McDonald's with Chapter analysis （Management）

Professor:Jose

February 27, 2021

Walmart is one of the largest retailers in the world recognizing factors that can affect the company’s macro environment is crucial. To analyze potential threats or opportunities for the organization, I will be using the PESTEL analysis tool to analyze Walmart’s macro-environment. By using PESTEL to analyze we can ensure the company can develop strategies that can help with any challenges posed by external factors. I will also be discussing the analytic tools that are used to diagnose the competitive conditions. This is important because knowing who your competitors are and what they offer can help develop a strategy to gain a competitive advantage. I will also discuss Walmart’s resources and capabilities and what has helped them have the competitive edge on their competitors. Lastly, we will evaluate the company’s situation and how it can assist mangers in making critical decisions about their strategic plans.

Chapter 3 Evaluating A Company’s External Environment

LO 1: Recognizing the factors in a company’s broad macro-environment that may have strategic significance. Using the economic, technological, and social factors Walmart can anticipate challenges or opportunities in these areas.

Example 1: Economic factors may affect changes in the company’s revenues, these changes can be positive or negative depending on the specific factors. The general economic climate may include specific factors such as the rate of economic growth. Economic conditions have affected many organizations negatively in the retail industry. Despite all the potential threats Walmart has been able to use PESTEL analysis and focus on the economic factors and develop strategies that has helped Walmart remain extremely profitable. Walmart has been able to exploit opportunities that emerge from countries with growing economies, as the economy grows so does the demand for affordable goods good from retailers like Walmart.

Example 2: The pace of technological change and development is changing rapidly, and it can be the biggest threat for any organization. In recent years we have seen a shift in the way customers shop. Because of Covid-19 many retailers were forced to develop strategies that offer more online shopping options including ordering on their phones through applications. Walmart has been able to use this opportunity to increase their online presence through online marketing. Offering things like free shipping or free pick-up in store is some of their working strategies to attract and retain customers. Having competitive pressure from other retail giants like Amazon, Walmart’s business process automation with the use of technologies is a priority helping them increase efficiency with their online presence.

Example 3: Social-cultural factors can change the customers perception and preferences of an organization. Social factors that can affect the macro-environment of an organization may include cultural influence, societal values, attitudes, demographics, and population size. These influences can be at a local scale or entire populations. Walmart has been successful because they know their market base, they are able to increase the variety of products to satisfy various cultural preferences. Even though Walmart has been successful it has also come under criticism for paying their employees low wages causing some customers to boycott their stores. Despite the boycotts Walmart has managed to keep their large part of customer base intact.

LO: 2 Using analytic tools to diagnose the competitive conditions in a company’s industry. We will be analyzing the conditions in the market that determine the level of competition using the five forces framework using. I will be discussing 3 out of the 5 forces, supplier bargaining power, buyer bargaining power and potential new entrants.

Example 1: Supplier bargaining power depends on the strength of the demand and availability of supplier’s products. The bargaining power of suppliers has a weak intensity in the retail industry there is no real impact on the strategic growth of Walmart. Many of the suppliers depend on giant retailers like Walmart that make large purchases. Because there is a large population of suppliers this gives Walmart the advantage to get change suppliers at any moment keeping the suppliers bargaining power weak. This has allowed the company to keep offering relatively lower prices than their competitors remaining competitive globally. Also having a weak supplier bargaining power has lowered the industry profitably making it less attractive to new entrants.

Example 2: When analyzing the buyer bargaining power, we need to take into considerations is the number and size of buyers relative to number of sellers. Because Walmart is one of the largest retailers in the world there is more buyers than sellers. Another consideration is the buyer’s knowledge of products, cost, and pricing. Walmart uses the pricing strategy decreasing the buyer’s bargaining power. Because individual customers do not make big purchases, they have little to no influence on the brand. The large population of buyers uses a weak force in Walmart and the retail industry. Higher buyer diversity makes it difficult for them to impose pressure on the company resulting in a weak bargaining power.

Example 3: Potential new entrants come with threats such as barriers to entry, strong brand preferences and customer loyalty, access to distribution channels and economies of scale. The threat of new entrants in the retail industry is low as it uses a small level of pressure on a company like Walmart because of its size. Walmart has one of the biggest and efficient distribution networks and supply chain. Because of their year in the industry and their size other existing companies have a difficult time keeping up with Walmart and their low prices. Walmart economies of scale come from buying their merchandise in bulk at a huge discount.

Chapter 4 Evaluating a Company’s Resources, Capabilities and Competitiveness.

LO 1: Why a company’s resources and capabilities are centrally important in giving the company a competitive edge over rivals.

Example:1 A Resource is a competitive asset that is owned or controlled by an organization. Using resources analysis to determine if an organization can sustain competitive advantage over their competitors is what Walmart has been able to do with their intangible and tangible resources. One of their strongest physical resources is Real Estate Walmart owns the buildings and surrounding storefronts. Walmart also has strong financial resources holding higher cash assets giving them the flexibility to invest in their firm. Organizational resources such as their large supply chain network and low pricing strategy, their focus on customer service has given Walmart a competitive advantage.

Example:2 Organizational capabilities support long term competitive advantage; capabilities are the core competencies of the organization that helps develop strategies. Walmart’s core competencies are low-cost operations, buying power and supply chain management. Using the SWOT analysis, the company can evaluate the strengths and weaknesses and the market opportunities and external threats of an organization. Walmart’s strengths derive from a high efficiency supply chain the advance in technologies for controlling the movement of inventory from suppliers to stores. Being able to buy in bulk gives Walmart the discount needed to keep prices low, this is what they are known for their extremely low prices.

Example:3 Walmart’s competitive edge began with their business venture offering low prices and great customer services which has been the biggest contributor to their success. Walmart has developed a partnership alliance with its stakeholders that has allowed them to make the necessary changes in their organization. They have created sustainability programs that align with their long-term goals. And developed action programs that helped developed new relationships which helped them reached integrated level. The organization price strategy is the strength that makes the business competitive against other retail giants. This competitive edge has allowed Walmart to operate in the global retail market. They have a strong brand reputation and the financial resources to continue to grow their business.

LO:2 Comprehensive evaluation of a company’s competitive situation can assist mangers in making critical decisions about their strategic moves.

Example :1 Company mangers look at value chain systems for an organization to help improve efficiency and effectiveness. Optimizing the value chain can make it more efficient and can help generate strategies of competitive advantage for the organization. The suppliers’ part of the value chain system is important for Walmart because the relationship with their suppliers has allowed for Walmart to have an effective supply chain. Walmart has also been able to pressure suppliers for lower price this a cost-saving opportunity. Walmart’s inventory management technique is a supply chain practice called cross docking. Cross docking removes the storage link of the supply therefore reducing cost of transportation.

Example: 2 Strategic approaches can be used to improve the effectiveness of customer’s value. Managers need to understand the underlying reasons on why a strategy works. The first step is to analyze opportunities that managers need to address first. Competitive challenges like expanding to another country, for example Walmart has not been able to be successful in South Korea despite trying once before. The problem was they did not have enough customer information and did not offer South Koreans anything new that would get them excited to choose Walmart over other local retailers. Other opportunities like the shift to online shopping can help management develop a strategic plan that can help with the expansion in other countries.

Example :3 Gaining customers and increasing its market share is a good indicator that the firm’s strategy is working well. Pricing strategy is one of the key elements of marketing strategy the everyday low-price strategy has helped with the brand reputation of Walmart. By building the reputation of low prices the marketing management can develop strategies to attract more customers by adding deals either in-store or online. Walmart has also improved their Human Resources Management by improving on employee wages and has developed funds for education and training. Investing on their employees and managing their strategies are good indicators that Walmart will continue to be successful.

Conclusion

Walmart has understood that times has changed any everything is unpredictable just like the Covid-19 pandemic. They know that changing and being aggressive with meeting their goals and commitments will be key for a successful future in the corporation. Even though, many things have changes over the years Walmart has remained committed to the founder’s core beliefs. Offering low prices, serving the community and high levels of integrity. Walmart will remain a very competitive organization because of the relationship that it has built over the years with their employees, customers, and suppliers.

Resources

Thompson, A. A., Peteraf, M. A., Gamble, J., & Strickland, A. J. (2016). Crafting and executing strategy: The quest for competitive advantage: Concepts and readings. New York, NY: McGraw-Hill Education.

Greenspan, R. (2019, February 22). Walmart Inc. five forces Analysis (porter's model), Recommendations. Retrieved March 01, 2021, from http://panmore.com/walmart-five-forces-analysis-porters-model-case-study

https://www.rancord.org/walmart-vrio-analysis-competitive-advantages-core-competencies

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