External and Internal Environments Essay Example | Topics and Well Written Essays - 2000 words

External and Internal Environments - Essay Example The company is engaged in the business of running retail stores that come in various formats like discount stores, supercentres, neighborhood markets, etc. worldwide. The products of the company are also offered through different e-commerce websites that includes samsclub.com and walmart.com. Wide range of merchandise products are also offered by the company which comes at every day low price (EDLP). The company's operation is divided into three broad segments namely, Wal-Mart International, Wal-Mart US and Sam's Club. External Environment Analysis The external environment in which Wal-Mart operates its business activities can have a significant impact on its growth and sustainability in future. The various external environmental factors that can have an impact on the company and its corresponding retail industry can be better understood through the PESTEL analysis. It stands for Political, Economical, Social, Technological, Environmental and Legal factors concerning the organization . Of all these six environmental factors the Economical and Social factors can have a significant impact on the organization and the industry in which operates its business. A detailed analysis of these two factors has been discussed below: a. Economical Factors: United States is considered to be one of the largest economies of the world with gross domestic product (GDP) of around $15.09 trillion and per capita GDP of around $49,000 in 2011 (CIA, 2012a). The recent global financial crisis (GFC) had a significant negative impact on the US economy but it recovered well. The US retail savings which also suffered a setback due to GFC is expected to have a steady growth. The disposable income of the US population is also expected to increase. All these factors can have a positive impact on Wal-Mart in increasing its sales in the forthcoming years through its low and competitive pricing strategy. b. Social Factors: The increasing healthcare costs and the ever increasing aging population o f US are major concerns for the country at present. Another major social concern for the country is the rising inequality of income. United States has been ranked 42 out of 136 nations with respect to the income equality parameter as evaluated by the Gini coefficient (CIA, 2012b). Although US economy as a whole has experienced consistent growth it has not translated into redistributive social policies and increased wages. All these social concerns can have a significant impact on Wal-Mart because it employs large number of laborers and the wages issues associated with them can hamper the future growth prospect of the company. Industry Analysis Porter’s five forces model helps an organization to assess the competitive forces which exists within the industry (Hill & Jones, 2012, p. 49). The forces which help out in the process are named as a) threat of new entrants, b) threat from the substitute products or services, c) bargaining power of the suppliers, d) bargaining power of the consumers and finally e) competition within the industry (Society for Human Resource Management (U.S.), 2006, p.38-39). Out of the five competitive forces mentioned above two most important forces that can have a significant impact on Wal-Mart has been described below: a. Buyer Power: The retailers that operate in the retail industry vary greatly in their size with respect to companies like Wal-Mart who are having large chain of supermarkets