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
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.
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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 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.
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.
- 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).
- 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 pestel framework
Pestel 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 pestel 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.
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After carrying out the pestel framework analysis, it can be stated that it is very simple and easy framework to carry out assessment of environmental factors. Along with this, Pestel 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 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 pestel 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 Pestel 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-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.
- 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.
From the above report it can be concluded that pestel 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.
Books and journals
- Casadesus-Masanell, R. and Ricart, J.E., 2010. From strategy to business models and onto tactics. Long range planning.
- Chuang, M.L and et. al., 2011. Walmart and Carrefour experiences in China: resolving the structural paradox. Cross Cultural Management: An International Journal.
- 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.
- 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.
- 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.
- Monetary policy. 2016. [Online]. Available through: <http://www.economicsonline.co.uk/Managing_the_economy/Monetary-policy.html>.
- 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>.
- Walmart annual report. 2015. [Online]. Available through: <http://www.corporatereport.com/walmart/2015/ar/_downloads/walmart_2015_ar.pdf>.
- Walmart UK. 2016. [Online]. Available through: <http://corporate.walmart.com/our-story/locations/united-kingdom>. [Accessed on 28th January 2016].