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PESTLE Analysis of Walmart

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Walmart is a popular department store and online retailer. It’s so popular, you likely have at least one store twenty minutes (or less) away. Founded in 1962, Walmart now has thousands of stores located within the United States and worldwide.

Walmart’s aims offer discounted products — everything from yarn to beer is available down its many aisles. Or you can find even more exclusive products on the online store.

In this PESTLE analysis of Walmart, you’ll see how corporations face many challenges, particularly related to the six primary macro-environmental factors, including politics, technology, and legal factors.

Read also: PESTLE analysis of the Retail industry

Political factors: Political (in)stability impacts Walmart’s operations

Walmart is a globally recognized department store. The company serves over 250 million customers globally every week. But because it operates all over the world, Walmart has many policies it must follow. It’s a tall order, but something it can’t ignore.

Policies can directly influence Walmart’s manufacturers and suppliers. If Walmart doesn’t operate in politically stable locations, any interruption could impede operations. For instance, Walmart suffered profit loss in Chongqing, China. One store sold prohibited products to the Chinese public, and the government was quick to not only stop the selling of the product but all products sold by Walmart (temporarily). Governments can be quick to intervene when a company fails to follow policies.

Additionally, governments can pass bills that threaten the revenue of corporations. Walmart and its eCommerce rival, Amazon, were affected by a bill to raise the minimum wage of workers to $15 an hour. It’s a positive move for workers but cuts into the bottom line for Walmart. If it didn’t follow the bill, stores in the state would be shut down quickly.

Economic factors: A volatile economy leaves Walmart with little option

Walmart, like any other corporation, is affected by economic stability. Walmart is known for low prices of goods. However, if the economy hits, it may require production to go up. If it does, Walmart will have to raise the price of goods. Customers won’t be happy.

If Walmart doesn’t raise its costs, it won’t be able to compete with other brands. These brands can likely raise prices and maintain good margins in ways that Walmart can’t. What’s more, customers are only buying the necessities when the economy tanks, so many of the products offered by Walmart will stay on the shelf indefinitely.

Since the economy can change based on the country, Walmart needs to be aware of the economic landscape in each location where stores operate. Some locations may have higher interest rates or taxes, which will also affect potential revenue.

Sociocultural factors: Failing to position itself to global audiences

Despite Walmart’s global recognition, it’s not necessarily a popular place to shop. For instance, Germany’s lack of interest cost Walmart over $1 billion. This was more an issue from Walmart, as they failed to properly market to the German audience. Walmart is an American brand, but by not adjusting its marketing to fit the German market, it led to heavy revenue loss.

Global brands can only be successful if they understand how to supply specific products to customers. For instance, providing healthy food to the health-conscious crowd. Walmart now provides organic and healthy foods for this demographic. It’s a smart move, and many businesses are currently or already have done.

To cater to more people easily, Walmart has put more focus on the user interface of its eCommerce store. Customers can order products to their home or the closest store. They can also have workers pick up groceries in the store and deliver it to customers in their vehicles. Although it’s used regularly, Walmart still isn’t close to beating out its eCommerce competitor, Amazon.

It’s beneficial though, especially for customers who can’t make it into the store, like the elderly.

Technological factors: Automation, robotics, and digital transformation

For more efficiency behind the scenes, Walmart has adopted automation and robotics. The technology can fulfill orders, streamline production, and help with keeping the store clean.

Adopting automation is a form of digital transformation, which uses automated technology to create more efficient business processes. With a brand as big as Walmart, automation is an expected step for the business to take. By allowing robots to handle menial tasks, employees can focus on selling products without distraction.

Additionally, the online shipping aspect reaches more people. Most people are either using a laptop, mobile devices, and tablets. It also means it can set up paid online ads to direct customers to the website from search engines.

Legal factors: Failure leads to $65 million loss

Walmart must abide by the laws and regulations of the world. The most common of these laws include employment regulations, data protection laws, labor laws, and health and safety laws.

Despite needing to abide by these rules, Walmart has failed in California. The company agreed to pay $65 million to 1000 current and past employees who say Walmart didn’t provide seating accommodation to employees. Rather than suffering through a lengthy trial, many corporations of Walmart’s size will agree to settle out of court.

Environmental factors: A sewage fiasco

Walmart receives backlash for improperly dumping pesticide and hazardous fertilizers, which found itself into the sewage pipes. After being caught, the company initiated Project Gigaton — the premise is about preventing a gigaton of emissions over the next ten years. Several companies, like Target, have made similar eco-friendly promises.

Bottom line:

Now a household name around the world, Walmart is one of the most successful stores in economic history. It’s expanded rapidly, with one available in nearly every country. Such rapid expansion and popularity means Walmart needs to stay up-to-date with the latest legal and political regulations. Otherwise, it risks shutting down, as one store did in China after failing to follow Chinese government policies.

Walmart must focus on providing the right products to specific — what Americans need may differ from what Germans in Germany desire. By failing to offer the right product, the company will likely lose profits. It also needs to continue with Project Gigaton — cutting a gigaton of emissions by 2030 — as the company has made a promise to the public. Eco-friendly customers won’t stick around if Walmart fails on this front.

Read also: SWOT analysis of Walmart

Image by Alexas_Fotos