Executive Summary

This report base on environment analysis of Wal-Mart. Environment

analysis divided by three parts. There are PEST - as political, economic,
social, and technological, Industry level as Michael Porter Five Forces
Model as Threat as a new entrants in market, bargaining power of suppliers,
bargaining power of customer, threat of substitute product, rivalry among
existing competitor and Internal as VRIO- value, rare, Cost to Imitate and
organization and value chain analysis. PEST analysis is a part of external
analysis. It is a framework of micro environment. When company go for
strategic analysis or market research that time company focus on micro
environment. Michael E Porter introduces industry analysis in 1979. This
model use as a strategy develop. Using this model can assess competitor
strength, weakness, threat and position of company. This model base on five
force to make unique from competitor and help to make decision. Value
chain analysis is the companys main activities. Also evaluate the efficiency
and effectiveness. Its help organization to decision making, how company
add value and get competitor advantage.

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Contents
Executive Summary .............................................................................................................................. 1
Introduction ........................................................................................................................................... 3
PEST Analysis ....................................................................................................................................... 4
Political Factor .................................................................................................................................. 4
Economic Factor ............................................................................................................................... 5
Social Factor ...................................................................................................................................... 5
Technological Factor ........................................................................................................................ 5
Industry Analysis .............................................................................................................................. 5
Porters Five Forces Model .............................................................................................................. 6
Threat as a New Entrant in Market ................................................................................................ 6
Bargaining Power of Suppliers ........................................................................................................ 6
Bargaining Power of Buyer .............................................................................................................. 6
Threat of Substitute Product ........................................................................................................... 6
Rivalry Among Existing Competitor............................................................................................... 7
Internal Environment ........................................................................................................................... 7
VRIO Analysis................................................................................................................................... 7
Value .................................................................................................................................................. 7
Rare .................................................................................................................................................... 8
Cost to Imitate ................................................................................................................................... 8
Organization ...................................................................................................................................... 8
Value Chain Analysis............................................................................................................................ 9
Administration .................................................................................................................................. 9
Human Resource Management........................................................................................................ 9
Technology ......................................................................................................................................... 9
Procurement ...................................................................................................................................... 9
Operation ........................................................................................................................................... 9
Marketing and Sale ........................................................................................................................... 9
Service ................................................................................................................................................ 9
Bibliography.......................................................................................................................................... 11

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 Environment Analysis

Walmart

Introduction

Wal-Mart is largest and biggest retain chain shop in the United State. Sam Waltons first open
store in 1962 at Rogers, Arkansas. After 52 years later, Wal-Mart has more than 11000 store
across the world 27 countries and 2.2 million casual, part time and full time employees serves
more than 200 million customers each week worldwide, making by them self-largest private
employers in United State of America, Canada and Mexico. In 2013, annually sale $446 billion
(Our Story, 2014). Even in global financial crisis Wal-Mart gain dramatically market share and
rise sales. Wal-Marts has significant success story from beginning and only can be wonder
what is in future hold for this company.

According to Sam Walton (1918-1992) that success of retail business is what customer want
and reality is think about point of view as customer, you will be realize, want everything: wide
range quality of product, lowest price of every day, after buying satisfaction on product, free
parking, good customer services, suitable hour and pleasant of shopping experiences. Efficient
logistics service is give them competitive advantage. In 1970, Wal-Mart developed strategic
facilities in ware house and buying bulk amount product. Its minimize cost. Today 147
distribution centers with serve 75 to 100 stores.

Wal-Mart has gaining competitive edge by using technology. This technology incudes video
and video communication with suppliers, flow of sales, inventory information. Inventory
update on every sale and supplier can be seen from distributions center. They believe that any
company improve performance by monitoring and controlling on inventory. Wal-Mart
continues expend market which help them from strategic smart decision. Wal-Mart introduces
super market center in 1988. Its incudes pet shop, pharmacy, garden corner, furnisher, tire, auto
mobile care, optical care, printing facilities and some of small shop give service to customer
for video, hair dressing and food shops. Now a days 2700 super center as concept of
neighborhood market and became a largest food shop in United State.

Wal-Mart first international store was Mexico in 1991. Two years later rapidly expend
international branch. Now 3859 international branches located in China, Canada, Brazil, India,
Japan, Chile, Argentina, Honduras, Mexico, United Kingdom, Nicaragua, Costa Rica, Puerto
Rico, El Salvador and United State of America (The Wall Street Journal, 2014). In 2001 Wal-
Mart introduces subsidiary store of Wal-Mart.com and head office is San Francisco adjust to
Silicon Valley. This store is different from Wal-Mart store. High quality of product of product,

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great feature, good service and lowest price and excellent internet shopping. The goal of Wal-
Mart was easy access to Wal-Mart product. More than 10, 000, 00 product customer can buy
from online and pick up from their conveying location. Respect for each and every customer,
determine for quality and customer service are basis belief and value for Wal-Mart. Those
belief and value cannot stop them from some controversy over the past decade for example of
unpaid wages, debatable business drill. Fairness, integrity, objectivity and honesty those four
global ethic make Wal-Mart popular (Ethics & Integrity, 2014).

PEST Analysis

PEST analysis is a part of external analysis. It is a framework of micro environment. When

company go for strategic analysis or market research that time company focus on micro
environment as political factor, economical factor, social factor and technological factor. This
tools can help to company assess market growth, decline, potential buyer, business position
and future crisis or threats.

Political Factor
Political factor is closely related to any company. It can be effect on business growth, profit,
future crisis or create new business threat. Most of the time company suffer crucial time when
government change. New government can be change tax policy, labour law or specific products
have to sell within country. Wal-Mart operation in 27 country and need to follow some rules
and regulation in host nation. In the year 2012, 27.2% sell came from internationals operation.
Some time they face big challenge for example when Chines government changed and
pressurizer to Wal-Mart purchase local firm. Political factor includes change currency law,
home company get tax offset, economic condition, properties laws, foreign investment etc.
(Swot And Pest Analysis Of Wal Mart Management Essay, 2014). Foreign company face
greatest impact from host country. For example Indian government change the foreign
investment law and said that open door investment but if any company acquire local firm. Wal-
Mart use this law as a advantage and shut down Germany and Korea operation. In 2009, Wal-
Mart acquired Indian largest telecommunication company Bharati Airtel.

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Economic Factor
Economical factor make greatest impact on business decision making and operation. It can be
interest rate change and that effect on capital cost which rise per unit price. Exchange rate of
interest effect on export goods, products, supply and increase the import goods price. In United
State, Wal-Mart facing highest rate of inflation and devaluation of currency because huge rate
of unemployment, financial crisis, interest rate, high fuel cost, instability economic growth,
debt of consumer, energy cost, higher income tax rate and some of economical factor effect on
consumer demand which product offer by Wal-Mart.

Social Factor
Social factor related to the cultural situation, health, behavior, having habit, believe, religious,
age, clothing, population, career. Those factor are very sensitive of any company. The social
trend effect on company operation and productions. Wal-Mart always focus on social trend for
host country.

Technological Factor
Technology sometime barriers of entry of any company. Research and development
department can eliminate this barriers which technology can use in production as reduce
production cost, outsourcing for decision making, and efficiency of production. Nowadays,
technology are major influence of any company. Wal-Mart always invest in research and
development and every year spend huge money to upgrade technology because its help them
to remain in market place no. 1.

PEST analysis helps any company to examine macro environment. Firm effectively recognize
strength, weakness, threat and opportune that can help future focus, decision making and
archive company goal (WalMart: PEST Analysis, 2014).

Industry Analysis

Michael E Porter improve a model for business industry analysis in 1979. This model use as a
strategy develop. Using this model can assess competitor strength, weakness, threat and
position of company. This model base on five force to make unique from competitor and help
to make decision.

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Porters Five Forces Model

Porter classify five factor which can determine to find the competitor nature in industry. There
are:

1. Threat as a new entrants in market

2. Bargaining power of suppliers
3. Bargaining power of customer
4. Threat of substitute product
5. Rivalry among existing competitor

Wal-Mart relay on these five factor to ensuring leading company in market and customer
satisfaction (Cartered Global Management Accountant, 2014).

Threat as a New Entrant in Market

Wal-Mart knows the power of own purchasing and advertisement. They have enough
investment for purchase product, hire or train up employee. However always chance to enter
new company but seriously its need massive investment and huge risk. Wal-Mart already make
a plane, open 40-55 more discount shop and 200-210 Supercenter. Last year sell increase
12.3%. They always offer good advantage from other company.

Bargaining Power of Suppliers

Wal-Mart dominate bargaining power of suppliers because has a large of market share. They
offer for business wholesaler, manufacture and small entrepreneur that give them power to
dominate suppliers by giving threat switch other supplier. Wal-Mart never do business deal
with large supplier those have bargaining power such as P&G, Coca-Cola, Proctor & Gamble.

Bargaining Power of Buyer

Most of customer look for low price with good quality. They can quickly switch one company
to another company if not satisfice with service. Wal-Mart no doing monopoly business
because competitor always offer substitute product with price. However, wide range of
selection, quality and customer services buyer give them high prefer. Wal-Mart belief customer
always have bargaining power. They do not want to dominate but ensuring every customer
satisfaction.

Threat of Substitute Product

There were not any substitute company like Wal-Mart when launch in market such as low price
and wide range of selection. Customer can make choose other retail shop or product only
specific services not wide range like Wal-Mart. They make substitute product by them-self.

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For example online shop Wal-Matr.com. Customer can buy or order in online cheaper than
store because do not need to storage or display cost and pick up from convenient store.

Rivalry Among Existing Competitor

Sams Wholesale is competitor for Wal-Mart. They are offering same product like Wal-Mart
but Wal-Mart has strong distribution channel and company making profit. However, Target
and K-mart also competitor. Domestically Target has 1494 store. Its not make any effect on
Wal-Mart global business but competition with domestic store.

It is important to every company focus on Michael E Porter five forces model that can be help
decision making and future probability (St.Hilaire, 2014).

Internal Environment

Scientist prove that SWOT analysis is not enough appearance environment factor influence
organization success. In SWOT analysis said that few environment factor for example
extremely competitive industry is inflexible to offer satisfactory condition for company.
However, this theory proven wrong by few company for example Wal-Mart in retail industry
and Southwest Airlines in US airlines industry. This limitation overcome by VRIO analysis.

VRIO Analysis
Everyday Low Prices is famous and strong slogan by Wal-Mart. This slogan make them
unique. With meaning of this slogan if customer come, they will offer best and competitor
price. Wal-Mart gain large market share by using this valuable resources (VRIO Analysis,
2013). VRIO model analysis on value, rare, cost to imitate and non-substitutable or
organization.

Value
Wal-Mart make unique value and capability for customer and create differentiated from
competitor. The capability includes unique store design, strong supply chain management, POS
data analysis and international acquisitions. Those are valuable resource for Wal-Mart in retail
industry. Sometimes valuable resource work as a tonic for company. It can be exclusive quality
product, innovation in market, finish goods or respect customer demand.

Mexico City was first international venue by the Wal-Mart. In 1997 they make join venture
with Sams Club. It was Mexican company name as Cifra and year 2000, its become Wal-

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Mart de Mexico (Walmart.com's History, 2014). Wal-Mart understand the market, use their
expertise and capability with Cifra. Its make them successful international Wal-Mart and
become nearly 1700 store in Mexico with number one retailer (Internal Analysis, 2012).

The design of the store base on customer understanding. Design includes low profile shelves,
bright of product and home brand. Those features make customer happy and confidence. They
quickly find out needed product.

Cross docketing is one of the successful practice in Wal-Mart. Its logistic practice with loading,
unloading or unnecessary storage of inventory. Supply chain management team quickly find
out current stock of inventory.

Rare
Wal-Mart facing penetrating competition. Target, K-mart, Sears, Home Depot are the main
competitor with Wal-Mart. Those retailer all the time do price mark down. The difference
between competitor and Wal-Mart is price and customer services. Its hard to give service like
Wal-Mart.

The employment level is age 15 to up. They belief that not educational base job. Its team work.
The mission of Wal-Mart is Save people money, they can live better. According to Sam
Waltons improve people average life at daily products with lowest price (Lee, 2011).

Cost to Imitate
Imitability means that a companys brand, product, resource possibility copy by competitor.
Its very important to strategic management. When its hard or expensive to specific product,
company gain competitor advantage. Its increase the brand value. For example Disney make
unique character Mickey Mouse. This animation film was new in market and worldwide remain
popular. Mickey Mouse character imitation nearly impossible. Wal-Mart selling same product
like other competitor. For example clothes, fresh food, electronic items etc. There is not direct
advantage.

Organization
In VRIO analysis, final factor is organization. It can be define as a skill, using way of resource
or way of value adding. Resource can be available but company should find the right way for

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using. However, if company cannot find right way of using resource, it can be useless for
competitor advantage. Some\time company structure make advantage from competitor.

Value Chain Analysis

This model analysis the companys main activities. Also evaluate the efficiency and
effectiveness. Its help organization to decision making, how company add value and get
competitor advantage.

Administration: Wal-Mart use effective communication flow. Its direct communication

between each store and head office. Head quarter send all information on competitor and get
feedback from local store.

Human Resource Management: Human resource management department always contact

with employees. This team always motivate, train and update skill for employee and gather
information from them. Wal-Mart employee receive low payment but get extra health care,
bonus, and retirement facilities.

Technology: Large organization invest use capital on technology because its make
effectiveness. For example Wal-Mart use cross docket method for inventory or stock by
technology which help to reduce maintains cost.

Procurement: Wal-Mart directly purchase from Manufacture Company and maintain by head
quarter. Also Manufacture Company should cut profit margin and meet employee policy. They
give facility supplier can control inventory for example P&G.

Operation: Wal-Mart offer to customer low price product. Its own national brand and great
value because of all store decentralize and store manager has power to make decision on
product. For this reason manager can understand local competitor.

Marketing and Sale: Wal-Marts goal, mission statement and vision everything symbol of
marketing for example slogan Everyday lowest price. This things minimize cost and save
advertisement expense.

Service: Wal-Mart make unique brand name for their service and customer satisfaction. They
have product 100% money back guaranty and refund policy.

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Recommendation

Wal-Mart is successful in retail business as lowest price leadership. In future they will maintain
same strategy. Wal-Mart should invest on increase strength, opportunities and eliminate threat.
Company need to focus on cultural practices. Saturday morning need to continue because its
maintain of employees sprits.

Europe and Asia are strong opportunities to expend market. As point of view international
market, should focus on customer demand like Canada and Mexico. Low wages is big issue of
Wal-Mart than competitor. Health care, bonus and retirement facilities are includes on salary.
Its make higher than other organization. Company need discus with employee and motivate.

Around the world like Wal-Mart save people money and they can live better life. Sam Walton
make unique culture on moral and value. This rules remain Wal-Mart number one and world
most admire company.

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Bibliography
Brave (Producer), & Greenwald, R. (Director). (2005). Wal-Mart: The High Cost of Low Price [Motion
Picture]. United State of America. Retrieved May 26, 2014, from
http://www.bravenewfilms.org/walmartmovie

Cartered Global Management Accountant. (2014, May 21). Retrieved May 21, 2014, from Porters
Five Forces of Competitive Position Analysis:
http://www.cgma.org/Resources/Tools/essential-tools/Pages/porters-five-forces.aspx

Ethics & Integrity. (2014, May 15). Retrieved May 15, 2014, from Global Ethic:
http://corporate.walmart.com/our-story/ethics-integrity

Internal Analysis. (2012, Febuary 23). Retrieved May 27, 2014, from Andrew Fanno:
http://andrewfanno.wordpress.com/2012/02/23/walmart-part-3-internal-analysis/

Lee, P. (2011, March 28). Walmart. (P. Lee, Ed.) Going Green, 23. Retrieved May 29, 2014, from
http://www.allfreepapers.com/print/Walmart/3046.html

Our Story. (2014, May 20). Retrieved May 20, 2014, from Walmart:
http://corporate.walmart.com/our-story/

St.Hilaire, K. (2014, May 27). Porters Five Forces Model for Wal-Mart. Retrieved May 27, 2014, from
Porters Five Forces Model for Wal-Mart: http://www.kylesthilaire.com/porters-five-forces-
model-for-wal-mart/

Swot And Pest Analysis Of Wal Mart Management Essay. (2014, May 20). Retrieved May 20, 2014,
from UKessays: http://www.ukessays.com/essays/management/swot-and-pest-analysis-of-
wal-mart-management-essay.php

The Wall Street Journal. (2014, May 23). Retrieved May 23, 2014, from The Wall Street Journal:
http://online.wsj.com/news/articles/SB10001424052748704875604575280414218878150

VRIO Analysis. (2013, April 14). Retrieved May 29, 2014, from SAR Report:
https://sites.google.com/site/sardiscountvarietystores/vrio-analysis

Walmart.com's History. (2014, May 28). Retrieved May 28, 2014, from Walmart.com:
http://help.walmart.com/app/answers/detail/a_id/6

WalMart: PEST Analysis. (2014, May 26). Retrieved May 26, 2014, from Scribd:
http://www.scribd.com/doc/158623175/WalMart-PEST-Analysis

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