Strategic Analysis of Walmart & Toyota

Strategic Analysis of Wal-Mart & Toyota

Memorandum

Date: 03/31/2008

To: Teresa Coates

From: Vivek Singh Bhadoriya

Subject: Strategic Analysis

The first Wal-Mart was open in Rogers, Arkansas in 1962. Wall-Mart is the largest retailer in the world with about $1 billion in sales in a mere 17 years becoming the first company to achieve this mark. At the end of 2006, Wall-Mart had around 2 million employees, 179 million customers a year and 6775 stores all across the globe (CIO, 2006).

Wall- mart has been known to provide the best services to its customers at a very low price although the big player applies pressure on the suppliers to give them every day low prices. Due to this low pricing strategy of wall mart, it has hardly any competitor in the merchandise and groceries category. The low price strategy has led to the lay off of various employees and close of US plants in order to outsource to other countries. Wal-Mart is known for continuous improvement in its ability to handle, move, and track merchandise and expects its suppliers to do the same. Wal-Mart has been forcing its suppliers to redesign everything from packaging to computer systems and was itself decided the price that it wants to pay to the suppliers for its product.

Wal-Mart is U.S.A.’s biggest seller of DVDs, diamonds, groceries, toys, guns, CDs, apparel, dog food, detergent, jewellery, sporting goods, videogames, socks, bedding, and largest film

developer, optician, private truck fleet operator, energy consumer, and real estate developer

(Fortune, 2003). The main target customers of wall- mart are the people who want to pay low prices for their items and this is what its winning strategy is. Wall- mart’s revenue has been forecasted to be $700 billion in 2010. Wall- mart is now trying to achieve the same success in the international market by combining its technology, logistics and human resources with its buying power on multinational suppliers. Mergers and acquisitions has been one of its strategies to achieve competitive advantage over other multinational retailers.

Business Strategy

The main strategy that the company has been adopting since it started is that it provides its customers with the lowest cost possible. Secondly, they take utmost care of their customer’s satisfaction as they have great refund policies. Wall-mart treats its employees as owners of the company as 70% of the employees have shares in the company. Wall-mart uses the very latest technology to reduce its cost and attain competitive advantage over competitors. The Sam’s club, discount stores and super centers have been the real cash cows for the company.

Financial Analysis

Wal-Mart has shown tremendous growth over the years with a record net sale of $345 billion which is an increase of 11.7% over the fiscal year 2006. Wal-Mart branches in Mexico and UK are also doing well with a 30% increase for the year. The Sam’s club operating income has grown faster than its sales and this has happened continuously for six quarters. The total store sale was only up by 2% and was very disappointing according to Wal-Mart’s standards. Wal-Mart closed its setup in Germany and South Korea because they were struggling there but other then this they have been doing well in other parts of the world. The ROI has been a record high in 2007 because of the coordination between the shopping patterns and staffing levels. In order to more improve the ROI the company must focus on capital efficient opportunities and customers. The foreign investment has led to a slow growth in the ROI but as soon as the company is established there it will improve the overall performance of the company.

The total assets of the company increased 9.4%, to $151.2 billion in 2007, when compared to 2006. During fiscal year 2007, the company made$15.7 billion of capital expenditures which was an increase of 7.8% over capital expenditures of $14.5 billion in fiscal year 2006. Return on assets for fiscal year 2007, 2006 and 2005 was 8.8%, 9.3% and 9.8%, respectively. The Return

on assets in 2007 and 2006 was affected by acquisition and consolidation of entities with lower asset returns. The gross profit has increased marginally from 23.1% in 2006 to 23.4% in 2007.

In the hypermarket and the supermarkets Wal-Mart is the real leader with no rivals close to