Wal-Mart’s performance depends on the following external factors: competition, socio-economic, political and technological factors. Wal-Mart has been an absolute market leader for many years in a row. In 2014 Wal-Mart became a leading grocery retailer in the USA with the market share of 25% (Statista, 2015). Due to the advantage in the economies of scale and financial power, the company will be able to dominate in the market in the nearest future. The socio-economic factors also have a very positive influence on Wal-Mart. The USA has recovered from the economic crisis, the unemployment level is below 8% and the inflation rate is approximately 1.5% (Index of Economic Freedom, 2015). In terms of the political factors, the political situation has been favorable for Wal-Mart so far. The company even receives subsidies in some states and does not face much resistance from the activists and non-profits (Resnikoff, 2015). Finally, the technological factors have begun to influence Wal-Mart’s development strategy. If Wal-Mart fails to react to the technological progress, the competing companies will use the innovations and destructive technologies in order to gain the competitive advantage vie e-commerce.
Porter’s Five Forces and Blue Ocean Strategy brief analysis
All four external factors correlate to the Porter’s Five Forces and the Blue Ocean Strategy. In terms of the competition, the threat of new entrants and substitutes is very low. Smaller businesses are not able to compete with Wal-Mart on the equal terms. The political factors also do not represent a threat, because Wal-Mart has been capable of successful lobbying their interests. The bargaining power of customers sometimes leads to the controversies and scandals and Wal-Mart needs to invest the resources in PR in order to maintain the positive reputation. The bargaining power of suppliers does not represent a challenge to Wal-Mart at the moment. In fact, the company has been benefiting from the economic crisis and currency devaluation in China, because the labor and output costs have significantly decreased. In turn, the technological factors may help Wal-Mart develop their e-commerce in the near future. Wal-Mart might have reached the peak in the traditional competition and the internet may represent a vast array of opportunities for Wal-Mart.
Factors’ impact
The factors that will have the greatest impact on Wal-Mart’s activity are the macroeconomic and the technological factors. Wal-Mart depends on the demand-driven economy. Therefore the economic situation in the USA should be stable so that Wal-Mart could continue achieving their financial goals. Despite the slow economic growth, Wal-Mart may expect that the American economy will not face the new economic crisis in the next several years. At the same time, technological progress for sure will shape Wal-Mart’s new strategies and practices. Last year, Wall-Mart’s e-commerce sales grew by more than 20% (Brohan, 2015). In order to continue internet expansion, the company will need to update the infrastructure. Concerning the other two factors – competition and political factors – the company is in the excellent position and it is doubtful that these two factors will have a great impact on Wal-Mart’s activity in the short-term.
Wal-Mart’s future
Wal-Mart should not slow down and rely too much the stable American economy. The company sets the pace for the competitors and e-commerce seems to be the next logical step in the company’s development. At the same time Wal-Mart should not forget about the political factors. Wal-Mart has grown into a giant company that influences the lives of millions of people. There are a lot of stakeholders who monitor Wal-Mart’s performance. For example many small towns in the USA oppose Wal-Mart, because local companies are unable to compete with Wal-Mart. So Wal-Mart should improve their corporate social responsibility to show the connection with the American people and communities. If Wal-Mart does so, it will dominate in the market and reduce the impact of the political factors.
References
Brohan, Mark. (19 February 2015). Global e-commerce sales climb 22% for Wal-Mart.
Internet Retailer. Web. Retrieved from
https://www.internetretailer.com/2015/02/19/global-e-commerce-sales-climb-22-wal-mart
2015 Index of Economic Freedom. (2015). The Heritage Foundation in partnership with Wall
Street Journal. Web. Retrieved from
http://www.heritage.org/index/country/unitedstates
Resnikoff, Ned. (14 April 2014). Walmart benefits from billions in government subsidies:
Study. MSNBC. Web. Retrieved from http://www.msnbc.com/msnbc/walmart-
government-subsidies-study#51652
Statista Portal. (2015). Wal-Mart Statistics and Industry Facts. Web. Retrieved from
http://www.statista.com/stats/146362/wal-mart
Appendix
Figure 1 Wal-Mart Annual Sales Growth
Source: www.scdigest.com
Figure 2 E-Commerce – Share of Retail Sales
Source: U.S. Census Bureau
Figure 3 Amazon vs. Wal-Mart estimated web-sales ($ billions)
Source: internetretailer.com
Figure 4 Average monthly visits
Source: statista.com
