Table of Contents
Question 1: How well is Wal-Mart performing?.
Evaluating current and past performance.
Selecting strategies and setting performance target
Question 2: In which of Walmart’s principal functions and activities do its main competitive advantages lie?
Value Chain Analysis.
Walmart’s value chain analysis.
Question 3. To what extent is Wal-Mart’s competitive advantage sustainable?.
Question 4. What challenges does Wal-Mart currently face and what measures does it need to take to sustain its recent performance and defend against competitive (and other) threats?.
Wal-Mart was the largest company internationally in 2015 in terms of revenue. Wal-Mart has about 11000 stores in 27 nations which serve about 260 million customers per week under 72 banners with the help of 2300,000 employees. It also offers products and services through e-commerce and application through mobile in about 11 countries. Through this paper, a critical evaluation is done on the performance, marketing policies, and management of the policies of Wal-Mart (Walmart Annual Report, 2016). This paper also evaluates the impact of the performance and policies of the company on the development of industrial policy and business activity. Then the paper conducts an evaluation of the ways Wal-Mart is achieving its sustainable competing benefits and the difficulties and challenges they are facing in both the regional and global markets. Lastly, the paper provides a suggestion on how to face and outlive the challenges they are facing in the market.
Question 1: How well is Wal-Mart performing?
As Keegan (2014) notes, profit performance analysis provides aids the business policies within four key areas and they are a). evaluating the present and previous record of the performance; b). identification of the performance; c) choosing the business policies depending on the performance; d) settling the target of the performance. The analysis of the profit performance in the four areas in the case of Wal-Mart is given below:
Evaluating current and past performance
Keegan (2014) recommended that an evaluation of the current and past situation is the first task of the profit performance analysis of the business. The present financial performances of the business can be recorded by doing an analysis of the value of the stock market and the ratios of the accountings.
Forward-looking performance measures: market values
According to the notes of Keegan (2014), to meet one of the goals of the company which is growing in the profit, the company needs to assess their performance of the business through evaluating the profit and the cash flows of their business. Wal-Mart’s cash flow indicates that their market value is escalating. The net sales rose from $230 billion in 2003 to $486 billion in 2015 according to the financial summary of Wal-Mart. The gross profit was 22.6% in 2003 and rose to 24.3% in 2015.
The operating income rose from $13.3 billion in 2003 to $27.1 billion in 2005 and the net income rose from $8.0 billion in 2003 to $16.4 billion in 2015 respectively. Even though the present liabilities escalated from $32.5 billion in 2003 to $65.3 billion in 2005 and the long-term debt also got escalated from $19.6 billion in the year 2003 to $43.7 billion in the year 2015 accordingly. The shareholder equity and the total asset got raised from $39.5 billion and $94.8 billion in the year 2003 to $81.4 billion and $81.4 billion in the year 2005 accordingly. As the marketing records are showing favorable values it can be said that Wal-Mart’s performance is well (Walmart Annual Report, 2015).
Our Recommended Resources:
Chart: Walmart performance in the competitive market Source: Walmart Annual Report (2015)
According to the records of the net income, sales revenue, shareholder equity, and total assets of Wal-Mart, the performance theirs can be considered better than the main competitors of the current competitive market. In 2014, the sales revenue of Target, Dollar General, and Costco were about $72.6 billion, $18.9 billion, and $112.6 billion whereas the sales revenue of Wal-Mart was $485.7 billion. Again in the case of net profit, the performance of Wal-Mart is better. Such as in 2014, Target had a loss of about $1.6 billion of net profit, and Dollar General and Costco had a net profit of about $1.1 billion and $2.1 billion but Wal-Mart achieved about $16.4 billion of net profit. As the performances of the main opponents of Wal-Mart are poor than them, so Wal-Mart is achieving the topmost profit and revenue and leading the market (Walmart Annual Report, 2015).
Backward-looking performance measures: accounting ratios
Keegan (2014) stated that, by doing an analysis of the ratios of the accounting, performance of the business which is backward-looking can be recorded. Wal-Mart’s ratio analysis report discloses little complicated and confusing data. In the comparison of the years, 2003 and 2005 Wal-Mart’s return on assets got raised from 0.9% to 8.4%. Nevertheless, the return on gross profit margin, equity, net profit margin, and operating profit margin percentage reduces noticeably (Walmart Annual Report, 2015).
Chart: Walmart financial ratios in comparison to its competitor’s Source: Walmart Annual Report (2015)
According to the record, the performance of Wal-Mart in 2014 was better than any other main opponents, Target and Costco. In the year 2015, Wal-Mart’s achieved 24.8% of gross profit, 5.1% of net profit, and 5.6% of operating profit. While Costco achieved 12.6% of gross profit, 1.9% of net profit, and 2.9% of operating profit, and Target achieved 29.4% of gross profit, 1.2% of net profit, and 6.2% of operating profit. Though, the performance of Dollar general was better than Wal-Mart as they achieved 30.7% of gross profit, 5.8% of net profit, and 9.4% of operating profit in the year 2014. In a word, Walmart has been encountering challenges and difficulties in case performance in the financial sector (Walmart Annual Report, 2015).