Wal-Mart

Instructions:-

Internal and External Environments of Wal-Mart

Solution

Internal and External Environments

Abstract

            Discussion will be about the segments that would rank highest in the general environment. The most significant forces of competition that Wal-Mart will and has faced. Analysing external threats that will affect the corporation and the opportunities they may have. It will also determine Wal-Mart’s resources, capabilities, and core competencies that are part of the value chain for this organization.

There are six segments of the general environment that influence publicly traded corporations. They are the demographic segment which addresses population size, age structure, geographic distribution, ethnicity, and income distribution. Second is the sociocultural segment which deals with workforce diversity, attitudes out the quality of work life, concerns about the environment, shifts in work or career preferences and shifts in product and service preferences. Third, the political segment which deals with antitrust laws, taxation laws, deregulation philosophies, labor training laws, educational philosophies and policies. (Porter, 1979).

 Fourth is the technological segment addressing product innovations, applications of knowledge, focus of private and government-supported R&D expenditures, and new communication technologies. Fifth is the economic segment concerned with inflation rates, interest rates, trade deficits or surpluses, budget deficits or surpluses, personal savings rate, business savings rates and the gross domestic product. Sixth is the global segment focuses on important political events, critical global markets, newly industrialized countries and different cultural and institutional attributes. (Porter, 1979).

The two segments of the general environment that rank highest in their influence on Walmart Stores are the sociocultural segment of the environment and the technology segment. An example of the sociocultural segment is annotated in the 2016 annual report, “WalMart’s success is dependent upon engaged, motivated associates who love serving customers. (Walmart Stores Inc. 2016 Annual Report, 2016). Globally, Walmart does more to invest in associates’ futures  through increased training and development, higher pay and better opportunities to build rewarding careers. Walmart has positioned themselves to win the future of retail by providing a ladder of opportunity for every member of their team.” This is a perfect example of their efforts to create a positive work life environment and improve employees’ attitudes about work by providing training and educational opportunities as well as the opportunity for advancement in the company. (Walmart Stores Inc. 2016 Annual Report, 2016).

Doug McMillon, President and CEO of Wal-Mart Stores Inc, announced a $2.7 billion investment in their employees over two years and reported that they were ramping up online grocery shopping. (Hamel, 1990). Our work starts and ends with the customer, and technology has changed expectations of customers. Customers used to compare us with the store down the street; now they compare us with the best online shopping experience. They compare our pickup experience to the speed and friendliness of the best drive-through. They compare our checkout process to the ease of paying with an app. Our customers have high expectations of us. People have limited time, limited money and limited patience. (Walmart Stores Inc. 2016 Annual Report, 2016).

The five forces of competition theory was introduced by Michael E. Porter of Harvard University in the Harvard Business Review 1979. He described this microenvironment as the Threat of New Entrants, Threat of New Substitutes, Bargaining Power of Customers, Bargaining Power of Suppliers and Industry Rivalry. (Porter, 1979). The two forces of competition that are the most significant for Wal-Mart Stores, Inc. are the threat of new entrants and the bargaining power of customers. Wal-Mart Stores Inc. have been extremely profitable, high profitability leads to prevalence of new entrants we can see this example clearly by the emergence of Target Stores Inc., shortly after Wal-Mart Stores Inc. became popular and profitable. They are strong rivals with emphasis on product differentiation and brand equity. (Porter, 1979).

Wal-Mart is perceived by the public as having the best prices and values, Target on the other hand is perceived as having “slightly better” quality for slightly higher prices. Target is more dependent on customer loyalty to established brands and Wal-Mart is more dependent on value savings and convenience. However, Target has been majorly focused on duplicating Wal-Marts’ goods and services with a bit more style and flair.

Last year Wal-Mart brought in 482 billion dollars in total revenue Target only brought in 116 million in total revenue and financially they did not see growth primarily because of their failure regarding pharmacy sales. Additionally Target still lags behind in product delivery and availability. (Walmart Stores Inc. 2016 Annual Report, 2016). They don’t have the comprehensive auto department, hardware and shopping club connections that Wal-Mart has and in terms of product diversity they are not in the same league yet.

Wal-Mart will continue to expand with strategies that utilize new digital tools for both customers and employees. They have an on­going data collection system that evaluates how they are doing in every area and they plan to remain committed to the 1 stop shopping experience that leads customers to trust that they have what they are looking for. They will also continue with the many shopping options like in-store, on-line, marketplace vendors and clubs through pick-up or delivery to your home. The newest service they offer is home delivered fresh food. (Walmart Stores Inc. 2016 Annual Report, 2016).

External threats to a corporation include rapid changes in technology, a weak economy due to inflation, intense competition with many new entrants, high taxes and interest rates, government regulations and security conditions. The most serious external threat faced by Wal-Mart is government regulations. (Porter, 1979) Wal-Mart really has no competition when it comes to financials however, Wal-Mart is also committed to global expansion. The current political climate is unstable particularly when it comes to foreign policy and trade issues. This administration has publically boasted its preference for keeping goods and services in America.  (Walmart Stores Inc. 2016 Annual Report, 2016).

New trade laws and policies that ban doing business in certain countries could stifle growth for Wal- Mart. The uncertainty of the future of trade relations with other countries could impact growth and development. In all other aspects of the delivery of goods and services Wal-Mart is winning and growing here in the US. The area that could make their net profits soar even higher is in the global expansion arena. (Hamel, 1990)

The opportunities that exist for a corporation are new products and services, diversification, acquisition of competitors and expansion in both domestic and international markets. The greatest opportunity for Wal-Mart lies in new products and services. The new grocery service will be life changing for many people who have busy schedules with little time for shopping. The opportunity to order your groceries from a website or mobile app and then either swing by the Wal-Mart to pick them up already bagged or have them delivered to your home changes the face of grocery shopping, something that every household has a need for. Whether it is due to time constraints, age or health issues you have to admit this is a convenience many will appreciate and utilize. Wal-Mart is on to something huge for the future and its’ customers. (Slywotsky, 1995)

Wal-Mart has a number of strengths which makes them very successful. They recognize that they must understand their people both customers and employees. Having knowledge of the skill levels of your employees and the trends, wants and needs of your customers and understanding both of their capabilities will impact others both inside and outside of the company. Wal-Mart provides higher wages and education and advancement opportunities for their employees. This strategy makes for a more positive work environment and leads to greater loyalty and production from the employees.

Another strength is Wal-Mart understands and researches the need for their wide variety of products and services. When a company can identify the distinguishing features or lack thereof regarding their products and services they will be in tune with the competitive advantages with that product or service. They can then successfully roll out the wrap around model of products and services tailoring them to the needs of their customers. They will take into consideration the quality and value of the product and the speed of delivery and/or service provision. Additionally a strength is understanding the company’s reputation, the customers’ perceptions of the company and its capacity for responsiveness to the customer base. Wal-Mart understands the importance of having a positive attitude towards its customers and they demonstrate follow through when needs are identified to meet the satisfaction of the customer base.

It is difficult to identify the greatest weakness for Wal-Mart because of their success rate however I would say that changes in corporate governance could be an issue moving forward. Of course the son-in law made the speech that he will continue in the direction set forth by his predecessor however we know that different people have different ideas and there is no guarantee that the direction or path chosen by the new Chairman may involve new risks that could undermine the previously enjoyed improvements in growth and development. Wal-Mart has in place a good strategy to ensure continued success. (Slywotsky, 1995).

 They have established an independent Board led by Dr. James Cash to ensure that the new Chairman cannot undermine the positive growth of the company. Other weaknesses identified are the economic challenges faces in China and Brazil which led to stores closing and/or not opening as planned. The strained economies in those countries did not impact the overall bottom line however they did impact the expansion plans. (Walmart Stores Inc. 2016 Annual Report, 2016)

What are Walmart’s company resources, capabilities and core competencies? The resources this company has are phenomenal. They have 428 billion dollars in total revenue, 260 million customers annually, 11,500 stores located in 28 countries as well as e-commerce websites in 11 countries. (Hamel, 1990). They consist of Wal-Mart US, Wal-Mart International and Sam’s Club, all cornering the markets in retail, wholesale and club shopping opportunities. They possess tremendous capabilities because of their commitment to leading on price, investing to differentiate on access to goods and services, being competitive on an assortment of goods and delivering a great shopping experience.

Core competencies were best defined by C.K. Prahalad and Gary Hamel as “a harmonized combination of multiple resources and skills that distinguish a firm in the marketplace.” (Hamel, 1990). Those core competencies will lead a company to providing access to a wide variety of markets. When your core competencies are strong it should be difficult for your company to be imitated by any other company. Additionally good core competencies will also make a significant contribution to the customers’ perception that the end product is the best for them. (Hamel, 1990).

Walmart’s’ strong core competencies have led them to enjoy continuous improvement and profits over time. They have demonstrated time and time again their capabilities for success growth and development. New ideas and fresh thinking particularly with utilizing digital tools and technology to expand the business is a capability sustainer as well as the commitment being equally as strong to the customer as the employee. Another capability for this monster company is the diversity of products and services as well as serving a diverse customer base and diversity within employment opportunities. All of these work together for the good of the company.

Wal-Marts’ value chain is stronger than ever. Wal-Mart is shaping the global systems using their size, mindset and policies. In the process they are not just being a great retailer they are making the world a better place, literally. They create opportunity globally. They increase the supply chain on farms and in factories. They are a social leader by buying more from women-owned businesses, by hiring veterans and by strengthening the retail industry workforce. They plan to be around for a long time, both in their own operations and the supply chain.

They have three new goals: creating zero waste, running on 100 percent renewable energy and selling products that sustain people and the environment. Wal-Mart also has a philanthropic side and they give back to the communities they serve. Wal-Mart supports American manufacturing they stand by the made in America slogan. Wal-Mart has and continues to prepare for natural disasters.

They have responded to many by providing various life sustaining goods and services in the time of crisis. They are also committed to fighting hunger in this country and abroad by donating both fresh and non-perishable food items to pantries and other social service agencies involved in the fight against hunger. The foundation aspect of the company ensures that customers can be proud to shop at Walmart and satisfied to know that your dollars spent there also support those philanthropic efforts.

 “The idea of the value chain is based on the process view of

of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources  money, labor, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits.” (Hamel, 1990). Wal-Mart understands this concept quite well.

They are the leader in the comprehensive usage of their financial resources, their work force, the manufacturing aspects of many of the goods they sell, the acquisition of resources, global expansion, and use of technology to grow retain and sustain their capabilities, and management with on-going data collection for the evaluation of how the business is doing overall.  (Walmart Stores Inc. 2016 Annual Report, 2016).

By 1980 he realized that working directly with manufacturers would cut costs and efficiently manage the supply chain. He started Vendor Managed Inventory (VMI) which made manufacturers responsible for managing their own products at Wal-Mart warehouses. This strategy ensured 100% order fulfillment on merchandise resulting in the most effective company supply chain. His idea to collaborate with vendors and to create strategic vendor partnerships gave Wal-Mart the potential for long-term and high volume purchases.  (Porter, 1979).

This resulted in his company having and maintaining the best possible prices.Wal-Mart has come a long way since 1962 but one thing is certain. They full grasped early on the importance of the value chain to ensure that Wal-Mart would become a household name as well as a globally respected multi-billion dollar business.

REFERENCES

Prahalad, C.K. and Hamel, G. (1990) “The Core Competence of the Corporation”, Harvard Business Review (v.68, no.3) pp 79-91

Slywotsky, A. (1995) Value Migration: How to Think Several Moves Ahead of the Competition

Porter, Michael E. (1979) “How Competitive Forces Shape Strategy,” Harvard Business Review May 1979 (Vol. 59, No. 2), pp. 137-145 Walmart Stores Inc. 2016 Annual Report