Every business organization operates in a business environment and the requirement for the business organizations is to take into account the effects and impacts of the business environmental factors for the organizational success. These factors are considered as the MACRO environmental factors or the external environmental factors. These are the uncontrollable elements or factors and have major influence on the decision-making process, performance and business strategies (Baker, 2014). The presence of different types of tools can be seen for the analysis of these external environmental factors; and one of these major tools is PESTEL Analysis. PESTEL analysis is regarded as a special framework and is used for scanning the external macro environment of the business organizations. All the letters of PESTEL stand for political, economic, social, technological, environmental and legal factors (Kennedy, 2016). The main aim of the report is the analysis of the MACRO environmental factors of a specific business organization. For the purpose of this report, Walmart Inc., USA is taken into consideration. Walmart Inc. (Walmart) is an American multinational retail company having operations in the in a chain of discout department stores, grocery stores and hypermarkets.
It can be seen from the above dicusison that this report involves in the MACRO environmental analysis of Walmart with the help of PETEL analysis; and the analysis is shown below:
P – Political Factors
The inclusion of some government and other factors can be seen in the political factors and these factors have major impact on the companies like Walmart as it is trying to operate both nationally and internationally. The interference of Walmart can be seen with the political factors due to the large size as well as significant of the United States (US) economy. In the year 2013, it was discovered that Walmart was involved in the process to convince the employees for making political contribution and the reason was to gain positive political impact. In addition, Walmart is considered among the top 100 political donors from the year 1989 (prospect.org, 2018). These factors indicate towards the impact of political factors on the business of Walmart. In addition, at the time of international expansion, it is needed for Walmart to take into consideration some of the major political aspects like stability of the economy, economic growth in the country, rate of employment and others. All these external political factors have impact on the business of Walmart.
E – Economic Factors
There are some major economic factors having effects on the revenue and profit of Walmart either directly or indirectly. For example, the currency exchange rate between US and other countries can be considered as a major economic factor having effect on the profit of the company. In the fourth quarter of the year 2015, the revenue of Walmart increased by 2.4% to $81.5 billion. However, 9.7% decline in the US current offset this revenue that led to the decline of revenue to $32.7 billion. This whole aspect created a negate effect of $4.7 billion due to the fluctuation in foreign currency exchange (Tenebruso, 2016). For Walmart, cost of labor can be considered as another major economic factor as many criticized Walmart for the low wage rate to their labors. For example, Walmart had to raise the minimum wage rate to $9 per hour in April 2015 and this affected the earnings of the company by 2% in the second quarter of 2015. Apart from these, some other economic factors having impact on the business of Walmart are change in tax rate, unemployment rate, change in rate of inertest, rate of inflation and others.
S – Social Factors
Social factors are considered as crucial external environmental factors for the business operations of as these factors have influence on consumer preference and perception. The presence of certain social factors can be seen for the business of Walmart. The spending habit of the customers of US is a major social factor for the company that is influenced by the present economic condition of the country (Schaltegger & Wagner, 2017). At the time of global financial crisis, due to the presence of massive unemployment, the focus of the common people shifted to the retail products with lowe price. In this situation, Walmart was able in gaining the customer’s focus due to the discounted price they offered. Another major social factor for the retail business of Walmart is the preference of the consumers related to the layout of the retail stores. It needs to be mentioned that Walmart uses to change the layout the retail stores as per the demand of the customers with the aim to ease the shopping experience for them. Some of the other social factors for Walmart are the trend for health lifestyle, cultural diversity and urban migration (Gifford & Nilsson, 2014).
T – Technological Factors
Technological factor is considered as another major external environmental factor having impact on the business operations of Walmart. The introduction of new technology has been majorly helpful for the retail companies like Walmart in increasing their business efficiency. For example, with the assistance of new advanced technology, Walmart has been able in doing research and development in different aspects of retail industry (Gillespie and Riddle 2015). The increased improvement in the automation technology in the retail industry is providing the company with great opportunities in the process of business expansion outside the boundary of US. Some other major technological external factors having impact on the business operations of Walmart are increased technological development in business automation, analysis of big data with the assistance of improved technology, increased usage of the mobile devises among the customers and others. In order to take advantage of all of these technological factors, it is needed for Walmart to increase their investment in these areas of technology. Most importantly, the introduction of online marketing and online selling has majorly increased the revenue of the company (Zeriti et al., 2014).
E – Environmental Factors
Environmental factors are considered crucial external environmental factors for the companies and it is related to the adoption of environmental friendly business practices conducted by the business organizations. Over the decade, it can be observed that Walmart has taken into consideration different kinds of sustainability initiatives with the aim to minimize the effects of their business operations on the environment and society (Armstrong et al., 2014). For example, Walmart has taken a major sustainability initiative with the aim to reduce the amount of waste from their business activities. In the present years, climate change is a major issue for the business organizations and the companies are needed to consider this matter with utmost importance. For this reason, Walmart has taken some of the major sustainability related initiatives with the aim to fight with the issue of climate change. Apart from these, some other environmental factors that Walmart have considered are environment friendly products, business sustainability trend and others (Armstrong et al., 2015). Apart from this, it is one of the major sustainability related responsibility of Walmart to disclose the information about their sustainability as well as environmental initiative within the integrated annual report. Walmart must consider all these aspects related to environmental external factors.
L – Legal Factors
Legal factors are crucial external environmental factors and it is needed for the retail companies to remain compliant with the required laws and regulations while conducting the business operations. It can be observed from the history of Walmart that the company had to suffer from large number of lawsuits related to the labor force (Achroll & Kotler, 2014). Apart from this, different types of legal issues made the situation difficult for Walmart like the discrimination of low wages and others. For this reasons, in the recent years, the main focus of Walmart is to develop better working conduction by complying with the required rules and regulations. Some of the major regulations and laws with which Walmart has complied are the food safety regulation, taxation law reformation, employment regulations, workplace health and safety and others. It is needed for Walmart to consider all these aspects in the environmental factors (Kotler, Kartajaya & Setiawan, 2016).
Conclusion
It can be observed from the above discussion that all the six elements of PESTEL have their impact on the business operations of Walmart. The analysis of policitical factors states that Walmart has been interfering with the politics of US in order to gain favorable business condition. The presence of some economic factor affects the business operations of Walmart like rate of interest, inflations, currency exchange difference and others. At the same time, social factors like the preference and choice of the customers have impact on the business operations of Walmart. The above discussion also states that the improved technology as well as automation has been a major help for the business operations of Walmart. In addition, due to the increased concern about different sustainability and environmental issues, Walmart has undertaken certain initiatives for addressing the environmental and sustainability issues. Lastly, Walmart has to face certain difficulties while complying with many regulations and laws.
References
Achroll, R. S., & Kotler, P. (2014). The service-dominant logic for marketing. The service-dominant logic of marketing: Dialog, debate, and directions, 320.
Armstrong, G., Adam, S., Denize, S., & Kotler, P. (2014). Principles of marketing. Pearson Australia.
Armstrong, G., Kotler, P., Harker, M., & Brennan, R. (2015). Marketing: an introduction.
Baker, M. J. (2014). Marketing strategy and management. Macmillan International Higher Education.
Gifford, R., & Nilsson, A. (2014). Personal and social factors that influence pro?environmental concern and behaviour: A review. International Journal of Psychology, 49(3), 141-157.
Gillespie, K. and Riddle, L., 2015. Global marketing. Routledge.
How Walmart and Home Depot Are Buying Huge Political Influence. (2018). The American Prospect. Retrieved 6 October 2018, from https://prospect.org/article/how-walmart-and-home-depot-are-buying-huge-political-influence
Kennedy, A. M. (2016). Macro-social marketing. Journal of Macromarketing, 36(3), 354-365.
Kotler, P., Kartajaya, H., & Setiawan, I. (2016). Marketing 4.0: Moving from traditional to digital. John Wiley & Sons.
Schaltegger, S., & Wagner, M. (2017). Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.
Tenebruso, J. (2016). Wal-Mart Stores Inc. Slashes Sales Outlook — The Motley Fool. The Motley Fool. Retrieved 6 October 2018, from https://www.fool.com/investing/general/2016/02/19/wal-mart-stores-inc-slashes-sales-outlook.aspx
Zeriti, A., Robson, M.J., Spyropoulou, S. and Leonidou, C.N., 2014. Sustainable export marketing strategy fit and performance. Journal of International Marketing, 22(4), pp.44-66.
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