Walmart Case Study

Introduction

Wal-Mart Stores, Inc. is the largest retailer in the world, it was founded in 1962 by Sam Walton. It is expanding further throughout the world to penetrate the global market. Wal- Mart operates retail stores in United State(US) in three different segment; Discount Stores, Supercenters, and Neighborhood Markets. Today, Wal-Mart has 3807 units in US and 4557 units internationally. The net sales for the year 2011 increased by 3.4 percent to $419 billion whereas earning per shares increased 12 percent to $4.18 per share. They returned $19.2 billion to the shareholders through dividends and share repurchases (Wal-Mart 2011 annual report). Walton had brought up the company with a vision to be "Worldwide leader in retail" and to accomplish the vision Walton came up with the general mission and company mission, "We save people's money so they can live better" and "If we work together, we'll lower the cost of living for everyone...We'll give the world an opportunity to see what it's like to save and have a better life". However, the whole vision and mission of the company grew from one simple objective, wealth maximization, which means maximizing the net wealth of the company's shareholders. In finance, there are main three key decisions, investment decision, financing decision and dividend decision, for the management of the company need to look into to make sure the company is meeting its main objective. Being number one in US does not mean the company has satisfied the stakeholders by meeting the company's objective. In this highly competitive world, Wal-Mart is facing many conflicts to compete the world market and satisfy the stakeholders. Stakeholders are those people who are interested in the company, they can be related personally or even not.

Shareholder and Board of Director

Wal-Mart has already started its online store however; it was not according to the needs of the customers nowadays and for the future of the business. To being able to keep up with the e-commerce market the board purchased Kosmix for $300 million for a social media startup. The acquisition made due to increasing level of users of social commerce. In addition to it, the board has decided to purchase the Tweet Beat platform and Right Health site that is under Kosmix as well. Kosmix will be operating under a new group of Wal-Mart called Wal-Mart Labs. They will be using social media and mobile commerce tools to create various technologies and businesses. The board made this decision in accordance to the objective of wealth maximization of the shareholders however, shareholders think that the company is taking a high-risk project due to it, there was a drop of 12 cent (www.yahoofinance.com) in the share price of the company. This drop is due to Wal-Mart's nature of the business where they are not specialized in research and development but they are trying to do new things to sustain in the electronic market. The shareholders are also afraid that the company will lose its traditional objective. The shareholders are questioning the board how will Wal-Mart do better than Amozon.com and e-Bay as they are already in the e-commerce for long time. Before facing any further consequence the board should setup a special research and development team rather than depending on Kosmix solely. Wal-Mart might have to change their corporate culture as well to overcome this situation.

Another conflict between the shareholders and board is, a market study found that a serious inflation is going to incur in US in few months time. The Wal-Mart CEO, Bill Simon warned clothing, food and other products price going to hike up. As the raw material price will be increasing along with that, the labor cost in China and fuel price are subjected to increase as well. Wal-Mart has to work close with the supplier to minimize the effect of the inflation. Yet the inflation is going to be serious, the retailer cannot do anything about it unless they start to take the prevention step now itself before it is too late. The prevention step would be hedging fund. They should implement it as soon as possible with the suppliers so even inflation occurs they do not need to worry about the price fluctuation. If they fail to do the prevention, the shareholders wealth will not be maximized and the profit of the company will be lesser. As a result, the shareholder will be unhappy with the performance of the company. If they did not implement the prevention method before hand, they could out source the suppliers, where China, India and other markets will be open for them.

Wal-Mart is a very fast growing company, it tries to invest in every local market in the world to bring up the value of the share price, but the rapid growth was not very healthy for the company where the management team might overlooked into the type of market they are investing in. For a good example, Wal-Mart invested in Germany in January 1998, it was the first entry for Wal-Mart into European country. Wal-Mart faced difficulties in German market, after five years of disappointing results. Wal-Mart's failure was due to the ignorance of the key principles of internationalization strategies and intercultural management. They also neglected and overlooked at the competitors in Germany. Wal-Mart at that point of time was not decentralizing the management team; it was another barrier for the company to move forward. The product they were selling at Wal-Mart in Germany was more US based products. The labels in the products are all written down in English not German language. This thing made the customer to prefer other retailer such as Tesco, Carrefour, Aldi, Metro, Hennes & Mauritz (H&M), and Ikea. Investment in Germany was a lesson for Wal-Mart. The made few billion losses. To overcome the international market, Wal-Mart has to do a research on the market and then they should invest in that country. They should be taking in the custom and norms of the specific area they are investing in. The international market is too wide they could not control all the market for one place, decentralization is the best thing to do for better performance. As the company should do more franchising and joint ventures so that they will have two different mind set and also local people to think in the way to bring up the business.

Shareholder and Operational Manager

Can Wal-Mart keep up with their slogan "Low prices. Everyday. On everything." ? It is another conflict between the board and shareholders. Each an everyday starting from January Wal-Mart is losing their customers to Target (competitor). Target is beating Wal-Mart's