Factors that drive and creates shareholder value in Walmart, and how it will lead to better decision making
Shareholder value plays a significant role in every organization’s performance. Typically, companies use the shareholder value to increase their sales and earnings. Additionally, the management ensures that it has the interests of shareholders when making decisions. Walmart is one of the organizations that have different shareholders that impact its operations. Some of the shareholders include BlackRock Fund Advisors, The Vanguard Group, and SSga Funds Management Inc. One of the factors that create shareholder value in Walmart is its profits. Every business aims at increasing its earnings and minimizing its expenditure. Hence, Walmart has ensured that it increases its earnings as one way to increase shareholder value. Practices such as marketing and offering discounts have been introduced to attract more clients and guarantee that the organization increases its output. These strategies have been of great significance since the organization has become one of the leading companies in the retail industry.
Cash flow is another factor that drives and creates shareholder value in Walmart. Positive cash flow is one of the company’s targets as it shows that the organization has more money moving into it than out of it. Thus, managers have focused on ensuring that positive cash flow is achieved to create shareholder value in the firm. For instance, the organization has assured that resources are used appropriately to minimize expenses limiting profits. Moreover, it has focused on modern technology, whereby customers can pay online and have their products shipped to their destinations. Thus, these strategies have created shareholder value by helping the company achieve positive cash flow.
The Decision-making process in an organization is vital as it can lead to more profits and free cash flow, leading to an increase in capital gains for the shareholders. Dividends can also be increased by developing strategies that can improve the performance of the organization. In this case, increasing the profits can help Walmart develop better decisions by using the capital to expand its operations in various regions. Additionally, having adequate capital enables companies to introduce new marketing plans that can attract more consumers. The positive cash flow can also be of great significance in decision-making since the management can present collaborative ideas on using the money acquired in creating shareholder value. (Heil and Bornemann, 2018). Thus, increased profits and having positive cash flow can essentially help Walmart shareholders in making better decisions.
The different types of business and financial risk faced by Walmart in the conduct of normal business operations and the decisions involved with it
Businesses experience different challenges that can impact their performance. Some companies have also experienced problems in their operations, forcing them to close due to bankruptcy. One of the significant challenges involves the financial risks, which involve the possibility of losing capital on an investment. In this case, Walmart is exposed to many financial risks such as interest and credit risk. The firm faces interest risk since there is the potential that a change in overall interest rates can reduce other mixed-rate investments. Moreover, a rise in interest rates can lead to a fall in bond prices (García and García, 2017). Therefore, Walmart can experience interest risks since market prices are unpredictable, and their rise and fall can impact the interest rates. Equally, credit risk can be encountered by Walmart since it involves the creditworthiness of a borrower. Walmart offers credit to many individuals and organizations, and the company faces the dangers of the borrower’s failure to repay a loan. Additionally, debtors may fail to meet the contractual obligations leading to losses of Walmart. Credit risks can also lead to the interruption of cash flows and increase collection costs, leading to minimized profits.
Business risks entail a company’s ability to cover its operational expenses. Therefore, Walmart faces these challenges due to factors such as competition and operational difficulties. Competition in business is inevitable and different organizations are developing strategies to improve their performance. Thus, Walmart can experience a decrease in its profits due to its competitors. The operational risks can also lead to a decline in revenue acquired by an organization (García and García, 2017). For instance, Walmart can decrease the charges for its services and products, leading to reduced profits. Thus, the financial and business risks are some of the aspects that impact the performance of Walmart.
Decisions involved in financial and business risks have also been analyzed in many organizations. For instance, the strategies that Walmart focuses on entail improving its operations. The corporation has ensured that clients can acquire the best products and services from the organization. The decision is vital as it helps in increasing revenues that support other business practices. Financial risks have been limited by guaranteeing that debtors repay their loans and meet the contractual obligations. Another vital decision made by Walmart is forecasting market trends to ensure that interest rates do not lead to losses. Thus, Walmart makes various decisions to ensure that its operations are successful and issues such as business and financial risks are analyzed.
The meaning of Value-Based Management and the methods to measure achievements in organizations and in Walmart
Businesses ensure that they create, manage and measure their value in various ways, such as marketing their products to increase their sales. However, use of Value-Based Management (VBM) is one of the most vital approaches that companies exercise to create maximum value. VBM is also a management philosophy that encourages companies to focus on the interests of the shareholders in their business actions (Plowman, 2017). Hence, organizations need to learn about VBM as one of the approaches to increase their performance.
Measuring achievements in organizations is another important aspect that every organization should practice. The approach is vital since it helps companies to develop strategies that can help them improve their performance. Additionally, it enables the management to learn about the weaknesses and strengths of the company and how they influence the performance. Walmart has ensured that it measures its achievements by analyzing the financial statements. The approach helps Walmart to calculate its profits and its trends in performance.
Checking customer satisfaction is another approach exercised by Walmart to measure its achievement. In most cases, customers present their feedback depending on the services and products they receive from a company. Consequently, Walmart analyzes customer feedback to measure its productivity and develop ways to meet customer needs. Conducting performance reviews can also be used to determine whether a business is reaching its goals. The reviews can be acquired from different individuals such as customers, suppliers, and workers. Thus, Walmart has used the approach by encouraging its workers and clients to present their reviews regarding its performance and achievement. The practice has been essential since the organization has learned how it can increase its performance by focusing on modern technology to attract more customers and improve its operations.
García, P. and García, F.J.P., 2017. Financial Risk Management. Springer International Publishing.
Heil, S. and Bornemann, T., 2018. Creating shareholder value via collaborative innovation: the role of industry and resource alignment in knowledge exploration. R&D Management, 48(4), pp.394-409. Web.
Plowman, B., 2017. Activity Based Management: Improving Processes and Profitability: Improving Processes and Profitability. Routledge.