The giant company called Wal-Mart has experienced unprecedented growth and demonstrated outstanding economical efficiency: in just a couple of decades it has grown from a chain of local stores into a powerful economical leader which represents a “status in statu” for American economy, and for the whole world’s economical system in general. “Worldwide, so many people shop at Wal-Mart that this year $7.2 billion people will go to a Wal-Mart store. Earth’s population is only $6.5 billion, so this year the equivalent of every person on the planet will visit a Wal-Mart” (Fishman 5).
Currently Wal-Mart corporation operates not only in the US, but has expanded its business outside (and it is only a starting step of this expansion); Wal-Mart is the world’s largest company by revenue and also the largest private employer worldwide; it is a famous grocery retailer and holds over 20% of grocery market in the US. The company has experienced quick growth until 2006; since that time, the speed of expanding has significantly decreased. However, the supervisors of Wal-Mart have prepared a development strategy that suggests penetration into foreign markets and integration into the economy if such regions as Europe and China (Fishman 73). The aim of this essay is to analyze current economical position of the company, discuss internal and external environment, regard possibilities and threats, strengths and weaknesses of Wal-Mart today and elaborate recommendations for future development strategy of Wal-Mart.
1. Company description
Wal-Mart was opened in 1962 and incorporated in 1969. Since that time, a real empire of Wal-Marts has been conquering the US market.
Distinctive features of Wal-Mart are unified standards of quality and service, low prices and discount systems. The department stores that belong to Wal-Mart vary in size and are aimed at different groups of customers (stores, supercenters, discount stores, neighborhood markets etc.). Among the countries where Wal-Mart successfully operates are the UK, Mexico, Japan, Brazil, Argentina, Canada and Puerto Rico.
The company has chosen a strategy of extensive growth and has efficiently exploited this strategy for several decades. The almost exponential growth and the diversity of Wal-Mart products and services have made it a true shopping brand. However, since 2005-2006 the growth rates of the company have decreased. Table 1 illustrated Wal-Mart development since 1999.
Fiscal Year Sales per Share Div. per Share EPS Gross Margin Net Margin Store Count Avg PE Ratio
1999 37.02 0.19 1.28 22.9% 3.5% 3,985 39.1
2000 42.80 0.23 1.40 23.0% 3.3% 4,189 38.0
2001 48.91 0.27 1.50 22.7% 3.1% 4,414 34.9
2002 55.64 0.30 1.81 22.9% 3.3% 4,688 30.3
2003 59.46 0.35 2.03 24.0% 3.5% 4,906 26.9
2004 67.36 0.48 2.41 24.5% 3.6% 5,289 22.8
2005 75.01 0.58 2.63 24.6% 3.5% 6,141 18.3
2006 83.51 0.65 2.92 25.0% 3.5% 6,779 16.0
2007 94.27 0.83 3.16 25.2% 3.4% 7,262 14.5
2008 103.25 0.93 3.38 25.2% 3.3% 7,550 16.5
Table 1. Wal-Mart activities 1999-2008 (Nagarajan 3)
2. Current environment analysis
“Wal-Mart isn’t just a store, or a huge company, or a phenomenon anymore. Wal-Mart shapes where we shop, the products we buy, and the prices we pay ”“ even for those of us who never shop there. It reaches deep inside the operations of the companies that supply it and changes not only what they sell, but also changes how those products are packaged and presented, what the lives of the factory workers who make the products are like ”“ it even sometimes changes the countries where those factories are located” (Fishman 112).
Let us analyze the reasons of Wal-Mart’s rapid growth and the decrease in growth for the last years. The diversity and well thought-out marketing practices of Wal-Mart in complex with low prices and discount system have positioned the chain of stores in the middle and low-price segment where supercenters and large department stores did not operate much leaving this niche to “mom and pop” small stores and local providers. However, Wal-Mart got this market segment and offered better diversity and choice together with a sense of Wal-Mart subculture to many people. Its expansion strategy was rather successful, but it was easy to grow for the sake of growth in 1980-1990s.
Nowadays, when the revenues and consumer expenditures have significantly decreased, expansion cannot be so quick and can sometimes even give negative economical effects. Statistics shows that the US market is already oversaturated with stores; now the time has come for the best to stay afloat; therefore, for Wal-Mart company it will be more wise to decrease the speed of building new stores and use existing ones more intensively and efficiently. Also, exploring new markets of countries with developing economy can be a successful idea. For example, Wal-Mart has made agreement with Chinese officials and non-governmental organizations in order to create a global supply chain for China. The company may use its economical powers to integrate with economies of those countries whose suppliers deal intensively with Wal-Mart.
However, the growth and development of the company may also be affected with union issues, minimal wages level and the compliance of Wal-Mart operating strategy with local laws. There have been lawsuits to Wal-Mart concerning racism, low wages and bad working conditions; also, there have been a lot of claims due to out-of-date products and false label information, not only in the US, but outside the country as well (Fishman 120). Such factors may damage the image of the company and result in significant loss of revenues; in the situation of increased competition such issues should not take place.
Current economical crisis has affected all the companies worldwide and resulted in at least restructuring and policy rethinking for all business owners; Wal-Mart is not an exception here. However, the strong financial position of the company, its large chain of stores and variety of products and services give a lot of space for dynamics and for fitting customers’ needs best of all. Exploring new areas such as banking and publishing can be quite efficient but should be done cautiously: banking system crisis may cause collapse of the best ideas.
According to current environmental situation, the US market is almost saturated by Wal-Mart shopping opportunities; therefore, the main objectives are to maintain existing line of stores, intensify their economical activity and efficiency and use Wal-Mart’s competitive advantages in order to establish position on large external markets such as Chinese and European ones. However, the strategy of quick expansion is not appropriate in current economical situation: step by step development reinforced by local agreements can be the best strategy nowadays.