Internal and External Factors
Discuss About The Business Process And Environmental Factors.
Innovation is considered as a new idea or method that is adopted by business organisations for gaining a competitive advantage (Drucker, 2014). This helps in analysing the capabilities and resources of an organisation. In the case of grocery retail industry, it is important to innovate as the products and services of the industries need to be updated for gaining the satisfaction of the customers.
The purpose of this study is to identify the external and internal factors that influence the innovation in the grocery retail industry. According to Sheth and Sisodia (2015), retail is the process of selling consumer goods and services through various distribution channels. The grocery retail industry focuses on providing goods and services to the customers through a well-defined supply chain management. The internal environment and the external environment are two important variables that need to be analysed by organisations and industries for its successful implementation.
The term retail is used to describe a process of selling goods and services to customers. In the words of McDonald and Wilson (2016), grocery retail industry is the services provided to the customers with various products that are required for everyday life. In this regard, the industries need to apply certain strategic process models that can be utilised to analyse the environment. In the case of the grocery retail, industry the application of a strategic process model can be the Porter’s five-force analysis. In this regard, an example can be stated with that of Walmart. Walmart is an American retail corporation that specialises in selling groceries (Walmart.com, 2018). The reason for selecting Porter’s five-force analysis over other models is that it provides a comprehensive yet detailed analysis of the factors that are involved in the business environment. It helps in analysing the important players in the industry.
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PESTEL |
CAGE |
SW |
Double Diamond |
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The PESTEL analysis can be used by the grocery retail store to analyse and monitor the external environmental factors that have an impact on the organisations (Armstrong et al., 2015). This model can help in analysing: · A wider scope in the analysis process · Identify threats and weaknesses · Analyse every factor that are required for gaining a competitive advantage |
The CAGE analysis helps in identifying certain factors that exist between countries. For example Walmart in UK and USA can be analysed analysed based on the various factors that affect the working of its business. These include the distances of cultural, administrative, geographic and economic (Neelakandan et al., 2015). The CAGE analysis can be considered as an alternate method of Hofstead’s cultural dimension that helps in the analysis of the factors that affect the countries and its companies. Therefore, this model can be helpful for analysing: · Different languages and beliefs · Political factors · Distance between the two countries · Fluctuation in the economy |
The SW framework is used to identify the strengths and weakness that exist in the business environment. For the grocery retail industry along with Walmart, the SW analysis is characterised with the fact: · It provides an analysis of the capabilities and resources in the business. · It helps identifying the opportunities that can be derived. |
The double diamond distributes the business process into distinct phrases which includes discover, define, develop and deliver. This can help a reputed company like Walmart in identifying the possible ideas that are required for conducting a proper research. However, Johnston and Marshall (2016) stated that the model lacks clarity, which can be considered as a negative factor. |
Table 1: External factor analysis
(Source: Created by author)
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PESTEL |
CAGE |
SW |
Double Diamond |
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The application of the PESTEL analysis can help the grocery retail industry to understand the competition it faces. Walmart can use this particular model to understand its competitors and ensure that a proper business model is developed. The positivity of the application of this model for Walmart is the fact that it can help in the complete analysis of the environment whereas the disadvantage of the model is the fact that it the external factors change every time (Chen et al., 2014) |
For a grocery retail store, this particular model can be used to understand the expansion it may create. Chaffey and Ellis-Chadwick (2016) stated that the positivity that can be faced by Walmart due to the application of the strategy is that it provides an idea about the differences that exist in different countries. At the same time, the negative point of the strategy is that it fails to provide a detailed analysis of the problems. |
The positive point for the SW analysis is that it provides a detailed analysis of the strengths that can be used by Walmart. Whereas the negative factor is that, it does not provide remedy to mitigate the weakness (Babin & Zikmund, 2015). |
It can be said that this model helps in the practical designing of theories. Discover mode of innovation and improvement. Develop a proper process |
Table 2: Result of the analysis
(Source: Created by author)
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Porter’s Five-forces |
RBV |
Value chain |
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Porter’s five forces can help the grocery retail industry to understand the forces that exist in a business environment. These forces are mainly the factors that affect the working of a business. The five factors help in the analysis of the business market and based on this analysis, the grocery retail stores can formulate the products. In the case of Walmart, this particular model can help it to analyse the challenges it may face from the US market. Therefore, the analysis of the model states that Walmart can benefit from the application of the five-forces as it can understand the potential threats that it may receive from the business (Bennett & Chorley, 2015). |
The Resource Based View is a strategic business model that provides an idea about the resources that are important for attaining competitive advantage. It helps in achieving a superior performance for a specific company. Walmart can use this particular strategy so that it can improve the performance of the organisation. The employees and other resources are the focal point for the company so that it can help it to gain a competitive edge in the industry. According to Biemans (2018), the application of the Resource Based View is mainly done based on two assets, the tangible as well as the intangible assets. |
The Value chain framework initially developed by Porter is used to analyse the operations and the logistics of a company. Walmart can apply this particular model to understand the marketing and sales of that can help the company. The procurement of the raw materials that are used by the company can be analysed so that Walmart can develop its resources properly. |
Table 3: Internal factor analysis
(Source: Created by author)
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Porter’s Five-forces |
RBV |
Value chain |
|
The retail grocery industry can analyse other retail industries and strive to achieve a competitive advantage over the competition. Walmart and other competitors such as Woolworths compete with one another for competitive advantage in the market. Hence, the analysis of the Porter’s five-forces can help it to achieve the status. However, there are negative consequences as well to the application of the model. One of the limitations is that the Porter’s five-forces do not provide a detailed analysis of the mitigation techniques required for the threats. This can be considered as a negative impact for Walmart as it may hamper the progress of the grocery retail industry as well as Walmart. |
The positivity of the application of the model is that it can provide Walmart with a proper analysis of the resources such as employees and materials and the manner in which it can be used to prolong the opportunities of the organisation. However, the negative factor is that the Resource Based View does not provide a proper assumption about the advantage that an organisation have over the others. |
Christensen, Raynor and McDonald (2016) are of the opinion that industry wise this model can help in analysing the resources and ensuring that the particular industry can help it expand in the particular market. However, the limitation of this model is that it is lengthy and requires proper analysis of the factors that may cause hindrance in the progress of a particular society. |
Table 4: Result of the analysis
(Source: Created by author)
After the analysis of the strategic frameworks, it can be said that the grocery retail industry need to apply the theories by considering the negatives as well as the positives. According to Christensen, Raynor and McDonald (2015), the industry needs to compete both internally as well as externally. Externally the competition is with the industry of different sectors, internally the competition is with other retail sector such as fashion or restaurant. At the same time, Walmart also faces competition from organisations that belong to the same industry. This provides Walmart with the opportunity to innovate its strategies and ensure that it remains the top grocery retail company in the United States and the world.
Strategic Frameworks Used for Analysis
The summary of the external analysis show that while PESTEL analysis has some major advantages, industries need to look at the disadvantages of the strategy. The fact that the strategy does not provide a stable analysis of the environment speaks about the massive problems that industries and companies may face. At the same time, PESTEL analysis can help the industries to grow by analysing the current external environment. Grant (2016) is of the opinion that the current analysis of the external environment provides an understanding of the factors that require to be mitigated before investing a separate country.
Hence, it can be said that the CAGE analysis in this case can be used to understand the differences between the cultures across countries. The CAGE analysis provides a complete understanding of the methods required for the expansion of an industry or company (Glaser & Strauss, 2017). In the case of the grocery retail industry the analysis, need to be based on the economic and geographic location. This is mainly because base on the distance and the geographical trading between different food products can be predicted. The grocery retail industry supplies all types of food products hence, it is necessary to analyse every product that exists in the market.
At the same time, the analysis of the SW and the double diamond strategy suggests that the grocery retail industry along with Walmart need to analyse the factors that may cause hindrance to the business. Skinner (2014) stated that the strengths of the industry could be converted into opportunities only after analysing the weakness. The double diamond analysis can provide an idea about the factors that are required for the innovation. Hence, it can be recommended that the grocery retail industry apply the CAGE strategy so that it can expand globally. The global strength of the global industry can provide opportunities in terms of scope and employment in a society. However, the expansion may even bring about internal threats for the industry.
The internal threat can be analysed by the application of Porter’s five forces. According to Dobbs (2014), the five forces is a useful strategic tool for the analysis of the threats and reactions of the buyers and suppliers. In grocery retail industry, the buyers and sellers are the main stakeholders and because of this, it is necessary for the industry to continue searching for ways to improve in the business.
At the same time, it is necessary to analyse other strategies such as the RBV and the value chain. The RBV is important as it helps in understanding the resources of a company. The resources are necessary for success, as without it organisations cannot hope to continue its business. In the case of Walmart, the organisation needs to arrange its resources and ensure that the talented employees are recruited to provide stability to the organisation (Veldman et al., 2014). It can be seen that the overall resources in the retail organisations can be improved with the proper marketing and exposure of the sector.
PESTEL Analysis
Hence, it can be said that it is important for grocery retail stores to undertake challenges that can help in mitigating the factors that hinder the progress of the sector. For this reason, it can be recommended that the grocery retail industry undertake the analysis of the environment using Porter’s five forces. This can help the industry to continue its progress and ensue that the required factors necessary for the production and expansion of business are met. The strategy of Porter’s five forces can provide stability to the industry and at the same time provide an opportunity for growth and success of the economy.
Hence, after the analysis of the external, internal and strategic process, it can be said that the company Walmart and the grocery retail industry can continue to expand with the help of the PESTEL and Porter’s analysis. These two analysis provide an opportunity for the organisations to understand the threats that exist both within the industry and outside of it. Although as pointed out by Ingram et al. (2015) that the stability of the two strategies cannot be relied upon, the application can provide an opportunity for success for both the company as well as the industry.
Conclusion
After the analysis of the paper, it can be said that the importance of formulating strategies can be understood. The result of conducting the paper is mainly to identify the factors that affect the progress of business. This can help in the success or failure of business and in turn provide an idea about the type of strategy required for maintaining a stable market. Thus, the analysis of the external and internal factors provides an idea about the changes to be made in the business market.
Throughout the paper the key points that have been includes the manner in which strategic analysis can help a company as well as an industry to expand. The focus has been mainly on the grocery retail industry and Walmart. This is because grocery retail industry is currently on the verge of a breakthrough in the international market. Thus, the paper highlights the industry along with the internal and external factors that need to be analysed for its growth.
The limitation of the paper is that it does not take into consideration the grocery retail industry of a particular country. This can be considered as an important limitation as the country can be crucial to analyse the in depth growth of the industry. Grocery retail industry is renowned worldwide along with Walmart. Hence, it is important that the paper keep its focus on a particular country so that it can analyse the growth and stability of the industry in a proper manner. Thus, the paper presents this limitation.
CAGE Analysis
In the future, the country needs to be specified so that it can be easy to gain more statistical data about the growth of grocery industry. A comparison can also be made between the grocery industries and other industries. Walmart can be compared with its competitors to understand the manner in which the companies mitigate the threats. The strategies related to the internal and external analysis also can be improved and improvised so that better results can be obtained.
Reference
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