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Introduction
Walmart Incorporated company is a retail corporation that runs businesses in different parts of the world with the headquarter located in the United States. It operates grocery stores, hypermarkets, discount stores, and neighborhood markets. The firm also has its outlets in different countries including, China, Mexico, Canada, and other parts of the world. The organization has got standard principles that guide all its associates for effective and better overall operations.
Ethics
Ethics refers to the moral principles that workers of an organization practice to uphold the companys image. They help the companys employees to serve with integrity and honesty, resulting in an effective and efficient outcome. The employees are expected to be honest and always fair, follow and adheres to the law, uphold integrity, do not give false information, respect, and promote diversity. In case of involvement in unethical conduct, provide the exact details. Always alert when there is misconduct in time. To effectively put the ethics in use, the company has issued several means to help promote the codes amongst the associates; the resources are a website page WalmartEthics.com, a global helpline that allows the members to report or inquire about any related concern.
Strategic Analysis
Strategic analysis refers to the criteria by which a company researches the internal and external environment in order to operate efficiently and effectively. The study helps the corporation identify and explore areas that can yield an excellent return to the industry. By using the SWOT analysis tool, we can examine the Strength, Weaknesses, Opportunities, and Threats of Walmarts business organization. The tool evaluates the internal environment (strengths and weaknesses) and the external operation (opportunities and threats).
Internal Strategic Analysis
Strengths
The company has developed the use of advanced technology systems such as the Scan & Go application that allows their consumers to check for the goods using their devices then pay at the corporation kiosks. It also uses engineering to trace sales, inventory, and customer orders; this system enables it to save money. Therefore, the high tech performs quick and correct data analysis, therefore enhancing faster and reliable decisions from the management team.
Walmart has a vast number of operating warehouses in different parts of the world, thus increasing the scale of operation. This gives the business advantage of enjoying large economies of scale and therefore offers the products to the consumers at a lower price. The corporation also offers different varieties of products than most of its competitors ranging from grocery, electronics, apparel, and pharmacy services. Furthermore, it sells brand commodities at a lower cost.
The company appropriately manages and controls the logistics, thus leading to an effective supply chain compared to the competitors. By offering products at a lower price to the final users than the opponents, the organization attracts a large number of customers who buy commodities from their superstores. Having some of their stores overseas has enabled the firm to challenge other retailers whose operations are based just within the state.
Weaknesses
Lack of product differentiation, the business might face challenges assuming the customers get attracted to the firms that offer product differentiation. The corporation does not offer suitable and efficient working environments for the employees, such as female discrimination, overtime work without pay, and low wages; this makes it lose many employees who go for better jobs forcing the company to spend money on hiring and training the incoming workers (McMann, 2019). The flooding of the United States market with cheap Chinese commodities has made the company experience a margin decrease and lower prices. Unethical operations such as unfavorable working environments and bribery have made the organization have a bad image in the market.
External Strategic Analysis
Opportunities
With the increasing sales of its own labeled commodities, the organization stands high chances of getting high income from those brands. Therefore, the company should adjust to the production of the merchandise to earn more profit. With the significant number of customers paying for their goods via credit or debit cards and electronic transfers, the firm should come up with a banking system that will reduce the expenses it incurs during the processing of electronic payments.
Since most of the companys strong competitors are based within the country, it should increase the international investments as it will get a high return because of unlimited market coverage. The current technology has made most of the retail shops adopt the online operation, Walmart having the ability should venture too so that it meets the customers desires and promote efficient shopping to the clients. The organization should increase the sales of vegetables and fruits following the customers continuous demand.
Threats
The corporation is facing a wide range of competition in the same production line from other retailers such as Tesco, Costco, and Amazon. Legal formalities required by the overseas countries to operate are blocking the industry from widening its operation internationally as they take time to acquire. The industry has come up with many firms in the market, making it hard to count for the incomes from the new stores established. With the changing economies from international markets, the company will be forced to source products at a higher price if the countrys money increases in value.
Economic Analysis
Economic analysis is the method of obtaining information on the current performance of a business to enable the owners to have a clear picture of the prevailing economic conditions. A company can do the analysis through examining target group; Walmart is a company that deals in a wide range of products from grocery, electronics, furniture, sports products, beauty, and health service, there; to support its operation, it needs to have a large number of clients (Courtemanche et al. 2019). Through the slogan Save money. Live better, most of the consumers are attracted to the industry for the lower prices.
By understanding the nature of their target group in terms of income, the industry has established store formats that suit the given class of people. They include; Discount stores, targeting customers with an income range of between $50,000 and $20,000, with consumers of about 130,000 persons. Supercenters, which focuses on clients earning about $64,000 and $25,000, aiming at a population of 70,000 individuals. Neighborhood markets; which majorly deals in drug and groceries, targeting customers with income range $70,000 and $25,000. Sams Club; aiming at people who earn around $70,000 to $40,000.
The income statement shows the corporations expenses and revenues in a given trading period.
Fig. 1: Economic analysis.
From the table above, there has been an increasing pattern on the revenue amounts from 2018, yielding $500,343 and 2019, with a revenue of $514,405 and 2020, $523,964. Expenses on the other side been increasing too from 2018, $479,906 and 2019, $492,448 finally, 2020, $503,396.
Risks
These are factors that affect the performance of the company. The corporation management should be aware of the rising level of competition from other retailers in the market; the market structure will be dominated by many players, thus lowering the outcome. The increased economic performance of other countries where it has its operational stores might cause devaluation on the currency, therefore, forcing the industry to spend more money to acquire the stocks (Shishkareva, 2020).
Having many stores affects the accountability of the management team promoting chances of embezzlement of funds. The turnover of workers also makes the firm spend additional money on new hiring. Natural disasters like floods, tsunamis, earthquakes, typhoons, cyclones, bad weather conditions, or terrorist attack, or pandemic diseases such as the Covid-19, affects the operations thus lowering financial performance.
Demand Analysis
Demand analysis is how a business organization conducts research to understand the consumers need for a given commodity in the market (Akici, 2018). By offering lower prices on commodities in the market, the company initiates the urge in consumers to want to buy some of the products they sell in the stores. The use of electronic data interchange has ensured the organization is in a position to manages and control the product flows in various stores. This technology gives it an advantage over competitive businesses by adjusting the shelves after every two weeks. In contrast, the opponents do so in a period of one month. The launching of the Omnichannel platform enabled the company to meet the timely delivery of the products to clients who might have urgency in the use. Customers in some regions can now get the merchandise within an hour after ordering from the stores.
Financial Overview
Financial overview refers to the procedures of analyzing the firms budgets, money transactions, and all other projects it undertakes to identify the performance and viability of the organization (Soboleva, et al. 2018). Capital structure, Walmart company, has both stockholders equity and debt within its capital structure.
Fig. 2: Capital structure.
For the last five years, the companys total Debt Asset Ratio was changing in 2016, 58.11%, in 2017 it had 59.49%, while in 2018, it was 60.48%, 2019, 63.69%, and 2020, the ratio was 65.52%.
Profitability
Profitability is the rate at which a business makes a financial gain. The profitability of an organization is determined through (Martínez, et al. 2017);
Gross profit margin= (Gross Sales /Sales revenue) * 100% = (380,000 / 50000) * 100 % = 76%
Operating profit margin= (Net profit / Sales) * 100% = (15,000 / 500,000) * 100% = 3%
Net profit margin= (Operating profit / Sale) * 100% = (25,000 / 500,000) * 100% = 5%
Return on Capital Employed= (operating profit/capital employed) = (25, 000 / 225,000) * 100% =11.11%
The profitability of the Walmart corporation grants it the ability to get financial support from lenders because, as from the analysis, the business is making a profit from its operations.
Cash flow is a statement that outlines all information of the industrys incoming money and outgoing cash within a given fiscal period. It indicates the firms ability to source money from its internal activities.
Performance Stock-Past 5 Years
Walmarts stock performance has not been consistent for the last five fiscal periods.
Fig. 3: Walmarts stock performance.
From the table above, Return on Equity dropped between 2018 and 2019 by almost 5.80% from the minimum required rate of at least 15%, indicating that the organizations stock value reduced and the business was not at its best. In the year 2020, the ROE = 19.93%, which shows that the companys stock performance went up; therefore, the industry is performing well.
Performance of Main Competitor: Amazon
Amazon is one of the biggest companies that threaten the survival of Walmart corporation in the market.
Fig.4: Amazons performance.
From the table, comparing the rates of ROE, it is clear that Amazon has been in its best performance last three consecutive years, that is, 2020, 2019, and 2018 having an average performance of about 21.55%. Amazon stock prices have been higher in the last three years compared to the previous two years 2017, and 2016. The management of Amazon has adequately utilized the available assets to acquire good profits in the industry.
Based on ROE performance analysis, both the companies should maintain at least 18% for suitable returns (Egam, et al., 2017). In the past five years, Walmart corporation has an average ROE of about 15.51%. Amazon company has maintained an average ROE of approximately 17.58%, which means that in terms of stock performance in the last five years, Amazon is excelling over Walmart.
References
Akici, A. (2018). Using Social Media Data in Demand Forecasting: the Case of Walmart.
Courtemanche, C., Carden, A., Zhou, X., & Ndirangu, M. (2019). Do Walmart supercenters improve food security? Applied Economic Perspectives and Policy, 41(2), 177-198.
Egam, G. E., Ilat, V., & Pangerapan, S. (2017). Pengaruh Return on Asset (ROA), Return on Equity (ROE), Net Profit Margin (NPM), dan Earning Per Share (EPS) terhadap Harga Saham Perusahaan yang Tergabung dalam Indeks LQ45 di Bursa Efek Indonesia Periode Tahun 2013-2015. Jurnal EMBA: Jurnal Riset Ekonomi, Manajemen, Bisnis dan Akuntansi, 5(1).
Martínez, A. B., Galván, R. S., & Alam, S. (2017). Financial Analysis of Retail Business Organization: A Case of Wal-Mart Stores, Inc. Nile Journal of Business and Economics, 3(5), 67-89.
McMann, S. (2019). Turnover Rate: Walmart.
Shishkareva, T. N., Meshkova, G. V., Tuguz, N. S., Noeva, E. E., Zatsarinnaya, E. I., & Bashkirev, A. P. (2020). Factors of Formation of Business Activity in an Organization in Innovative Conditions. Revista San Gregorio, 1(41).
Soboleva, Y. P., Matveev, V. V., Ilminskaya, S. A., Efimenko, I. S., Rezvyakova, I. V., & Mazur, L. V. (2018). Monitoring of businesses operations with cash flow analysis. International Journal of Civil Engineering and Technology, 9(11), 2034.
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