Wal-Mart Formal Case Analysis-Swot Essay Example

its stores caused by cultural, linguistic, and managerial differences. In certain nations such as Germany and Japan, the corporation has overlooked indigenous practices relying solely on their global image and revenue which resulted in failure. The company's size makes it difficult to offer personalized services that meet all consumers' needs. Furthermore, products imported from China are frequently deemed subpar with minimal or no guarantees or customer support follow-up.

Wal-Mart has received mounting global condemnation for various matters, specifically the exploitation of child labor, inadequate remuneration for workers, detention of staff members during night shifts by locking them inside stores, absence of labor unions and overreliance on part-time employees. In Japan, Wal-Mart significantly depended on temporary personnel with almost 80%-85% serving under such arrangements. Furthermore, due to its expansionary approach, small merchants struggled to survive as they were pushed out of business once the retail behemoth introduced new outlets resulting in people losing all they had established. The mentioned opportunities denote external circumstances that are advantageous to the company.

Due to its dominance in the retail industry, Wal-Mart has the potential to become the world's largest retailer. Their formidable presence allows them to capture local markets, merge with nearby businesses, and form strategic alliances to gain market share in Europe and Asia. The globalization trend presents opportunities for Wal-Mart in Russia, China, and South America as Western culture spreads. Furthermore, given current economic conditions where shoppers value price over other factors, Wal-Mart's diverse product and service offerings further cement their competitive advantage.

There are various possibilities for Wal-Mart to expand its services, including travel agencies, kindergartens, cleaning services, and tax services. Additionally, there is an opportunity for the company

to address previous criticisms and enhance employee benefits, medical coverage, wages, and environmental concerns. Wal-Mart can also prioritize its online sales in response to the growing trend. There are numerous opportunities for this retailer in the future.

The dangers that may negatively impact a business's performance are referred to as threats. For Wal-Mart, not adjusting to local markets represents a significant threat to its growth, which could lead to reduced sales and negative reactions from the local community. Despite their belief in the universality of their culture, the failure in Germany demonstrates otherwise.

The slowing economy is causing a decrease in sales and affecting people's incremental income, which poses a threat to Wal-Mart. Additionally, the company could face competition from local and global opponents, as well as potential obstacles to their expansion efforts due to mergers and acquisitions among competitors. Target and K-mart may become the world's largest retailer if this occurs. Another potential challenge for Wal-Mart is RFID technology, which could harm their relationships with suppliers. As a business that typically collaborates with manufacturers and suppliers of affordable, high-quality products, Wal-Mart may suffer negative consequences if supplier relations are impacted.

Despite the advantages offered by RFID technology, many suppliers are reluctant to adopt it due to the associated high expenses. The Ratio Analysis figures for the year ended January 31, 2004, presented in Exhibit 4, provide important information on profitability. These include a return-on-equity (return on investment) of 21%, a return on assets of 9%, a profit margin of 3.5% (calculated as net income divided by net sales equaling $9,054 and $256,329 respectively), fixed assets turnover of 2.6 times (computed as net sales divided by average total

assets amounting to ($256,329/[(104,912+92,900)/2]), and earnings per share valued at $2.The following financial ratios are calculated:
- Payout ratio equals cash dividends divided by net income, which results in 0.004 after dividing 0.36 by 9,054.
- Activity ratio for inventory turnover is found by dividing the cost of goods sold by the average inventory, which equals 7.79 after dividing 198,747 by averaging 26,612 and 24,401.
- Liquidity is measured using the current ratio, which is calculated by dividing current assets by current liabilities, resulting in a ratio of 0.

The report analyzes Wal-Mart's strategic direction of becoming the leading retailer globally by offering the lowest prices, considering both external and internal factors. It utilizes SWOT and ratio analysis to assess Wal-Mart's current financial, technological, economic and social position for identifying areas of progress and leveraging existing strengths. The company first opened in 1962. The Debt to Equity Ratio for Solvency and Equity is calculated as (17,102+2,997) / 43,623 = 46.07%.

Wal-Mart, founded by the visionary Sam Walton, is now the biggest retailer in America and the second largest company worldwide. It boasts a range of stores including discount stores, supercenters and Sam's Clubs, while also actively extending its reach across the globe.

In 2003-2004, Wal-Mart achieved $256 in net sales and opened 234 new stores thanks to technological advancements including automated distribution centers which reduced delivery time and shipping costs. Furthermore, advanced computer systems were implemented for improved inventory tracking, resulting in faster checkout and reordering processes.

In the previous year, Wal-Mart's net sales amounted to 3 billion and grew by 12%, as shown in Exhibit 4. Despite a weak economy and consumers choosing discount stores to

save money, Wal-Mart has surpassed its competitors. However, there is significant criticism of Wal-Mart's increasing market dominance due to concerns about wages, healthcare, and environmental issues. Ultimately, Wal-Mart aims to expand further and become the world's largest retailer.

Wal-Mart has become a leader in the retail industry due to its dedication to respecting individuals, providing excellent customer service, and striving for excellence. The company's wide range of services and affordable prices have enabled it to retain current customers while also attracting new ones. As a general store, Wal-Mart is favored by shoppers who prefer a one-stop-shop experience.

Despite facing fierce competition from other discount retailers and warehouses such as Costco, Home Depot, and Best Buy, Wal-Mart has managed to establish a dominant presence in the market and will continue to be a significant player. According to Exhibit 4 for the year ending January 31, 2004, Wal-Mart's profitability measures were impressive: return on equity (return on investment) stood at 21%, indicating the profitability of owners' investment; return on assets was at 9%, indicating overall profitability of assets; profit margin measured at 3.5%, indicating net income generated by each dollar of sales; lastly, fixed assets turnover was two which shows how efficiently the company generates revenue using its fixed assets.

The following text presents financial ratios:

• Earnings per share = $2.07 (measures net income earned on each common share)

• Payout ratio = Cash Dividends/Net Income = 0.36/9,054 = 0.004 (measures the percentage of earnings distributed as cash dividends)

• Inventory turnover = Cost of goods sold/ Average Inventory = 198,747/(26,612+24,401)/2 = 7.79 (measures how efficiently assets

are used to generate sales and the liquidity of inventory)

• Current ratio = Current assets/Current liabilities = 0 (measures liquidity)

The debt to equity ratio measures the ability to pay short-term debts, with a higher ratio indicating lower risk of failure. This is calculated by (17,102+2,997) / 43,623 resulting in 46.07%. Conversely, a high debt to equity ratio increases the risk of default. Key success factors for a well-operating company include money management, customer satisfaction, service development and strategic relationships as well as sustainability. Wal-Mart has many assets compared to its competitors such as positive cash flow and growth in revenue and profit margin by 12% and 3% respectively in 2004.

The reasons behind Wal-Mart's triumph are twofold: its size and profit margin. The company's profit margin, which gauges the net income per dollar of sale, stands at 5%. Furthermore, Wal-Mart's vast scale is advantageous since an unprofitable store will not affect the overall cash flow. In addition, the corporation's power and magnitude enable it to form strategic partnerships that can open up fresh business opportunities and facilitate market development in foreign countries or mergers with established firms for a smoother entry.

Wal-Mart's strength lies in its capacity to consistently obtain the most favorable prices from suppliers and manufacturers. Being the largest client for many of them, they are compelled to provide their products irrespective of profitability. Moreover, Wal-Mart has a talent for recognizing latest commodities and amenities that retain current patrons and entice fresh ones. This was exemplified by the introduction of diverse offerings like one-hour digital photo service, financial services, DVD rentals, vacation planning, online music stores, and flower delivery in 2004.

Wal-Mart's expansion of services paid off as it attracted new customers and ensured high levels of customer retention through continuous improvement. The company's constant technological advancement further reduced delivery time and spoilage, while increasing inventory accuracy. The key success factor in keeping everything linked and functioning smoothly is sustainability, which refers to Wal-Mart's ability to sustain operations.

With the objective of enhancing and strengthening its operations, Wal-Mart boasts a dedicated leadership team who employ a balanced scorecard system that evaluates performance across four perspectives: financial, customer, internal processes, and learning/growth. The financial perspective gauges strategy execution against established goals. In this regard, Wal-Mart has performed exceptionally well and attained an impressive financial standing.

There are different ways to evaluate a company’s financial performance, including revenue growth, profit margins, cash flow, and net operating income. In the retail industry, Wal-Mart is a significant player that generated $256.3 billion in sales in 2004. Notably, the company achieved a remarkable 12% increase in sales within this sector between 2003 and 2004. Additionally, Wal-Mart's international divisions have experienced impressive growth in operating income over time; for instance, from 2002 to 2003 alone, these divisions' operating income increased by an astounding 57.2%.

The organization's value proposition for satisfying customers' needs is based on the customer perspective. Wal-Mart's customers are satisfied because the store always has products available and offers attractive prices, resulting in repeat business. The internal process perspective focuses on activities and processes required by the company to provide the expected value to customers. In Japan, Wal-Mart achieved a 94% inventory accuracy rate by implementing new inventory systems resulting in decreased ordering and delivering time.

Wal-Mart places emphasis on enhancing the internal

skills and capabilities of its employees to ensure adequate stock availability and customer satisfaction, by adopting a learning and growth perspective. The company designates all workers as associates to instill a sense of significance. While Wal-Mart has been accused of paying low wages, compelling overtime work, and disregarding child labor regulations in supplier factories, it remains the primary employer in the US and offers professional development opportunities to all staff members.

To sustain its impressive expansion rate, Wal-Mart must prioritize augmenting its internet sales channel which only contributes 6% to total sales. As online shopping gains momentum, greater publicity must be given on the official website about internet sales availability. If Wal-Mart intends to venture into European markets successfully without encountering problems similar to those faced in Germany, comprehensive market research is crucial.

To prevent employees from hiding in the bathroom, Wal-Mart should tailor their stores to local markets and employee preferences. In China, where sales are profitable, they should push sales and consider merging with local retailers similar to what was done in Japan. For the well-established US market, Wal-Mart should restructure some stores, improve location and infrastructure, and aim to replicate successful markets like Mexico in similar countries. They can also expand into new markets such as Russia and India where low prices drive sales due to a large population.

Wal-Mart can reinforce their "One-stop shop" concept by introducing new services like pharmacies, auto repair shops, hair salons, tax advisory offices, kindergartens, low-price travel agencies and cleaning services.

However, there may be limitations to this growth strategy including adapting to cultural differences and regulations in new markets as well as finding suitable locations for new stores. Incorporating

new services may also require significant resources and investment which could pose challenges for Wal-Mart. Without proper market research negative responses from the populations of newly developed markets might arise.

Furthermore if not managed properly mergers with competitors such as K-Mart or Target could threaten Wal-Mart's control over suppliers customers and main markets worldwide. The poor integration of other countries into Wal-Mart's culture could also create further problems for them going forward.Wal-Mart faces growing allegations of mistreating employees and underpaying them, leading to potential employee boycotts. Additionally, poor management practices and a slowing economy may result in reduced sales. However, Asia presents long-term opportunities for Wal-Mart's international market dominance due to the desire for discounts in Asian culture; Japan and Indonesia show constant increases, while India is likely to be successful with development. Conversely, Europe may only offer short-term opportunities as there are cultural differences regarding locally made products and encouraging local economies.

To propel itself forward, Wal-Mart can expand into new markets while conducting proper market research and establishing integration into new cultures. Its large size allows cost-cutting measures such as lower supplier prices and reduced storage expenses while enabling control over suppliers and elimination of competitors. Further advantages include investment in new markets, opening stores quickly to adapt to changing circumstances resulting in faster distribution of products in stores with greater control over inventory stock.

Ultimately due to its immense size and influence, Wal-Mart is virtually impossible to eliminate; no other entity has enough power to take over its place.