Examining the Operations of Wal-Mart

The main objective of this paper is to examine the operations of Wal-Mart. The paper starts with a small prologue and a diminutive narration of Wal-Mart’s history. The next section describes focuses on the current industry in which names of different competitors or rivals of Wal-Mart are mentioned. A comment by Wan Ling Martello, CFO of Wal-Mart’s international division about Wal-Mart’s market share has also been included. Focus on the company’s current situation comes next, in which the company’s current status has been explained. This includes how much space companies are using; about different types of Wal-Mart’s store etc are explained. The company’s current sales and sales growth has also been included in this segment. All sorts of strengths, weaknesses, opportunities, and threats of Wal-Mart are explained in the SWOT analysis segment. Financial analyses are also included. The next segment of the paper describes Wal-Mart’s website. Different features of Wal-Mart’s website and its comparison with K-Mart’s websites are explained. This paper ends with a conclusion and recommendation. The recommendation section of this paper points out some sort of improvements Wal-Mart can make to achieve better performances during the coming years.

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Wal-Mart is an American public corporation. It is very successful in running a large number of discount department stores. Fortune Global 500 named Wal-Mart as one of the largest public corporations in case of revenue. This was according to 2008 Fortune Global 500. “Wal-Mart was founded in 1962, with the opening of the first Wal-Mart discount store in Rogers, Ark. The company was incorporated as Wal-Mart Stores, Inc., on Oct. 31, 1969.” (About Us). Wal-Mart started its trading on OTC markets in 1970 and after two years Wal-Mart was listed on New York Stock Exchange. By the end of the decade, the company opened nearly 276 stores in 11 states. “In 1983, the first Sam’s Club members-warehouse store opened. The first Supercenter opened in 1988, featuring a complete grocery, and 36 departments of general merchandise. By 1989, there were 1,402 Wal-Mart stores and 123 Sam’s Club locations.” (History). During the recent recession time “business at Wal-Mart has never been better.” (McGinn). But the company managed its sales up to some extent. Technological advancement helped Wal-Mart a lot in increasing its supply chain.

Focus on the industry currently

Currently, there are plenty of competitors for Wal-Mart. The important competitors are K-Mart, Target, Meijer, Giant Tiger, and ShopKo, etc. Demands for products are very high during a present trend. “The profitability of individual companies depends on merchandising and an efficient delivery system.” (Bentonville). For keeping the customers with the company always, the company needs to follow some strategy. Some of such strategies are promotion, pricing, and distribution. “Wal-Mart’s strategy these days is to pick up new consumers, and then hang onto them as the job market improves.” (Rosen bloom).

Wal-Mart’s promotion strategy includes different kinds of advertising and giving publicity which is done through different types of media. The pricing strategy followed by Wal-Mart is lowering the price of the product to increase total sales volume. “Wal-Mart CEO Mike Duke told Wall Street analysts that the retailer plans to aggressively reduce prices heading into the holiday season.” (Gaffney).

For Wal-Mart, there are plenty of distribution systems. It is mainly through shipping, roadways, etc. “Wal-Mart has strengthened its balance sheet over the past year, which puts it in a position to take advantage of acquisitions abroad.” We’re very actively looking at possibilities,” said Wan Ling Martello, CFO of Wal-Mart’s international division.” (Kapner).

Focus on the company currently

The sizes of Wal-Mart discount stores vary from 51,000 square feet to 224,000 square feet. The average size of each Wal-Mart store comes around 102,000 square feet. Till July 2009, there were about 883 Wal-Mart discount stores accessible in the United States.

The sizes of Wal-Mart supercenter stores vary from 98,000 square feet to 261,000 square feet. The average size of each of the supermarkets comes around 197,000 square feet. Till October 2009, there were about 2,750 Wal-mart supercenters. The largest supercenter is about 260,000 square feet.

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Another type of Wal-Mart market is the Wal-Mart neighborhood market, which is about 42,000 square feet. This type of market aims to fill the gap between supercenters and discount stores.

About sales and sales growth, Wal-Mart stores Chief Executive Mike Duke told that the company is expecting to achieve more sales growth during the coming Christmas season. “The retailer sees 1% to 2% sales increase for the current fiscal year, which ends in January 2010. Wal-Mart expects sales to rise 4% to 6% the following fiscal year.” (Update: Wal-Mart Sees Sales Growth 1% to 2% This Year). Companies this year’s capital spending approximately ranges from $12.5 billion to $13.1 billion.

SWOT Analysis

Every business organization aims at maximum profitability and productivity, it analyses the business environment concerning the firm and the market. SWOT is the acronym for the strength, weaknesses, opportunities, and threats. These factors are external and internal to the firm, the strength and weaknesses are internal to the firm, opportunities and threats are external to the firm.

The SWOT is a tool

Different kinds of analyses and interpretations are considered for SWOT analysis. They may include Strategic planning and market strategy, financial analysis and sales growth, brainstorming techniques and workshops, competitor strategy analysis, and the criticism faced by the company

The SWOT of Wal-Mart stores Inc

Strengths

Wal-Mart is the largest established brand with a high reputation globally and these are the largest retailer in terms of profit, it is the established company that provides products at cheap prices. The company is indulged in Multinational operations with good turnover; it is in the private sector which wholly owns the internal business. Much importance is given to training and the development of employees. The owner of the own core competencies like the IT; electronic co etc which make them independent. The organization has diversified the products into different categories to suit the organizational and individual needs. The company’s strong market presence in the US leads to economies of scale. The penetration to the market is very high and serves the increased number of customers.

Weakness

As the company has a wide range of outlets with a global presence, it lacks the control being provided in the mode of operations, The firm being the largest and the reputed one in the world, it is the main aim or the target of the other players in the market, the other player analyses each nook and corner of the wal-mart operation and the success stories. The diversification is limited to the US continent without due consideration of others. The store policies are static from the day of establishment. The less consideration on the mission statement.

Opportunities

Growth in internet shopping, The purchasing power of the people increases in the developed countries, the chance of expanding in the European and German markets. The good opportunity for merger with the other performing retail outlets.

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To have the presence of the company in local and mall-based operations. To have a wi-fi network and wi-max for full-fledged operational success.

Threats

As the company is the largest globally, political factors are affecting its operations. It had to pull its operations from South Korea and Germany when it lacked operational efficiency. The company had critics from women’s rights, labor organizations, and grassroots. Restriction of the company’s entry by small towns, where they think it may hurt the small retailers. Variety of promotion tactics from new entrants nationally and globally. The taxation is imposed in different countries during distribution. Price war from competitors like Costco, sear holdings, etc where the people are much conscious about the income and expenditure.

Financial Analysis

The financial analysis helps know the financial stability of the company; it helps to know the growth of the company.

Financial Condition Company Industry S&P 500
Debt/Equity Ratio 0.70 0.71 1.11
Current Ratio 0.9 1.1 1.5
Quick Ratio 0.2 0.3 1.2
Interest Coverage 12.1 18.3 27.2
Leverage Ratio 2.6 2.6 3.5
Book Value/Share 17.55 17.75 21.56

Financial data in U.S. dollars

(Wal-Mart Stores Inc: Key Ratios).

The financial analysis is viewed from the above table which shows the performance of the company and it is useful to indicate the profitability of the company.

Current Ratio

This is the ratio of the current asset to the current liability of the firm; the ratio is 0.9 which indicates the good performance of the firm as the ideal ratio is considered to be 1.

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Debt equity ratio

The debt-equity ratio is the ratio of total liability to the shareholders’ equity, the total liability may include the long-term debt, the ratio is said to be ideal when it is less than 1. From the above table, it is evident that the ratio is 0.7 which indicates reduced debt for the organization and smooth functioning of the business.

Quick Ratio

The quick ratio is the indicator of the immediate liquidity of the company; it helps the company to face any of the sudden obligations. It is the ratio of current inventory to current liability, the higher the quick ratio higher the performance of the company. Here, the quick ratio is 0.2, whereas for the industry as a whole it is 0.3; so this firm has a better performance.

Interest coverage ratio

The interest coverage ratio is the ratio of the earnings of the company to the interest expense on the debt, the lesser the value of 2 finds hard for the company to survive, here the ratio is high which shows a better performance of the company.

Book Value

Book value is the value of the asset according to the balance sheet; this depends on the assets and the liabilities. Book value is obtained by subtracting the tangible assets and liabilities from the assets. The book value should be higher as the assets of the company should be always higher.

Financial condition for the company and industry

The financial condition of the company and the industry mean the amount of the finance or the assets that are with the company for the budgeting and the forecast of the company to identify the performance and the profitability.

The ratios are analyzed to know the financial condition of the company, the ratio gives an overall idea of the performance of the company, from the above analysis it is evident that the firm has good assets than its liabilities to meet the needs of the company currently and forth. The data obtained from the debit equity analysis also shows the debt which is payable by them is less and they have a stable position. The analysis of the inventory, interest per share, liability from the above ratio gives the stability of the operation for the company. They have total sales of 403.68 billion which contribute a better part to the country’s income and are 10% of the retail sales of the industry. They have a value of 0.77 per share in the 3 months. The highest revenue generator for the retail sector is well –mart stores which is the isolated brand from the credit crisis and decline economically.

Retailing Mix

Merchandise assortment: The retailers are always perplexed on what to purchase, how much to purchase; the decision on quality and quantity is to be taken by the retailer.

“Retailers have many tools that help them develop a merchandise plan – Gross Margin Return on Inventory Investment (GMROI), inventory turnover and sales forecasting.” (Marketing Communications).

Merchandise assortment and sales strategy are much useful in improving the performance of the company; this may include identification of the customers itself as it is easy to sell the products to the existing customers than to the new customers by creating need and awareness about the product.

Promotion and pricing strategy: Promotion strategy is adopted by every company for the well-being of the product. Wal-Mart concentrates more on advertisements by the slogan of low price, it conducts campaigns for publicity and promotion; it has persons who are hired to study about the advertisement agency and to contribute best to the advertisement. It has an online website for customer support and also has online support to them in terms of publicity and satisfaction to the customers. The pricing strategy adopted is the ‘affordable cost’ which is made available to almost all the customers. It considers the manufacturing cost, production cost, etc for the fixing of the price.

Supply chain management: Supply chain is the chain of activity that is to be carried out until the final product reaches the customer through different channels of marketing. “For the supply chain to work more efficiently, all parties involved — from raw material suppliers to consumers and every touch-point in between — will need to work more collaboratively and invest in technology.” (Role of Supply Chain in Indian Organized Retail).

Wal-Mart deals efficiently with procurement, distribution, logistics, and inventory management. It also makes use of the software tools that are useful in effective supply chain management. Wal-Mart identifies and executes distribution and logistics without affecting the customers but adding value to the customers. If the supply chain is effective, then only proper customer satisfaction and the value of the company get raised. Wal-Mart functions more as a supply chain company as the resources are used well in pact with requirements and to customers.

“Wal-Mart is committed to improving operations, lowering costs, and improving customer service. But the key to retailer Wal-Mart’s success is its ability to drive costs out of its supply chain and manage it efficiently.” (Why Wal-Mart’s Supply Chain is so Successful?).

Future Facing Industry

Annual Report

PERIOD ENDING 31-Jan-09 31-Jan-08 31-Jan-07
Assets
Current Assets
Cash And Cash Equivalents 7,275,000 5,569,000 7,373,000
Short Term Investments
Net Receivables 3,905,000 3,654,000 2,840,000
Inventory 34,511,000 35,180,000 33,685,000
Other Current Assets 3,258,000 3,182,000 2,690,000
Total Current Assets 48,949,000 47,585,000 46,588,000
Long Term Investments
Property Plant and Equipment 95,653,000 97,017,000 88,440,000
Goodwill 15,260,000 16,071,000 13,759,000
Intangible Assets
Accumulated Amortization
Other Assets 3,567,000 2,841,000 2,406,000
Deferred Long Term Asset Charges
Total Assets 163,429,000 163,514,000 151,193,000
Liabilities
Current Liabilities
Accounts Payable 47,638,000 44,278,000 43,471,000
Short/Current Long Term Debt 7,669,000 11,269,000 8,283,000
Other Current Liabilities 83,000 2,907,000
Total Current Liabilities 55,390,000 58,454,000 51,754,000
Long Term Debt 34,549,000 33,402,000 30,735,000
Other Liabilities
Deferred Long Term Liability Charges 6,014,000 5,111,000 4,971,000
Minority Interest 2,191,000 1,939,000 2,160,000
Negative Goodwill
Total Liabilities 98,144,000 98,906,000 89,620,000
Stockholders’ Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock 393,000 397,000 413,000
Retained Earnings 63,660,000 57,319,000 55,818,000
Treasury Stock
Capital Surplus 3,920,000 3,028,000 2,834,000
Other Stockholder Equity (2,688,000) 3,864,000 2,508,000
Total Stockholder Equity 65,285,000 64,608,000 61,573,000
Net Tangible Assets $50,025,000 $48,537,000 $47,814,000

(Wal-Mart Stores Inc. (WMT): Balance Sheet).

The report of the company depicts better functioning of the company. An increase in the assets and improvement in the performance of the company can be seen each year. The company has been prospering year by year as the leading giant in the retail chain despite competition in the retail industry. It has earned an increase in the per share by 0.77. The total assets of the company and the equity give the highly insulated company from liquidation and bankruptcy.

Impact of the Internet

The impact made by the internet on Wal-Mart is great. The number of visitors visiting the Wal-Mart site is increasing day by day. “Walmart.com boasts 40 million unique visitors each month which spikes to as high as 80 million during the holiday season.” (Walmart.com: Delivering Impact “When She’s Making Choices”).

The main aim of sites is to make customers aware of various products available in the company before purchasing. Wal-Mart always stays top twenty among the most visited websites in the world.

About company website

Wal-Mart’s website carries a simple design that looks very attractive to visitors. The website includes lots of features on the front page itself. Wal-Mart’s brand showcase which is always on, its website is one of the attractions for visitors. All the various categories of departments of the product are shown on the front page and one can see all names of the available product under each of the departments by just placing the mouse on the name of the department. Search bar facility, login facilities are also included on the website. Email facility to get special offers from website to one’s inbox is another attraction of the website. But, this feature is taking more than a day to get activated.

Analysis of Wal-Mart website compared to a competitor like Kmart

While comparing Wal-Mart’s website with Kmart, Kmart’s website has got more attraction than Wal-mart. The way of showing available departments on both websites is similar. Availability of search bar facility, login feature, registration facility, and email facility for receiving special offers from websites is there in both companies’ websites. One important thing that makes Kmart different from Wal-Mart is Kmart’s website includes pictures of its products with names and prices which are highlighted on the front page itself. Visitors can see a variety of products displayed over there.

Conclusion and recommendation

By examining and analyzing various aspects, Wal-Mart, one of the biggest retailers in the world, has been properly researched in this paper. The company started its operation many years back and still now it is running in a full-fledged manner. Even though many competitors are present, no one can make any kind of impact on Wal-Mart. This is just because of its austere following of the company’s rules and strategy and also because of a very good management team leading from the front.

As for recommendations, there are some areas where Wal-Mart needs to improve a lot to bring everything to their side. One of the important obsessions company needs to keep in mind is making customers happy always. Customer satisfaction is more important than anything else. Another important issue is regarding employees working in the company. Wal-Mart needs to take care of them in a better manner. There are some rumors that employees working in Wal-Mart are still living in poverty. Wal-Mart needs to take care of such issues very carefully because these kinds of issues will easily disrupt the image of the company. Also, female employees should be given more chances to enjoy top positions in the company; presently these positions are enjoyed by male employees. These issues need to be sorted out quickly to keep the image of the company static.

Works Cited

About Us. Walmart, 2009. Web.

Bentonville, AR. Wal-Mart Stores, Inc.: Company Description. Hoovers, 2009. Web.

Gaffney, Andrew. Wal-Mart’s Aggressive Pricing Strategy Puts More Pressure on Margins For Holiday Season. Retail TouchPoints, 2009. Web.

History. Walmart, 2009. Web.

Kapner, Suzanne. Wal-Mart Celebrates its Growing Market Share. CNNMoney.com, 2009. Web.

Marketing Communications. Case Studies in Business, Management, 2009. Web.

McGinn, Daniel. Watching Us Save, One Cart at a Time: Plenty: At a Walmart Superstore Outside Denver. Newsweek, 2009. Web.

Role of Supply Chain in Indian Organized Retail. Map’s of India.com’s India Business Directory, 2000. Web.

Rosenbloom, Stephanie. Business: Wal-Mart Profit Up, but Key Indicator Slips. The New York Times, 2009. Web.

“Update: Wal-Mart Sees Sales Growth 1% to 2% This Year.” The Wall Street Journal, 2009. Web.

Wal-Mart Stores Inc. (WMT): Balance Sheet. Yahoo! Finance, 2009. Web.

Walmart.com: Delivering Impact “When She’s Making Choices.” New Market Builders, 2009. Web.

Wal-Mart Stores Inc: Key Ratios. msn.money, 2009. Web.

Why Wal-Mart’s Supply Chain is so Successful? Supply Chain Management Case Studies, Case Study Search, 2009. Web.

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