This is the detailed PESTLE/PESTLE Analysis of Wal-Mart which elaborate the external factors impacting the retail Company and Industry; Political, Economical, Social, Technological, Environmental and Legal.
The political environment of a region tends to have a significant effect on the financial profitability of an organization. Keeping the case of retail industry into consideration, the political turmoil can result in slowdown of the organizations operating in this sector. On the other hand, political stability enables the business entities to achieve growth and expansion in the retail industry (Welsh, Alon & Falbe, 2006). Political environment effects the economic environment of a region, ultimately creating an environment that is either supportive or discouraging for the companies operating in the retail industry. In case of Wal-Mart, the company has been able to attain growth in countries which are marked by political stability. However, regions that have political uncertainty create a business environment that offers slower growth prospects to retailers such as Wal-Mart (Motsoeneng, 2015). As evident from the company’s progress in developing countries, Wal-Mart has only been able to establish 25 new stores, which is not adequate to deal with the intense competitive pressure in the retail industry.
The economic factors play a significant role in the business success and stability, attracting the foreign organizations to set up their business operations in such favorable circumstances. At the same time favorable economic environment provides business opportunities to the existing local and international organizations (De Bruyn, 2012). The economic downturn had a negative effect on the sales and profitability of different retailers. However in case of Wal-Mart, the company has been able to use this situation as an opportunity.
As indicated by Palmeri (2008), the organization has offered discounted prices for its various products to appeal the customers seeking affordable prices during the economic crisis. The company has recognized the implications of the financial on the disposable income of the customers and decided to pursue a sales discount strategy to respond to the economic pressures. According to D’innocenzio (2008) the company has been able to achieve an increase in its market share which can be attributed to the organization’s strategy during financial crisis. The apparel section of the organization has been able to demonstrate an increase in the sales, which shows the positive effect of low cost approach. Different countries across the world have experienced increase in unemployment as the companies during recession have engaged in layoff of the workers, resulting in higher unemployment. This situation has exerted pressure on the retail organizations to provide the products in a price range that can appeal the customers seeking affordable cost.
The social factors that seem to affect the retail industry are the spending habits of the people which are influenced due to the economic conditions present in a country. During the global financial crisis, people have faced issues such as unemployment which increased the preference for items that offered lower price. In such a context, retailers like Wal-Mart have been able to gain customer’s focus due to the discounted prices the organization has put forward for the people. On the basis of this pricing approach, the company has been able to gain leverage despite the financial crisis in many markets, owing to the management’s ability to identify and respond to the social factors that could affect the company sales.
Another social factor that carries significant implications for an organization in the retail industry is the people’s preference for the layout of the retail stores. Changes in store layout were made due to customer’s demand as the company has focused on bringing the customers with the ease of shopping experience (Wal-Mart, 2016). The change in the format of stores as a response to the social preferences is one means of gaining a stronger position in the retail industry in different parts across the globe.
Technological factors have a strong impact on the functioning of the companies in the retail industry. New forms of technologies are introduced with the passage of time which guides the retail stores in managing their operations while at the same time help the company in bringing efficiency. The inclusion of new technology requires adapting to these changes and bringing alterations in the way the organization’s operations and processes are being managed. The recent era indicates the development of different forms of technologies, which has propelled the organizations in retail sector to integrate these technologies as a way to gain a stronger position in the market. A significant example of technology that effects the operations of Wal-Mart is the increased trend of online shopping by the consumers. The company has responded to this technological development by integrating technology as a part of the customer’s shopping experience. As mentioned by Bergh (2014), the mobile app of Search My Store, helps the store visitors to locate the items they intend to purchase easily as the app guides the customers through written and visual cues about the location of the product.
There are different forms of legal factors that have an effect on the retail industry. Some of the notable ones in this domain are related to the employment practices of the retail stores. For instance, the recruitment and selection of the employees needs to be based on a criterion that offers opportunity to people belonging to different cultural, religious, or ethnic groups. Likewise, gender and age of an individual is not supposed to be used as means of hiring criterion as it can lead to legal issues and problems for an organization. Wal-Mart has been subjected to legal issues arising out of the inability of the management to follow fair and equal employment procedure as well as fair treatment of the personnel (Gershman, 2015).
The environmental factors are related to the environment friendly business practices being carried out by an organization. Wal-Mart has identified various sustainability related initiatives, that the company has made a focal point in the last decade. The increasing focus on environment friendly operations has encouraged Wal-Mart to focus on recycling and reduction of greenhouse gas emission (Gunther, 2015). Along with that, the company has managed to participate in activities pertaining to preserving wildlife.
Bergh, W. (2014, October 31). Find Items Even Easier with ‘Search My Store’. Wal-Mart Today. Retrieved from http://blog.walmart.com/innovation/20141031/find-items-even-easier-with-search-my-store
De Bruyn, S. M. (2012). Economic growth and the environment: an empirical analysis (Vol. 18). USA: Springer Science & Business Media.
D’innocenzio, A. (2008). Wal-Mart’s Low Prices Mean Big Profits In Crisis. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2008/11/13/walmarts-low-prices-mean-_n_143494.html
Gershman, J. (2015, September 18). Court: Threatened Wal-Mart Employees Have the Right to Stand Their Ground. The Wall Street Journal. Retrieved from http://blogs.wsj.com/law/2015/09/18/court-threatened-wal-mart-employees-have-the-right-to-stand-their-ground/
Gunther, M. (2015, November 18). Walmart is slapping itself on the back for sustainability but it still has a way to go. The Guardian. Retrieved from http://www.theguardian.com/sustainable-business/2015/nov/18/walmart-climate-change-carbon-emissions-renewabe-energy-environment
Motsoeneng, J. (2015). Wal-Mart makes slow progress navigating Africa’s challenges. Reuters. Retrieved from http://www.reuters.com/article/us-wal-mart-stores-africa-idUSKBN0OI12V20150602
Palmeri, C. (2008, October 29). Wal-Mart Wins Big During Downturn. Bloomberg. Retrieved from http://www.bloomberg.com/bw/stories/2008-10-29/wal-mart-wins-big-during-downturn
Wal-Mart (2016). The Latest in Walmart’s Store Design Comes to Crestview. Wal-Mart. Retrieved from http://corporate.walmart.com/_news_/news-archive/2010/11/01/the-latest-in-walmarts-store-design-comes-to-crestview
Welsh, D. H., Alon, I., & Falbe, C. M. (2006). An examination of international retail franchising in emerging markets. Journal of small Business management, 44(1), 130-149.