Summary
In 2010, Walmart had a market value of $210 billion, more than the value of the following five largest retail companies combined (Miles,2019). Walmart remained the largest company in the world in terms of market value. The company’s revenues and profits grew in 2010, and its stock price increased by more than 20 percent (Struckell et al., 2022). Its size, global reach, and low prices have made it a lightning rod for criticism. Walmart has been accused of putting small businesses out of business, paying its employees low wages, and contributing to declining communities where its stores are located. Walmart has been praised for its efficient operations, low prices, and positive impact on the communities where its stores are located. This report will analyze Walmart’s business model and its impact on the retail industry, the economy, and society. Using a discounted cash flow (DCF) analysis, we will also value Walmart. The company’s business model is based on offering low prices to its customers. Walmart achieves low prices by using its size and scale to negotiate low prices from its suppliers and operate its stores efficiently. It will also look into the problem definition, the analysis, and the recommendations.
Problem definition
The problem to be investigated is how Walmart’s share price has been affected by its decision to close down all its stores in China. The report will investigate whether the decision was good for shareholders and the future implications for the company. To investigate this problem, the following research questions need to be addressed:
How has Walmart’s share price been affected by its decision to close down all its stores in China?
In 2016, Walmart decided to close down all 102 stores in China (Zagaris & Psilakis, 2019). This was a surprising move, as Walmart had been operating in China since 1996 and had been seen as a significant success story. However, the company has been struggling recently, with sales stagnating and profits falling. The decision to exit China was seen as a way to focus on other markets where the company was faring better. The news of Walmart’s exit from China made its share price tumble, as investors worried about the company’s future prospects. However, Walmart has since rebounded, and its share price is now back to where it was before the announcement.
What are the future implications for the company in terms of its share price and growth potential?
The future implications for Walmart in terms of its share price and growth potential are very positive. The company is expected to continue to grow at a rapid pace, and its share price is expected to continue to rise. Several factors contribute to this positive outlook, including Walmart’s strong brand name, efficient operations, and vast scale (Bloom & Hinrichs, 2017). Walmart is also expected to benefit from the continued growth of the global economy and the continued expansion of its operations.
What are the implications for shareholders?
The implications for shareholders are both positive and negative. On the one hand, Walmart is a very successful company that is consistently profitable and growing. This means that shareholders can expect to see good returns on their investments. On the other hand, Walmart has been criticized for its treatment of employees, its environmental record, and its impact on local communities. This means that shareholders may be concerned about the company’s reputation and ability to continue growing in the future.
What are the implications for the retail industry in China?
The retail industry in China has been booming in recent years, thanks to the country’s booming economy and burgeoning middle class. However, the recent entry of Walmart into the Chinese market has thrown the industry into turmoil as the world’s largest retailer seeks to muscle its way into a market that is already crowded with domestic players. The implications of Walmart’s entry into China are far-reaching and could significantly impact the retail landscape in the country. For one, Walmart’s sheer size and scale could give it a significant advantage over its smaller rivals. Walmart’s low prices could also pressure other retailers to lower their prices, leading to a race to the bottom. Finally, Walmart’s arrival could shake up the relationships between retailers and suppliers, as the retailer is known for its aggressive negotiating tactics.
The analysis
The Walmart company was founded in 1962 by Sam Walton. The company is headquartered in Bentonville, Arkansas. According to Abecassis, (2018), the company operates in three segments: Walmart U.S., Walmart International, and Sam’s Club. The Walmart U.S. segment comprises retail stores in the United States, including discount stores, supercenters, and neighborhood Markets. The Walmart International segment operates retail stores in Argentina, Brazil, Canada, Chile, China, India, Japan, Mexico, and the United Kingdom. The Sam’s Club segment operates membership-only warehouse clubs in the United States and Brazil, China, and Mexico. The company was founded in 1962 and is based in Bentonville, Arkansas. On October 5, 2010, Walmart Stores, Inc. announced that it would purchase a majority stake in Massmart Holdings Ltd. (Massmart), a South African company that operates in 14 countries (Dralle, 2017). The purchase price was approximately $2.4 billion and the acquisition was completed on May 9, 2011. These acquisitions were to help the organization diversify its operations to many parts of the globe, putting it in a better position to make more profits.
Recommendations
Walmart should continue focusing on its core competencies and strengths to maintain its position as the leader in the retail industry. It should invest in technology and innovation to improve its efficiency and competitiveness. Walmart should focus on expanding in emerging markets to maintain its growth momentum. They should focus on improving their online presence and capabilities to compete in e-commerce. Also, Walmart should continue to focus on offering low prices and value to its customers to maintain its competitive advantage. Walmart should also continue investing in its workforce and training and development programs to ensure that its employees are highly skilled and motivated.
References
Abecassis, J. M. (2018). Walmart Stores, Inc. WMT: steady returns with prospects for growth (Doctoral dissertation).
Bloom, J. D., & Hinrichs, C. C. (2017). The long reach of lean retailing: Firm embeddedness and Walmart’s implementation of local produce sourcing in the U.S. Environment and Planning A: Economy and Space, 49(1), 168-185
Dralle, T. M. (2017). The South African Walmart/Massmart Case SME-Friendly Domestic Competition Laws in the Light of International Economic Law. Small and Medium-Sized Enterprises in International Economic Law, 315, 93.
Miles, C. (2019). The combine will tell the truth: On precision agriculture and algorithmic rationality. Big Data & Society, 6(1), 2053951719849444.
Struckell, E., Ojha, D., Patel, P. C., & Dhir, A. (2022). Strategic choice in times of stagnant growth and uncertainty: An institutional theory and organizational change perspective. Technological Forecasting and Social Change, 182, 121839.
Zagaris, B., & Psilakis, A. (2019). Transnational Corruption and Transparency. International Enforcement Law Reporter, 35, 245. Web.