Research Paper on Walmart Corporation.

An American company that deals with retail product sales is Walmart. The corporation also runs a number of other stores, such as hypermarkets, inexpensive department stores, and grocery stores. Walmart was founded in 1962 by Sam Walton at his mansion. Since then, the company has expanded abroad and into a number of US states. However, Walmart’s growth story has not always been simple. The corporation’s growth over time has been accompanied by a number of modifications in branding and service delivery.

The Background of Walmart.

In an effort to provide his customers a better deal, Sam launched the first Walmart shop in 1962. Mr. Sam had opened various retail outlets and hence gained an extensive experience in this field. His main aim when starting the company, now a leading retailer, was to allow customer’s value for their money. At the beginning of his adventure, many did not think that he would succeed. The reason being that the company was founded on the concept of quality service provision at low prices, meaning that he had to compromise on his profit margins. What they did not understand was that he was working on the principles that quality service keeps customers coming back, therefore increasing product-selling volume. In the beginning, it was not easy to find suppliers who were willing to provide him with the utilities at the price that he was asking. He, therefore, chose to go another route where he employed farm workers as part of his company. An avenue was created for them to sell their product at the rates that he wanted as long as it served the supplier as well as the company’s price range. Within the first five years, the company had expanded to twenty-four stores across Arkansas. In 1968, Walmart stores were opened in Missouri and Oklahoma. In 1970, the store opened its base offices at Arkansas and in the same year the company became a publicly traded. Between 1971 and 1980, the company expanded its territory to include stores in Tennessee, Kentucky, Mississippi, and Texas.

In the ‘80s the company expanded extensively, having its twenty-fifth anniversary in 1987. In this same year, the company was able to install a networking system for its entire store. The network allowed for inventory monitoring and faster communication between stores. The system made Walmart the first company to be able to link all its operating units putting it on a higher level concerning efficiency and service provision. Mr Walton resigned as the chief executive officer of the company in 1988, allowing David Glass to take office. In this same year, the brand’s first supercentre was opened in Missouri.

The company was steadily climbing the ladders regarding returns, and in 1990, Walmart was listed as the largest retailer in the U.S regarding revenue. (Chart, 20) The gains saw the company expanding its influence into the west coast mainly California and Pennsylvania. The store’s returns indicated profits, therefore, pushing the company out of regional border onto international ones. The company expanded into Mexico and Canada in 1991 and 1994 respectively. The company went forward to open stores in southern America in countries like Argentina and Brazil in 1995. In 1999, the company was able to enter the European market opening a store in the United Kingdom.

By 2005, Walmart was estimated to be controlling twenty percent of the grocery and retail business. In 2000, Walmart had a new CEO, Lee Scott. In 2002, the company was on the Fortune 500 list with sales at an all high of over two hundred and nineteen billion dollars and profits grossing up to six point seven billion dollars. The company has since continued to appear on the list with an exemption of the years 2006 and 2009, when it experienced substantial losses. The company’s influence in the retail continued to expand in the U.S with the opening of many more stores such that the stores were now walking distance from one another. Due to the great success of the chain of stores, research in recent years has been done to see the effect of its success in other retail businesses in small localities. The studies seem to prove that local retailer would run out of business within a decade of a Walmart opening within their city. Positive influences were also seen such as a need for more creativity and initiative by other retail businesses to keep up with Walmart.

The Corporation is involved in various initiatives and acts of social responsibility. In 2005, after Hurricane Katrina, the company donated millions in cash, one thousand five hundred trucks with utilities and up to a hundred thousand meal packages. The company also assured affected employees that they could keep their jobs after they had relocated. In the same year October, Walmart announced that it was investing in an energy saving program that would see the company cut down on greenhouse gas emission by significantly in the next seven years. Since then the company has taken the time to research on its environmental impact and ways to which its operations can improve. The company has become the largest retail distributor of organic milk and consumer of organic cotton. The change in production was aimed at reducing the processing and energy costs incurred. The company has also recently come up with its own electricity plant that allows it to store the power it purchases on a wholesale cost.

In an attempt to appeal to a wider demographic, the company opened a more upscale store, in comparison to its other stores, in Texas. The new supercentre was complete with wooden floors, sushi bar, free Wi-Fi, a coffee place and wider aisles.

In 2007, the company launched a new slogan ‘save money, live better,’ to widen its general demographic. This slogan replaced ‘Always low prices, Always.’ (Pope et al, 1)In 2008, the company changed its logo to include a spark symbol at the end of its name and removed the hyphen from in-between its name. The company acquired video streaming company Vudu Inc. in 2010 as an investment. In 2011 the company announced its intention to offer more nutritious products by cutting down on sugar and salts and to get rid of transfats. In 2012, the company tried out a product delivery system ’Walmart to go’, that allows delivery to consumers’ homes. In 2013, the company tried to acquire a share of a supermarket chain called Naivas in Kenya. This attempted buy in was in an effort to spread into the African market. In 2015, Walmart stock fell by ten percent. The fall warranted for the closure of two hundred and sixty-nine stores in 2016. This portion of the business accounted for less than one percent of the corporations’ revenue. The company has since then strengthened its supercentres and Neighbourhood markets, as they are a source of constant revenue. As well as, growing its e-commerce business and delivery services. To this effect the –commerce company acquired, Jet.com an e-commerce website at a whopping three billion dollars.

The company has however indicated a major problem on crimes in recent years . In the recent past, various criminal offenses have been reported from different Walmart stores. The type of offenses has ranged from petty thefts to serious hate crimes. These crimes significantly affected the company’s stock as well as the customer volume that it attracts. The company has, therefore, made various efforts in rebranding to ensure that it gets rid of the bad image that it has attained.

Walmart’s Products

Walmart offers a wide array of products that are store brands, which are lower-priced in comparison to name brand products (Stankevičiūtė et al 1201). The company stocks on foods, household essentials, pet amenities, beauty products, health and pharmaceutical products, stationery among other products. Most of the products at Walmart are private label meaning the company has supplier’s companies deliver products at a friendly price, and they do their packaging. The company has some brands for its products, for example, Sam choice brand. The brand is the most premium of brands under the Walmart banner. The brand offered competitive prices to other national brands since the cost incurred for marketing and advertising is less for retail house brand as compared to house brands. The brand offers products such as beverages, snacks, grocery items and frozen meat. This account for a significant percentage of the revenue that Walmart produces the brand was launched as the great value brand in 2013 to offer a wider assortment of products from various manufacturers. It is important to note that the products in this brand are expressed to be of the same quality as those on national brands but just as good.

Great value is also another brand that is from Walmart that has been in existence since 1993 and forms a brand with national equivalent products. Products offered through this brand are said to be the same quality as those on national brands just at lower prices due to reduced marketing and advertising costs. The products in this brand are therefore not produced by Walmart. They come from agricultural corporations such as Sara Lee which under contract provide products exclusively for Walmart and on their behalf. Being the largest brand from Walmart, it encompasses products such as bread, canned foods, trash bags, pies, frozen dinners and vegetables and other retail agricultural commodities. There has been controversy about the labelling of the product sunder this brand as it does not contain the location of manufacture for the product. The company has however gone on record to say that all the goods are made in the United States and were it not so the packaging would indicate that.

The company also has a wide variety of brand under which it distributes its products. Equate is a brand that distributes consumable pharmaceuticals, health and beauty items. Mainstays is a low-cost brand by Walmart for beddings and furniture. Ol’Roy is the stores brand for dog food. It is currently the number one brand of dog food in the United States in recent years. Dr. Thunder is the stores brand for soft drinks. Special Kitty is the stores brand for cat food. Parent’s choice is the brand for baby care products ranging from diapers to formula. White stag is the stores brand for women’s clothing and shoes. George is the stores brand for men’s clothing. Play Day is a cost friendly brand for children toys in the store’s outlets. This store also has other minor brands that collectively contribute to the general revenue of the corporation.

Walmart’s Services

The company offers a variety of services that contribute to its revenue. The primary of its services include Walmart-2-Walmart services, Walmart Money card, Pick up today, Walmart.com, Walmart pay. Walmart-2-Walmart is a service platform that allows users to carry out online money transfers both domestic and international. The company offers this service through a subsidiary, RIA. The Walmart Money Card is a preloaded MasterCard or Visa card that allows holders to make purchases and pay for other services. The pickup today service allows for customers to collect ordered products at their nearest store at no cost. Walmart.com is the online platform that the company offered where customers can order products from the comfort of their homes. The Walmart pay is the service that allows customers to pay for in-store purchases using the Walmart app.

Walmart’s marketing

On the side of marketing, Walmart has been able to keep people interested in their products for a long time using their unique marketing mix (Greenwald and Robert, 6-11). The first aspect of their marketing mix is their product. The industry of retail purchase requires fast shipping and quality service while at it to keep consumers coming back. Walmart offers excellent customer service with attendants that easier assist shoppers and top niche products. The corporation as a brand has therefore been associated with this type of service, therefore, attracting a huge customer base. The fact that the stores also sell products at affordable prices has further pushed the company’s products as pocket-friendly.

Another aspect of marketing is the pricing strategy. As the company mantra implies, the company endeavours to provide quality products at low cost and low prices. The company uses an Everyday low pricing strategy that allows them to ensure low prices on every product sold every day. The company strives to be a leader in pricing such that their volume of purchases leads them to large profit margins despite the low prices. Pricing is, therefore, an integral component of marketing, and in Walmart’s case, its low prices attract a large customer base. Regarding location as an element of marketing, the company uses strategic distribution tactics to allow for maximum utilization of resources. In this strategy, the company ensures that at all store locations, the quality and variety of product offered is the same. The approach also applies to the roles and duties of services dictated to employees in similar positions in each store. This element, therefore, attracts customers regarding convenience in their shopping experience regardless of location.

Promotions are a large part of marketing for all retail companies. Promotions include advertisements, sales promotions, and public relations. The use of newspapers and website advertisements or sales promotions as well as product discount do increase purchase volumes. Walmart’s involvement in various charity helps to build the company product recall, such that many people are attracted to the company since they associate the company with compassion and doing the right thing. This type of marketing is essential for attracting the target customers.

Walmart’s Financial Profile

Finally, looking at the financial aspect of the company, its financial ratios have to be calculated. Being a publically traded company with its current ratios, Walmart is a very attractive investment for those looking for secure investment and return on current dividends. To properly understand the financial status of Walmart its financial ratios ought to compare to other companies within the same industry (Rouziek and Miriam, 13). Regarding price-earnings-ratio (P/E) for the previous financial year is 13. For companies such as Target and Costco, Walmart’ biggest competitors, the P/E ratio is 13.2 and 28.1. The standard P/E ratio for the industry is 15. Walmart is below average but still a viable investment for investments that are looking for value. Concerning price to book ratio (P/B), Walmart recorded 2.4 compared to 3.1 and 6.0 from Target and Costco. Investors like to see a P/B of below three, therefore, giving the Walmart the age in this category. Regarding equity on return (R.O.E), Walmart stands at an 18.6%, with Target and Costco. Stand at 19.3% and 20.2%. An R.O.E of above 10% is considered stable therefore placing Walmart as a value investor favourite. Concerning debt/equity (D/E), Walmart recorded a 64.2% against Target’s and Costco’s 96.5% and 55.3% respectively. The D/E capital is an expression of the company’s debt as a percentage of its equity. A D/E of below 100% is advisable and the lower the figure, the better. In all expressions of the financial ratios, Walmart’s finances seem to represent its stock well and are, therefore, appealing to an array of investors, primarily value investors.

Regarding its gross margins, the company has experienced a decrease of 24.3% in the past three years. Despite the store’s high sales volume, the profit margin was seen to decline in the U.S market especially, due to its change in meat products and Medicare. The operating margins have also reduced slightly by 5.6% for the stores based in the U.S. International sales for Walmart have however grown over the years due to the company’s expansion into various markets. An improvement in sales of 4.5% was observed. Regarding operating margins, an increase of 4% was recorded. Therefore, generally regarding revenue, the company seems to be earning more from its stores outside the U.S.

Conclusion

The Walmart Company continues to be a leader in retail and still grosses the highest in revenue from all its chains despite the fact that there are losses made in the U.S. Walmart have managed to remain true to its principal of providing utility and service at a low cost while pulling in a large volume of clients. The company has in recent years changed some of its operations to suit the trends in the retail market in recent years. These changes have mainly been regarding lifestyle and the economy. The changes that the company has introduced attract a whole new demographic of customers since it appeals to all individuals irrespective of financial status. With the strides that the company is taking to stay in the race, experts predict that Walmart will be in business for a long time to come.

Work Cited

Chart, Stock. “Target Corporation Stock Analysis.”(2003).

Greenwald, Robert. Walmart. New York: Brave New Films, 2005.

Pope, Devin G., and Jaren C. Pope. ”When Walmart comes to town: Always low housing prices? Always?.“ Journal of Urban Economics 87 (2015): 1-13.

Rouziek, Miriam. ”Financial Performance of Discount Retail Stores During a Recession Comparison of Wal-Mart and Costco.“ (2009).

Stankevičiūtė, Erika, Rokas Grunda, and Edverdas Vaclovas Bartkus. ”Pursuing a Cost Leadership Strategy and Business Sustainability Objectives: Walmart Case Study.“ Economics and Management 17.3 (2012): 1200-1206.