Assessing the Macro Environment of Wal-Mart - Research Paper Example

Management Table of Contents Table of Contents 2 Assessing the Macro environment of Wal-Mart 3 Political and Legal Forces 5 Long Term Objective and Strategic Scenarios 5 Long term objectives 5 Key Assumptions 7 Scenario Analysis 7 Modified objectives 8 Works Cited 10 Name of student: Name of Professor: Course Number: Date of Paper: Management Assessing the Macro environment of Wal-Mart The macro environment of Wal-Mart can be evaluated by studying the various sectors that are related to it. The strategic analysis of Wal-Mart can be done by evaluating: Macroeconomic Forces The growth rate of the United States economy has been rising. This has impacted Wal-Mart positively. The stock price of the company reached a very high level that surpassed the price level of last 12 years. There was a rise of more than 3% in share price and this was due to optimistic economic data. The earnings of the company were 10% more than last year in the first quarter. Sales of the company also rose because of the positive economic forecasts. This in turn influenced economic growth. Wholesale business sales also influence the company’s financial position. Higher growth is positively related to rise in production by the company’s factory (Bloom and Perry, 379-396). Changes in the market interest rate also affect Wal-Mart’s earning per share. Earnings of Wal-Mart also experienced a fall due to the prevailing currency exchange rates. Wal-Mart is always affected by a strong dollar. The company also can significantly explain deflation. The products at Wal-mart are generally priced very low. The sellers experience a cost cutting scenario. So to reach the targeted price level, Wal-Mart influences the price mechanism which leads to deflationary pressures in the economy (Basker, 203-229). Global Forces Wal-Mart is the largest retailer and thus its business operations are certainly influenced by various global forces. Global outsourcing has a huge impact on Wal-Mart’s Business. The purchasing power of the United States is greatly influenced by this retailer. Factors of production prevailing in the global markets also indirectly affect Wal-Mart. Production reformation all over the world has forced the global retaining giant to modify its own production structures (Basker, 203-229). Technological Forces Technological forces are vital for Wal-Mart’s success. Consumers prefer transacting via the internet and thus the retail market, particularly Wal-Mart, has seen a rise in its sales with the rise in the use of internet by consumers. Wal-Mart has always adopted innovative strategies of marketing through advertisement on their own website and different social media. The technological factors ensure that the targeted customers are identified easily. Wal-Mart has designed various policies and schemes with the help of the advanced technology to reach its customers (Singh, Hansen, and Blattberg, 457-476). Demographic Forces Wal-Mart’s profitability is affected by demographic factors. The structure of population greatly influences business operations of Wal-Mart. The stores of Wal-Mart are set strategically to cater to all kinds of customers; key customers are provided with outstanding service. The products are priced keeping in mind the purchasing ability of the consumers. Customers can avail all kinds of goods ranging from groceries to other merchandises at the same store (Franklin, 105-114). Social Forces Social forces also influence Wal-Mart. The company’s remuneration policy should ensure that all its employees are provided with equal opportunities in terms of remuneration and other benefits. There should be no scope for gender discrimination. The company should not encourage any discriminatory practices within the organization (Basker, 203-229). Political and Legal Forces Political forces can have an adverse effect on the business of Wal-Mart. This will be the case if the economy suffers from political unrest and tension. There are barriers pertaining to political forces in many areas. In such locations, it becomes very difficult to reach the potential customers. Negotiations play a vital role in such cases. The company should ensure that it does not violate any policies that may aggravate the political condition of a country. Violation of some policies or procedures may lead to various lawsuits against the company. Wal-Mart has been charged of engaging itself in unethical practices such as influencing politicians to serve specific business operations. Markets can be accessed by influencing the political conditions of a country. Thus political and legal forces play an important role in the business operations of Wal-Mart (Jia, 1263-1316). Long Term Objective and Strategic Scenarios In order to sustain in the long run, Wal-Mart has many objectives to achieve. These objectives are planned strategically. This will help the company to expand its markets globally (Arnold and Fernie, 416-432). Long term objectives Wal-Mart needs to develop an effective e-commerce strategy. This strategy has to be designed with a global approach. This would help in expanding market to areas which are still not exploited by the company. With the advancement of technology, e-commerce serves an important role in the success of any business operation. Long term sustainability of business is enhanced through this objective. The company also seeks to accelerate the growth of its online channel. This channel operates globally. Managing this online channel is essential as most business operations are carried through this channel. The company also focuses on meeting customer requirements by setting up stores strategically (Basker, 203-229). The company aims at providing outstanding service to customers. Prices are set at an affordable level so that all segments of the population can avail the products. The company also ensures that the quality of the product is not hampered. The company designs plan that can increase sales significantly over the long run. Such decisions are taken after analyzing the sales returns from various sources. Initiatives are taken by the company to enhance productivity growth. Wal-Mart aims at improving returns by setting short term goals. However, the objective will help to achieve long term goals by evaluating company’s profitability scenario on a regular basis. A balance would have to be achieved between the short term and long term plans. The company also aims at improving shareholder value. This can be done by ensuring that the company’s fundamentals are evaluated properly. The shareholders should be provided with regular dividends. Ultimately, the company’s profitability situation would be reflected in its stock price. Thus, it is necessary for the company to maintain a viable and sustainable position throughout its business undertakings (Basker, 203-229). Key Assumptions The long term objectives of Wal-Mart are set on the grounds of various key assumptions. These assumptions have been evaluated and monitored for setting feasible objectives. It has been assumed that the boom in technology would demand a shift of business operations towards e-commerce. Thus the company has focussed on building proper networks that would enhance the e-commerce experience for its customers. It has been assumed that customers prefer to transact more using the online interface. The company has also made assumptions about strategic store locations that the customers might prefer. The company also made assumptions about the demographic features of the locations where the business undertakings are carried on. It has been assumed that the segment of population that avail Wal-Mart’s goods and services mainly fall under the middle income group. This has encouraged the company to set prices at an affordable range without making any compromises with the product quality. Company also assumes that enhancing share holders value will indirectly affect the growth prospects of the company in the long run. The company thus focuses more on building a public image that would help to enhance the goodwill of the brand (Neumark, Zhang, and Ciccarella, 405-430). Scenario Analysis Best case scenario for Wal-Mart: Wal-Mart can dominate the retail market by reaching all targeted customers. The expansion plans may work in favor of Wal-Mart and this would enhance growth in the United States and in other international markets. Retailer would be offered with the best prices and customer satisfaction would be improved. The company would be able to branch out into latest sectors of retailing (Hausman and Leibtag, 1157-1177). Worst case scenario for Wal-Mart: Wal-Mart would find it difficult to penetrate into the potential markets due to price competition and other barriers to entry. Growth opportunities may die down owing to economic adversities that may indirectly affect the country’s profitability conditions. The company may find it difficult to keep pace with the advanced technology. Customers changing taste and preferences would not be fulfilled due to inefficient in Wall-Mart’s business operations. The latest trends in Wal-Mart’s profitability condition offer a sustainable picture. Wal-Mart has been working towards achievement of its goals and objectives. The company enjoys a strong financial base which has ensured its dominant position in the retail market. The company has utilized its resources properly to sustain growth in the long run. This has helped the company to expand globally (Holmes, 253-302). Modified objectives The study of the best and worst case scenario of Wal-Mart gives scope for modifications in objectives. The best case scenario reveals that Wal-Mart enjoys a smooth growth in its business operations. The worst case scenario calls for action. Wal-Mart should aim at identifying the potential entry barriers in the various markets where expansion plans have been taken up. The company needs to understand the economic conditions prevailing in the countries where it operates. A country’s economic conditions have a direct influence on the growth of the company. Various policies related to free trade and exchange rates are to be monitored continuously. Wal-Mart should aim at integrating their business operations with the latest technology (Hays, 67). Wal-Mart thus has to make efforts to sustain their goodwill and in order to maintain their position in the retail market; the company has to ensure that all the goals and objectives are achieved in the long run (Basker, 203-229). Works Cited Arnold, Stephen J, and John Fernie. "Wal-Mart in Europe: prospects for the UK." International Marketing Review 17.4/5 (2000): 416-432. Print. Basker, Emek. "Selling a cheaper mousetrap: Wal-Marts effect on retail prices."Journal of Urban Economics 58.2 (2005): 203-229. Print. Bloom, Paul N., and Vanessa G. Perry. "Retailer power and supplier welfare: the case of Wal-Mart." Journal of Retailing 77.3 (2001): 379-396. Print. Franklin, Andrew W. "The impact of Wal‐Mart supercenters on supermarket concentration in US metropolitan areas." Agribusiness 17.1 (2001): 105-114. Print. Hausman, Jerry, and Ephraim Leibtag. "Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal‐Mart." Journal of Applied Econometrics 22.7 (2007): 1157-1177. Print. Hays, Constance L. "What Wal-Mart knows about customers’ habits." The New York Times 14 (2004). Print. Holmes, Thomas J. "The Diffusion of Wal‐Mart and Economies of Density."Econometrica 79.1 (2011): 253-302. Print. Jia, Panle. "What Happens When Wal‐Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry." Econometrica 76.6 (2008): 1263-1316. Print. Neumark, David, Junfu Zhang, and Stephen Ciccarella. "The effects of Wal-Mart on local labor markets." Journal of Urban Economics 63.2 (2008): 405-430. Print. Singh, Vishal P., Karsten T. Hansen, and Robert C. Blattberg. "Market entry and consumer behavior: An investigation of a Wal-Mart supercenter." Marketing Science 25.5 (2006): 457-476. Print. Read More