External Factors Affecting Wal-Mart

External Factors Affecting Wal-Mart
Name
Course
Dr. Megan Endres
Date

 Memorandum of Transmittal
Date
Dr. Megan Endres
Course

Dear Dr. Megan Endres:
In partial fulfillment of the courses requirement, I submit this report titled External factors affecting Wal-Mart.
The report examines the companys external environment using the SLEPT and SWOT analysis tools with a focus on issues capturing the headlines in recent times such as employee strikes, labor unions, and lawsuits. Also discussed are the qualities of Wal-Mart that make it an excellent company and the largest corporation in the world by value. Possible remedies
to the various challenges the company encounters are suggested from time to time throughout the report.
I hope you find this report satisfactory.
Sincerely yours,
Signed
Name
Course

 Table of Contents
Introduction 1
Social factors 2
Legal factors and Lawsuits 3
Economic factors 4
Figure 1 Wal-Mart Net Sales 1980-2003 5
Political factors 5
Technological factors 6
Strikes and Labor unions 7
Competition 7
Opportunities 8
Threats 9
Conclusion 9
References 10




 Introduction
The aim of this study is to determine external factors that affect Wal-Mart growth and success and try to suggest possible solutions and improvements to the problem factors. Most of the information available about the company is from business journals, scholarly articles, and newspapers. The results identify a number of limiting factors to the growth of the business. The author saw it as merit to use the SLEPT Analysis to group the external factors affecting Wal-Mart. SLEPT is an acronym standing for Social, Legal, Economic, Political, and Technological Analysis. Other factors that will be considered in this analysis include lawsuits, competition, strikes, and labor unions. However, some of these factors may fall under the broader factors in the SLEPT Analysis. Another analytical tool that will be useful in this endeavor is the SWOT analysis. According to the SWOT analysis, which is also referred to as the Internal/External Matrix, the external business environment comprises of opportunities and threats that influence the wellbeing and continuity of a business.
Dr. Megan Endres authorized this report. The purpose of this report is to highlight the external factors affecting Wal-Mart operations across the world. Wal-Mart has been running for more than 50 years. The company has one primary goal, providing customer with the most valuable for their money. While this is the purpose of the company, the road is not without challenges. For the continued prosperity of the company, it is important that it continue identifying and responding to external factors. This is because unlike internal factors, external factors are beyond the control of the company. The best option the company has is to continue meeting the expectations of the concerned stakeholders by timely identifying specific external factors that may limit it from achieving its purpose and respond to them by changing aspects in the internal environment.
Social factors
Social factors, such as changing social structures and patterns of behavior affect business. The boomer generation that has dominated consumption for many years is aging fast. The numbers of people above the age of 60 will increase to more than 40% of the population in the next 30 years. People tend to work and save their money when they are young. At retirement, people are at the peak of their wealth. There is therefore a distinct pattern of spending and saving throughout the life of an individual. As the population ages, people spend more of their proceeds and savings. The aging populace is also likely to order different products from the young. For example, the aging population is likely to demand more of Botox injections, anti-aging cream, and other such products that fit the aging context. Having grown old in an e-commerce dominated world, the aging population is likely to demand products that are delivered to their doorsteps by delivery companies from online stores. Such are the challenges that Wal-Mart is facing currently as it prepares for the changing consumer demographic in the future (Anon., 2004).
Another possible effect of this aging population on business is increase in labor shortages. However, this is not likely to be a major problem for a company such as Wal-Mart because of its popularity with those seeking employment. The decline in the number of labors available in the market may influence businesses to increase wages in order to attract new employees and maintain the old ones. The decrease in productive population and increase of elderly people in the society may force the government to increase taxes and insurance contributions to ensure it is capable of offering basic services to increasingly demanding aging population. In response to such external environmental factors, Wal-Mart management continues to shift the policy of the company to ensure the survival and profitability of the business in the new and changing environment. To achieve a balance with nature, the business balances social cost with social benefit. Social cost comprises of the cost that the business and external environment incurs because of a decision. Social benefits comprise of private benefits and external benefits that the business and community receives respectively because of a decision made by the business (Spangler, Britt & Parks, 2008).
Wal-Mart interacts with consumers by associating itself with activities or products that capture the consumers interest. These include sports, such as football, cricket, and racing, as is the case of Wal-Mart with NASCAR. Companies such as Wal-Mart seek exclusive rights to sponsor events such as NASCAR to ensure lovers of NASCAR racing associate the sports with their business. This improves rating and brand image in the mind of NASCAR racing fans. Another aspect of the society that Wal-Mart exploits is the peoples love of celebrities. Most people in world today want to be celebrities. Those who cannot be celebrities change their lives to live like them. From a business point of view, celebrities help create demand for products because they set social trends, which are defined by possession of certain products (Hansen, 2009).
Legal factors and Lawsuits
Wal-Marts record is full of despicable behavior. Every year, the company deals with thousands of lawsuits, with some ending successfully. It seems the company is always doing some wrong and every point. Give the large size of the company and number of employees it is hard for the company to exist without complains. However, the sheer number of lawsuits facing the company every year and it involvement in political matter is evidence that the company is not doing everything in its power to meet the expectations of all stakeholders, especially the employees. Failure to meet employees’ expectations means that customers do not receive the best service possible (Greenwald, 2011). In 2013, a customer sued the company after slipping on a wet floor in the store. The customer broke several bones in his body, including backbones leaving him permanently disabled. The customer fell on the wet floor is because an employee left the floor wet after cleaning to get a warning cone, however, before he could get back, the customer had an accident. Such cases make it clear that employees in the company do not receive training. However, in many such cases, the company drags the cases to ensure the customer cannot meet the extended cost of pursuing justice through compensation (Samakow, 2013).
Wal-Mart employees seem to sue the company constantly. One major recent case is a class action lawsuit filed by more than 1.5 million Wal-Mart female workers. The company won the case in 2011 not because the case lacked merit, but because of the laws definition of class. A class action lawsuit can only proceed in instances where all the plaintiffs have similar factual claims. The issue presented to the court is that of sexual discrimination. More than 70% of the companys 2.2 million employees are women. However, women are paid significantly lower wages than men are. The lawsuit failed because the plaintiffs factual claims did not march (Samakow, 2013). Wal-Mart also faces several civil lawsuits, such as the recent lawsuit concerning Wal-Mart stores in Central America and Mexico. In the civil lawsuit, Wal-Mart is accused of bribery and artificial inflation of stock prices. Employees also sue the company frequently because of lack of payment for overtime. In 2013, the company paid its employees 4.83 million dollars in back wages for overtime not officially acknowledged and compensated (Greenwald, 2011).
Economic factors
Wal-Mart is global chain store that offers products at low prices. This is possible because the company uses a central procurement system that gives company suppliers real-time information about the products being bought by customers at different stores. This computerized supply chain enables the company to reduce the cost of operation and pass the benefits down to the customers. While the company is a big profitable company making billions of dollars each year, it effect on local economies is detrimental. The company provides a wide range of products at a low price. This drives small locally owned businesses out of the market (Greenwald, 2011). Even in situations where people have to drive for long distances to buy products, the low prices act as an incentive. As such, a Wal-Mart store kills small local businesses in a wide radius. The company has also adopted a new policy that sees certain business activities outsourced to Asian countries, such as Bangladesh. The impact of the outsourcing negatively affects the local economy and livelihood of people who have dedicated most of their productive lives to the company. Unlike the negative effects that the company has on the local economy and employees, the shareholders of the company make a fortune. The profits of Wal-Mart have been increasing as shown in the figure below since its inception to date.

Figure 1 Wal-Mart Net Sales 1980-2003
Political factors
Wal-Mart exerts unprecedented pressure on political issues at the local level. Recently, the company has stepped into the role of influencing politics at the national level by funding politicians who pursue their interest. For example, Wal-Mart is the biggest supplier of guns and ammunition in the country. The company supports pro-gun politicians to ensure that the political class protects their sales. For many years, the company has taken a small role in national politics. However, during the 2004 national elections, the company was the largest corporate donor in the country through its PAC (Political Action Committee). The increased interest in politics is perhaps because of the many lawsuits the company is facing in courts. Other challenges that the company faces include legislation by local government to limit its expansion, which is aimed at protecting small local businesses (Anon., 2003). Increase in the number of people against the companys policies and way of doing business increases its interest in how Washington handles issues. For example, in case the government limited importation of products from china, Wal-Mart would be the biggest loser in the country. This is because the company imports good worth more than 15 billion dollars each year (Samakow, 2013).
Technological factors
Wal-Mart is a global leader in Information Technology (IT). The success of the company is because of efficient supply-chain management practices, which focus on consumer needs. The history of the companys use of computer technology starts in the 70s. In the 1970s, the company became the first retail store to develop and use a central information system known as the hub-and-spoke system (Ortega, 1999). Under the system, goods are assembled in a large central warehouse hub and dispatched to various individual stores spoke. This gave the company a competitive edge it still wields to date. The system enables the company to purchase goods in large quantities, thus benefit from the economies of scale. The company also uses its logistical infrastructure to distribute the goods further reducing on cost. The company purchases in large quantities directly from the manufacturer eliminating any intermediary. Wal-Mart is the only intermediary between the producer and consumer. Currently, Wal-Mart owns one of the most sophisticated computer systems in the private sector with the exception of silicon companies (Ortega, 1999). A key feature of the computer system is the Wal-Mart EDI system that connects individual stores with suppliers and the central warehouse. Suppliers can download real time information about the sale of their products in different stores. When the number of remaining products reach a certain threshold, the supplier send product to the logistical center from where they are sent to different stores across the country (Hansen, 2009).
Strikes and Labor unions
Wal-Mart employees are always going on strike either as individuals or in unions. Most of the strikes and complains are because of poor working conditions and employment policies. In many such instances, Wal-Mart adopts an offensive posture as is evident in the many lawsuits that the company has filed against workers unions in various parts of the country. The company is the most anti-union company in the United States. In an instance where the central management learns that workers in a certain store plan on unionizing, the company send three new managers to take over the store and terminal the unionization process. The managers mandate is to use coercion and intimidation to kill the union efforts and identify those workers in the store championing the issue. Some of the tactics the managers employ include withholding of pay and dismissals. The company has gone as far as closing a store in Canada after the workers successfully unionized (Greenwald, 2011).
Competition
Wal-Mart is the largest corporation and leading seller of food products in the world. In Mexico and the United States, the company is the leading private employer. The company has come to dominate the marketplace and enjoy monopolistic advantages. Wal-Mart uses a strategy of crashing competition to ensure it remains the sole supplier of almost every product in a region (Greenwald, 2011). Most of the locations where there is a Wal-Mart store are deserted. For example, before the opening of a Wal-Mart store in downtown Texas, the area was thriving with businesses. However, after the opening of the store, all other businesses went out of business because Wal-Mart supply the same products but with more variety and cheaper prices. Because of the large size of the company and the efficient organization of its distribution system, small local businesses that sell products that have passed through several intermediaries cannot compete (Ortega, 1999).
Opportunities
Wal-Mart operates in a major industry, which is a major employer. There are several opportunities available to Wal-Mart in this industry. They include capitalizing on the employment, brand equity, and additional products on shelves. Wal-Mart has the ability to employ the most resourceful employees in the industry. The talent that these individuals bring to the business often translates into success. Wal-Mart operates in a segment of the economy that employs more than 20% of all non-farm workers. Even with the recent recession, the discount department stores category is projected to grow at more than three times the manufacturing sector. Wal-Mart has a competitive advantage over other employers, thus is capable of employing bright people to ensure the most benefit from hiring new employees (Hansen, 2009). The Wal-Mart name is a household brand recognized by many across the country. By capitalizing on brand name, the company is able to penetrate new markets by opening up stores in areas where the residents can hardly wait to benefit from the low prices associated with Wal-Mart. The companys information system is one of the most interconnected in the retail sector. It places the company at a distinct advantage because the company bypasses any intermediary between the producer and consumer. With the company remaining as the only intermediary, it can make a reasonable profit and still deliver products to customers at prices lower than the market price (Hansen, 2009).
Threats
The future of the company looks bright; however, several challenges limit the company from achieving its full potential. The company must address employees complains satisfactory. The company is infamous for paying low wages and making employees work extra hours without compensation. The current strategy of expanding both product range and geographical reach is good; however, the company faces the risk of stretching resources too thin and losing operational control. The adoptions of smaller stores as the company reaches out to smaller communities may also weaken strategy coherence. The local governments in various cities pose a threat to the companys expansion because of its tendency to kill local businesses. The continued negative publicity of the company may damage its image and reduce customer loyalty, especially with it highly publicized political involvement at the national level (Benoit & Dorries, 1996).
Conclusion
Wal-Mart is the largest corporation in the world by value and the largest distributer of food products in the world. With operations spanning several continents, the company is a symbol of American capitalism. As with other global corporations, the company faces its share of challenges, notably, the numerous lawsuits filed against the company each year by employees and customers. While some of the claims are ungrounded, some reveal malpractice and gloss negligence. As the company expands into new markets and adopts the strategy of smaller stores, it faces a logistical challenge that could turn into a nightmare even with the advanced information system in use currently.



 References
Anonymous. (2003, Dec 08). Whispers. Northwest Arkansas Business Journal, 7, 3-3, 5.
Anonymous. (2004, Mar 15). Wal-Mart remains aloof. Northwest Arkansas Business Journal, 7, 4.
Benoit, W. L., & Dorries, B. (1996). Dateline NBC's persuasive attack on Wal-Mart. Communication Quarterly, 44(4), 463-477.
Greenwald, R. (2011). Wal-Mart: the high cost of low prices a documentary produced by Robert Greenwald. Web document
Hansen, J. M. (2009). The evolution of buyer-supplier relationships: An historical industry approach. The Journal of Business & Industrial Marketing, 24(3), 227-236.
Ortega, B. (1999). In Sam we trust: The untold story of Sam Walton and how Wal-Mart is devouring the world. London: Kogan Page.
Samakow, P. (2013). Suing Wal-Mart: Bad business practices lead to litigation. The Washington Times Communities. Retrieved from: http://communities.washingtontimes.com/neighborhood/leading-edge-legal-advice-everyday-matters/2013/jun/2/suing-wal-mart-suing-city-hall-its-almost-impossib/
Spangler, M. A., Britt, M. M., & Parks, T. H. (2008). Wal-Mart and women: Good business practice or gamesmanship? Journal of Applied Management and Entrepreneurship, 13(2), 14-25.