Walmart Organisational Analysis

Register to read the introduction… The successful world retailers’ business categories include Wal-Mart Stores (U.S.), Sam's Club (U.S.), and International stores. The International segment yields about 20% of the companies’ overall business income and is responsible for several different types of restaurants and stores including Wal-Mart and Sam's Club in 13 countries. In the viewpoint of industry analysis, Retail is the second-largest industry in the United States both in number of establishments and number of employees. The U.S. retail industry generates $3.8 trillion in retail sales annually ($4.2 trillion if food service sales are included), approximately $11,993 per capita. The retail sector is also one of the largest worldwide. Retail trade accounts for about 12.4% of all business establishments in the United States. Single-store businesses account for over 95% of all U.S. retailers, but generate less than 50% of all retail store sales. Gross margin typically runs between 31 and 33% of sales for the industry but varies widely by segment. Average industry revenue growth rate in 2010 was -0.8%. Wal-Mart is very selective in their choices of suppliers. Wal-Mart forms partnerships with individual entrepreneurs. Suppliers are asked to keep up with demand and to provide a continuum of quality products. Wal-Mart has the standards for suppliers, if they do not satisfy the requirements any chance to become the supplier. All suppliers must have competitive prices, financial stability, proven success in the marketplace, and offer excellent products in order to receive contracts with Wal-Mart. Being the largest retailer in the country, many local suppliers can only play by Wal-Mart's rules in order to get a piece of the pie. Wal-Mart imported over 15 billion dollars worth of goods. The suppliers to Wal-Mart and other discounters have almost no power. Wal-Mart is notorious for pressuring suppliers to cut their margins lower and lower, and often receives criticism for this practice. Unfortunately, there is no way around this given the consumer demand for quality goods at low prices. And while a supplier might sell half of its volume through Wal-Mart, this brand probably makes up less than 5% of Wal-Mart’s sales. Also Wal-Mart can easily switch to new suppliers and it reduces bargaining power of suppliers. As we know Wal-Mart has millions of buyers, there are at least 200 million customers per week. Wal-Mart has great power over his consumers because each buyer has little portion of his sales. Wal-Mart does not sell unique products, we can say that its goods are homogenous to all other retailers, but it maintains the customers by offering low prices. Wal-Mart always emphasizes on his low price level and this way …show more content…
Due to Wal-Mart’s immense size, they can purchase products in enormous quantities for very low prices, and then pass those low prices to their customers, thereby beating the prices of most rival retailers. This creates a catch-22, or a negative loop, for rival companies, because in order to grow in size they need customers, but Wal-Mart draws customers away from them with their lower prices, and these rivals can’t usually match those prices because they aren’t large enough. In order to compete with Wal-Mart, companies have to find new ways to offer low prices. Online retailers can cut costs by eliminating many expenses associated with a brick-and-mortar business. Costco derives most of its income with its membership fees, and therefore sells its products at nearly the same price it purchased them in order to try to keep prices low. A company like Costco can put up with very low profit margins over a significant period of time in order to gradually grows and pierces the competitive shield of Wal-Mart. Still, Wal-Mart is indeed in a very strong and difficult-to-shake position among …show more content…
The stock may deserve placement as a fairly conservative pick in a dividend-growth portfolio. In my opinion, the stock represents a fairly good value while it remains in the low-to-mid $50s. The business is highly scalable, and if the company can defend its domestic businesses and continue to grow at a reasonable pace internationally, while all the while generating substantial free cash flows used to pay dividends and buy back inexpensive shares, shareholder returns should be healthy and consistent. Due to the predictability of dividends and buybacks, WMT currently grows dividends and EPS like