Essay on Environmental Scanning & Strategy Formulation: Aligning Operations With Strategic Goals

Introduction

Environmental scanning and strategy formulation are some of the most vital processes that companies conduct to align their operations with the existing strategic goals and objectives. Environmental scanning refers to the process that an organization uses to gather information about various events and their relationships within its internal as well as external environments (Lotayif, 2018). The primary goal of an environmental scan is to assist the management in determining the future direction of their firm. Strategy formulation, on the other hand, is the process through which a business chooses the most effective courses of action to achieve its predefined goals and objectives (Borges & Janissek-Muniz, 2018). This process is critical to the success of every organization because it offers a unique framework for the actions and operations that will lead to the achievement of the desired outcomes. Walmart Inc provides the best example of a company that relies exclusively on environmental scanning and strategy formulation to achieve its desired goals in the long-run (Mujtaba, 2007). As a result, this research provides a comprehensive discussion on the environmental scan as well as strategy formulation operations of Walmart as one of the leading multinational retail corporation in the world.

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Company Highlights

Walmart is an American international retail company headquartered in Bentonville, Arkansas (Cheng, 2019). The multinational retail firm operates a wide range of businesses, including discount department stores, grocery stores, and a chain of hypermarkets. Walmart began its operations in 1962 under the leadership of Sam Walton, who also served as its founder before its incorporation on October 31, 1969 (Mujtaba, 2007). Today, Walmart has multiple locations across the world. The company operates more than 11,300 retail stores under approximately 58 banners in more than 27 countries (Ferguson, 2016). Also, Walmart has numerous eCommerce websites in more than ten countries across the world. The company employs approximately 2.2 million workers across the globe (Walmart, Inc., 2020). Walmart made an annual gross profit of $129.104 billion in 2019 (Cheng, 2019). The company had improved growth rates over the last three fiscal periods. For instance, Walmart had an annual gross profit of $124.617 billion in 2017, which represented a growth rate of 2.87% from what it generated in 2016 (Ferguson, 2016). Consequently, Walmart realized a 1.87% growth rate in profitability in 2018 to reach a total of $126.947 billion in revenues (Macro-trends, 2020). The company recorded a 1.7% increase in profitability in 2019 when compared to its performance in 2018 (Macroaxis, 2020). Lastly, the company's annual gross profits for the twelve months that culminated on October 31, 2019, stood at $129.322 billion, representing an overall growth rate of 0.37% annually (Macro-trends, 2020), as summarized in appendix 1.

Also, Appendix 1 indicates that Walmart realized a continuous improvement in its market performance over the last twelve years. The company's annual gross profit increased from $84,389 million to $129,104 million from 2007 to 2019 (Macro-trends, 2020). However, Walmart recorded remarkable fluctuations in its quarterly gross profits from 2016 to 2019. Such results point to the overall need for assessing the company's performance challenges with the use of various key performance indicators (KPI). KPI refers to a quantifiable metric used in evaluating the success of a company or its employees in meeting the available performance objectives (Cheng, 2019). Some of the most vital KPIs for assessing the performance of a company include the current ratio, return on asset, and profit margin. Walmart's current ratio, which refers to the value computed by dividing the current assets of an organization by its current liabilities, is 0.81 times (Macroaxis, 2020). This ratio measures whether an organization has adequate cash or liquid assets to pay its current debt over a given fiscal year.

Aghaei (2013) identified current ratio as a good test of the overall liquidity of an organization. Recommended current ratios tend to vary from one industry to another. However, current assets must be at least as twice as the current liabilities. Therefore, Walmart's performance is below the acceptable limit. Return on Equity (ROE), on the other hand, is a standard measure of the profitability of an organization concerning its equity computed by subtracting liabilities from assets (Macroaxis, 2020). Therefore, ROE is a computation measure of how properly a company uses its investments to generate profitability. In many industries, an ROE between 10% and 30% is appropriate. Such ROE can allow the company to offer dividends to its owners and implies the presence of more funds for the future growth of the organization. Walmart has an ROE of 0.0016%, which is not recommendable for investors and shareholders (Macroaxis, 2020). Therefore, the company must make effective use of these KPIs to address its performance challenges and, in turn, attain operational sustainability.

Analytically, there are remarkable changes in the performance of Walmart over time about its competitors (Cheng, 2019). The global retail industry market is continuously shrinking due to the influx of competitors operating both on a small scale and large scale. Walmart's leading competitors include Kroger, Tesco, Amazon, Home Depot, Walgreens, Best Buy, Target, and Carrefour. Most of these firms have highly-developed customer networks, with Amazon taking the lead through its continuous involvement on the online platform (Meeks & Chen, 2011). As a result, Walmart's management has a crucial role to play in addressing the threat of competitors to retain their outstanding performance in the global market. For instance, the company should make a massive investment in its unique products such as groceries, apparel, and the home front to withstand the threat posed by Amazon. Also, Walmart should use improved technological applications and devices such as social media and robots to deliver enhanced customer experience (Cheng, 2019). Lastly, the organization should acquire more firms across the world to attain sustainability, as seen in its move to purchase Flipkart, an Indian online retailer.

Walmart's Mission Statement, Vision Statement, Goals, Objectives, Structure, and Culture

According to Ferguson (2016), Walmart operates with the mission statement of "Saving people money so they can live better." The company's vision statement, on the other hand, is "To be the best retailer in the hearts and minds of consumers and employees." Doug McMillon, who serves as Walmart's Chief Executive Officer (CEO), plays a crucial role in the realization of this unique vision and mission statements alongside encouraging employees to remain committed to attaining its goals and objectives (Meeks & Chen, 2011). Walmart set different goals more than a decade ago, including being powered by 100% renewable energy, creating zero waste, and selling products that sustain people and their environment. As a result, the company developed various objectives to help in the realization of these vital goals. First, Walmart seeks to increase economic opportunity not only in the retail as well as its supply chains by advancing economic mobility and fostering inclusion (Walmart, Inc., 2018). Secondly, the retail company seeks to improve the sustainability of operations and value chains by enhancing its renewable energy portfolio, reducing emissions, and producing zero wastes.

Finally, Walmart works to strengthen local communities by providing disaster relief services, engaging its associates, relieving hunger, and supporting veterans (Walmart, Inc., 2018). Walmart operates with a hierarchical functional organizational structure, which contains two unique features, the hierarchy, and function-based designation. The hierarchical feature implies that every employee has a direct supervisor in Walmart except for its CEO. Therefore, middle managers and employees have a crucial role to play in the implementation of the directives received from top-level leaders. The function-based feature, on the other hand, entails the fulfillment of Walmart's critical functions by its employees and associates (Lombardo, 2019). For instance, the company has various departments to implement specific duties, including human resource management, marketing, and information technology. Walmart's organizational culture consists of four critical elements that guide the behavior of its employees, which, in turn, guide the capacity of the organization to add value in the delivery of high-quality retail services to the target customers. These elements include services to customers, acting with integrity, striving for excellence, and respect for the individual (Meeks & Chen, 2011). These four features remain crucial to the company's success and the sustainability of its unique culture.

Assessment of the Macro Environment

According to Nandonde (2019), assessment of the macro-environment is a critical step towards identifying and addressing some of the risks that affect the operations of a given company in a predetermined industry. Business experts use the PESTEL model to asses a total of six macro-environmental variables that affect the activities of companies in a given industry (Gupta, 2013). These variables include Political, Economic, Social, Technological, Environmental, and Legal factors, as summarized in Appendix 2.

Assessment of the Micro Environment

Assessment of the micro-environment of an organization puts into consideration various factors that affect its operations and decision-making process internally. According to Bonakele, Beaty, Rasool, and Kriek (2014), conducting a stakeholder analysis is a practical approach towards understanding the micro-environment of the targeted organization. Multinational firms such as Walmart have a plethora of groups and individuals with a stake in their operations. Walmart's stakeholders exist in two broad categories; market stakeholders and non-market stakeholders. By definition, market stakeholders are those individuals as well as groups with an economic stake in the company's activities (Bonakele et al., 2014). Non-market stakeholders, on the other hand, are individuals who have a political stake or regulatory ambition in the course that the organization undertakes, as summarized in Appendix 3.

Impact of Globalization on the Relationships of Walmart with its Stakeholders and the associated Strategy

Globalization refers to the process of international integration, which arises from the interchange of ideas, products, values, and other aspects of culture among businesses (Jensen & Sandstrom, 2011). Globalization has a far-reaching impact on the stakeholders of every organization. The effects of globalization stockholders, investors, and shareholders of Walmart can be either positive or negative. The adverse impact occurs as a result of the failure of stockholders to assess the risks associated with their local markets while making various investment decisions (Christopher & Darren, 2014). The positive effect, on the other hand, lies in the expansion of the market that the organization can sell much of its products to generate more revenues and profitability. Therefore, the best strategy for Walmart's stockholders should entail conducting a comprehensive analysis of their target markets and increasing its investments in foreign markets through expansion. Top executives and employees, on the other hand, would benefit from globalization through continuous collaboration with their global counterparts despite the challenges posed by cultural differences (Jensen & S...