cln group session 11 - walmart case analysis final bharti business strategy.pdf · page 7 of 16...

Strategic Analysis Report

Walmart Case Study 2006

Daniel Cross Bill Kanellis Joseph Rega Matt Smith

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Table of Contents

EXECUTIVE SUMMARY .............................................................................................................................. 4

INTRODUCTION ......................................................................................................................................... 5

BACKGROUND ................................................................................................................................................... 5

PURPOSE .......................................................................................................................................................... 5

ENVIRONMENTAL ANALYSIS ...................................................................................................................... 6

MACRO-‐ENVIRONMENT ANALYSIS ........................................................................................................................ 6

PORTER’S FIVE FORCES ANALYSIS ......................................................................................................................... 7

ORGANISATION ANALYSIS ......................................................................................................................... 8

STRATEGY ......................................................................................................................................................... 8

Key Stakeholders ....................................................................................................................................... 8

Outside Interests ....................................................................................................................................... 8

PERFORMANCE .................................................................................................................................................. 9

Financial Performance ............................................................................................................................... 9

Internal Current Performance ................................................................................................................... 9

Internal Long Term Development ............................................................................................................ 10

MARKETING .................................................................................................................................................... 10

CAPABILITIES ................................................................................................................................................... 10

SWOT ANALYSIS ............................................................................................................................................. 10

HIGH-‐LEVEL OPTION ANALYSIS ................................................................................................................ 12

CONCLUSION ........................................................................................................................................... 13

RECOMMENDATIONS .............................................................................................................................. 13

REFERENCES ............................................................................................................................................ 14

APPENDIX 1 – WALMART 5-‐YEAR FINANCIAL PERFORMANCE STATISTICS ................................................ 15

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ASSIGNMENT COVER SHEET FOR SUBMISSION OF INDIVIDUAL AND GROUP WORK

Department/School Open Universities Australia Course/Unit Code

Assignment Number

Assignment Due Date

Group/Session name (if applicable)

OMBA660 BUSM4045

1 27/01/2013

Session 3 2012-2013: CLN Strategic Analysis Report: Walmart

Course/Unit Name Program Title

This statement should be completed and signed by the student(s) participating in preparation of the assignment. Declaration and Statement of Authorship: I/we hold a copy of this assignment, which can be produced if the original is lost/ damaged. This assignment is my/our original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgement is made. No part of this assignment has been written for me/us by any other person except where such collaboration has been authorised by the lecturer/teacher concerned and is clearly acknowledged in the assignment. I/we have not previously submitted or currently submitting this work for any other course/unit. This work may be reproduced, communicated, compared and archived for the purpose of detecting plagiarism. I/we give permission for a copy of my/our marked work to be retained by the School for review and comparison, including review by external examiners. I/we understand that Plagiarism is the presentation of the work, idea or creation of another person as though it is your own. It is a form of cheating and is a very serious academic offence that may lead to expulsion from the University. Plagiarised material can be drawn from, and presented in, written, graphic and visual form, including electronic data, and oral presentations. Plagiarism occurs when the origin of the material used is not appropriately cited. Enabling plagiarism is the act of assisting or allowing another person to plagiarise or to copy your work

Family name Given Name Student Number Student Signature Date

Cross Daniel S2106762 Daniel Cross 27/01/2013

Kanellis Bill S3225039 Bill Kanellis 27/01/2013

Rega Joseph S3362256 Joseph Rega 27/01/2013

Smith Matt S3339865 Matt Smith 27/01/2013

Business Strategy

MBA (Executive)

Lecturer/Teacher’s Name Tutor (or Marker’s) Name (if applicable) Ryszard Bliszczyk Ryszard Bliszczyk

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Executive Summary

As the US market for everyday low price (ELDP) consumer goods had become saturated by 2006, Walmart,

the world’s largest retailer turned its focus to international expansion. With predicted growth in the retail

sector of 20% per annum from 2007 onward along with rising incomes and consumerism, Walmart turned its

attention to India. As previous forays by Walmart into the German and South Korean markets had failed due

to lack of market knowledge, Walmart sought a joint venture (JV) with Bharti, an established cell phone

operator in India with the intention of leveraging their local market expertise.

In 2006, the JV announced its intention to open hundreds of Walmart branded stores in India. This

announcement sent shockwaves through the retail industry in India which consisted predominantly of Small

and Medium Enterprises (SME’s), and local ‘ma n’ pa’ stores. Walmart’s reputation of driving small retailers

out of business threatened these stores generating socio-economic unrest, resistance and adverse publicity

for the JV.

Analyses conducted identified significant risks to the JV such as underdeveloped state of IT and logistical

infrastructure, the highly unorganised nature of the Indian retail sector, and the Indian government’s intention

to maintain its balance of trade terms through self-sufficiency in the manufacture of consumer goods.

Subsequently, this paper recommends that the JV does not currently pursue a strategy to sell directly to

Indian consumers by investing in the rollout of hundreds of retail stores. Rather, to enable Walmart in

achieving long term success in India an alternative strategy is proposed.

It is recommended that the JV adapt its business strategy through the development of a business-to-

business wholesale capability, allowing it to use its buying power to procure goods from Indian

manufacturers and leverage its strengths in IT & logistical capability to supply Indian SME’s. In doing so, the

JV stands to win both supplier and SME confidence and co-operation, enabling them to grow and prosper

together with Walmart as they receive access to cheap EDLP goods and Walmart benefits from high volume

scale sales via its supply to the hundreds of thousands of SMEs.

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INTRODUCTION

Background

As the U.S. market is saturated, shareholder demand on return led senior executives at Walmart to seek

international expansion. The opportunity to leverage their successful domestic business model to achieve

further growth in sales and profits on a global scale seemed the next logical growth step.

In an effort to prevent recurrence of failed entries into Germany and South Korea Walmart adapted their

global expansion strategy to include joint ventures (JV) with local organisations when entering a new market.

This adaption made it possible for Walmart to partner with organisations familiar with local markets, and with

proven networks and infrastructure in place. In its expansion into India, Walmart partnered Bharti Enterprise,

a successful leading cell phone operator in India.

Together with Bharti, Walmart announced its intention of opening hundreds of Walmart branded stores

across India over 5 years. As part of the 50:50 Bharti Walmart JV, Bharti own and operate the retail outlets

whilst allowing a back-end entry into one of the largest world markets for Walmart to exploit their expertise in

logistics, supply chain management and sourcing. Bharti also leverages Walmart expertise in outlet

operations.

Walmart’s current entry model into India leans toward a global convergence strategy rather than one of

localisation. Walmart have acknowledged there is a need to strike a balance of international integration. In

the retail sector challenges of a localisation strategy extend to Indian government policy, and uncertainty in

IT and transport infrastructure.

Purpose

This report will analyse what Walmart must do to achieve long-term success in India and make

recommendations that address the strategic question of whether Walmart should continue with its entry

model into India given market conditions in 2006. If not what could be a viable alternative strategy?

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ENVIRONMENTAL ANALYSIS

Macro-‐environment Analysis

The market analysis in Table 1 has been conducted of India holistically as a place for international

corporations to commence retail business operations. As a developing market, India is a highly attractive

option with market predictions for India indicating significant growth. India rates 2nd as one of the top 10

emerging markets of 2004, with the lowest level of saturation and an average to low risk score of 62%. It is a

highly unorganised retail market with a 10 year growth from 10% to 42% in food, grocery & general

merchandise predicted from 2004 to 2015.

The analysis concludes that projected growth in the Indian retail market and the changing social

demographic outweighs the uncertainty of the countries politics and reliability issues of developing

infrastructure. Entry into this burgeoning sector should be large to best leverage the competitive advantage

of Walmart. To mitigate the risks associated with India’s infrastructure Walmart should closely monitor

supply-chain network efficiency and phase its entry focusing firstly on urban areas.

Table 1 - Macro-environmental PESTEL Analysis

PESTEL Analysis

Political Influences

1. Publicly stable democratic political system. 2. High levels of regional corruption. 3. Coalition government leads to increased bureaucracy and delayed political decision-‐

making. 4. Economic reform agenda targeting high FDI, increased privatization, and deregulation. 5. Good trade relationships with established economies and bordering countries. 6. Policies focus on making India more self-‐reliant with a strong industrial base. 7. High scrutiny of foreign investment can be expected with objection to organizations

reliant on imports such as Walmart.

Economic

1. High growth forecast for India. 2. Service sector (including retail) is largest contributor to India’s economic growth

although 97% is disorganized. 3. Inflation and unemployment relatively high. 4. Complex tax regime. 5. Crowded retail industry.

Social

1. Burgeoning middle class matches Walmart’s target market. 2. Middle class growth linked to urban areas. 3. Increased consumerism is attractive however there are high levels of diversity in

regions of India may undermine generic product offerings. 4. Large population means abundance of human capital. 5. Protective attitude to local retailers particularly in grocery.

Technological 1. IT infrastructure improving but not standardized across the country (Walmart rely on a

high standard of IT infrastructure to maximise supply chain efficiency). 2. General infrastructure underdeveloped.

Environmental 1. Limited retail space in major cities and urban areas. 2. Power supply cannot meet demand leading to outages.

Legal 1. Retail and some service industries are market regulated. 2. Business restrictions on FDI and joint ventures have to meet onerous laws. 3. Differing interpretation of laws in difference regions and provinces.

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Porter’s Five Forces Analysis

The analysis in Figure 1 has considered the organised retail industry in India. It concludes that recognising

the current state of the industry, adopting a supply chain control strategy will significantly impact the

influences of power within the industry. Reducing the power of competition and positioning the JV as an

industry leader as the industry grows and becomes more organised.

Figure 1 - Porter's Five Forces Industry Environmental Analysis

Suppliers

Low threat

-‐ Strategically working with local suppliers and improving infrastructure, educacon and creacng consistency in supply and demand for supply will significantly reduce the threat from supplier power.

-‐ Due to Govt intervencon and corrupcon, supplier control will be essencal and need to be successful early . It has the potencal to be a high threat to the JV

New Entrants Medium threat -‐ The predicted growth and size of the Indian market has high appeal for foreign investment. -‐ Lack of infrastructure, industry fragmentacon, Government corrupcon and legislacon makes it a difficult marketplace for foreign companies to enter. -‐ Combined JV experience may provide an entry barrier for new compectors, parccularly foreign. -‐ Local compeccon from small to medium scale and will be a bafle for market share.

SubsZtutes Low threat -‐ Walmarts one stop EDLP shop makes it difficult to compete with. -‐ Strong supplier control and industry leader will create difficulty for consistence in subsctute quality.

Buyers Low to Medium threat -‐ Strong supply chain control with EDLP leaves lifle buyer power. -‐ Unorganised market, low demand control from buyers. -‐ JV as price leasers will reduce buyer's power

Industry Rivalry Medium threat -‐ High compeccon for marketshare -‐ Defragmented, unorganised market -‐ Controlling supply chain and buyers power could lead to a compeccve edge

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ORGANISATION ANALYSIS

Strategy

High on Walmart’s corporate strategic agenda is the pursuit of new markets in the retail sector. At the

generic level Walmart pursues a deliberate strategy of providing Every Day Low Prices (ELDP) by procuring

high quality products at the lowest possible prices. This is achieved primarily by leveraging its bargaining

power as the world’s no.1 retailer to aggressively negotiate and procure goods directly from manufacturers

(avoiding costly intermediaries), and shifting of their manufacturing base to take advantage of cheaper

labour. Furthermore, Walmart leverages its efficient supply chain and logistics methodology, which enables

cheap, fast and effective transportation of goods direct from manufacturers to their stores.

The product markets that Walmart seeks include general merchandise, food items and drug

(pharmaceutical) sales, as currently sold through its extensive network of discount stores. In addition,

Walmart has set up a number of supercentres, which sell everything that its discount stores sell, plus meat

and poultry, baked goods, dairy products and garden produce.

To increase the chances of successful entry into the Indian market, strategic planning at Walmart should

take into account the needs of key stakeholders and expectation of outside interests.

Key Stakeholders

Vendors: Walmart is often the largest customer to most of its suppliers and manufacturers. Consequently,

vendors place significant value on retaining Walmart as a client, as evidenced by their endeavours to supply

goods to Walmart at lower prices by shifting their manufacturing bases to China and other developing

countries.

Customers: Walmart’s customers value the ability to purchase consumables at low prices, and expect that

goods purchased are safe for use/consumption, and that they were procured ethically.

Shareholders: Shareholders expect maximum return on their investment in Walmart stock. This includes the

expectation that sales revenues and profits will continue to grow to enable returns to be maximised.

Employees & Unions: Employees of Walmart expect to receive remuneration, benefits and treatment that

are in line with industry, market and legislative expectations. Walmart has attracted global condemnation

from workers, unions, investors, small businesses, political and religious leaders in relation to the way it

treats its workers.

Indian Government: The Indian Government does not want Walmart’s entry into India to upset its balance

of trade. It would prefer Walmart to utilise Indian domestic production rather than importing massively from

China, which may damage Indian manufacturing industries. The Indian Government also regulates Foreign

Direct Investment (FDI) for single brand product retailing to a maximum 51% ownership (Ministry of

Commerce & Industry 2006).

Outside Interests

Other Businesses: In India, small traders dominate the retail landscape. In the U.S., Walmart has a history

of driving small retailers out of business when opening a store in those communities. In India small business

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owners have staged numerous anti-Walmart protests in response to the threat that Walmart’s entry may

eventually undermine them and drive them into insolvency (New York Times 2007). Additionally, they have

political influence on the Indian government and continue to lobby against the entry of corporate behemoths

such as Walmart into their market.

Performance

Financial Performance

Walmart was able to increase sales revenues over the 5-year period from $204 billion (USD) in 2002 to $312

billion in 2006 (Appendix 1). Walmart has achieved a consistently healthy trend of financial performance over

the last 5 years, with almost every key financial indicator trending positively. To put Walmart’s performance

into perspective, in 2006 Walmart made over US $108 billion more in net sales than it did in 2002, and its

subsequent net profit has almost doubled to $11.2 billion (Walmart 2006).

Walmart’s ROE has continually strengthened from 19.4% in 2002 to 22.6% in 2006, meaning that the money

invested by shareholders is making consistently healthy returns. The fact that ROA has been remained

relatively flat, deviating little from the 9% average over the 5 years suggests that despite its growing asset

folio, Walmart has been successful at keeping its relative rate of return steady. A slight but gradual decline in

sales growth is noted, dipping to 9.54% per annum in 2006 from 12.55% in 2003. This is likely due to the fact

that sales growth tends to slow as companies grow and markets mature.

A gearing ratio of under 0.5 each of the 5 years observed suggests Walmart has taken a manageable level

of long-term debt with little financial risk. Similarly, the debt to equity of 1.6 (short term debt) also indicates a

low level of financial risk. Walmart’s capital structure is sound.

Operating cash inflows appear to be growing year on year and importantly, cash outflows are growing

proportionately, which means that Walmart is a financially sound company, which exercises prudent, cost

control and responsible leveraging to achieve consistent growth. Sales revenues and cash flows are healthy,

which in turn deliver ongoing profitability and consistent returns to shareholders.

Internal Current Performance

Walmart’s expense to sales measure has remained for the 5-year period at close to the 77% mark, indicating

that it has a stable cost structure. Whilst this figure can appear deceptively high at first glance, it is a typical

efficiency ratio for businesses with large and stable cash flows such as Walmart. Whilst it’s a good level of

efficiency for a company of its size, there is always room for improvement in this area.

Interestingly, Walmart’s asset turnover ratio appeared low in 2002 at 2.5, and continued a slight but steadily

decline to a 2006 level of 2.26. This can be attributed to Walmart’s increasing capital investment in local and

global expansion efforts and is likely to improve once growth investment slows. The Net Profit to Sales ratio

which indicates percentage of sales dollars left after all operating expenses has also seen steady and

consistent growth year on year, starting at 5.1% in 2002 to 5.56% in 2006. A similar story is noted for the

profit after tax to sales ratio, which finished the 2006-year at 3.59%. The internal current performance

analysis indicates that whilst already operationally efficient, Walmart continues to make efficiency

improvements year on year and trends in the right direction.

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Internal Long Term Development

According to the 2006 Annual Report (Walmart 2006), Walmart is planning to construct 20-30 new stores,

280 new supercentres (relocations accounting for approximately 160 of those), 20 new Neighbourhood

Markets, 40 new Sam’s Clubs in the USA. On the international front, Walmart is planning to open 220 new

stores (with relocations accounting for 35 of those). As the US market becomes increasingly more saturated,

there may be value in Walmart further exploring the idea of diverting capital investment into international expansion efforts, which may offer greater growth potential. Walmart’s intention is to continue international

acquisitions where strategic value can be added.

Marketing

As the globe’s largest employer of over two million, Walmart is open to scrutiny and is often targeted for

bullying in the market place. Recognising this, a policy of sustainability in operational processes and good

vendor relationship management allows Walmart to maintain integrity in the political and business arena.

Consistent delivery of its EDLP promise maintains customer satisfaction and consumer confidence.

Recognising the success of acting global and looking local in international markets, the Bharti Walmart JV is

of strategic advantage. A local business face with a global back end encourages localised customer

satisfaction.

Capabilities

The combined capabilities of the Bharti-Walmart joint venture have distinct advantages to increasing market

share in a short timeframe – something that is critical being able to best leverage Walmart’s purchasing

power and supply chain efficiency. As a local operator Bharti bring local knowledge. This joint venture is

Bharti’s first entry into the part of the retail sector and as such questions remain over whether the local

knowledge is specific enough to the target market of food, groceries and general merchandise. As an

organisation Bharti provide knowledge of the local retail market and supply markets. Bharti also provides

knowledge of IT infrastructure through its cell-phone business.

Walmart uses its purchasing power to be a price leader and gain market share through competitors having to

reduce profit margins to match Walmart’s product offerings. Walmart will have to open many stores to

maintain their purchasing power and cost structure. This will enable them to reduce operating cycles and

inventory turnover. Walmart’s model as an ELDP retailer and a large scale importer may meet with political

displeasure as it threatens smaller local operators and contradicts the government policy of self-reliance.

SWOT Analysis

The analysis in Figure 2 has been conducted of the Bharti/Walmart JV and its strengths, weaknesses,

opportunities and threats for Walmart. It concludes that there are a variety of opportunities that enable

Wlamart to access India’s growth potential.

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Figure 2 - SWOT Analysis

Strengths: The JV proposal leverages Bharti’s local knowledge, infrastructure and standing as one of India's

leading business groups with interests in telecom, agri-business, insurance and IT retail. It also leverages

Walmart’s expertise as the world’s leading retailer, renowned for its efficiency and expertise in logistics,

supply chain management and sourcing. Combined the JV has significant buying power notwithstanding

investment capacity.

Weaknesses: The JV will have cultural differences between Bharti and Walmart at an operational level

which could trigger inefficiencies and for trust to erode particularly given high levels of corruption. In addition

Walmart may have problems deriving profit share. Bharti’s lack of experience and knowledge in owning and

operating retail stores is of concern to the JV which could in turn erode Walmart’s brand and reputation.

Opportunities: The JV has numerous opportunities from its respective strengths particularly through

leveraging Bharti relationships with the Indian government. With astute investment in local producers

Walmart can grow its own supplier network and support India manufacturing in the process. Localized

branding of the outlets will see Walmart forgo brand equity in lieu for substantial success across India whilst

still maintaining Walmart culture through a back-door entry strategy. The growing middle class indicates that

a commitment to corporate social responsibility will create inclusive relationships with the Indian consumer.

Threats: Walmart involvement as a foreign company will initially be resisted by the Indian government and

given the JV business model employs a global convergence strategy conforming to Indian Government

policy will be problematic. A threat to Walmart is Bharti’s control of the JV however the JV business model

may be sufficiently ‘ironclad’ that it overcomes and dissipates the threat. Given Walmart’s extensive supplier

network buying imported manufactured goods and produce will be problematic for the Indian government

reliant upon self-sufficiency. Overcrowding of the retail sector and deficiency of IT coverage and antiquated

transport infrastructure is a significant distribution concern notwithstanding a lack of ample retail space in an

already overcrowded area. Given that the rollout of retail outlets is to be exponential this will be a sizable

impediment facing the JV.

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HIGH-‐LEVEL OPTION ANALYSIS

Option One

As per the case study Bharti and Walmart’s intention is the opening of hundreds of Walmart branded stores

across India over 5 years. As part of the 50:50 Bharti Walmart JV, Bharti own and operate the retail outlets

whilst allowing a back-end entry for Walmart into one of the largest world markets for Walmart to exploit their

expertise in logistics, supply chain management and sourcing and where Bharti also leverages Walmart

expertise in outlet operations.

This option requires Walmart to maintain itself as a price leader within the Indian market through developing

and working with local vendors and utilizing its past expertise in large-scale distribution and vendor control.

Being a price leader allows the JV to deliver on the EDLP customer satisfaction, whilst marketing with a local

brand identity. In a developing market that is unorganised, this strategy should encourage a loyal market

share that is hard for competitors to penetrate.

Option Two

A Business-to-Business wholesale business strategy of mega outlets rather than opening hundreds of stores

where mega outlets are located at regional distribution points will require considerably less outlets and

facilitate the logistics of infrastructure distribution in line with Indian government localization policy rather

than global convergence by developing and buying from SMEs ultimately introducing SMEs to the global

markets. This more cooperative network strategy means that the Bharti Walmart JV supplies to thousands

of SMEs from its regional distribution points and indirectly reaches out to far greater ‘ma n pa’ buyers. The

opportunities expressed in the SWOT analysis better leveraged by thus strategy and the simplified industry

environment analysis in Figure 3 shows considerably minimised competitive forces making this option viable.

Suppliers Low Threat

New Entrants Medium Threat

Subsctutes Low Threat

Buyer Power Medium

Industry Rivalry Low Threat

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CONCLUSION

The analysis indicates that Walmart is a highly profitable and established global retail business. Its financial

strength and ongoing high global demand for its ELDP products ensure that it is well positioned for further

growth into new markets.

Whilst India’s burgeoning economic growth and growing middle class makes it an attractive entry target,

Walmart should heed the lessons of the previous failed entries into Germany and Korea due to lack of local

market knowledge to avoid further failure.

India’s existing foreign investment restrictions and significant social opposition driven by threat to small

retailers by proposed establishment of Bharti-Walmart stores strongly suggests that Walmart needs to adapt

its approach. As option 2 suggests, developing a hub to spoke wholesale B2B JV strategy will require less

capital investment and will enable the conversion of ‘ma n pa’ stores from opponents into customers, as

EDLP goods flow from the warehouses to the hundreds of thousands of small retailers across the Indian

nation. Retailers will benefit from the lower prices, and Walmart will benefit from achieving high volume scale

sales of its products.

RECOMMENDATIONS

To leverage Walmart’s strengths and mitigate the uncertainty in a full-scale localisation strategy into India

this report recommends that Walmart amend its entry model into India to a business-to-business wholesaler.

Further this report recommends the following elements of this strategy be implemented to successfully enter

the growing Indian retail market:

§ Focus on supply chain control. Educating suppliers, building and developing the infrastructure and

support for suppliers to meet the JV's demands. Being first to market in organizing and developing

the supplier's market will create huge buying power advantage and make it difficult for competitors to

enter.

§ Recognizing the opportunities in the unorganized yet developing market. Similar to supplier market,

it is an unorganized, non-loyal and uneducated consumer market, with huge growth potential.

Supporting this market and capturing its loyalty through EDLP and consistency again will make it

hard for significant foreign competitors to gain market share.

§ Global back-end entry into India recognises the importance of remaining a local identity through the

Bharti JV whilst implementing systems and infrastructure of global efficiency and strategy to support

the JV. § The partnering and development of SMEs to grow their businesses to the point of being competitive

in the global market place will appease the Indian government in its quest of self-sufficiency,

localisation and competitive advantage.

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REFERENCES

Bhatnagar, P 2006, Walmart's dilemma in India, CNN-Money, viewed 21 December 2012,

<http://money.cnn.com/2006/03/23/news/companies/walmart_india/index.htm>

De Wit, B & Meyer, R 2010, Strategy: Process, content, context, 4th ed., South-Western Cenage Learning

UK.

Ghosh, A & Siddhartha, P, Walmart in India, case 19, pp. 910-915.

Hubbard, G, Analysing a case, Cases in Strategic Management, pp. xi-xix.

Levitt, T 1983, ‘The Globalisation of Markets’, Harvard Business Review May.

Ministry of Commerce & Tourism 2006, Foreign direct investment policy: April 2006, Government of India,

India, viewed 20th December 2012, <http://www.orissa.gov.in/industries/pdf/fdi_policy_2006.pdf>

Porter, ME 2008, ‘The five competitive forces that shape strategy’, Harvard Business Review, January, pp.

1-19.

Slape, M, Walmart’s head of international business development

<http://www.guardian.co.uk/business/2010/jan/12/walmart-companies-to-shape-the-decade>

The New York Times 2007, Indians protest Walmart's wholesale entry, The New York Times Company, New

York, viewed 19th December 2012, <http://www.nytimes.com/2007/08/09/business/worldbusiness/09iht-

walmart.4.7061818.html>

Walmart 2004, 2004 annual report, Walmart, USA, viewed 27th December 2012, <http://media.corporate-ir.net/media_files/irol/11/112761/ARs/annualreport_2004.pdf>. Walmart 2006, 2006 annual report, Walmart, USA, viewed 27th December 2012, <http://media.corporate-ir.net/media_files/irol/11/112761/ARs/2006_annual_report.pdf>.

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APPENDIX 1 – Walmart 5-‐Year Financial Performance Statistics

In Millions except for ratio data

Overall Performance

Year 2002 2003 2004 2005 2006

Net Sales $204,011 $229,616 $256,329 $285,222 $312,427

Cost of Sales $159,067 $178,299 $198,747 $219,793 $240,391

Net Profit $6,592 $7,955 $9,054 $10,267 $11,231

Earnings Per Share $1.47 $1.79 $2.07 $2.41 $2.68

Long Term Debt $15,676 $16,597 $17,102 $20,087 $26,429

Return on Equity (%) 19.40% 20.90% 21.30% 22.60% 22.50%

Return on Total Assets (%) 8.4% 9.2% 9.2% 9.3% 8.9%

Sales Growth (%) n/a 12.55% 11.63% 11.27% 9.54%

Total Assets $81,549 $92,900 $105,405 $120,154 $138,187

Shareholder's funds $35,192 $39,461 $43,623 $49,396 $53,171

Total Liabilities $48,349 $55,347 $61,289 $70,758 $85,016

Profitability

Net Profit/Sales (%) 5.10% 5.39% 5.54% 5.65% 5.56%

Profit After Tax/Sales (%) 3.23% 3.46% 3.53% 3.60% 3.59%

Expense/Sales (%) 77.97% 77.65% 77.54% 77.06% 76.94%

Asset Utilisation

Asset Turnover (times) 2.50 2.47 2.43 2.37 2.26

Capital Structure

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Gearing Ratio 0.45 0.42 0.39 0.41 0.50

Debt-Equity Ratio 1.37 1.40 1.40 1.43 1.60

Cash Flow

Operating Cash Flow $10,519 $13,005 $15,996 $15,044 $17,633

Cash Outflows $7,223 $9,839 $8,312 $12,351 $14,183

Cash at Beginning of Year $2,054 $2,161 $2,758 $5,199 $5,488

Sources: Walmart (2004), (2006).

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