Wal-Mart Corporation: Company Analysis
The stores of Wal-Mart are the biggest retail company that operates within the United States of America. The company has received the first position in the Fortune 500 Index Fortune Magazine for a substantial number of years. The company has managed to embrace a distinct corporate strategy whose goal revolves around dominance into the already existing retail market. There has also been an increase in the manner for which expansion activities of the business are conducted. Numerous ventures have been made into the United States, as well as other international markets.
Nowadays, the company is perceived to be engaged in creating positive brand-image for its products as well as conducting immense levels of campaigns which are meant for the company recognition processes. However, it should be noted that Wal-Mart public affair policies should be put to task in order to conduct an effective implementation process. Currently, it is stated that the company works effectively under a corporate policy-focused strategy.
The unique manner in which the company executes its services to the potential customers is an effective strategy that has been in use for a substantial period of years to attract a larger customer base. Newer ways and ideas of serving customers continue to play a significant role of affecting the Wal-Mart corporate policy. This includes conducting negotiation deals for merchandise that are sourced directly from the producers, thus, ensuring the elimination of potential middle-men. Notably, the company sells most of its products to customers at significantly lower prices.
Thus, I would encourage potential investors to buy placed stocks in Wal-Mart Corporation and subsequently hold onto the investment for a long period of time given the fact that the company is vibrant in breaking into the international market niches altogether.
Company Overview: SWOT Analysis
Wal-Mart opened its first store in Rogers, Ark in 1962. This happened under the leadership of the founder: Sam Walton. The company was later listed in the New York Stock Exchange in 1970. This also meant that it was it a public traded company operating within the United States. After passing on in 1992, Sam Walton was replaced by S. Robison as its second chairman of the company operations. Currently, the company has been expanded into the foreign market, hence, expanding on its leadership structure to include foreign company’s CEOs.
The company operational activities expand into China and other foreign established economies, hence, assuming an international corporate strategy. The increased level of improvement made in respect to service technologies as well as efficient warehousing services encouraged the company to attract a larger customer base. This was associated with decreased levels of prices that are charged to customers irrespective of the market niche. The fundamental marketing strategy that the company adopts is meant to dominate the retail market within the United States. Discount prices form the key strategy for attracting a larger business clientele as well as the consumer fraternity as a whole.
Lines of Business
The company has embarked on selling different consumer merchandise for a substantial period of time. However, in recent times the company has contemplated gas station business. The company purchases merchandise directly from the manufacturers and, thus, eliminates mediators’ services, which in its turn, significantly reduces the levels of prices for their products.
The fundamental growth strategy of the company lies in the fact that it has allowed for a distinctive relationship to grow between the employees and the management team. The fact that the company has invested in employing part-time employees makes it easier to post enormous profit margins which are later used to develop other company products. The company has also been keen in providing quality products at lower prices for its potential consumers. For that matter, the sales continue to post higher sales volume.
The key competitors of the company are K-Mart and Sears which dominate a significant sector of the US market. These companies conduct extensive retail businesses and, thus, they are a threat to the operation of Wal-Mart business. However, the company has managed to keep up with the competition by embracing a unique pricing model as well as effective employee policies that requires staff to remain positive to all of its consumers.
Financial Statement Analysis
The consolidated statement of financial position for this company depicts a positive growth right from its long-term to short-term assets. There is a significant growth of assets from $ 48.96 billion in 2009 to $ 51.09 billion in 2011. This is a 32.8 % increase in terms of short term assets owned by the company. The company’s long-term assets value also depicts an increasing rate so that the net financial assets shift from a low of $ 163.9 billion in 2009 to $ 180.34 in 2011. This depicts about 47.6 % increase in the amount of assets owned by the company.
On the other hand, the liabilities for the company remain relatively low in comparison to the amount of assets needed to offset the obligation altogether. Despite the fact that the liabilities of the company increase the difference are offset by the increase in the level of assets. Liabilities increased from $ 34.55 billion in 2009 to $ 43.84 billion in 2011. It gives a 55 % increase in the values of the liabilities that are offset by the increased levels of both long-term and short-term assets.
In respect to the operating income, there is a significant systematic increase in the values of the income from $ 22.7 billion in 2009 to $ 25.5 billion in 2011. This clearly indicates that the company has out-grown its financial obligations by posting relevant and significant amounts of sales that later translated into profits.
The company stockholder’s equity is made up of two components that include common stock par/carry value as well as immense retained earnings. Moving forward, there is a significant steadiness on the part of the total equities of the companies in that matter. For instance, the total shareholder’s equity increases from $ 67.48 billion to $ 71.66 billion. This depicts a significant 48. 5% increase in the values of the income over these years.
Ratio Calculation Analysis
In respect to the liquidity ratios there is a positive and steady projection of the ratio-values which is an indication that the company is operating under a healthy environment. For instance, the quick ratio is used to present the value of assets that are to offset financial obligations. In this case, the company has maintained a 1:1 ratio which means that for every financial obligation there is a matchup of another asset that can be used to pay for it. The inventory turnover ratio depicts an increase altogether. The percentage increases from 9 % in 2009 to 10 % in 2011. This means that the stock is being converted into revenues at a significantly higher rate, thus, the company is placed fairly to support its operational activities. With respect to asset turnover, the percentage remains steady at 2 % meaning that fewer assets are mismanaged, hence, the company is able to support its day-to-day activities. There are enough assets within the company’s reach that can be used to take care of the immediate financial obligations.
The debt ratio of the company is set below the 5 % mark for a substantial period of time. This means that the company is placed at a favorable position upon which can be used to take care of its debt obligations. The Times Interest Earned ratio remains at a zero mark meaning that there are no other sources of external equity funds which are likely to attract interests. The profitability ratio of the company has remained at a significant level of 4 % for all the three years presented. This means that the company is operating under a healthy environment which guarantees the future survival of the company. The market value ratio for the company is relatively significant and favorable in that matter. There is a positive level of return for both the equities, as well as the assets deployed in the course of the business activities. The ROE of the company is placed at an average of 22% while the ROA stands at an average of 8. 5%.
The company’s equity standings reflect a positive growth in its quest to maintain a steady shareholder’s wealth. There has been a significant percentage increase of shareholders equity between the three financial years. It should be noted that the company shareholder’s equity is composed of two components which are the common stocks and the retained earnings. Total equity changes from $ 67.44 billion in 2009 to $ 71.66 billion in 2011. This depicts a 48.8 % in the growth-value of the shareholders’ wealth.
It should be noted that the shareholders’ equity of the company is a clear representation of the amount of revenue posted for each preceding year of the company growth. It is without doubt that the policy of the company encouraging charging of relatively lower prices for the products has been a cutting-edge for immediate competitors as K-Mart. The management leadership style also fosters transparency for public and private affairs of the company, hence, attracting a substantial level of stock investors whose purchase provides first hand resource funds for the shareholders’ equity.
The company has also engaged in diversified business venture that include gas stations. For this case, the shareholder equity is subsequently higher and positive in the sense that additional funds are received from the additional revenues. Notwithstanding, these figures are a distinct depiction of the future growth of the company.
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