A competitive environment is described as an environment where firm’s function and compete effectively with other businesses that provide similar products and services to a related set of clients. The five forces of Michael Porter will help in analyzing Walmart’s competitive environment. However, The PESTEL framework is used to determine a company’s success and to describe its macro environment. Walmart has various stores across the globe and the five Porters forces will aid in analyzing Walmart’s competitive advantage in all its stores and on the other hand, the PESTEL framework highlights challenges that the firm faces in the macro environment.
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Competitive Environment
The first force is the Bargaining power of buyers which involves the customer’s power over the prices and quality of a company’s product. However, in the case of Walmart, the customers have a low bargaining power due to the number of customers that the company has. A good example is where when the customers decides to shift and purchase from another seller, Walmart’s purchases are less likely to be affected. In the case of Walmart, the bargaining power of its suppliers is quite thus making it quite hard for sellers to drive up their prices. A good example is where Walmart has built a strong relationship with their suppliers and as the firm grows so does their suppliers.
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The third force is the rivalry among existing competitors and this force examines competition intensity in the marketplace. In the case of Walmart, the competition among its rivals is the driving force of the company and it has been able to maintain its leading position in the retail industry. A good example is where Target which is the biggest competitor of Walmart have implemented a low pricing strategy which is similar to that of Walmart. The forth force is the threat of substitutes and it studies the likeliness of customers to switch from a firm’s product to that of their competitor. A good example is where the clients have the option of shopping in other retail shops such as Home Depot but their biggest challenge will be finding a store that sells products similar to that of Walmart. Lastly, In the case of Walmart, the threat of new entrants which is the last Porters force is relatively low. A good example is where there are low costs of running a new small business compared to the costs that bigger firms such as Walmart need.
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Macro Environment Forces
To start with, the major political factors that affect Walmart are the Government policies. A good example is where, in cases where Walmart want to enter into a new market, political stability has a huge impact in the success of its expansion strategy. Also, the firm is under high political pressure to raise their employees’ salaries. Secondly, in economic factors instability and economic changes are huge threats to Walmart and they have a huge impact on its profitability around the globe (KILNER, 2017). An example is where high rates of unemployment will result to a weak customer purchasing power. Thirdly, social factors such as cultural diversity and urban migration have huge impacts on Walmart’s operation. A good example is where Walmart can rise the range of its goods to meet the numerous cultural preferences.
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The fourth technological factor that affect Walmart include business analytics, increasing the use of mobile devices among customers and increasing business automations. A good example is where to deal with the clients usable of mobile devices, Walmart need to provide effective online services and products thus boosting their revenues (Yam, 2016). The fifth factor which is the environmental factors are highly influenced by the sustainability of the business and providing products that are friendly to the environment. A good example is where to achieve business sustainability, the company must improve its functioning competence. Lastly, legal factors that affect Walmart include tax law reform, food safety regulations and employment regulations. A good example is where the company must observe the food safety rules as a chance to rise its products quality.
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Conclusion
Walmart has numerous retail stores all over the world and by using the five porter’s forces and PESTEL framework they will assist in analyzing the company’s challenges and competitive advantage. In the retail industry, Walmart is among the leasing companies as it has been able to implement strategies that have helped the company in dealing with their competitors and suppliers. Moreover, at the same time Walmart ensures that it provides efficient services and high quality products at relatively low prices to its customers. Lastly, examining the macro environment plays a vital role in strategic management.
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