External and Internal Environments Order Instructions: Assignment 2: External and Internal Environments

worth 350 points

Choose an industry you have not yet written about in this course, and one publicly traded corporation within that industry. Research the company on its own Website, the public filings on the Securities and Exchange Commission EDGAR database (http://www.sec.gov/edgar.shtml), in the University’s online databases, and any other sources you can find. The annual report will often provide insights that can help address some of these questions.

Write an eight to ten (8-10) page paper in which you:
1. Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Assess how these segments affect the corporation you chose and the industry in which it operates.
2. Considering the five (5) forces of competition, choose the two (2) that you estimate are the most significant for the corporation you chose. Evaluate how well the company has addressed these two (2) forces in the recent past.
3. With the same two (2) forces in mind, predict what the company might do to improve its ability to address these forces in the near future.
4. Assess the external threats affecting this corporation and the opportunities available to the corporation. Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer.
5. Give your opinion on the corporation’s greatest strengths and most significant weaknesses. Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths, and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices.
6. Determine the company’s resources, capabilities, and core competencies.
7. Analyze the company’s value chain to determine where they can create using the resources, capabilities, and core competencies discussed above.
8. Use at least three (3) quality references. Note: Wikipedia and other Websites do not quality as academic resources.

Your assignment must follow these formatting requirements:
• Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; references must follow APA or school-specific format. Check with your professor for any additional instructions.
• Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required page length.

The specific course learning outcomes associated with this assignment are:
• Identify how the six segments of the general environment affect an industry and its firms.
• Identify the five forces of competition.
• Analyze the external environment for opportunities and threats that impact the firm.
• Analyze the internal environment of a company for strengths and weaknesses that impact the firm’s competitiveness.
• Use technology and information resources to research issues in business administration.
• Write clearly and concisely about business administration using proper writing mechanics.

External and Internal Environments Sample Answer

Name

Institution

1. Introduction

A company’s external and internal environments are important catalysts for business performance. Therefore, it is imperative for organizations to understand factors within their environments in order to develop effective strategies to promote business. Wal-Mart, a renowned United States retailer has been in existence since 1969 (walmart.com). The corporation operates through hypermarkets, grocery stores, and discount department stores, and is considered the largest retailer in the globe. This paper is a discussion of the external and internal environments affecting Walmart, how the company can address factors in the environment to enhance performance and how the company’s resources, capabilities and key competencies can be enhanced to create value for the company.

2. General environment assessment

The social and economic environment remain the most prevalent segments of the general environment affecting Wal-Mart. These are discussed as follows.

External and Internal Environments and Social environment

This segment refers to the factors within the social environment which may affect demand patterns. In the contemporary world, customer needs and preferences are changing drastically and this has affected companies that deal with consumer goods such as Walmart in a significant manner. This means that it is not only harder to predict demand but the company has also experienced greater instances of dead stock because consumer interest easily dies down with the introduction of newer and better models of products. New trends such as technological trends have been a constant challenge because the retailer must keep up with customer demands. An example is the advent of smartphones, whose demand keeps changing as newer versions are produced.

Online shopping is a new social trend among consumers and this has led to increased competition for Wal-Mart. While the retailer also has an online store, Amazon and Ebay have gained a wide following and consumers are increasingly ordering from these sites.

Walmart is under constant pressure to be socially responsible by participating in charity work and contributing to community development. This means that the company must invest more in corporate social responsibility in order to gain confidence and favor from clients (Lamb, Hair & McDaniel, 2011).

Despite the effects identified above, Walmart should however view social/cultural changes as an opportunity to make more profits. The increasing demand for healthy products for example insinuates that the company should invest more on such products to tap the growing demand.

External and Internal Environments and Economic environment

Walmart like any business operates in a highly volatile economic environment where different factors affecting the economy are likely to impact business operations at any time. Economic fluctuations lead to changes in the prices of goods and also affect buying power. Walmart depends on peoples’ purchasing power to make sales and when this is affected the organization’s profitability is also affected. The economic environment also presents opportunities in terms of the growing economic progress in developing countries which the company can exploit for future growth.

3. Five forces of competition

The five forces of competition greatly influence business operations from a micro level. Among the five forces presented by Porter, industry rivalry and the bargaining power of buyers emerge as the most influential forces affecting Wal-Mart.

Industry rivalry/competition

Walmart faces stiff competition in the retail market, with major competitors being Target, COSTCO, K-Mart, Dollar Tree Inc, B&M, Macy’s Inc, Sears, Pricesmart and Dollarama Inc. among other retail outlets. In addition, Walmart now has to deal with online suppliers including Amazon, E-bay and Alibaba which supply customers with products of choice from the comfort of their homes or offices. These sites are also fond of giving discounts, such that customers gain both convenience and value for money. In an industry that has numerous competitors who are equally committed to meeting customer needs to the best extent possible, Walmart must invest more in providing a variety of quality products at affordable prices in order to retain customers.

Walmart has been proactive in addressing the issue of industry rivalry by combining various strategies. By offering highly competitive prices and offering discount coupons, Walmart has managed to attract a large number of customers. Enhancing accessibility through convenient locations ensures that customers can easily find Walmart outlets within their convenience. The company also provides a store locator on their website to help customers in identifying the nearest stores. Walmart attempts to provide the highest variety of products possible in order to appeal to a wide customer base. One can practically obtain everything from Walmart including household items, foodstuff, electronics, toys, baby items, beauty products and clothing among other products, which makes it convenient for general shopping. Walmart has an active online store, allowing customers to shop conveniently from home or on the move. Finally, Walmart is becoming increasingly active on social media, where it conducts campaigns aimed at attracting customers.

External and Internal Environments and Bargaining power of buyers

Product variety and the existence of numerous sellers leaves customers with a wider choice range; such that they can compare price, quality, usability, durability and convenience before making purchasing decisions. Given the high number of physical retail stores in the United States, as well as online stores, customers now have a higher bargaining power and tend to purchase from retailers who offer the best quality at the lowest price, and at the greatest convenience (Lynch, 2012). In this regard, the bargaining power of customers is exerting increasing pressure on companies such as Walmart to provide products at lower prices in order to prevent loss of customers to cheaper alternatives. Walmart must compete with peer organizations for customers by meeting their growing and changing needs in a better way than competitors.

To address this force, Walmart has been ensuring that only the highest quality products are supplied at their stores. Low prices also form part of the strategy that Walmart is using to retain customers. Walmart has become increasingly proactive in obtaining feedback from clients, a practice that helps the company to effectively predict customer needs and work towards meeting them. The online store has also contributed to the company’s ability to enhance convenience for customers.

4. Improving ability to address forces of competition

It is notable that Walmart actively seeks to address the above two forces. However, the retail giant must exert more efforts towards improving its ability to address the forces more effectively in order to enhance profitability.

Industry rivalry/competition

Social media has been hailed as one of the most effective marketing avenue in the modern times. This has been enhanced by the advancement in technology, which has inherently led to increased access to the internet and social media (Johnson et al, 2014). Walmart should focus more on social media as a marketing tool through creating a wide following on social media sites including Facebook, YouTube and Twitter. This should be accompanied by engagement in social media campaigns to promote their products.

External and Internal Environments and Bargaining power of buyers

While it may be difficult to control customers’ ability to choose between products, Walmart can influence buyer decisions by providing favorable conditions that attract customers. An example is to create value for customers through enhancing customer service. Walmart has been faulted for underperformance in terms of customer service, a factor that could contribute to the loss of customers to competitors (Lynch, 2012). This can be enhanced by hiring additional staff to counter the staff shortage problem and making customer effective customer service a deliverable for all stores and for all employees. Based on customer feedback, the company should address issues of poor customer service at the departmental level.

5. External threats and opportunities assessment

Threats

Competition remains one of the most significant threats faced by Wal-Mart. Existing firms and new entrants into the market are keen on attracting customers and this is a major threat to Wal-Mart’s success.

In the recent past, Walmart has experienced employee union issues, stemming from allegations of poor employee treatment, low wages and understaffing. This has led to negative publicity in the midst of ethical concerns. Bad publicity related to poor customer service could also threaten the company’s future performance.

Economic fluctuations influence business performance and profitability to a significant extent, particularly when it affects the price of supplies and the purchasing power of customers. In the event of unforeseen economic turbulence such as through economic crises, forex fluctuations and inflation, Walmart could suffer major losses.

Opportunities

Technology advancement

Technology advancement is a valuable opportunity to exploit in enhancing profitability. Advances in technology have led to the development of computer and mobile phone applications that can utilized to enhance performance. Online selling, which Walmart has already invested in is a great opportunity to reach customers. Secondly, social media is one of the products of technology advancement, and which has led to greater customer reach for organizations. Through social media, Walmart not only stands a chance to increase its reach through promoting followership but also through social media campaigns and advertisements

Walmart has the opportunity to expand globally into countries that it does not currently operate in. This is more so with the increasingly number of developing

Global expansion

There is a growing demand for healthy foods among consumers, as individuals seek to improve their health and get rid of lifestyle diseases. This is a major opportunity for Walmart to take advantage of, by serving the needs of this market.

Most serious threat and opportunity

Based on the above discussion, it can be established that competition is the most serious threat while technology advancement is the most lucrative opportunity. Johnson et al (2014) notes that businesses must utilize available opportunities to deal with threats affecting the business. In order to deal with competition, Walmart could utilize technology advancement to develop competitive strategies such as social media to expand its global reach. Walmart should focus on providing more products on its online market and improve on delivery in order to attract customers. It should also consider expanding globally by allowing customers from outside the United States to shop from the website and have the products shipped to them. Providing customers with high quality products will ensure that the company does not lose out to competitors.

6. Greatest strengths and most significant weaknesses

Strengths

Walmart has a well-established brand name and is well known across the United States and beyond. This gives the retailer advantage over other competitors.

Product variety and favorable prices remain a major boost for the retailer. Customers are attracted to low products and the additional benefit of being able to shop for the majority of the products they are looking for within Walmart makes it a convenient store.

Due to its expansive size, Walmart has achieved cost leadership based on its bargaining power. Walmart benefits from economies of scale based on its large purchases. It also sources some of its products directly from the manufacturer thus enabling the company to cut its costs significantly.

One of Walmart’s greatest strengths is supply chain management efficiency. The company has a sophisticated supply chain management system which ensures efficient delivery of products to their distribution centers which are well managed. The same applied to inventory management, which ensures that all stores are supplied with required products and that dead stock is minimized.

Walmart has an expansive store network, with 11,534 outlets under its name.

Weaknesses

Adapting in different countries and cultures has been difficult for Wal-Mart, which is mostly successful in the U.S. The company has had little success outside the U.S. and this has impended its global expansion attempts. An example is the flopped entry into Germany which demonstrated that global expansion is not the company’s stronghold.

A deteriorating public image due to issues such as poor employee conditions and poor customer service have affected the company through reduced sales, legal battles with unions and strenuous working relations that lead to inefficiency. In April 2016, Wal-Mart, at the Pennsylvania Supreme Court, failed at appealing a judgment of $187.6 million issued over infringing minimum wage laws by failing to pay workers as indicated in their policies (Wheeler, 2016).

Walmart applies the low price strategy to attract customers and this means that the business must endure lower profit margins. While this is counteracted by the high volume of sales, the company loses significantly by selling at below market rate prices.

Walmart is severely understaffed, a factor that has been a cause for criticism over the years. This leads to overworking of staff and often leads to poor customer service. Besides, there are more part-time workers than full-time workers, such that commitment to work may be limited. This may be detrimental to the company’s performance in the long-run and impact on its profitability.

Walmart has a history of high staff turnover. This means that the company is constantly hiring and training, which may greatly affect its operations. It also means that the quality of service may be affected because there are new employees at any given time.

Due to its strategy of low pricing, Walmart has in various instances encountered community hostility. Wal-Mart’s strategy is seen as a threat to local businesses, which are unable to make profits due to lack of customers, and the fact that they may be forced to accept lower profit margins in order to compete effectively.

Wal-Mart’s low price strategy is to a great extent achieved through the sale of cheap and poor quality products (Mitchell, 2011). As the company offer low prices, quality is also compromised to a great extent.

The large size of the company makes it difficult to keep up with employee and manager performance and makes decision making difficult. It also leads to inconsistency in service delivery and poor customer care.

Strategy to maximize strengths and minimize weaknesses

To maximize the company’s strengths, Walmart must invest more on developing the brand through marketing and provision of quality products. In order to minimize weaknesses, it is imperative that Walmart addresses the challenges being faced by the company including staff welfare issues and customer service in order to maintain a good reputation, hence increase customer trust.

7. Resources, Capabilities and Core Competencies

A superior logistics system is considered Walmart’s major resource and capability. The company has invested highly in its logistics system which ensures that the organization is able to identify the pace at which products are moving, the best suppliers, best bargains for products, best transport routes to ensure products are delivered in good time and that its stores never run out of stock. The system also allows the company to divert goods on transit in case there is an urgent need to supply a particular store or region.  This plays an imperative role in enhancing distribution and supply management.

Walmart has a well-established management information system to ensure overall efficiency in operations. This ensures that the company can manage its expansive network including store operations, finances and human resource management.

Cost leadership is a core competency for Walmart. This has helped the company compete effectively against major players in the economy. Due to the bulky purchases which allow the company to gain discounts and a well-managed logistics system which promotes efficiency and reduces costs, Walmart has achieved cost leadership.

Walmart makes a high volume of sales across its stores and one of the major resources the company boasts of is financial resources. The company is capable of maintaining its operations, handle expenditure, pay suppliers, purchase stock, provide returns to investors and invest in more stores. This means that the company’s financial stability is strong and it can easily expand its activities to grow the business further.

Walmart has a strong distribution network consisting of over 42 distribution centers (Walmart website). This increases efficiency and reduces delivery time. It also ensures that customers always find products in the stores.

Store brand variety ensures that the company can serve different market needs. Walmart operates different store brands including Walmart U. S., Walmart International and Sam’s Club, with an aim of serving different needs of customers. This is imperative in enhancing profitability.

Managerial skills and competencies ensure that Walmart is capable of operating the expansive business empire. This is achieved through strategic decisions and improved efficiency, ensuring that the company continues to make profits and that customers are satisfied.

8. Company Value Chain and How Walmart Can Derive Value From Its Resources, Capabilities And Core Competencies

Based on Porter’s value chain analysis, an analysis of Walmart’s value chain can be summarized as follows:

Walmart Value Chain

In reference to the value chain illustrated above, Walmart could create additional value through utilizing its resources, capabilities and key competencies as discussed below.

• Walmart’s customer service is in dire need of improvement and this can be achieved through utilizing the high financial resources available at the business.
• Consideration of the expansive network of stores suggests that there is a need to address the question of low staffing and low salaries. Walmart should use its financial resources and its highly qualified management team to restructure the human resources function.
• Walmart should recognize that competition is high in the retail sector and that there is a need for high level marketing to maintain its customers and attract new ones. By leveraging on the brand popularity, its low cost strategy and strong financial position, the company can undertake marketing strategies to promote demand for its products.
• Taking advantage of the expansive market that it already has, Walmart could derive more value by expanding the store globally as well as increasing the number of stores locally. Bases on its sophisticated logistics system, Walmart can effectively manage the new stores by ensuring timely delivery of supplies.
• The high volume stores and distribution centers represent untapped potential which could be utilized through increasing product variety. The spacious stores and distribution centers can still take in additional products and further satisfy their customers.
• Online shopping has gained high popularity due to the availability of internet and digital devices. Customers are also preferring online purchasing because of its convenience. Walmart which already has an online store should focus on online selling to capture the growing market by investing its financial resources in developing a detailed and interactive website where customers can obtain a majority of products.
• Walmart could create additional value through the production of custom products. Taking advantage of its connections with manufactures, the company could develop customized products for its customers, thus increasing sales.
• The community plays a major role in adding value to the company, hence the reason why Walmart must increase its involvement in community social responsibility (CSR). This can be done through dedicating a considerable portion of some of its profits towards improving community health.
• Walmart must utilize its managerial and expert skills to further enhance its systems, inbound and outbound logistics. It is notable that competition continues to escalate and failure to keep upgrading to better mechanisms could cost the company greatly.

9. External and Internal Environments Conclusion

Walmart remains one of the most influential businesses in America based on its service to the retail market and as an employer. The company has not only expanded to most major towns in the U.S. but it also supplies a majority of consumer products in its expansive stores. However, the retailer faces considerable issues in its international and external environments. To overcome negative influences in the internal and external environment, Walmart must take strategies aimed at improving its resilience and gaining competitive advantage. In order to deal with its weaknesses and threats, Walmart must seek to maximize on its strengths and opportunities. Further, based on its resources, capabilities and key competencies, the company can improve its performance through creating value in its processes.

10. External and Internal Environments References

Johnson et al. (2014). Exploring Strategy: text and cases. 10th edn, London, Pearson.

Lamb, CW., Hair, JF., & McDaniel, C. (2011). Essentials of Marketing. Cengage Learning,

Lynch, R. (2012). Strategic Management, 6th Ed, London: Prentice Hall

Mitchell, S. (2011). How Walmart Drives Down Product Quality and Durability. Retrieved from reclaimdemocracy.org/walmart-product-quality-durability-longevity/

Walmart website. (2016). http://corporate.walmart.com/

Wheeler, L. (2016). Supreme Court rejects Wal-Mart appeal in employee wage case. Retrieved from thehill.com/regulation/court-battles/275064-supreme-court-rejects-wal-mart-case-challenging-class-action-lawsuit