Expert answer:For Chemtai..continuation of the project, short pa
Expert answer:For the attached continuation of the project, write a short papers which will prepare you for your final culminating projectShort Paper:You will do an internal analysis of competitive advantage using the VRIO framework, analyze the competitive position of your selected company and perform a SWOT analysis of the company.Which resources will help sustain a competitive advantage in a foreign market?What are the core competencies of the company?
2017111813430020171117215717project_includingfeedback_2__2_.docx
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Running head: PROJECT PROPOSAL
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Strategy in Organization
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PROJECT PROPOSAL
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Country: United States of America
Company: Wal-Mart
Product: Retail stores
Foreign Market: Australia
Wal-Mart is the largest retail company in the entire world. It is the biggest company in
the United States with many retail stores and hyper supermarkets that sell their products in the
huge franchise. Most Americans have had the experience of shopping at Wal-Mart as they have
set up shop in most of the states in the US. Wal-Mart is favorable for its many stores and cheap
prices as compared to other stores (Huang, Kuo& Lu, 2014). Wal-Mart, however, has not
expanded into many other countries except Mexico, Canada and some other countries that are
close by. Australia is filled with small retail stores and Costco is the only huge retail store that
has opened in Australia. It would be a great idea for Wal-Mart to expand into Australia due to a
number of reasons. Australia already has a ready market and due to the large population that is
found in Australia, Wal-Mart would be successful in the market. The best corporate market
strategy that has been used by Wal-Mart is the low prices strategy (Brennan&Lorman, 2009).
Most of the products that are offered by Wal-Mart are sold at a price that is lower than the price
of the same commodity in other stores. The products are also of very good quality that competes
favorably to the quality of the same commodity in other stores. Wal-Mart should also focus on
the difference in culture when expanding into the Australian market where they should consider
the strategies that have proved favorable and accepting to people in Australia. There have been
some difficulties in the expansion by Wal-Mart mostly due to the huge capital that is required to
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enter the Australian market. This is a problem because there is an already existing huge retail
store in Australia that would offer competition to Wal-Mart. The strategies that Wal-Mart can
use therefore include either acquiring an existing competitor, form an alliance with an already
existing competitor or start using Greenfield operations which they can choose to either do alone
or form partnerships with other existing players (Jiang, Holburn&Bearnish, 2016). By doing this,
Wal-Mart will achieve huge success in the Australian market.
PESTLE Analysis
Political Factors
For effective entry into the foreign market segment of Australia, political factors are key
determinants of business success of Wal-Mart. It is true that Wal-Mart is facing a number of
problems in the process of trying to expand to other international market (Christine, 2017).
Australia has some restrictions on direct foreign investments, just like what India has been doing.
These are some of the situations proving difficult for Wal-Mart to expand to huge geographic
locations such as Australia.
Economic Factors
Just like the United States of America, purchasing power of customers in Australia is
quite appealing due to good life standards and high populations (Christine, 2017). This is a good
sign for Wal-Mart making huge profit should it consider making investments in this region.
However, Wal-Mart ought to be aware of any effects of recession and economic slowdown that
are likely to occur. Generally, huge population of Australian and effective economic and
individual purchasing power are clear indicators for Wal-Mart to venture in the Australian
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Market. Australia is already occupied with other retail stores such as Coles and Costco hence
Wal-Mart should be aware to ensure that it is able to operate without succumbing to huge
economic losses.
Social Factors
Wal-Mart global expansion in Australia is likely to be affected by some social challenges.
Generally, there are number of countries on the globe where citizens do not like traveling for
long distances to acquire commodities (Christine, 2017). For the case of Australia, individual
cultural differences are likely to affect smooth running of the retail business should it fail to
comply with such cultural differences. Wal-Mart will have to face stiff market competition with
local retailers such as Costco hence there is need to device effective strategies of handling stiff
market competition caused by such social factors.
Technological Factors
There has been increased use of technology in the retail world; where Australia is one of
the countries embracing advanced technology (Christine, 2017). It is of great value to appreciate
the fact that Wal-Mart has initiated effective efforts of leveraging technology in the process of
selling consumable products online and ensuring that supply chain management is done in the
best way possible. Embracing advanced and high technology will be one of the added advantages
of ensuring that it is able to attain a competitive edge in Australia. The technology used for
supply chain management and online sales should supersede that of its competitors such as
Costco.
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Environmental Factors
There are no significant environmental barriers for Wal-Mart to conduct its businesses on
the globe (Christine, 2017). However, while making investments in Australia, it should be keen
enough to check on local environmental compliance policy and any other factor that could derail
the process of conducting its business activities.
Legal Factors
Currently, Wal-Mart is facing numerous legal suits filed by employers due to disparities
in its human resource management practices. In Australia, legal is only conducive to those
foreign investors who don’t violate internal economic policies. This is likely to ruin its reputation
in the public domain (Christine, 2017). Therefore, it is of profound impact for it to clear these
suits before making business ventures in Australia. This is justified by the fact that success of the
business is greatly determined by its public relations image and the way in which customers have
embraced its services.
What is the foreign market’s environment as related to the PESTEL framework?
The Foreign market (Australia) is it relates to PESTEL analysis is indeed promising for
Wal-Mart to make business ventures. As already opined in the above section, purchasing power
of Australians is promising due to the fact that human population is high with high living
standards. However, there are local retailers such as Costco. Different cultural activities of the
Australians should be respected to ensure that business success is realized without succumbing to
huge losses. Despite the fact of these juicy business factors, success of Wal-Mart is Australia
will be determined by it to make and have advanced strategies of attaining customer loyalty and
addressing stiff market competition.
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What factors in the PESTEL framework are most important when entering the foreign
market and why?
The following factors are very important in the PESTEL framework while entering the
foreign market; economic, political, social and legal factors. A foreign market should be
politically stable, without terrorism and civil unrest to avoid destruction of an organization’s
goods and services (Yüksel, 2012). Economic factors determine consumer behaviors and the
ways in which pricing mechanism are made. Effective business investment require being aware
of all monetary factors. Social factors determine how customers embrace company products.
Legal factors will always streamline company’s image in the public domain.
Porters Five Forces of Wal-Mart
Wal-Mart’s commercial direction is determined by its ability to analyze and respond to
Porter’s Five Forces within the retail industry (Roberta, 2017). The Five Forces that shape the
business environment of the company have determined the possibility its possibility to attain a
unique competitive advantage that is characterized by huge profit making process, being leading
retail in the industry and having been enabled to develop effective strategies of addressing the
bargaining power of buyers and suppliers within the industry (Dobbs, 2014). Generally, there is
need to develop advanced business strategies of ensuring that the company is able to withstand
business threats of substitutes and entry of new business competitors within the industry. WalMart’s five forces of competition analysis is based on the following: strong competitive rivalry,
weak bargaining power of buyers, weak bargaining power of suppliers, weak threat of substitutes
and strong threat of entrants in the industry. Below is an analysis of Five Forces of Competition
(Roberta, 2017).
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Bargaining Power of Buyers
Wal-Mart faces weak intensity caused bargaining power of buyers/consumers in the retail
industry (Roberta, 2017). Due to the large number of suppliers in the industry, it is almost
impossible for this company to impose huge pressure on some of the retail firms in the industry.
Due to the bargaining power of buyers, Wal-Mart is supposed to address the following issues in
the retail industry: the strong force of large population of buyers in the industry, high intensity of
buyers and the minimal size of the individual purchases made by buyers. It is prudent to
appreciate the fact that large population of buyers does exert strong force on Wal-Mart in the
retail industry.
Suppliers’ Bargaining Power
The retail environmental industry is faced with the issue of weak intensity of suppliers.
There are many more suppliers in the retail industry both in America and the foreign market of
Australia (Roberta, 2017). Therefore, Walmart is supposed to address the following issues of
concern relating to the retail industry: the strong force of large population of buyers, stiff market
competition being experienced among business suppliers themselves and finally the weak force
of high availability of the supply system being conducted within the industry. The ability of WalMart to address the above issues is caused by the fact that numerous suppliers have the capacity
to affect smooth running of business activities of the company. It is justified fact that many
suppliers are ever competing for the limited space within the retail industry thus there is need to
ensure that success is attained without incurring huge financial losses in the industry (Brea-Solis
et al. 2012).
Threat of Substitutes/Substitution
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Generally, the threat of business substitutes/substitution has very weak intensity of
affecting Wal-Mart from discharging its activities in a streamlined manner (Brea-Solis et al.
2012). Wal-Mart is the retail company that offers range of consumable goods having almost
minimal or no substitutes at all. However, it is of great concern to appreciate the fact that the
following are significant substitution threats having significant impact to the activities of the
company: low variety of product substitutes in the industry, higher costs of the consumable
substitutes and low substitute variety in the industry. Low substitute variety has compromised
abilities of customers to move away from the company products; due to another fact that such
substitutes are also expensive (Brea-Solis et al. 2012).
Threat of new entrants
The intensity of new entrants is a huge business threat that should be addressed both at
the foreign market level and in the United States of America. Many retailers enter the market
segments and compete on the basic of convenience, location, specialty and other notable factors
of concern being experienced in the industry. Threat of business entrants is broken into the
following segments: low cost of executing business activities, moderate costs of capital and
moderate costs of the brand. It is a justified fact that it is hard to moderate establishment of new
retail firms by Wal-Mart in the industry. Generally, new entrants keep operating in a business
environment end up becoming potential threats to business activities of the company (Gerdeman,
2012).
Intensity of Competitive Rivalry
There is stiff market competition in the retail industry; driven by the fact of numerous
firms venturing in the same industry. For example, there is need for Wal-Mart to be careful
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because of large number of retail firms that are operating in the same industry. Such firms will
always jeopardize smooth flow of business activities of Wal-Mart; both in the United States of
America and the foreign market such as Australia. Business competitors tend to device effective
ways of ensuring that the company is able to attain unique competitive advantage in the industry,
maximize of profit making efforts and generally act as distracters to Wal-Mart. For effective
business competition, Wal-Mart should consider the following factors of concern: many firms
immersed in the same industry, large variety of retail firms in the same industry and huge
aggressiveness of the retail industry (Gerdeman, 2012).
Conclusion
Analysis of Five Forces of competition does reveal presence of stiff market competition
in the industry and increased threat of new entrants in retail industry. Therefore, Wal-Mart must
create well streamlined and executable strategies of enhancing business success on long term
basis. This should be done at the international market such as that in Australia or in the United
States of America.
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References
Brea-Solis, H., Casadesus-Masanell, R., & Grifell-Tatje, E. (2012). Business Model Evaluation:
Quantifying Wal-Mart’s Sources of Advantage. Harvard Business School.
Brennan, D. P., &Lorman, L. (2009). An assessment of Wal-Mart’s global expansion strategy in
the light of its domestic strategy. European Retail Research.GablerVerlag. 125-151
Christine, R. (JAN 13, 2017). Walmart PESTEL/PESTLE Analysis & Recommendation.
Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry
analysis templates. Competitiveness Review, 24 (1), 32-45.
Gerdeman, D. (2012). Location, Location, Location: The Strategy of Place. Harvard Business
School.
Huang, K, L. Kuo, C, & Lu, M. (2014). Wholesale prices dvs.ate vs. capacity expansion: the
optimal strategy for seasonal products in a supply chain. European journal of operational
research. 234(1), 77-85
Jiang, G, F, Holburn, G. L &Bearnish, P. W. (2016).The spatial structure of foreign subsidiaries
and expansion strategy. Journal of World Business. 51(3), 438-450
Roberta, G. (JAN 8, 2017). Walmart: Five Forces Analysis (Porter’s Model)
Yüksel, İ. (2012). Developing a multi-criteria decision-making model for PESTEL analysis.
International Journal of Business and Management, 7(24), 52.
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