Wal-Mart : External Environment Analysis Report

Introduction

Customer-intimate firms know that their clients have a hierarchy of needs beyond their requirement for a product. Attached to every product is basic service, service that customers expect as part and parcel of the product purchase. While operational-excellence companies and product-leadership firms never look beyond a client's need for product or basic service, the customer-intimate firm understands that a client that needs a product has a broader, underlying problem that they are trying to solve. A customer-intimate firm often has the expertise to change the way a client manages the underlying problem (Treacy & Wiersema 1997). The most common characteristic of customer-intimate companies is that they offer a unique range of superior services, from education to hands on help, so that customers can get the most out of their products (Treacy & Wiersema 1997).  Supply chain management (SCM) is a helpful management theory; the goal of SCM of is to improve the efficiency and effectiveness of a company’s entire supply chain operations. The supply chain runs from raw material suppliers at one end, right through all the intermediate processing stages, to the customer at the other (Mcmenamin 1999).

 

The focus of SCM or logistics management is on adding value and eliminating inefficiencies at each stage of a company’s supply chain. This will include, for example, the optimization of stock or inventory movements; planning for peak activity periods; and the organization of transport and distribution systems. The process seeks to ensure that the right materials, supplies and personnel are in the right place at the right time. The emphasis of SCM on adding value at each intermediate stage, has given rise to the term value chain. Supply chain or value chain management emphasizes the strategic value-adding and financial role of a company’s entire logistics management process (Mcmenamin 1999). In recognition of the new emphasis on providing the best net value for the customers, logistics represents a key bundle of resources that can be applied successfully to this end. In effect, this formally recognizes the fact that customer value can be created by providing elements of customer service such as product availability, timeliness and consistency of delivery, and ease of placing orders. The net impact is that logistical service is becoming recognized as an essential element of customer satisfaction in a growing number of product markets today. The logistics process has several unique characteristics.  First, it is comprehensive, extending from the original source of raw materials to the location of the final customer (Bounds & Stahl 1991).

 

The second characteristic is that it pertains to the flows of both product and information, and considers each as essential to the value-creating process. Third is that logistics represents a viable means to satisfy and create value for the external customer of the firm and/or the channel of distribution (Bounds & Stahl 1991).  The supply chain is an important part of business because through it a raw material can be transformed into a finished product, this product is then sold to clients for the company to gain profit. The report aims to discuss and evaluate the internal and external influences in a business that can affect its standing in the supply chain. The report also aims to create methods that will create a more accurate supply chain management decisions. The report is about Wal-Mart and its Supply chain. The paper will use theoretical ideas such as PESTLE, SWOT, Porters Five Forces and Competitor Benchmarking. The next part in the paper will be a backgrounder on Wal-Mart and its supply chain; it is followed by the main customer markets, analysis using the theoretical ideas mentioned above and recommendations.

 

Company and supply chain background

 Wal-Mart is a company that has adopted an innovative approach to the management of people. Some of the actions that characterize it are the profit-sharing scheme linked to the improvement of each store's management, a participative culture that encourages its employees to implement continuous improvements, and a high level of decentralization in decisions concerning the product categories to be kept or replaced, inventory management, or purchasing. For its customers, the essence of Wal-Mart's strategy has consisted of two principles. First, there is the 'We sell for less' policy. Wal-Mart consistently offers products with the lowest prices available in a particular geographical area. The second has consisted of a wide product mix, much more varied than that of any other discount retailer in the USA (Canals 2000). Against an average of about 30,000 items stocked by the discount stores, a typical Wal-Mart store may hold more than twice as much. Wal-Mart's efficient cost structure rests on several pillars.  It includes an extraordinary logistics system based on holding inventories in large warehouses, and not in the stores. Stores are for selling, not for inventories. This improves space management, where it is most expensive. A communication system between stores, warehouses, and suppliers enables the company's inventories to be kept to a minimum, while also facilitating identification of the best-selling products (Canals 2000).

 

Wal-Mart stores are located in areas where the land and rentals are cheaper than in the main urban conglomerations on the USA's east or west coast. Wal-Mart's main shopping centers are located in the Midwest. Wal-Mart's marketing costs are lower than those of its rivals. Furthermore, Wal-Mart's low prices and wider product range mean that the flow of shoppers to its stores is greater than in other companies. Wal-Mart's initial location in small and medium-sized towns has translated, in practice, into the consolidation of local quasi-monopolies, as some of these towns' populations are so small that there is not space for another discount retailer (Canals 2000). Wal-Mart is the largest public corporation in terms of revenue. It has gained success in almost its entire endeavor in different parts of the world. The company has been criticized by various groups as an organization having a reputation of extensive foreign product sourcing. It is also criticized for the low rates of health insurance enrolment, resistance to allow their personnel to have union representation and sexism practices. The company’s supply chain management system or logistics system is concentrated in making sure that their product supplies are stored in factories to reduce space limitations for stores.

Main customer markets

The market of Wal-Mart is different individuals who need a discount store that will provide them the products they need. This market is the one that needs an alternative shopping experience. This market wants a store where every product they need is available and sold at lower prices.  The market segment of the company is divided into clients who have brand loyalty and price sensitivity. There are specific products for those clients that are price sensitive and want low priced products. There are also products that direct its attention clients who are brand conscious. The company makes sure that they cover all the segments in the society they are operating in. The company has specialized prices for the different market segment, this will ensure that the clients will have lesser doubts about taking a look at the company’s product and the products that they can afford.

 

The target market of the company involves almost all sectors of the society. They want to provide products to all ages and all gender. The company as much as possible aims to reach all walks of life. This target market is a larger source of income. The company has different marketing strategies that can cater to the taste and appeal of such markets.  The company makes sure that its stores and branches are located in the most profitable places where clients can easily see the store and they can be encouraged to visit the store and buy products.  The company also makes sure that competition in the location they want to put up the branch will not be too heavy.

 

Analysis

SWOT analysis

Strength

Wal-Mart’s strength is the popularity it has. The company is known throughout the world.  Strength of the company is the strong brand name they have. The strong brand name is what makes the company, its products and services popular. Furthermore a strength of the company is its ability to make strategic adjustments whenever there is a need for it. The company makes sure that whenever changes in the industry happen they have alternative plans towards it. Another strength of the company is the supply chain system wherein the company keeps the products in a secure place until it is needed in a certain branch.  Lastly a strength Wal-Mart’s is its website that is easy to use, attractive, and informative.  Such website encourages the clients to visit the store.

 

Weakness

The main weakness of Wal-Mart is the criticism towards the company. The criticism affects not only the image of the company but its standing in the supply chain. Such criticism affects the relations between the suppliers and the company thus causing issues in the company’s supply chain.  Another weakness of Wal-Mart is the notion that the company is losing its charm. This means that the company in some way is having problems in their relationships with clients.  Lastly a weakness of Wal-Mart is poor sales in clothing merchandise. The company does not do well in this kind of product due to the company not being known as a reseller of such product.

Opportunities

An opportunity for the company is to find out more ways to give a distinctive look and features to their stores and branches. By doing this the company will have competitive advantage over other firms. An opportunity for the company is to improve the features of their website. By doing this it can attract more markets. The company should also continue to improve its supply chain so that different issues and problems can be resolved ahead of time.  It should device faster means to deliver supplies to prevent shortages of products in their branches. Lastly an opportunity for the company is to continue to reach newer territories where it can offer its products and services.  This newer territories may be in a country that has recently just improved its economy.

 

Threats

The main threat to the Wal-Mart is the competitors. The competitors like Tesco and Carre-Four try various tactics to overcome the standing of the company in their industry. The competitors may device a way to overcome the company and have a better standing in the supply chain. The threat to the company includes the laws in the country they are operating in. Another threat to the company is the tariffs and taxes that the company has in different countries, each countries has its own rate of taxes and tariff that creates additional expenses for the company. Lastly a threat to the company is the culture of some clients in other countries they operate in. Some people may not like the new culture that is brought by Wal-Mart and its expansion into newer markets.  

PESTLE analysis

Political

Wal-Mart made sure that they were aware of the political situation of every country they have operated in and the company has made sure that it has a reasonable position with regards to political issues. Wal-Mart is continuously prepared for any problems concerning the political sector.

 

Economic

Wal-Mart can be said to be economically stable for the past years. Its economic stature is doing well that’s why they try to improve their products to give the best to their clients. It is not only the internal economic situation of the company should be taken note of but also the economy of the country, Wal-Mart checks first the economic status of the country they are operating in before making decisions if they will have a branch in that area.

 

Social

Wal-Mart makes sure that the products they offer will be accepted by the public. Wal-Mart does not authorize the delivery of some products they know will cause outbursts or complains from different groups in the society. Wal-Mart makes sure that they have a very good relationship with different sector in the society although some sectors hold a grudge towards them. Wal-Mart also engages in social activities that tend to develop a better relationship between them, the clients and the society they are operating in.

Technological

Wal-Mart offered new innovations in its technological aspect and introduced new concepts with regards to its industry. Wal-Mart makes use of highly advanced cash register or better performing slot machines. It also makes use of better security systems.  Since technology rapidly changes Wal-Mart makes sure they are updated to what is happening and they can adjust to these changes.  If other companies use new technologies to provide services, Wal-Mart has the technology capable of competing with such technologies.

 

Legal

            Wal-Mart makes sure that it follows the different laws of a country they engage transaction in.  The company doesn’t want to risk their client’s welfare and company image by breaking local and international laws Wal-Mart makes sure that the transactions they engage in will have a legal basis and will be sanctioned by local or international legal organizations.

 

Environmental

 Wal-Mart makes sure that the products they sell are proven to cause minimal problems to the environment. Wal-Mart puts up certain regulations on what type of product they will sell in their store. Wal-Mart has also introduced better waste management strategies that aim to reduce pollutants and create a cleaner environment for the future.  Wal-Mart makes sure that its waste system is organized to prevent any mistakes from the personnel.

Porter’s five forces

Potential Entrants

            Wal-Mart has been around for a quite some time and the company is not greatly affected by the new entrants. The influence of potential entrants to the company is weak.  Any new entrant will have difficulty in gaining clients not unless they can provide innovative strategies that can thwart Wal-Mart from its position and get Wal-Mart’s clients.

 

Competitive rivalry

            Competitive rivalry has a low influence on Wal-Mart. The company has lower concerns on its competitors since there are limited competitors in their industry.  The competitors cannot give much problem to the company since it already acquired a good percentage of the buying public.

 

Substitutes

Substitutes give high influence to Wal-Mart and its different branches since substitutes can make a company lose the clients it has. The substitutes can be in the form of online or actual stores. This kind of business is continuously growing and continuously changing strategies. The company and its different branches in different locations make sure that the substitutes won’t give them much problem. They do this by proving that the service they offer and the technologies they use to provide the service are the best quality and are better than substitutes or any other company.

Bargaining power of buyers and sellers

The bargaining power of buyers highly influences Wal-Mart. As much as possible the company maintains reasonable prices for their products and service to satisfy the buyers. When the clients try to dictate lower prices the company tries to know whether it is reasonable and if isn’t it has no choice but let the client go. The bargaining power of sellers highly influences Wal-Mart. The company makes sure that their suppliers have high bargaining power through helping them show their importance in the industry.  Wal-Mart makes sure that the price being asked for a material has the same value as the same materials’ quality and durability. This will ensure that budgets will not be wasted.

 

Competitor benchmarking

Tesco is one of several European retailers whose entry into Central Europe has changed the local retailing structure. It grew first through acquisition of local chains and of chains of Western retailers, and then through Greenfield investment in new hypermarkets. Government regulations did not present major problems to its expansion (Mcgowan, Radosevic & Tunzelmann 2004). ). Tesco is a British retailing company that is known to have gained large international and domestic market share. Tesco is the third largest retailing firm behind Wal-Mart and Carre-Four. Like other retail companies, Tesco wants to have clients that will patronize their product. The company uses a loyalty program to gain the loyalty of its clients. Compared to Wal-Mart, Tesco has started to concentrate on the housing market but it has not been that successful as of late.

Recommendations

Wal-Mart should continue to improve its supply chain so that different issues and problems can be resolved ahead of time.  It should device faster means to deliver supplies to prevent shortages of products in their branches. The supply chain should have a feature of determining the best possible route for delivery of a supply so that branches will not experience product shortages and clients will not wait for products to be replenished.  The supply chain should be checked for errors and additional features should be added to it. This additional features should include, for example, the optimization of stock or inventory movements; planning for peak activity periods; and the organization of transport and distribution systems. In logistics management having a secured record of supplies is an important thing. The supply chain system should be used to have a secured record of supplies.

 

The system should be able to input different information and data that are important to the logistic section of a company. The system would then arrange the said records according to the classification they belong to or in any means the company deems to be help. The system should not be the cause of delays in determining whether there are still supplies for a product or whether the company should start ordering from suppliers. The system should be protected from hackers that want to destroy records of supplies. It should be accessed only by a few people that the company can trust. Those who know how to operate the supply system should be taught on how to fix the system. The company should continue to invest in its website. If the website is improved further it can bring additional benefits to the company and can cost less expenditure to the company. The website should also be promoted more in the Wal-Mart stores so that more users will visit the site. The company can ask their consumers on how the website can be improved and how they want a website appear.  The company should try to use the brick and click strategy and interconnect the website with their stores so that clients and the different stores can have interconnection and assistance can be given to the clients on a particular product. 

 

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