Research Wal-Mart 10-K reports and Annual Reports with other material, 2009 to present. Explain and analyze the following questions:
1. What is the financial condition of Wal-Mart, please address the following
a. Financial condition:past, present, trends (does impact strategy)
b. Financial statements
c. Level of performance and soundness
d. Industry identification/segmentation
e. Culture of Wal-Mart
2. Explain Wal-Mart's external and industry analysis. Using the Macro-environment framework (STEP+), address:
2. Social/demographic trends
3. Governmental/Legal issues
4. International/ global issues
5. Technological issues
3. Explain Wal-Mart's strategic condition/performance using (+Building Blocks/Value Chain/ Strategy) address and analyze the following listed below.
a. Mission statement (MVVG)
b. Current functional level strategy
c. Current business level strategy
d. Current corporate level strategy
e. Current global level strategy/concerns
g. Resource and capabilities (tangible and intangible.)
Financial Position of Wal-mart
- Net Sales of Walmart in 2012 has been reported to be $4,43, 854 million (Wal Mart, 2012: n.d). This is showing an increase in sales of 5.9% in 2012 as compared to $418952 million in 2011 (Wal Mart, 2012: n.d). Although the sales growth of Walmart had declined in 2010 to 1% as compared to growth of 8.4% in 2008 but the rise again in the sales of the company in 2011 to 3.4% and then a jump of 5.9% in 2012 shows an incremental trend in the growth of the sales (Wal Mart, 2012: n.d).
- Gross profit margin is steady at 24.5% in 2012 with insignificant increase or decrease since 2008 and has been in the range of 24% to 25% (Wal Mart, 2012: n.d). This may be due to a control over expenditure with operating, selling, general and administrative expenses ranging from19.1% to 19.7% of sales (Wal Mart, 2012: n.d).
- The only cause of concern for Walmart is that the level of inventories has been rising and has been highest within 5 years in 2012 at $ 40,714 million with Walmart in U.S showing a marginal increase in calendar year sales of 0.3% (Wal Mart, 2012: n.d). It means that the inventory turnover is very slow and Walmart needs to be aggressive in selling the products.
- The cash flow situation has worsened for the company with a decline in free cash flows from $14065 million in 2010 to $10,745 million in 2012 (Wal Mart, 2012: n.d). This is probably due to the investments made by the company in properties and expansion of new stores (Wal Mart, 2012: n.d).
- The Return on Investment has dropped marginally for the company in 2012 to 18.6% as compared to 19.2% in 2011 due to decline in the sales for the company (Wal Mart, 2012: n.d).
The above facts show that the company is now losing its business to other retailers but with a strong brand name, the company has been sustaining the business in the market and after a decline from 2008 to 2010, there has been an increase in the business for the company from 2010 to 2012.
The above performance shows that the Walmart's retail store operations in U.S have not been performing well as compared to Walmart International which has registered the highest growth followed by Sam's Club which is wholesale operation of Walmart. An analysis of financial statement of Walmart shows that although the operating income in financial year ending Jan, 31 2012 has declined for all the three business units - Walmart U.S, Walmart International and Sam's Club from 3.1%, 14.4% and 12.9% in 2011 respectively to 2.2%, 10.8% and 9% in 2012 respectively but the net sales have grown for the three business units from 0.1% in 2011 to 1.5% in 2012, from 12.1% in 2011 to 15.2% in 2012 and from 3.5% in 2011 to 8.8% in 2012 (Wal-Mar, 2012: n.d). This shows that although operating income has declined for all the business units due to heavy investment but there is a strong growth in the sales for the Walmart's International division which is the fastest growth followed by Sam's Club.
Indicator of Financial Soundness of Walmart
Walmart has been a profitable organization with the latest performance measures showing in Nov. 2012 that the company has gone beyond the customer expectations and reported a third quarter profit of $3.63 billion as compared to $3.33 billion in the third quarter of 2011 although the sales revenues of the company were below expectations rising only 3.4% with sales of $113.2 billion as compared to the expectation of $114.9 billion (New York Times, 2012: Nov. 19).
Industry and Segment Identification
Walmart is present in retailing and wholesaling business worldwide and the company has defined three operating segments which are as follows (Walmart, 2012: n.d):
1) Walmart U.S - The company operates in U.S with large retail store chain across the length and breadth of the country.
2) Sam's Club - It is the wholesale operations which sells to its customers goods in bulk through club membership.
3) Walmart International - It operates the Walmart stores worldwide across Middle East, Japan, Mexico, China and other countries where more growth is sensed by the company.
Walmart targets middle income consumers through its everyday low prices strategy not only in the U.S but worldwide (Walmart, 2012: n.d).
- Walmart refers its employees as Associates and as stated by Bill Simmons, the President and CEO of Walmart in U.S that "every associate can achieve their dream at Walmart." (Walmart, 2012: n.d).
- Walmart focuses on the three cultural ...
The solution provides guidance on analyzing the present position of Walmart, external and industry analysis for the retailer and internal capability assessment of the company.