinho & Vargas-Sanchez, 2018). Walmart needs to ensure that it stalks
enough environmental friendly products in order to see to it that the company is successful in its
business in the States and continues to be a market leader.
Legal Factors
There are various laws and regulations which a business needs to abide by. There are
several food safety regulations which need to be incorporated in the organization. There also
exists various employment regulations which tend to have a severe impact on the firm and lastly
the tax law reform in the United States acts as a disadvantage for the company in the long run.
Porters Five Forces
The five forces analysis is generally performed in order to understand the different
industry dynamics which tend to have a huge impact on the business enterprise (Eden &
Ackermann, 2013). The retail industry in the United States is highly competitive and there are
various components present. These are as follows:
 Competitive Rivalry present in the industry

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 Bargaining power of the buyers (Morschett, Schramm-Klein & Zentes, 2015).
 Bargaining power of the suppliers
 Threat of Substitutes
 Threat of new entrants
Rivalry in the industry
The competitive rivalry present in the American retail industry is very high. There are
various retail firms operating in the industry which make the competition a cut throat matter. The
large number of firms make the factor a strong one because due to this the customer purchase
will be divided accordingly.
Secondly the variety which the retail firms tend to offer also have a huge impact on the
organization and its operations. As other competitors tend to offer goods which are unique,
Walmart suffers. Thirdly, there exists many situations of price wars in the given country.
Bargaining Power of Buyers
The bargaining power of the buyers with respect to Walmart is considerably weak. As the
number of workers who are present in the given industry are considerably large, the loss of a few
customers shall not have a negative impact on Walmart (Hubbard, Rice & Galvin, 2014).
However, there exists a huge diversity amongst the different buyers and all their needs have to be
abided by. This tends to form a potential threat for the long run of the company. Lastly, the
individual purchases are small in size which poses as a threat to the firm.
Bargaining Power of Suppliers

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The bargaining power of the suppliers in the given industry is also very weak. As the size
of Walmart is considerably very large, it tends to have a huge impact on the suppliers and they
are intimidated by this (Frynas & Mellahi, 2015). However, there exists certain factors which
tend to have an impact on Walmart like the diverse offerings made by the different suppliers in
Australia. The company needs to ensure that it maintains strong and successful relationships with
its suppliers to ensure that it achieves success in the long run.
Threat of Substitutes or Substitution
The threat of substitution in the given scenario is very weak. This is because, Walmart
follows the format of a hyper market and offers a huge variety in terms of the products which it
tends to order (Harrison & John, 2013). In such a scenario, the availability of substitutes has a
moderate impact on Walmart. Walmart tends to stock up its products adequately and this thus
leads to lower impact of substitutes on the given company.
As the substitutes which are not available in any other firm tend to have a strong case of
the customers because they cannot move away from the firm easily. Secondly, it may also be a
case that the company offers considerably lower price than substitutes which further improves
the situation. Hence, the substitutes tend to have a weak impact on the company.
Threat of New Entrant
The given industry is considerably a very potential one. For this reason, there are many
retailers who are interested in entering the company. However Walmart has a considerably
strong presence which makes this difficult (Barney, 2014). The capital cost and brand

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development costs tend to act as a barrier for the given organization looking to enter into the
industry.
Recommendations
After analyzing the industry environment of Walmart and conducting the Pestle Analysis
the following recommendations have been made:
1. Wages problem
The wages rate prevalent in the American market tends to form a huge problem for
Walmart group of companies. Wage problem causes various operational as well as cost barriers
in the given industry which then causes the firm to not be able to perform that well in the
external environment (Bettis et al., 2014). For this reason, it has been recommended that the
given firm should take considerable steps to ensure that it follows a well set system to intake
labor and it has strong ties with the unions to ensure efficiency.
2. Improvement in Operational Efficiency
Walmart also needs to take considerable steps to improve the operational efficiency of
the organization. This can be done by using the advanced technology to improve the efficiency in
different procedures and usage of policies on the products which will ensure success (Alkhafaji
& Nelson, 2013). If the firm is able to input efficiency in the operations then it will be able to
save its costs which will ensure higher profits for the organization.
3. Adoption of safety food regulations and policies

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The environmental factors also tend to play a major role in the business domain as the
health of the society tends to play a key role in the long term success of the business. For this
reason it becomes extremely important for the business to ensure that it is being able to consider
food regulations crucial to the consumers and engaging in policies which make the environment
a better place.
4. Lastly, the company needs to ensure successful relationships with the suppliers. The
suppliers play a huge role in the success of the business and their wellbeing needs to a
priority of the business (Hill, Jones & Schilling, 2014). Ensuring stronger relationships
with the supplier and inculcating automation in the supply chain process shall ensure that
the firm goes a long way in maintaining its strong position in the market.
Conclusion
Therefore, from the given analysis on the business environment of Walmart in the home
country of United States, it can be stated that due to its competitive advantage and efficiency the
company has been successful in incorporating success in its different operations. The firm has
been working well in the States and has also expanded its operations in various other countries
around the globe. However, as stated earlier, it has not been able to perform that well in all other
countries in which it operates.
As observed from the pestle analysis, the firm needs to be aware of the political and
economic environment to ensure success and it needs to stay updated with the technology to
incorporate operational efficiency. Lastly, the Porter`s Five forces showed that successful
relationships with its suppliers would assist the company in its long term. Certain
recommendations for the same have also been provided.