Wal-Mart Stores Inc. I. Introduction In Forbes magazine’s annual ranking of the richest Americans, the heirs of Sam Walton held spots five through nine in 1993 with $4. 5 billion each.
Sam Walton, the founder of Wal-Mart Stores Inc. , died in April 1992 and left his fortune to his wife and four children. Wal-Mart was a phenomenal success with a 20-year average return on equity of 35 percent, compoundaverage sales growth of 34 percent, and compound earnings per share growth of 23 percent. Sales per square foot of nearly $300 at Wal-Mart Surpassed the industry average of $220, and at the end of 1993, Wal-Mart had a market value of $65 billion.
Wal-Mart was one of the first retailers to invest heavily in information technology, and it was a widely held belief that Wal-Mart had revolutionized many aspects of retailing. David Glass and Don Soderquist faced the challenge of following in Sam Walton’s footsteps. Glass and Soderquist, CEO and COO had been running the company since February 1988 when Sam, retaining the chairmanship, turned the job of CEO over to Glass. Their record spoke for itself the company went from sales of $16 billion in 1987 to $67 billion in 1993, with earnings more than tripling from $628 million to $2. 4 Billion.
II.General Environment A. Strength * A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them. * Wal-Mart has grown substantially over recent years, and has experienced global expansion.
* Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store. * The company has a core competence involving its use of information technology to support its international logistics system. For example, it an see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement. B.
Weaknesses * Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control * . Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors. * The company is global, but has a presence in relatively few countries Worldwide. C. Opportunities New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large supercenters, to local and mall-based sites.
* Opportunities exist for Wal-Mart to continue with its current strategy of large, supercenters. * To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region. * The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.D. Threats * Being number one means that you are the target of competition, locally and globally.
* Being a global retailer means that you are exposed to political problems in the countries that you operate in. * The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost has fallen due to outsourcing to low-cost regions of the World. This has led to price competition, resulting in price deflation in some ranges. Intense price competition is a threat. III.
Main Problem The drop in the value of Wal-Mart stocks because no one would like to sell heir shares. IV. Alternative Courses of Action Alternative 1 Let the stocks expires Advantage The stockholders still have their stocks. Disadvantage There is no possible income because it’s already expired.
Alternative 2 Selling of the stocks Advantages * Stockholders can bring new skills, ideas and different views to Wal-Mart. * Can Gain finance to improve business very quickly and easy without any interest rates because you don’t need to pay it back. * To have more capital than they can borrow. Disadvantages * To share any profit made with the stockholders.
They should not use long term so that they won’t lose money. * They will lose a part of their business. Alternative 3 Hold stock in longer in the expectation that the value of it will increased. Advantages * There is a limited liability * There is a capital appreciation Disadvantages * There is an extended periods of time, investors could be forced to wait years to have their gains. V.
Chosen Alternative Alternative 2 Selling of stocks, because it is the right alternative they also need to sell it in public because they need more capital to expand their business.
