Welcome to this PESTLE analysis of Walmart.
Walmart is one of America’s largest multinational retail corporations, operating as a chain of departmental stores, grocery stores, and hypermarkets. With a gross yearly profit of USD 12 billion (as of 2023) and over 611 billion USD revenue, it serves over 230 million customers weekly across 24 countries.
Despite the business’ strong success, especially in America, the company has faced criticism over the years due to several factors.
This blog post will analyze the positives and negatives of factors affecting Walmart with the help of PESTLE analysis.
Walmart’s Background
Founded in 1962 by Sam Walton, Walmart is still majorly owned by the Walton family. It went public in 1970 and was listed on the New York Stock Exchange in 1972. It has over 10,500 stores across the world with more than 2,300,000 employees.
First started as a single store in Rogers, Arkansas, Walton’s vision behind Walmart was to help people save money to live a better life. Even after so many decades, the business is well known to follow its low pricing and extensive range of products – from groceries, clothing, electronics, and more.
Other product ranges customers can find in Walmart stores are –
- Pet supplies
- Furniture and home décor
- Beauty and personal care products
- Sports and fitness products
- Toys and games
- Automotive products, car accessories, and maintenance equipment
PESTLE Analysis of Walmart
Political Factors
Political factors refer to the political environment in which a business operates. This includes government regulations, policies, political stability, and similar arenas.
Since Walmart operates in several countries apart from the US, like Canada, Mexico, China, and more – it is affected by the political factors around labor practices, regulations, and trade policies.
Here is how the political environment affects Walmart’s business:
- Walmart has a strong supply chain globally, and any political support acts as a strong opportunity for them, especially in bigger markets like China and India
- Walmart is known to be one of the top 100 political donors with increased political funding. This is done by convincing employees to participate in political contributions in favor of the Republicans and influencing labor legislation and corporate tax
- Walmart shared its opinion against religious freedom law in Arkansas in 2015, interfering directly in a political debate and impacting the business positively
- Walmart’s lobbying expenses increased from USD 2 million (2000) to USD 15 million (2014) to enter several markets like India
- Walmart has taken a stand to increase the legal age for owning a Gun license and in favor of gay rights in 2018
- A few years ago, Walmart was found selling some prohibited products in the Chinese market. As a result, the sale of all Walmart products was banned for some time, though temporarily
- Walmart stores are negatively affected whenever there is a road blockage, protest, or political event. This happens as it becomes tougher for the customers to visit the store, also resulting in a loss of daily revenue
- Walmart had to raise their minimum wage for workers to USD 15 an hour as a result of the “Stop Walmart Act” bill introduced by the Vermont Senator
- As Walmart’s new export commitment, it is going to boost the sale of MSMEs in India and export goods worth USD 10 billion every year by 2027
Economic Factors
Economic factors refer to the economic environment, including inflation, interest rates, economic growth, exchange rates, consumer spending patterns, and more.
Since Walmart is a highly customer-centric business, it is strongly affected by the economic factors of each country it operates in. Being a global chain, the currency exchange rate also impacts the business’ revenue streams and profitability.
Here is how the economic environment affects Walmart’s business:
- Since Walmart is known for low-priced goods, the pandemic that impacted economies negatively was more like an opportunity for Walmart. With no other player in the market with similar prices, its marketplace grew to over 70,000 sellers in 2020, leaving Amazon behind
- Most products that Walmart offers are likely to remain on the shelf indefinitely as they are necessary products that never go out of demand, no matter what calamity happens
- Walmart needs to proactively be aware of its economic landscape in each global location as economies vastly change based on the country
- The US is witnessing a fall in its unemployment rate, ensuring economic stability, which is ideal for Walmart
- Operating in developing countries like India ensures smooth entry for WALMART
- With its lower pricing strategy, it is tough for Walmart to compete with its competitors in terms of profit margins
- Higher interest rates across the globe have thinned profit margins for Walmart
- Recently, Walmart has given promotions to over 230,000 employees, which has dipped the company’s overall revenue
- Labor cost affects Walmart’s economic performance the most, especially after the increase of the minimum pay in 2015
- Over 26 items in Walmart’s product list are likely to get affected because of the high tariffs on Chinese goods, again lowering business profitability
- The exchange rate between the USD and other currencies, typically where Walmart is operating, directly impacts Walmart’s profits in terms of offsetting profits after currency conversion
Social Factors
Social factors comprise the social environment, including lifestyle trends, changing needs, cultural norms, demographics, and social values.
Walmart is directly impacted by social factors like changing demographic and consumer preference trends as they impact product demand. A positive change increases the demand and vice versa.
Here is how the social environment affects Walmart’s business:
- Walmart failed to fit the German market’s marketing fit, resulting in the German consumer’s lack of interest in the store, which cost the business USD 1 billion
- Walmart has started focusing on supplying specific products in different regions to ensure that social norms in different locations are adhered to. For example, having more vegetarian grocery items in the Indian market compared to the Chinese or American market
- Walmart has created a user-friendly interface for its eCommerce store to reach more people. However, it still lacks behind Amazon due to Amazon’s unparalleled goodwill
- The growing adoption of online grocery ordering is going to impact Walmart negatively since its eCommerce services are still only limited to 11 countries
- Over 60% of Walmart’s business is generated in the US, and the changing American demographics (20% of its population will be over 60 by 2030) require the company to shift its focus
- With most consumers becoming health conscious after the pandemic, Walmart should shift its focus to selling organic and healthy items across its outlets
- Walmart uses Electronic Data Interchange technology to cut down human labor hours, which impacts its reputation negatively amongst the people as it becomes more machine-extensive and lowers job opportunities
- Subsidies that Walmart receives often give the business an unfair advantage over smaller competitors
- The business has improved its green credentials by using better packaging and energy efficiency initiates – coming in a positive light amongst the youth
- Walmart has been a part of several scandals like bribery allegations in Mexico, which has tarnished the business’ reputation
Technological Factors
Technological factors include advancements, invention, innovation, and automation used in any business.
Since Walmart is a highly technology-driven business, technological factors directly impact it regarding the supply chain, operations, and more. In today’s dynamic world, artificial intelligence, robotics, and digital transformation are also technological factors affecting Walmart as a business.
Here is how the technological environment affects Walmart’s business:
- Walmart has adopted high automation and robotics into its business to streamline production, fulfill orders, store maintenance, and more
- While the automation adoption has helped the business save over USD 8 billion in labor costs and USD 2 billion in reducing shrinkage, it is not the best approach when seen from an unemployment perspective which is rather high in most of the countries currently
- To reach out to the increased mobile users, the business has improved its mobile application system
- Walmart uses advanced technology to take care of its big data across different countries
- Robots are appointed in over 650 Walmart stores to track prices, stocks, and much more, increasing technology dependency but reducing the cost of production in the long-term
- Walmart’s e-commerce platform functionality has enabled the business to get in touch with its customers round the clock
- Walmart’s app feature allows customers to list items they want to purchase on their phones instead of carrying a physical list
- Fast Unloader is another application Walmart uses to unload goods and manage inventory
- Walmart is digitally transforming by using ML and AI to reimagine its retail stores across countries
- The organization has also partnered with Adobe to provide several businesses with access to the same technologies powering Fortune 100 companies
- The business is planning to expand technically, which will require the hiring of thousands of technologists, increasing employability
- Walmart’s Global Tech includes over 20,000 associates across the globe and is growing continually
- Atlanta and Toronto are Walmart’s newest tech hubs with diverse talent
Legal Factors
Legal factors refer to the regulations, laws, court decisions, and other legal issues affecting a business’ operations.
Walmart, a business operating in different judiciaries, is always affected due to legal factors, especially labor laws, and regulations. The business has often faced backlash regarding how it treats its employees and its wage rate.
Here is how the legal environment affects Walmart’s business –
- The company has suffered a loss of $65 million in California upon the mistreatment of current and past employees
- In 2011, some women filed a lawsuit against the company for discriminating against women in terms of salaries, job opportunities, and promotions, but the decision came out to be in favor of the company
- However, in 2015 Walmart was accused of not granting sick leaves to their employees, churning employee dissatisfaction
- Walmart hired its international legal chief in 2020, eyeing global expansion, which has resulted in legitimate business growth
- Walmart has often come into bad limelight due to firing employees upon health conditions, like the firing of Adrian Tucker, who had too many absences due to her Crohn’s disease
- The FTC filed a misguided lawsuit against Walmart regarding money transfers to customers, which has saved customers on the pursuit of Walmart offering them low-fee money transfers at the store
- Walmart’s anti-fraud program helps in stopping third-party criminals who use money transfer services to commit fraud
- It offers money transfer fees 87% lower than the competition, saving its customers billions. It has already saved USD 2.4 billion in fees after launching Walmart2Walmart
Let’s move to the last factor of the PESTLE analysis of Walmart.
Environmental Factors
Environmental factors include everything related to the natural environment, like sustainability, environmental regulations, climate change, etc.
Since Walmart strongly focuses on sustainability, it is directly affected by environmental factors. The company ensures it adheres to the demand for eco-friendly products and reduces its environmental impact.
Here is how environmental factors affect Walmart’s business:
- Walmart has consistently received backlash for dumping hazardous fertilizers and pesticides publicly
- To deal with the backlash, the company initiated a project name Gigaton, which promises to prevent a gigaton of emissions in the coming decade
- Walmart serves over 200 million customers online, making it one of the largest environmental footprints impacting a reduction in emissions
- Walmart has decreased its toxic land waste by over 78%
- The company is planning to use at least 50% clean energy by 2025
- Currently, the company uses 28% renewable energy sources for its operations
- Walmart has donated over 696 million pounds of food to the US
- The company has also covered over 1.8 million acres of land, along with Acres of America
- Walmart is very active in its sustainability, ensuring a private-brand packaging by 2025 that will be 100% recyclable, reusable, or industrially compostable
- Already 58% of its global private brand packaging is environmentally friendly
Conclusion
Walmart’s PESTLE analysis highlights that the company has both positive and negative impacts from external factors. Though the company is trying to work on the negatives by launching more projects and focusing on the societal and environmental benefits, there is still a long way to go for Walmart to achieve what it is capable of.