PESTEL analysis of Walmart
This is an in-depth PESTEL analysis of Walmart. It investigates how Walmart develops and implements its strategies and techniques in response to several powerful forces in the USA, Canada, and other markets. Walmart Inc. is an American retail giant that has operations in many countries. While it operates under the name Walmart in the United States and Canada, it uses different names in some other countries.
Political factors affecting Walmart
Walmart has largely benefitted from the political stability in the USA, Canada, and some other countries. This shows that it applied due care in selecting overseas markets. If those markets faced frequent political challenges such as protests, and road blockage, it would have been difficult for it to keep its operations going as usual.
Walmart supports elected officials from both major political parties in the USA to ensure that politicians make informed decisions on issues critical to the interests of its customers, members, associates, and shareholders. However, its political giving does not endorse a lawmaker’s individual beliefs or voting records (Walmart, 2021). It reviews and adjusts its strategy at the end of every election cycle (Hirsch, 2021). Indeed, it has records of suspending donations to certain lawmakers in murky political circumstances.
Economic factors affecting Walmart
Walmart offers customers cheap prices for many of its products. Every Day Low Price (EDLP) is the cornerstone of its strategy. It implements this strategy by using a largely automated supply-chain management system. It also keeps the in-store design basic, and its executives use budget travel options (John, 2019).
It should be mentioned that if recessions or other economic challenges kick in, Walmart is likely to be affected badly. For instance, it cut prices on so many products during the recession in 2008/9 to help customers, however, it affected its profit margins.
As Walmart operates in many countries, it is affected by several other economic factors such as tax rates, employee wages, exchange rates, and interest. Walmart is in fact under pressure to increase the minimum wage in the United States.
Social factors affecting Walmart
Social environment is the next component in the PEST analysis of Walmart. Social factors can sometimes make or break a company. For instance, Walmart failed in Japan for several reasons. However, one of the most important ones is that Japanese consumer tastes are highly varied. Preferences for everything vary from region to region which enable smaller companies to vie for market dominance for local products. Even though Walmart is a global giant, it could not leverage the bargaining power in the Japanese local markets (Inagaki and Lewis, 2020).
While a new Walmart store creates job opportunities for local people, it can hurt the business of smaller companies. Many small businesses could not compete with it at local levels and went out of business making many people jobless. This raises an ethical question that Walmart should consider in its future growth strategies.
Technological factors affecting Walmart
Companies around the world are heavily investing in technology to increase their efficiency. Walmart is no exception in this regard. It has decided to spend around $14 billion in the fiscal year 2022 to enhance its supply chain, automation, and other areas of the business. The aim of this massive investment is to drive long-term sales growth (Garcia, 2021).
E-commerce helps Walmart reach out to a wider audience very swiftly. Most people in the USA, Canada, and many other countries prefer online shopping now-a-days through their devices such as laptop, mobile phone, or tablet. Therefore, the future is great for Walmart. In fact, it expects its e-commerce revenue to go over $100 billion in the next couple of years, and $200 billion in the few years after that (Garcia, 2021).
Environmental factors affecting Walmart
Disasters impact on Walmart’s business and its stakeholders directly. They disrupt its operations in some places and put the lives of the associates and customers at risk. Properties may be damaged as well resulting in high costs of recovery (Walmart, 2021). Therefore, disaster preparedness is part of its Global Security Program.
To reduce the impact of its operations on the environment, Walmart has come up with a number of techniques. For instance, it has put efforts in place to encourage its budget-conscious customers to buy more sustainable products. It is also working with its suppliers to avoid a gigaton of greenhouse gas emissions by the year 2030 (Walmart, 2021).
Legal factors affecting Walmart
Legal environment is the last area of focus in the PESTEL analysis of Walmart. Walmart needs to ensure that its activities are in line with the rules and regulations of all the markets where it operates. Any breach may be damaging for its brand image. For example, it lost a lawsuit in Wisconsin because of firing a sales associate with Down syndrome. The jury ordered it to pay $125 million as punitive damages. It also had to pay massive fines in Canada and India in the past because of its failures in several issues.
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Last update: 16 November 2021
CBS News (2021) Jury orders Walmart to pay $125 million after it fired worker with Down syndrome, available at: https://www.cbsnews.com/news/walmart-lawsuit-down-syndrome-employee-fired-fined-125-million/ (accessed 12 November 2021)
Garcia, T. (2021) Walmart to invest nearly $14 billion in automation and other business areas in fiscal 2022, available at: https://www.marketwatch.com/story/walmart-to-invest-nearly-14-billion-in-automation-and-other-business-areas-in-fiscal-2022-11613752795 (accessed 16 November 2021)
Hirsch, L. (2021) Walmart joins companies suspending donations to lawmakers who voted against certifying the election, available at: https://www.nytimes.com/2021/01/12/business/walmart-political-donations-Republicans.html (accessed 16 November 2021)
Inagaki, K. and Lewis, L. (2020) Why Walmart’s might couldn’t crack Japan, available at: https://www.ft.com/content/db42cb7e-5f87-4e46-b923-e9ef5a9d4600 (accessed 10 November 2021)
John, S. (2019) How Walmart keeps its prices so low, available at: https://www.businessinsider.com/walmart-low-price-strategy-tips-2019-4?r=US&IR=T (accessed, 15 November 2021)
Walmart (2021) Our business, available at: https://corporate.walmart.com/our-story/our-business (accessed 16 November 2021)
Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.