Question

Evaluate changes in Walmart’s general environment (e.g., PESTEL analysis) to identify trends that represent both opportunities and challenges. What trends are the most important for Walmart’s future?

Answer 1

Walmart’s remote environment or macro-environment involves factors that determine the company’s success. These factors are best presented through the PESTEL/PESTLE analysis model. As a retail industry leader, Walmart continues to withstand the potential negative effects of threats in the political, economic, sociocultural, technological, ecological and legal (PESTEL/PESTLE) aspects of its business. However, this success requires continued evaluation of the retail industry environment. These PESTEL/PESTLE factors also change over time, thereby imposing challenges for Walmart. These changes may present threats or opportunities. Walmart must exploit the opportunities and protect itself from threats. In using the PESTEL/PESTLE analysis, Walmart leaders and managers can determine which factors to prioritize in strategy development.

The external factors in the remote or macro-environment of Walmart, based on the PESTEL/PESTLE analysis, indicate the need for strategic focus on economic, sociocultural and ecological concerns.

Walmart considers political factors in the retail market, usually pertaining to government policies. In the PESTEL/PESTLE analysis model, politically active interest groups are also significant. The following are the political external factors in Walmart’s remote/macro environment:

1. High stability of politics (opportunity)
2. Political support for globalization (opportunity)
3. Political pressure for higher wages (threat)

The remote/macro-environmental factors show that Walmart must address the threat of higher wages. This is a threat because it goes against the cost minimization essential in Walmart’s cost leadership generic strategy.

Walmart is under significant pressure from economic changes. Any such change directly leads to changes in the company’s revenues. Based on the PESTEL/PESTLE analysis model, the following are the economic external factors in Walmart’s remote/macro environment:

1. Stability of major economies (opportunity)
2. Continued growth of developing countries (opportunity)
3. Decreasing unemployment in the United States (opportunity)

All of these economic factors show that Walmart should exploit opportunities around the world. Emphasis should be on the fast-growing economies of developing countries, which have increasing demand for goods from retail firms like Walmart.

The social or sociocultural factors in the business environment of Walmart influence consumer perception and preferences. In the PESTEL/PESTLE analysis model, the following are the social or sociocultural external factors in Walmart’s remote/macro environment:

1. Healthy lifestyle trend (opportunity)
2. Cultural diversity trend (opportunity)
3. Urban migration (opportunity)

These social/sociocultural factors present opportunities for Walmart. The company can increase its array of healthful products. Walmart can also increase the variety of its products to satisfy various cultural preferences. Moreover, the company can adjust its strategies to exploit increasing consumer demand in cities and surrounding areas.

Walmart needs to address technological trends. In the context of the PESTEL/PESTLE analysis model, technologies affect the retail industry’s competitive landscape. The following are the technological external factors in Walmart’s remote/macro environment:

1. Increasing business automation (opportunity)
2. Business analytics or big data (opportunity)
3. Increasing mobile device usage among consumers (opportunity)

Walmart can increase its investment in all three factors. In exploiting the opportunity in mobile device usage of customers, the company must boost its online presence. Online marketing and online selling increase Walmart’s revenues.

The ecological or environmental factors significant in Walmart’s business pertain to environmental conservation concerns. Environmental conservation is now a popular principle. The following are the ecological external factors in Walmart’s remote/macro environment in the PESTEL/PESTLE analysis model:

1. Business sustainability trend (opportunity)
2. Environmentally friendly products trend (opportunity)

To attain business sustainability, Walmart must improve operational efficiency. Technological innovation helps improve efficiency in business. Improved policies and standards on products sold at its retail stores can also strengthen Walmart in addressing these ecological factors.

Walmart is subject to the requirements of laws and regulations. Based on the PESTEL/PESTLE analysis model, these external factors usually impose limits on retail firms. The following are the legal external factors in Walmart’s remote/macro environment:

1. Food safety regulations (opportunity)
2. Employment regulations (opportunity)
3. Tax law reform (threat)

Tax reform is a potential threat if it leads to higher tax rates. Walmart must take food safety regulations as an opportunity to improve quality standards. Also, enhancing Walmart’s human resource management practices can exploit opportunities concerning employment regulations.

1. Strength in Both In-Store and Online Grocery Sales

Walmart is the largest grocer by sales in the U.S. According to Packaged Facts, 59% of grocery shoppers have purchased groceries from Walmart in the last 3 months.

To counteract rising competition from Amazon and other online retailers, Walmart has expanded its omni-channel experience with online ordering and in-store pickup. Packaged Facts estimates that Walmart’s “click-and-collect” grocery sales will grow a whopping 154% on average each year from 2017 through 2021.

Consumers that shop for online groceries at Walmart are drawn to low prices, one-stop convenience, brand selection, and curbside service. However, competitors may be able to exploit Walmart’s weaknesses in the future as online grocery shopping becomes more commonplace.

2. Broad Financial Services Offerings

Walmart is not only a leader when it comes to grocery sales, it also offers the broadest array of consumer financial services compared to other major retailers.

Financial services and related products generate about $1.6 billion in revenue, according to estimates by Packaged Facts. This number does not even include revenue made by Walmart’s partners, such as Green Dot, MoneyGram, Synchrony Financial, and Jackson Hewitt.

However, the biggest payoff for Walmart may be the role of financial services in boosting store traffic. When shoppers visit in-store bank branches, for example, they are likely to pick up a variety of other groceries and merchandise at the same time.

3. A Large Base of Customers That Buy Pet Products

Another area where Walmart shines is in selling pet products. More pet owners purchase from Walmart than any other retailer, according to Packaged Facts. Of the 67 million pet-owning households in the U.S, 43 million shop at Walmart.

When considering the sheer size of its customer base, Walmart has a significant lead over competitors such as Target, Kroger, and Costco, which only have a combined customer base of 35 million pet-owning U.S. households.

In addition, a significant portion of consumers are also purchasing more pet products from Walmart than they did a few years ago.