Business Environment of a Wal-Mart - Essay Example

?Environmental Analysis Case Study Introduction Wal-Mart Incorporation with its headquarters based in Arkansas in United s on a weekly average caters to the need of around 200 million customers spread around the world. The retail chain is spread on a network of 8,838 outlets based along fifteen different countries. The total sales for the 2010 period amounted to around $405 billion. Total manpower strength of Wal-Mart stands to around 2.1 million people operating along the global sphere. The company was ranked the first by Fortune Magazine in 2010 as the world’s most admired retail company. The retail firm operates on the basis of several formats like Discount Stores, Supercenters, Neighborhood Markets and Marketside to help cater to different levels of customer needs (Walmart Corporate, 2011). The business environment of Wal-Mart like any other business firm is divided along both internal and external facets. The internal environment of the firm is governed by the family ownership of Wal-Mart being the largest stakeholders. Further, the firm works in a centralized fashion with higher management settled at Arkansas. The retail firm strategizes its internal operations with a view to reduce the operational cost and binds the workers to each other. It continually promotes research and development activities to innovate newer private label products. (Environmental Scanning, n.d.). The external environment of the firm is composed of economic, political, social and technological factors. Further being internationally spread the firm is amenable to environmental changes of the different nations and also faces global completion from a large number of retailers. (Wal-Mart Case Study, 2010). Business Environment of a Firm The business environment of a firm is composed of such factors belonging to the external side of it and would affect the present and future operations of the firm. Moreover, different business firms have different types of business environment which is thus situational in nature. Specifically, the business environment of a firm is divided into two factors viz. general and task. The general business environment is also known as the social environment and encompasses the macro-economic factors affecting the business operations. On the other hand, the ‘task environment’ of a business firm encompasses the factors which can be managed by the firm itself and thus relate to the micro-business environment. The general business environment of a business firm can be further sub-divide into the culture and historical status of the region or country to which the firm belongs. Moreover, it also encompasses the technological and economical development of the region and other such demographic factors like age and income level of the population. The total set of social and legal factors including government rules and regulations govern the external environment of the firm. On the other hand, the task environment of the business firm being the micro-economic environment is composed of factors like suppliers, customers, other competing firms, legal and regulatory issues of the local government and other technological changes. The general environment being huge easily governs the task environment of a business firm and thereby governs the business processes of the specific firm. (Kew & Stredwick, 2005.p.1-2). International Business Environment of a Business Firm The international environment of a business firm is mainly governed by the general macro-economic factors of the different countries in which the business company has set up its regional centers. The business environment of the firm is affected by the different social, cultural, legal and ethical norms of the different societies in which the business house has set up its outlets and offices. Again, the cultural and social factors differ from region to region. Thus, a business entity may perform flexibly in one area while operating in a certain economy while on the other it may face certain hurdles while trying to perform the same business activity in that market. The current international environment of a business firm in addition to facing a whole lot of political and social threats is countering an increased threat from the security of its operational process from terrorist and infiltration activities. The high level of terrorist activities in a state or region greatly affects the business operations of the trading organization through the dismantling of its inventory and financial system. The terrorist organizations through the targeting of the large business organizations tend to inculcate a fear in the minds of others to help achieve their objective. Thus managers need to identify and strategize the business operations to counter the insurgency threats on business activities. The inventory circle of the firm can be saved by the managers through the synchronization of the business activities in setting localized distribution and sourcing centers and thus reducing the threat to the complete ceasing of business activities. However, the consumers and suppliers become greatly affected on the occurrence of such terrorist activities (Suder, 2004, pp.48-56). PESTEL Analysis of Wal-Mart The PESTEL Analysis of Wal-Mart incorporates the macro-economic environment of the firm which in turn encompasses the general factors like Political, Economic, Social, Technological, Environmental and Legal Factors. Political Factors Wal-Mart while carrying on its business operations also performs as a socially accountable business entity. In the region of United States, Wal-Mart is increasingly looking forward to generate huge amount of financial resources for the happening of philanthropic activities in the region. The charitable activities of the business firm include setting up state based funding organizations which are aiming to grant more than $25,000 for charitable programs. The charitable programs to which the business firm aims to extend its donations include healthcare, environmental activities and other educational activities. In the international sphere Wal-Mart is looking forward to extend the network of charitable activities through the active cooperation with international bodies like United Nations Children’s Fund. The healthcare funding initiatives taken by Wal-Mart mainly focus on the low income households and hence are greatly supported by the government of the country. (Birchallin, 2008). Economic Factors The changing economic environment of the economy of United States has greatly affected the operations of the retail firm, Wal-Mart. Inflationary effects of the United States economy which included the rising of house and fuel prices affected the buying patterns of the consumers in the region of United States. Wal-Mart’s business operations being affected by the economic downturn of the region resulted in a fall in the revenue of the firm by more than five percent in the second business quarter. In recognizing the grave economic crisis surrounding the American region the total annual business profits of the firm was reduced by around 3 percent by its central management team. Further, to counter the economic downfall of the region, Wal-Mart ventured in erasing the high priced product categories which eventually hit the profit margins of the firm. (Guerrera, 2007). Social Factors Wal-Mart the largest retail arm in the world based in United States is facing the heat of grave social issues like gender and sex discrimination in its operation system. Gender discrimination practices used at Wal-Mart discouraged the women force to take to senior management positions in the company. To this end, the management team at Wal-Mart made a pledge to counter such social pressures in helping the women force to rise to higher levels based on their competencies. The management even mentioned of suing the person who would lay obstruction to such process. Further, the employees working at Wal-Mart complain of not being paid adequately and in not getting proper recess time. The management team at Wal-Mart pledged that it would look forward to stop such inhuman employment practices (Hays, 2004). Technological Factors The key technological issues faced by the retail giant, Wal-Mart owe its effects in affecting the environment of the operating country. The company looks forward to reduce the emission of ‘greenhouse gases’ by around 20 million metric tons by the end of 2015. The management team at Wal-Mart observed that aiming to reduce carbon emissions would help the company in becoming more energy efficient in the near future (En Espanol, 2010). Environmental Factors The retail giant Wal-Mart was accused for emitting high amount of carbon in the atmosphere in the course of its business operations. Thus increased pressure was put on the business group to curb down the level of carbon emissions in promoting a safer a greener environment. Thus, the management team at Wal-Mart strategized its business operations to emit around 20 million metric tons of harmful greenhouse gases by the completion of the 2015 period (En Espanol, 2010). Legal Factors The retail giant, Wal-Mart is facing the heat of legal issues streaming from gender discrimination practices in its business environment. One of the lady workers had filed a case in the Supreme Court for issues of less payment and hindrances in promotion which had to be countered by the retail firm (O’Neill, 2010). Porter’s Five Forces Model The Porter’s Five Forces Business Model can be used to analyze the micro-business environment of the retail firm which consists of components like buyers, suppliers, competitors (existing and new), and threat emanating from the sale of substitute products. Buying Power The bargaining position of the customers is safely met at Wal-Mart through the increased focus on lowering the prices and enhancing the product quality. Customers tend to stick to Wal-Mart owing to its enhanced practice of setting reduced prices (Kneer, 2009, p.3). Supplier Power The suppliers of Wal-Mart fail to exert their business power in manipulating the quality and price of goods for Wal-Mart’s management team endeavors to maintain a strong relationship with them through the activities of close interactions (Kneer, 2009.p.3). Threat from New Competitors The threat emanating from the entry of new competitors fails to deter the firm’s operational practices for Wal-Mart through the techniques of mass production focus on setting down the operational costs. Moreover, through increased customer loyalty by producing quality goods at reduced prices the firm creates a suitable business position (Kneer, 2009.p.4). Threat of Substitute Products The desire of many business firms to imitate operational practices of Wal-Mart to produce cost effective products have countered a failure. This is because of the high quality of customer service methods practiced by the business firm which aims to provide the customers with a special retail experience (Kneer, 2009.p.4). Industry Competition The main competitors existing in retail to produce threat to Wal-Mart constitute of Kmart and Sears. However, the former fails to render considerable business threat owing to poor customer service practices while the latter fails for charging increased costs of the products from the customers. Wal-Mart excelling along such parameters successfully covers such threats (Kneer, 2009, p.4). Porter’s Value Chain Analysis The value chain analysis model given by Michael Porter encompasses primary actions of the firm like procuring materials, operational practices, distribution, marketing activities and generating after sales services. These actions are supported by the infrastructural, human resources, technological and procurement policies of the company. Procuring Materials Wal-Mart is a retailer who conducts the practice of procurement of materials in its factories with due efficiency. The information technology resources of Wal-Mart help the company in quick scanning of such continuous flow of merchandise. (Lamb, Hair, McDaniel, 2008, p.345). Operations The retail operations of Wal-Mart targets at mass production of goods which helps in the lowering of the production cost of the company. Moreover, Wal-Mart’s increased practices in the global sphere helps the company in gaining a large supplier base (Hill, Jones, 2009, pp.253-254). Distribution Strategies Wal-Mart through the use of the huge network base of suppliers based along the world successfully distributes the products to the hands of the final consumers. Further, the company has an effective customer servicing segment which takes care of customer queries (Keegan, 2002, p.428). Marketing and Sales Activities Wal-Mart efficiently tracks the target market by conducting survey of the target groups and then strategizes its distribution mechanism to fulfill the needs of the target market. Moreover, through the system of reduced prices and efficient customer servicing Wal-Mart gathers a lot of potential customers (Thierauf & Hoctor, 2006, p.181). Customer Servicing Systems Wal-Mart efficiently tracks the customer needs by incorporating the efficient management practices of the several departments to fulfill the needs of the external customers. External and Internal customers of the firm are treated with due importance so that their needs and aspirations are fulfilled. The human resources of the firm are so trained as to leave their current work and work for the betterment of the customer. Thus the firm operates on the ‘customer first’ philosophy. Wal-Mart motivates its employees to work in an integrated manner to satisfy customer needs through the use of the ‘360 degree performance appraisal system’. Through this approach the employees are not only aptly rewarded but also given a steady feedback on their performance (Bergdahl, 2008, p.171). Conclusion Wal-Mart situated in Arkansas in United States is one of the biggest retail firms in the world which aims to serve millions of customers on a worldwide basis. Like any other business firm the global retail chain, Wal-Mart’s business environment is divided into two sub-parts viz. external and internal. The external environment composed mainly of general factors pertaining to social, political, legal, economic and other environmental factors counts fulfills the macro-economic environment of the firm. On the other hand the internal environment composed of factors like customers, suppliers, competitors (existing and new), and other substitute products manufactured occupies the position of the micro-economic environment of the business firm. Business firms operating on an international scale face a lot of political and security issues in the different countries in which they operate. The paper draws an analysis of the macro-economic environment of Wal-Mart through the use of PESTEL Analysis to focus on the several parameters individually. To study the micro-economic environment of Wal-Mart the use of Michael Porter’s Five Forces Model is used. Further a value chain analysis of Wal-Mart’s operations is also conducted to understand the firm’s competitiveness. On the external front Wal-Mart suffers some significant drawbacks due to political, economic and social pressures of different countries. 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