Question

Create a Situational analysis for the company, Walmart entering a new international market that includes: Business Environment analysis

Political/Legal/Institutional Environments

Regulatory Environment (Present and anticipated)

Economic Environment (Conditions and Trends)

Social and Cultural Environment (Factors and Trends)

Demographic Environment (Data and Identification of Trends)

Technological Environment (Factors and Trends)

Natural Environment (Effect of Seasonal or Climatic Factors)

Physical Environment (Infrastructure Indicators)

Nature of Demand

Size and Extent of Demand

Structure of the Industry

Cost Structure of the Industry

Competitive Structure of the Industry

Competitor Analysis (in country of investment)

Answer 1

Situational Analysis - It is an evaluation of the internal and external factors by an organization which will effect its performance and decision making strategies. Whenever an organization is planning to launch a new product or enter a new market, the first step is to create a marketing plan and second step is situational analysis.

A brief description of Walmart - Walmart, Inc. is an American multinational retail brand founded by Sam Walton in 1962 incorporated in 1969 in Delaware.  It changed its name to Wal-Mart Stores, Inc. in 1970. The company was listed on the New York Stock Exchange in 1972. By 1990, Walmart was America's number-one retailer. Gradually, Walmart expanded into other countries like Canada, Mexico, United Kingdom etc. Today it has more than 11,000 stores globally, it employs more than 2 million associates and its revenue in 2018 was close to 500 Billion.

Before entering a new international market, a situational analysis is carried out by Walmart which identifies the factors that could impact the company's performance. This analysis is carried out using tools such as PESTEL Analysis, Porters' Five Forces Analysis, SWOT Analysis.

PESTEL Analysis studies Political, Economical, Socio-Cultural, Technological, Environmental, Legal environment of the market.

• Walmart considers the political factor in the retail market like stability of the government . It should look into the economic and trading policies of the new market (NAFTA between Canada, Mexico and USA)
• It should look into the unemployment rate. Low employment rate during recession will lead to lower income which will ultimately lead to lower spending by people and financial loss by the company.
• Walmart needs to adapt to cultural norms of the country it operates in. It needs to follow the international labour laws and minimum wage requirements of certain countries.
• Walmart needs to address technological trends of the market it is about to enter. It can offer online shopping and use social networking sites to boost sales.
• Conservation of environment is also an important factor. It should follow environment friendly products trend.
• Legal environment of the country will play a key role in Walmart's expansion like taxation policies etc.

Porters' Five Forces Analysis is a tool to study the competition of the business. These forces are Bargaining power of buyers and suppliers, Threat of substitute products and brands and level of competitive rivalry. (It covers Nature of Demand, Size and Extent of Demand, Competitive Structure of the Industry, Competitor Analysis).

• In today's world, control is in the hands of the buyers. This will help to analyse the ability of the customers to determine the price of the product. Prices in turn will determine the nature, size and extent of demand. if the retail brand provides quality product at affordable prices, they will enjoy higher customer loyalty which will boost sales.
• Bargaining power of Walmart's suppliers is low. As Walmart buys in bulk, they are able to press the suppliers for lower prices.
• Threat of substitutes is high for retail brands in the market but it gets moderated for larger brands like Walmart as they can offer wide range of products at competitive prices.
• The threat of new entrants is low as it requires a huge capital investment and a new organization cannot achieve the same level of economies of scale of an existing organization.
• The level of competition and rivalry is very high in retail market. Only financially strong organizations can survive in a new market. One key strategy adopted by Walmart is lowest pricing of the available product.

Other factors -

• Demographic Environment - The study of the target population comes under demographic environment. It is important to determine who are most likely to buy the product. the organization should not loose investment in producing something which is not demanded by the public.
• Institutional and Regulatory Environment - An organization must carry on its business activities keeping in mind the policies and framework developed by the Institutional and Regulatory authorities of the country it operates in.
• Natural Environment - Walmart should supply goods considering the seasonal or climatic conditions of the new market. Most Asian countries enjoy warm weather for better part of the year as compared to US. Supplying woolen clothes in these markets will decline the sales revenue.
• Physical Environment - It comprises of the study of the resources (natural and man-made) available in the operating country. Careful observation of the resources available like land, water, vegetation, infrastructure like roads, dams, power, transportation etc. is important. It affects the overall sales revenue of the organization.
• Cost Structure of the Industry - It is essential to study the cost structure of the retail industry in the new market. Whether the country follows labor-intensive or capital-intensive techniques of production, studying whether the market is dominated by small or big manufacturers etc.