Vault Guide to the Top Retail Employers - Case Study Example

? External Business Environment: A Case Study of Wal-Mart Stores of External Business Environment: A Case Study of Wal-Mart Stores Introduction Organizations do not operate in isolation. There must be an environment that the organization operates in. The business organization contains both internal and external factors that affect the day to day running of organizational activities. The external environment consists of customers, competitors, technology, laws, regulations and resources. The external environment affects the future core competencies of an organization. The external environment affects how an organization will customize its products in order to meet the changes in the environment. The external business environment is uncertain and an organization cannot control the forces within it. The external environment changes constantly and every organization has to adapt or change its strategies in order to adapt to the environment or be wiped out of the market. Company Overview-Wal-Mart Stores Core Competitive Advantage Wal-Mart Stores Inc. is the largest retailer in the world, having been in business for over twenty years. Wal-Mart’s strategic plan for competitive advantage is selling of goods that have already been branded. For this reason, the company has over four thousand retail facilities in the world. The competitive strategy for Wal-Mart is to sell brand name and high quality products at the lowest price possible. The company ensures that the products are sold at a lower price by reducing costs of warehousing and use of advanced technology to monitor operations. The company has achieved a competitive advantage by lowering its prices while offering high quality products. The company has accepted to operate with small margins, which combined with high quality products have ensured that the organization maintains and attracts more customers (Hayden et al, 2002). External business environment competitive advantage is arrived at by the firm’s ability to offer value added products to the customers. Wal-Mart has taken the strategy to offer high quality products to the customers at lower prices. The company adds value to the expenditure of the customers. For an organization to gain and maintain continuous competitive advantage strategy, the organization has to exploit the identifiable opportunities in the external environment. Wal-Mart has examined the external environment and realized that investing in small locations such as towns can bring a lot of profits for the company. The company has retail stores in both small and large towns all over the world. Wal-Mart started from small towns and extended to the large towns. External Environment Threats Due to the size of Wal-Mart Stores Inc., the external business market it operates in is dynamic and unique. The external business environment of Wal-Mart has a significant influence on organizational continuity plan. Wal-Mart has ensured that the use of information technology is efficient to ensure its survival. The external environment in the recent past has affected Wal-Mart in an adverse manner. The hurricanes, terrorist attacks, earthquakes have affected the activities of the company and their continuity plans. For example, in November 2004, a hurricane that cut across the United States affected the growth of some stores. Wal-Mart stores were closed temporality. The hurricane saw the closure of more than seventy five stores. The children who were going back to school were affected by closure of these stores during that month (Hayden et al, 2002). As such, Wal-Mart has to set aside a significant amount of money in order to protect the company and its employees from environmental calamities. Competitive Environment Wal-Mart has been faced with stiff competition from Target, Costco Wholesale, Kmart and BJ’s Wholesale Club (Pasiuk, 2006) Competition affects the overall business continuity plan because the organization has to watch what the competitors do. Wal-Mart has faced stiff competition from Target especially when it comes to labels. Target has taken over the competitive advantage of advertising which is more captivating than that of Wal-Mart. The customers have different needs and wants, which affect the business plan of organization production process. The preferences of customers keep on changing from time to time. Wal-Mart customers want more from the company than just low prices. As a result Wal-Mart has shifted to other diversified fields such as pharmacy. It’s not just about lowering prices for Wal-Mart that will guarantee their retention of the market share. The company must diversify their brands in order to meet customer needs. The demographic changes that have affected Wal-Mart include cultural, economic and social changes. Wal-Mart has faced major challenges in India. The main demographic change Wal-Mart has faced is the difficulty in distribution due to lack of good transportation facilities. The difficulty in transportation has affected the delivery of products in India, affecting the overall strategic plan laid down by the company before it penetrated India. Wal-Mart has had to seek consultancy from Bharti in order to improve the distribution problems. Effect Strategic Business Continuity Plan The resources available to an organization will affect the business continuity plan. The suppliers of branded goods for Wal-Mart have been generous enough to offer goods at lower prices. However, as the world economic crisis is deepening, the suppliers have to offer their products at much higher prices. Wal-Mart has had to operate with low margins. The organization has decided not raise the prices of the customers despite the rising economic crisis especially in United States. The organization has over thirty five thousand employees in all major branches in the world. The availability of skilled employees to operate the Wal-Mart stores has been a major concern, since the company focuses only on employing competent people to operate their stores. The employees have to be trained in offering excellent customer care. The company has had a problem with immigrant employees who work in the store. Finances control the overall aspects of a company just as finances are the base of all organizations. Wal-Mart is a public company that is listed in New York Stock Exchange. The main factors that affected the business continuity plan include venture capital, investors, stock market climate and money to fund new ventures. Wal-Mart has been aiming to venture into the Chinese market. The idea of venturing in China has to be approved by the major stake holders, a factor that holds back such key decisions and bear heavily on the business continuity plan. Technology is another factor that affects the long run business continuity plan. The onset of use of social networks such as facebook has affected Wal-Mart in a great Way. Any change in the organization has been reported in the websites and social networks. For example, Wal-Mart changed its brand logo. The news of the change was all over the social networks such as twitter and facebook. The social networks have been a major contributor to implementation of the business plan. Major laws and regulations in different countries have affected the operations of Wal-Mart as every government has its laws and regulations that the firm must observe to continue operating in localized markets. Some governments are more accommodative due to the feeling that the venture of Wal-Mart into their market will lead to increase in tax revenue and employment while other organizations and pressure groups oppose entry into certain markets due to the feeling that the venture of Wal-Mart into their territories will reduce the market share of their local retailers. The fear of some governments in letting Wal-Mart invest in their countries is that Wal-Mart offers low prices that may extend unfair competition to domestic products. From the Wal-Mart website, the company emphasizes that a profitable and efficient business depends on a company’s stewardship towards the environment. The market and external environment determines all the activities that an organization does. This is because the business environment is difficult to explain and predict. The external business environment affects the development and growth of an organization. Every organization ought to be reactive and proactive regarding the environment changes and opportunities. The external business organization is comprised of the political, economic, social cultural and technological factors. Wal-Mart operates in a globalized business environment with stores in countries like United States, India, Australia, and United Kingdom among other countries. The performance of the company has been largely influenced by the legislative and political conditions existing in these countries. Many governments have ensured that Wal-Mart adheres to employment rules and regulations. All governments want employment opportunities for their citizens and revenue to carry out their activities. Many legislators require Wal-Mart to provide flexible training for their local citizens. in response, Wal-Mart has started a program where students from various countries are offered internship opportunities. The availability of such opportunities for the people has fostered healthy relationships with many governments. The legislators have also ensured that Wal-Mart pays its employees well. Major political factors that have affected the business continuity plan are the changes in economic policies of the government. The many government policies in different countries have either fostered or disrupted the activities of Wal-Mart. Major trade policies such as European Union trade laws normally affect the normal business operation of Wal-Mart stores in the European countries. Major changes in the tariffs and taxation policies contribute to disruption of store activities. Wal-Mart has been able to adhere to many government policies and regulations in different countries. The adherence to these policies and regulations has seen the company enjoy a good business environment. One major political factor that has fostered a good business environment for Wal-Mart is that the company offers basic goods at a lower price. Economic factors that affect the business external environment include income rate of the citizens, interest rates of concerned countries, inflation rates and the strength of the currency of the country concerned. The main contribution of these economic factors is that it affects the demand of the goods and services. Economic factors affect the costs, profits, prices and demand of products. A country like India that has high levels of unemployment has led to realization of low returns for Wal-Mart compared to a county like the United States where returns are high in many stores. The rate of employment affects the demand for goods in a particular country. Economic factors have had a significant effect on the market mix and strategies of Wal-Mart in many countries. Wal-Mart depends mostly on the United States market for its revenues. The exchange rate affects the returns that the company gets from major countries like United States. The cost of importation and exportation affects the cost of business operations. The current fall of the dollar has seen an increase in the costs of operation and a decline in returns for Wal-Mart. The social cultural factors that affect the business environment for Wal-Mart include beliefs and attitudes. Many customers have shifted their shopping from frequent purchasing to bulk and one stop buying. The change in customer perception of healthy food choices is gaining momentum. The consumers’ belief that sifted foods are harmful to their health is affecting the sales of Wal-Mart significantly. As a result, Wal-Mart has been investing in products that promote healthy growth in order to maintain its customers. The change in population has affected business returns for the organization. In towns where there is a large population the returns are high than towns where population is low. The major technological factors that have affected the business environment for the Wal-Mart include availability of an efficient network that administers the operations of every store. The availability of advanced technology has helped Wal-Mart stores to monitor its supply chain in an efficient manner. The use of advanced technology has helped the managers of various stores to monitor movement of goods. The company has also adopted payments by customers through use of electronic transfer. The company accepts credit cards from customers who purchase goods. This has promoted the business of the stores since customers do not waste time. Wal-Mart is a proactive company and has done an extensive analysis of the business environment. The company has analyzed the environment using potters five forces approach. The forces include threat of new entrants, bargaining power of suppliers, bargaining power of the customers, threat of substitutes and bargaining power of the competitors. The retail market all over the world is saturated but there is still a window for new entrants. Due to the rising demand for retail goods, many small supermarkets are being formed every day. As a result there are many retail shops which do not have the capacity to enjoy large scale economies of production but still pose competitive threat to Wal-Mart. These retail markets have posed a major threat to the market share of the company. However, the company has a greater market share due to the ability to maintain efficient and high quality products at an affordable price. The bargaining power of suppliers has been reduced by the large retail stores such as Wal-Mart. Many suppliers like to deliver their products to Wal-Mart because they are assured of quick returns at a shorter period of times unlike other retail shops. Wal-Mart has been able to import its products to major retail stores thereby reducing the bargaining power of local suppliers. However, the high competition between the suppliers has led to low returns for the company and other retail stores as well. Consumers bargaining power can be influenced by standardized products. Customers will be able to buy a certain product that is standardized because they do not have another choice thereby increasing the yields from customers. Wal-Mart has applied Potters advice of ensuring low prices, customizing services and making better choices of variety of products. According to Roy (2011), Potter acknowledges that consumers will shift to an alternative product if the products serve the same purpose. The entry of substitutes has caused major losses for the company. Many substitute products are being sold by other companies at much lower prices. Wal-Mart offers brand products and the substitutes have cost the company a great deal of money. The retail industry has seen significant growth. However, Wal-Mart has maintained presence in the market. The bargaining power of competitors has seen a major shift in the retail industry. The competition has seen the retail industry taking on innovation in order to maintain a competitive advantage. Wal-Mart has been able to remain one of the major retail companies by ensuring that all its stores focus on value and price while offering excellent customer care. Role of Business Ethics in Gathering Competitor Intelligence Market research upholds ethics because it is focused on the end consumer and the researcher. The competitors being researched on are usually excluded when it comes to generating a report. Ethics upholds that competitors should be excluded from the main stakeholders. Consumer intelligence is based on the competitive arena and competitors. When carrying out market research, the competitor is the subject of the research and should be excluded from being the main stakeholder in the research. Ethics require that a systematic ethical and legal process be used in gathering, analyzing and disseminating intelligence to stakeholders for operations and decision making. The goal of ethics in competitor intelligence is to formulate a frame work to enable the organizations make decisions on information gathering techniques. The information gathering techniques used for the research should be acceptable by all ethical standards. The management should discuss all the approaches taken in collecting competitor information. The approaches should grip the multinational ethical codes. The professional should struggle to increase respect and recognition of consumer intelligence collection. All professionals should conform to the applicable international and domestic laws (Trevino & Weaver, 1997) References Hayden, P. (2002).Wal-Mart: Staying on Top of the Fortune 500.A Case Study On Wal-Mart Stores Inc. Retrieved October I, 2011 from http://mike-pereira.com/subpage/docs/walmartcs.htm  Pasiuk, L. (2005). Vault Guide to the Top Retail Employers. New York: Vault Inc. Roy, D. (2010). Strategic Foresight and Porter’s Five Forces: Towards a Synthesis. Norderstedt: GRIN Verlag. Trevino, K. & Weaver, R. (1997). Ethical Issues in Competitive Intelligence Practice: Consensus, Conflicts, and Challenges. Competitive Intelligence Review, 8(1), Spring 1997. Retrieved October 1, 2011 from http://osint.pbworks.com/f/Trevino.pdf Read More