Executive Summary
Walmart is one of the largest retailers in the United States and dominates the discount retailing business. It has historically outperformed and continues to outperform its competitors. To improve slowing growth, Walmart must focus on retaining its strengths in I.T implementation, distribution planning and vendor and store management but implement these skills in growing internationally and including organic products in its merchandise.
Analysis
Walmart succeeded in the US by selling branded products at a lower cost that other options available to customers. Walmart’s centralized purchasing system allowed it to have better economies of scale than its competition. It is also never too dependent on a single vendor so it maintained its bargaining power. Its logistics set up was also much more efficient with about 80% of all merchandise going through its own distribution system .Also its electronic hook ups to its vendors allowed both Walmart and the vendors to reduce inventory costs and transfer the savings to its customers.
Walmart also grew initially by building stores in small rural towns and saturating the market. These locations resulted in lower operating expenses but the towns were not big enough for another store, this effectively created a barrier for competitors to enter these saturated markets.
Walmart’s financial performance favors comparably compared to its competitors and by 1993 had achieved an ROE of 33% annually since inception. In the same time Walmart had achieved 25% y.o.y sales growth as well. Walmart had a market cap of 57 billion dollars. The company hoped to continue this growth with internal forecasts predicting sales of $84 billion in 1994.
International markets
In order to maintain its rate of growth Walmart has to expand internationally as it has already saturated the domestic market and growth is harder to find.