The Factors Of Pest Analysis Marketing Essay

One of the intentions of this report is to make a PEST analysis, which consists of the external factors that tend to influence the whole organization. These indirect external factors may or may not have a quick and straightaway influence on the company; however, it can surely have a massive impact on it. The factors of PEST analysis include: political, economic, social and technological.

The second intention of this work is to analyse Porter’s Five Competitive Forces of Walmart. The five main elements of the Porter’s Five Competitive Forces are the threat of new entrants, as well as competitive rivalry, the threat of substitute products, the bargaining power of suppliers and, finally, the bargaining power of buyers.

So for all of these analyses I have chosen Walmart, one of the most renown and influential companies in the whole of retail market.

Introduction

Walmart, the very organization I am interested in, was founded by a famous and legendary man, Sam Walton in the year of 1962 in Rogers, Arkansas. From that time on, the chain has been rapidly growing. It started with only 9 stores across the country and total revenue of $ 1.4 million. In the year 1972 it has also been listed in the New York stock exchange.

Thanks to Sam Walton’s leading and contributing, the company has become internationally known and opened its very first store in 1991 in Mexico City. Later on, Walmart has expanded its stores to Puerto Rico in 1992, Canada in 1994, Brazil in 1995, and South Korea in 1996 and to Germany in 1998.

Walmart’s logo has been renovated several times on various occasions during its 46-year history.

At present time Walmart is divided into four different parts: Walmart Supercenters, Walmart Express Stores, Walmart Discount Stores and Walmart Neighbourhood Markets.

An average Walmart Discount Store hires around 225 associates and there a customer can find a huge variety of value priced diverse merchandise, starting from electronic gadgets, toys and games, up to automobile supplies and garden tools.

In the year of 1983, Walmart opened its very first Supercentre, which is currently the company’s dominant format. There clients can purchase such groceries as bakery, meat and dairy products, beverages and frozen foods, as well as household supplies.

The company also has an online shopping service called Walmart.com, which was founded in the year 2000. It is very convenient and makes the whole process of purchasing goods a much more pleasant and enjoyable experience. Walmart.com has a vast selection and differentiation of products, which count up to more than 1 million. Also during the holiday season, the website features many special offers and discounts that can be available only online. However the site also provides information about holiday special offers.

Since recently Walmart has offered their clients an option of purchasing goods online and then have them shipped for free to the customer’s local store so they can obtain their purchases right there.

As of 2012, Walmart controls and runs over 10,130 stores in 27 countries worldwide, all with 69 different names with the total revenue of $ 443 billion, providing the largest revenues in the entire world.

Walmart’s main and major product lines are customer electronic products, garden tools, health and beauty products, sports and fitness goods, home décor, bedroom furniture and goods, toys and grocery as well.

Walmart is not only one of the biggest retail chains in the whole world with more than 2.2 million employees worldwide, but it is also a financial strength. Its significance and importance, as well as global presence, makes Walmart a superior competitor in the retailing business. And what’s rather interesting, is that it all started with Sam Walton’s uncomplicated idea to offer clients and customers prices less expensive than anywhere else. This is the very approach of Walmart to their customers that has shaped the company’s escalation.

Because of the company’s low prices, millions of clients return to purchase goods from their stores every single day. Walmart’s intention to be the leader in reasonably low prices in the society has saved lots of money for their customers, which as research has shown can total up to hundreds of dollars for each family.

At present Walmart is so independent and secure that it, in fact, has the ultimate power to outline the labour market worldwide and to affect, or even change, the whole industry of retail itself.

The Mission Statement of Walmart

Usually the Mission statement points out why the industry is, in fact, in the business and how it executes its missions, and carries out various tasks and activities. It states what the company promises to do for their clients, shareholders, staff and the society itself.

Walmart Stores Mission Statement is: “To help people save money so they can live better”

Walmart’s mission is to offer goods and services to their customers at a cheap price. With their knowledge and vast differentiation of products, they range from food items, school supplies, clothes, household goods, music, etc. Walmart attempts to be one of the best and finest retail stores in the entire industry and to give and promise the best value for money to their clients. In the company, the staff contributes a lot and influences and determines what their business actually is, and what it will be in the near and distant future.

The company believes that by working closely and tightly with their suppliers and communities, it will be able to reach people around the globe and to help them make their lives better.

At Walmart clients can be promised and ensured with satisfaction of what products they will purchase, the service they will receive, as well as the convenient and suitable working hours.

PEST Analysis

The PEST analysis is a model for reviewing and surveying a company’s strategy or its position in the market. It measures the market, along with its competitors from the viewpoint of a particular business. It is also used to describe the framework of macro environmental factors that a company should regard and take into consideration. Of course, the external factors may vary in significance to a given company based on the products and services that it produces and also on the industry it is in.

Political factors

Political factors are laws and regulations, legislation and policies set by the government in a particular country. Companies that wish to start a business or are already doing one in a specific country should keep in mind the rules and laws of that same country. Walmart runs its stores in over 15 countries around the globe and thus, works in an international atmosphere with various companies. The retailers are usually supported by the government in their management, and encouraged to turn low paid local employment to high efficient and high payment jobs.

To add up to all of this is the demands and requirements from such population of the society as pensioners, employed people and also students. Walmart, being a labour intensive chain, realises that trade has a huge affect on jobs and social factors. It also offers economically reasonable prices if compared to its rivals, and has key factors like solid infrastructure, for example economical culture and pleasant atmosphere and work conditions at work. Walmart makes certain that they are aware and follow terms and regulations in a particular country, in which they are opening up their stores.

Economic factors

Economic factor relates to the economy of the country itself, as well as market and trade cycles. Over the past years Walmart has had a stable economic condition and had 11% growth totalling in $6.5 billion.

Why Walmart’s figure has been doing so well so far is because it takes into account not only the economy of the company, but also of the country’s economy in which they are setting up their business. Another reason for its success is that Walmart prefers to first check the economical factors of the county before actually doing any business there. The main economical factors that are worth considering are economic stability and people’s purchasing power. It’s crucial to acknowledge these factors for doing business in the third world countries because any change in economy can increase the actual price of the goods and services, which the company offers to its customers and of course the demand for these products will go down.

Social Factors

Social factors are made up of lifestyle trends, major events and various influences, religious and ethnic factors. Walmart has a tendency of evaluating and measuring social factors, just like economic factors, of a country they have chosen to do business in. Social values and frugality are also quite important factors. Walmart appeals to consumers with a rather low income, nevertheless, it ensures that the goods, products and services that they provide are apprised and accepted by their customers. It is a known fact that Walmart doesn’t supply its stores with goods that are likely to cause various complaints from the clients and customers. The company makes good relationships with its customers in engaging and taking part in various public activities.

Technological Factors

Technological factors generally include various factors like maturity of technology, global communications and innovations, as well as technology legislation. Nowadays technology plays an immense part in the whole society. As a matter of fact, technology hugely improves quality of the products, however it tends to decrease the amount of time to promote and advertise the goods and services. Walmart was quick to accept new technology and to make effective and best use of it. It operates most of its logistics with the usage of a modern system called hub-and-spoke of its distribution centres.

Customers that shop at Walmart stores get the most benefits out of it. Walmart believes that by introducing natural products on the market, it can have a big and positive impact on the atmosphere around us and the world’s natural resources.

Walmart exploits the newest technology such as brad new cash register and security system. In short, Walmart keeps up with technology innovations and adjusts very well to the changes in the world.

Porter’s Five Competitive Forces

Porter’s Five Forces model is generally used in order to understand better the context of the industry in which the company is operating in and to see the attractiveness of an industry structure.

By using this model we can see that Walmart is a strong independent company that has a stable growth, professional management and reasonably competitive prices. This model helps to look into the company more closely by assessing the potential threat of new entrants, the competitive rivalry within already existing companies, the threat of substitute products and goods, the bargaining power of suppliers and finally, the bargaining power of customers.

Threat of new entrants

There’s always a possibility of new companies coming into existence, however in order to compete with such strong company as Walmart they will need a relatively large capital. Walmart is expanding rather fast and it practically leaves neither chance nor room for other new companies to enter the competitive market. Above anything else, Walmart has excellent distribution systems, for example hub-and-spoke system that I mentioned before, as well as good locations and an enormous capital to be actually able to compete with new entrants.

Competitive rivalry

Walmart is a much larger and more profitable company than its competitors, so the competition inside the retail industry poses no threat whatsoever to it. However, there are a few other strong competitors such as Target, which can bring out some fair competition to Walmart. To sum up, Walmart is generally ahead of its competitors; it is a global leader in the retail industry and has a firm position in the competitive market.

Threat of substitute products

There aren’t a lot of direct substitutes to Walmart, because stores in the retail industry sell products for everyday use mostly. However, there are some substitute products that can be a threat to the sales of branded products. Another threat can be put from specialized retail stores like electronics and various garments.

There are stores such as Carrefour and Target, which can offer same goods at a similar price or even lower. Still, when it comes to Walmart, there aren’t many other stores that can actually replace its convenience and attractively low prices.

Bargaining power of suppliers

Walmart is a huge customer to its suppliers and, thus, it has a lot of power, because in case it decides to switch to a different supplier, this would create a very scary tactic for its suppliers. It also has an option to purchase goods from many various suppliers so if they decide to drop out some, this won’t make a significant difference.

Walmart definitely takes advantage of being one of the largest customers to such international companies as Kraft Foods and Gillette. Because of its strong position in the market, suppliers are more than willing to satisfy Walmart’s requirements, as well as provide them with favourable terms of payment and various discounts. We can see this good relationship between Walmart and its suppliers through its enhancing success.

Bargaining power of buyers

The customers will surely always be a threat to Walmart mainly because there are so many competitors. The buyer’s decision tends to be based on the price and quality of the product, and also on the convenience. Usually consumers are price sensitive and their decisions are based mainly on the price itself. And if products are similar this will increase the rivalry in the industry, which will lead to lower prices and thus, lower profit.

Also, Walmart is not in a monopolistic market, but a competitive one, so the goods it offers can be replaced or substituted by its rivals. However, the company strives to please its clients by making the prices of their products and services similar to those of their competitors. Its profitability has proved that consumers are pleased with the chain’s reasonably low prices and its very convenient locations.

Conclusion

The purpose of this report was to analyze the external factors that have a certain impact and influence on Walmart. There are some significant factors that became clear after the PEST analysis and Porter’s Five Competitive Forces analysis have been made. I found out that Walmart is one of the global leaders in the retail industry, which has a great influence on various sectors. Walmart is still expanding to new locations and it is a growing strong company that has a firm position in the domestic market in the US and abroad as well.

Unfortunately, Walmart, just like any other organization, isn’t protected against the negative influence from various environmental factors, which may decrease the company’s total revenues or even weaken the popularity of the whole company. However, despite all of the negative factors mentioned above, the positive impact of the external factors is much greater. Walmart’s intention “to help people save money so they can live better” moves the company on the top position in the retail industry and makes it more attractive and appealing to existing and future consumers.

Recommendations

In my personal opinion the future success and survival of Walmart will depend on changing its attitude and becoming even more customer focused, as well as building even closer relationships that would broaden the product range and competitive prices. The company should take into consideration that the market is still rather new to foreign companies and that other retail stores are also expected to appear in the nearest future, which will probably result in reduction of clients

Walmart is considered as one of the international leaders in the retail industry and I think it will keep its position for a certain period of time. However, I have to make a point that the company should also consider its promotion and shouldn’t rely in the fact that they are one of the best in the market.

What’s more Walmart should take into consideration that the market is still rather new to foreign companies and that other retail stores are also expected to appear in the near future, which will probably result in reduction of clients.

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