Introduction
Strategic planning allows organizations to mobilize their resources and pursue specific goals and objectives. Organizations that operate in the volatile retail industry, such as Walmart, require an effective strategic plan to remain competitive. The creation of a strategic plan needs a critical examination of the internal and external environments of organizations in various countries. In this view, this paper describes the situation of Walmart in remote, industry, and operating environments with the intention of creating a strategic plan that mirrors its growth and performance in the next five to ten years.
Remote Environment
Walmart’s globalization exposes the business to diverse business environments. The characteristics of the firm’s remote environment include ecological, political, social, and technological forces that influence the industry’s activities and the company’s decision-making abilities. The market conditions of host countries comprising of population characteristics and business regulations significantly affect the firm’s profitability and performance (Hardaker, 2018).
Social trends comprise lifestyle changes, a shift in age distribution, and population growth that guides market features. These social trends have positively contributed to the establishment and stabilization of online stores as leading outlets of business transactions, which affect the performance of Walmart’s products and services.
The political factors influencing Walmart’s business activities are tax programs, minimum wage legislation, environmental policies, and political instability. Legal and regulatory parameters imposed by countries and trading blocs within which the firm operates influence the organization’s performance and market sustainability (Hardaker, 2018). A key observation involving the international market dynamic is the Chinese and Indian governments’ regulations that demand partnership with local firms. Conversely, technological advancement provides an opportunity for product-line diversification, including the capacity to project market trends. Therefore, Walmart has invested heavily in technology upgrades enabling it to remain competitive and leader in the market.
Industry Environment
Walmart is a retail store business faced with numerous industry challenges, such as an intense rivalry, a weak supplying power, a fragile purchasing power, a significant threat of substitutes, and a potent threat of new entrants. The intense rivalry in the industry is a result of market saturation with numerous competitors of roughly equal size and limited product differentiation that reduces switching costs (Hardaker, 2018). The high number of firms imposes challenges in developing Walmart’s competitive advantages. On the other hand, the company faces a weak customer bargaining power emanating from a large population of consumers and a small size of individual purchases with negligible effect on revenues.
Furthermore, the suppliers’ industry bargaining power is low due to the large population and fierce competition for limited space, leading to minimal influence on Walmart’s growth. The combination of a moderate availability, a low variety, and a high cost of substitutes results in a weak threat in the retail industry. However, the industry faces a substantial threat of new entrants due to the low cost of brand development and capital requirement enabling entry of small retailers into the market. Thus, the company must stay aggressive to remain competitive.
Operating Environment
Factors in the local market that influence the ability of organizations to succeed in the acquisition of resources, marketing, and generation of profits form an operating environment. In the United States, Walmart’s operating strategies include store location, supply chain processes, and maintenance of a robust quality system. The location management goal is to ease supply processes and improve the customer’s shopping experience. Walmart store logistics entails having dense store networks to bolster its market dominance. The organization’s focus in this supply chain involves building new distribution networks in central location and utilization of electronic records management system. This radiating system helps to maintain a lean inventory while reducing overhead costs.
Furthermore, as a retail store, Walmart holds final accountability for the safety of products. The company has created a system of quality control that brings onboard its suppliers to achieve standard value. The measure requires suppliers to acquire certification internationally recognized Global Food Safety Initiative (GFSI). Fundamentally, the company applies the wireless technology to its self-inspection system while using third-party audits in keeping food safety in check across the firm’s entire network.
Significant Changes Expected in the Next 5-10 Years
Remote Environment
In the global markets, modern consumers place more value on experiences when compared to physical items. This sociocultural dynamic potentially revolutionizes the retail industry business processes such as modifying products’ objectives to fit into an individual lifestyle, tell a story and be unique to satisfy a specific need. In this context, the consumers have the power to influence the design and building of products to meet the market standards and make shopping exciting. Additionally, technological advancement will allow the use of robots and drones in supporting retail operations in packs, shipments, and online updates.
Industry Environment
The future environmental dynamics of the retail industry lie in technological advancement that modifies the market characteristics encompasses competitive rivalry, availability of substitutes, and buyers bargaining power. According to Grewal, Roggeveen, and Nordfält (2017), advancements in technology weaken entry requirements such as brand development and supply chain processes, resulting in the saturation of the retail industry. Moreover, improved communication networks and mechanization have a weighty effect on future production and product deliveries, giving a chance to increased the availability of substitute products in the market. Therefore, projection indicates that Walmart will face a harsh business environment, which warrants strategies and tactics to build on the company’s strengths.
Operating Environment
The primary trend in the industry operating environment involves shaping business layout and recruitment procedures. The technological advancement has significant effects on the traditional business model relating to the location of the physical store and the use of paperwork (Grewal et al., 2017; Hardaker, 2018). One of the significant changes in the industry environment includes the growth in e-commerce that shifts consumer purchasing patterns and spending habits from physical brick and mortar stores to online markets.
In this context, the employment and supply chain needs of the organizations shift from in-store positions to online support, inventory management, and door delivery of goods. Since the success of the retail industry depends entirely on staff satisfaction, the principal objective in operation involves attracting and retaining the best talent to ensure long-term success. Therefore, due to global market entry by techno-savvy population, companies must adjust their recruitment processes to attract talented employees.
Macroeconomic Forecast of Economic Indicators
A macroeconomic forecast of Walmart indicates that the company’s key strengths include low hard to beat prices, a broad product line, strong brand, flexibility, and a stable supply chain network. Another economic indicator includes a flexible operation framework that facilitates market adjustments and expansion (Grewal et al., 2017). The company offers a wide selection of items at affordable market prices, attracting most consumers from low and middle-class levels.
This low pricing policy has bolstered Walmart’s brand name, making the company famous in different market regions. The company keeps its strategies flexible to accommodate regional demands such as legal regulations and cultural diversity to strengthen market dominance and minimize expansion challenges. A robust supply chain system, including an easy-to-use website, facilitates availability and ease of access to the organization’s outlets attracting a vast customer population.
The firm’s future strategic plans must incorporate market opportunities such as global growth, increasing consideration of health issues, environmental concerns, and payment systems. The global increase in concern for healthy lifestyles is an important economic indicator (Moore, Pinard, & Yaroch, 2016). Since consumers are willing to buy healthier foods, Walmart must focus on providing fresh and healthy food items in its stores to supplement the packaged products.
Also, the growing need for environmental conservation provides an opportunity to improve the company’s image. As efforts on social welfare involving green ethics are a core element of consumer preferences, Walmart must improve to beat competitors on adopting processes with the least environmental effects. Additionally, the company has an opportunity of diversifying its product line to include banking systems to improve its financial performance. Establishing its own banking facilities enables Walmart to save cash from third-party electronic payments.
Conversely, Walmart must consider negative economic indicators comprising high employee turn-over, unwanted publicity, and low differentiation. Since employees are first-line brand ambassadors, the company’s low-wage strategy results in workforce dissatisfaction and high staff turnover with negatively influencing brand loyalty (Blut, Teller, & Floh, 2018). Undesirable publicity involving poor working conditions and criticism affects the relationship between the organization and its suppliers in the supply chain network leading to poor market image and low sales. Furthermore, Walmart’s little differentiation reduces its market dominance while increasing the number and effect of its store competitors such as Amazon, Target, and Kmart.
Moreover, some of the global adverse economic conditions affecting the retail industry include political challenges and intense competition. Political challenges such as an unexpected rapid change in international economies and regulatory compliances leading to cumbersome processes create obstacles in new markets. Importantly, unstable economic conditions involving devaluation of the currency, as in the case of China, increase overall operating costs leading to low profitability. Similarly, the increasing competitors’ power, such as Amazon, Target, and Tesco, to eliminate price differences puts huge pressure on Walmart’s business sustainability, threatening its future growth.
Noneconomic Factors in the Remote Environment
The non-economic factors influencing the market performance of retail companies comprise social, cultural, political, and technological aspects of the macro-environment. These factors make the industry less attractive about the overall industry profitability. The socio-cultural factors affecting the industry comprises of dynamic lifestyles, change in workforce demographics, and emerging disease conditions.
The dynamic lifestyles include modified consumer behaviors with a preference for convenience, online social engagements, and healthy eating habits. Grewal et al. (2017) hold that the emergence of techno-savvy generation influences the processes of conducting businesses giving retail stores the opportunity to provide real-time online order and same-day delivery of services. Further, growing global awareness of healthy lifestyles and the needs of customers with chronic diseases opens new business prospects and compels retail stores to adjust to these changes to sustain their growth. However, the demand for quality products expressively affects Walmart’s performance in keeping track of its cost leadership strategy.
The political environment has a critical role in the performance of all businesses across different industries. Companies must adhere to set regulatory policies governing operations, employee conditions, and customer service. This legal framework influences organizations strategic planning and informs management decisions. In the retail industry, corporate managers must comply with these legal structures as it directly affects the target market to improve their reputations, maintain their market image, and improve brand loyalty. However, Walmart has encountered criticism on its adherence to the laws with several lawsuits concerning employee discrimination, which has negatively affected its market performance.
Technological advancement has changed the processes of conducting business globally. New concepts introduced encompass an online presence, door-deliver, and global reach. Many retail companies run online stores to meet the social needs of the flexible new population of consumers. This technological aspect has changed how businesses operate in the retail industry, characterized by a shift from brick and mortar basic facilities to the application of virtual sites (Grewal et al., 2017; Shukla & Sharma, 2018). Social networks act as an advertising channel to inform consumers of product availability and facilitate the comparison of prices and quality.
Competitive Analysis of the Organization: Microeconomic Perspective
Pricing of Products
Walmart utilizes a cost leadership pricing strategy to gain a competitive advantage over rivals due to the lowest cost of operation in the industry. Since most consumers are price-sensitive, this low-cost pricing strategy enabled Walmart to gain and quickly expand its market share. Investments in technological upgrades and innovation in communication systems allowed the firm to afford minimal operation costs, cheap pricing and create a strong market brand while still making benefits out of it (Grewal et al., 2017; Shukla & Sharma, 2018). This domination of the market attracts a large consumer population both locally and internationally, allowing the firm to drive down product prices to its advantage.
Assessment of Market
Walmart has a robust distribution system, which gives a rapid response to market demands while keeping a low level of inventory. The company continuously delivers goods to warehouses and stores within one day. Since customers want a convenient experience (Blut et al., 2018), the company offers a broad product line that encompassing groceries, home appliances, and cosmetics under low pricing. This market strategy makes Walmart a one-stop-shop in fulfilling all customers’ needs. The online aspect of Walmart is becoming increasingly beneficial in market penetration. Fundamentally, the application of everyday low price marketing concept enables the organization to attract large populations to its outlets, leading to more sales and a high cumulative profit margin.
Assessment of Cost Structure
Walmart uses a customer-centered strategy involving tailored product offers to match the demands of different market segments. However, the main cost structure involves offering consumers unmatched low prices. This approach exploits weekly deals of discounts, coupons, and ad matches on sets of products. Additionally, the company utilizes social media campaigns, including mass mailers, electronic newsletters, circulars, website publicity, and newspaper ads.
Apart from competitors’ product-price match concept, the company also employs an assortment-planning browse and shop innovative tool to track store traits and consumer purchasing patterns, which enhance tailored marketing strategy. Despite these technological advances, Walmart is expanding and opening new stores in fresh markets to promote accessibility and market convenience.
Conclusion
The analysis of the business environments of Walmart has identified its stance in the retail industry. In these environments, Walmart is experiencing numerous challenges, ranging from competition to changes in consumer needs. For Walmart to grow and remain competitive in the retail industry, it must embrace dynamic changes in the remote, industry, and operating environments. The use of pricing strategy, expansion of product array, the adoption of technology, and the creation of convenient stores are some of the critical strategies that would boost its performance in the next five to ten years.
References
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Grewal, D., Roggeveen, A., & Nordfält, J. (2017). The future of retailing. Journal of Retailing, 93(1), 1-6. Web.
Hardaker, S. (2018). Retail format competition: The case of grocery discount stores and why they have not conquered the Chinese market (yet). Moravian Geographical Reports, 26(3), 220-227. Web.
Moore, L., Pinard, C., & Yaroch, A. (2016). Features in grocery stores that motivate shoppers to buy healthier foods, consumer styles 2014. Journal of Community Health, 41(4), 812-817. Web.
Shukla, A., & Sharma, S. (2018). Evaluating consumers’ adoption of mobile technology for grocery shopping: An application of technology acceptance model. The Journal of Business Perspective, 22(2), 185-198. Web.