Today we will perform Pestle analysis of Walmart to analyze its external environment opportunities and threats and how these external factors affect its profitability and performance in the retail industry.
Walmart Inc. also known as Walmart Stores Inc. is an American based Retail Company that operates a chain of hypermarkets, discount and grocery stores. Sam Walton found Walmart in 1962. Walmart is operating in 28 countries with 11,348 retail units. These days Walmart is not only concentrated on Physical stores but also focuses on ecommerce business operations. The company purchased Jet.com in 2016 which is an ecommerce company. The basic logic behind this acquisition was to compete with Amazon.com.
Walmart is the retail industry leader and managed to withstand the pestel factors – political, economic, social, technological, environmental and legal – of its external environment. The retail industry is changing overtime and Walmart should regularly analyze the industry to exploit opportunities and safeguard itself for threat in external environment. Here is the Pestle Analysis of Walmart Inc.
Table of Contents
How Political Factors affect Walmart
Walmart is the retail industry leader operating worldwide and serving 270 million customer weekly. The Company is required to handle political issues and government activities that are creating opportunity or threat that can affect Walmart.
Political stability is an important pestle analysis factor for Walmart, its suppliers and manufacturers. If Walmart want to expand its physical stores and ecommerce platform political stability plays a crucial role in the success of its expansion strategy. Furthermore political stability in the locations where its suppliers and manufacturers are operating allows suppliers to meet standards and focus on operations.
The success of Wal-Mart expansion relies on exploiting Chinese market opportunities and handle threats wisely. Every American company should follow the guideline “When in China, do as the Chinese politicians want you to.” Once Walmart China sold a prohibited product in China and government shutdown its operations in Chongqing for a certain period time.
Political pressures for higher wages is another political issue and a threat to amazon. For example, The Vermont senator introduced a bill “Stop Walmart Act” that proposed to stop companies like Walmart and Amazon from stock buyback unless they raised the minimum wage to $15 per hour followed by several other terms and conditions as well. Such Government Office Holders decisions can badly affect Walmart brand image.
How Economic Factors affect Walmart
Economic changes and instability is another significant threat to Walmart Inc. and can affect its profitability around the globe.
According to Walmart Annual Report economic factors that affect Walmart can also affect its suppliers as a result an increase in cost of goods sold can affect its edlp pricing strategy. Lower pricing is the main competitive advantage of Walmart. In this case Walmart cannot compete with its competitors for a long time and can face thinner profit margins or even a loss.
Economic slowdown and recession in the U.S or any other geography where Walmart is operating can badly affect the consumers demand for Walmart products. As a result this can affect the net sale and can slower the inventory turnover.
Higher interest rate is another economic factor that can affect Walmart earning as a result it can face thin profit margins which Walmart cannot afford at this time. Other factors include increase in medical and utility bills, increase in unemployment which can weaken consumer buying power.
How Social Factors affect Walmart
Social factors include all those factors related to consumer life style, culture and changing behavior can impact Walmart business strategy, growth and performance.
Walmart is the successful retailer in the United States but failed in Germany at a loss of $1 billion. According to some critics in Germany one of the reasons was culture issues that Walmart was unable to understand. The Walmart Germany was developed on the basis of American Culture which was much different from German Culture.
Consumers are getting health conscious and it’s an opportunity for Walmart to increase healthy and organic food items across its retail stores locations. It will increase Walmart brand image in the mind of consumers. Today everyone is crazy for online shopping. Senior citizens who are unable to go outside can also avail the online shopping facility. Walmart can exploit this opportunity by expanding its ecommerce business.
How Technological Factors affect Walmart
Technology is greatly influence different industries worldwide and Walmart is one of them. Business process automation also digital transformation is greatly affected Walmart Inc. According to Walmart currently robots and automated units – for store maintenance, fulfilling online orders – are functioning in few locations and that it is testing this technology for months and looking for positive response. This new technology is a great opportunity for Walmart and this technology allow its staff to concentrate on selling products and serving customers.
The use of mobiles, tablets and laptops create a huge opportunity for ecommerce business like Walmart and Amazon. Such companies can attract customers by using websites and affiliate marketing strategies to increase market share and sales.
E commerce platform enabled Wal-Mart to get in touch with the customer 24/7. This system is a good opportunity for Walmart to reduce costs – labor cost, reconciliation, supervisions, and data entry – and improve its thing profit margins or offer cheaper products and maintain its competitive advantage of low pricing strategy in the industry.
How Environmental Factors affect Walmart
Few year back the world’s largest retailer Walmart was charged for dumping of hazardous fertilizers and pesticides and such dumps made their ways into sewage pipes. In this Pestle analysis of Walmart we can find such environmental issues can affect retail giant brand image.
Emission reduction is another challenge in the Walmart external environment. Each weak, Walmart serve more than 200 million customer and even more customer visit Walmart’s ecommerce website for online shopping. This can be considered the largest environmental footprint. To address this environmental issue Walmart launched Project Gigaton. Walmart and its suppliers are working together to avoid one gigaton of emission by year 2030.
How Legal Factors affect Walmart
Walmart is one of the largest retailer operating in 28 counter and severing millions of customers every week. Walmart is subject to comply laws and regulations in the different parts of the world. These external environment factors in the pestel analysis affect Walmart and its competitors in the retail industry.
There are several legal factors that can affect Walmart, for example, discrimination laws, employment regulations laws, food and safety regulations, data protection laws, consumer protection laws for ecommerce business.
Walmart agreed to pay $65 million to almost 1000 current and retired cashiers in the State of California who accused the world largest retailer Walmart for not providing seating while they worked and that was state laws violation.
